Saturday, July 12, 2008
Video: Feds Overtake IndyMac | FDIC: IndyMac Closure | FDIC: IndyMac Closure Q&A | July 1 Video: IndyMac Assures Customers | Gov't Considers Freddie, Fannie Bailout
IndyMac had $32.01 billion in assets as of March 31.A successor institution, IndyMac Federal Bank (FSB), will open for business on Monday and be run by the FDIC, according to the OTS, which is part of the U.S Treasury Department.According to the OTS, IndyMac Bank is unlikely to be able to meet continued depositors' demands in the normal course of business and is therefore in "an unsafe and unsound condition."
What Will Happen To My Money?Depositors will have no access to banking services online and by telephone this weekend, but will continue to have access to their funds this weekend by ATM, through other debit card transactions and by writing checks, according to the OTS.Online banking and phone banking services will be available again on Monday.Depositors' accounts at IndyMac are insured by the FDIC's Deposit Insurance Fund up to the statutory limits. Customer questions regarding the institution, including questions about federal deposit insurance coverage, should be directed to the FDIC at 1-866-806-5919.The hotline's recorded message explains the bank's status. The message states that Internet banking has been suspended for the weekend, but online banking should be available Monday.
- Friday, July 11 -- 3 to 9 p.m., PDT
- Saturday, July 12 -- 8 a.m. to 8 p.m., PDT
- Sunday, July 13 -- 8 a.m. to 6 p.m., PDT
- Thereafter: 8 a.m. to 8 p.m., PDT
How Could This Happen?The immediate cause of the closing was a deposit run that began and continued after the public release of a June 26 letter to the OTS and the FDIC from Sen. Charles Schumer of New York, according to the OTS. The letter expressed concerns about IndyMac's viability. In the following 11 business days, depositors withdrew more than $1.3 billion from their accounts."This institution failed today due to a liquidity crisis," said OTS Director John Reich. "Although this institution was already in distress, I am troubled by any interference in the regulatory process."According to the OTS, IndyMac had been in a precarious financial situation that was caused, in part, by an unprecedented stress in the residential real estate market, combined with the evaporation of the non-agency secondary mortgage market in August 2007."The OTS had significant concerns with the bank's funding strategy, had directed appropriate changes and was finalizing a new set of enforcement actions to address its numerous problems," the OTS said in a statement released Friday.As a result of an OTS examination that began in January 2008, the OTS deemed IndyMac to be in troubled condition.An overwhelming majority of problem institutions are able to successfully modify their operations and business plans, work closely with their regulator and eventually return to a healthy condition. IndyMac had reacted to market conditions and OTS concerns in November 2007 by changing its operations and business plan to build a foundation for recovery, according to the OTS."IndyMac was actively seeking to arrange a significant capital infusion or find a buyer. The recent release of the senator's letter undermined the public confidence essential for a financial institution and took away the time IndyMac needed to pursue a recovery," the OTS said in Friday's statement.With no viable alternatives and insufficient liquidity, IndyMac was placed into receivership.The OTS has appointed the FDIC as conservator of the newly chartered successor institution and will transfer most of the assets and liabilities of IndyMac to the new thrift.IndyMac specialized in making and selling so-called Alt-A mortgage loans, a category of loans to consumers more credit worthy than subprime borrowers but typically without the complete documentation of income or assets necessary to receive a prime-rate loan.
OTS Fact Sheet: IndyMac BankInstitution Profile
- Total assets, as of March 31, 2008: $32.01 billion
- Branches: 33 retail branch offices, all located in Southern California
- Employees: On July 7, 2008, announced staff reduction from 7,200 to 3,400
- Deposit inflows in the three days prior to June 27, 2008: $31.2 million
- Deposit outflows beginning June 27, 2008: $730.2 million through July 7 and $1.3 billion through July 10
- Brokered deposits as of June 30, 2008: $5.97 billion or 32 percent of total deposits
- Federal Home Loan Bank advances as of June 30, 2008: $10.1 billion
- Loans held (March 2008 10-Q statement): $11.9 billion in single family loans held for investment, including $3.4 billion pay-option ARMs (29 percent) and $4.9 billion interest-only (43 percent)
- Loan servicing (March 2008 10-Q statement): $184.5 billion in loans serviced for others, including 16 percent pay-option ARMs, 10 percent reverse mortgages and 39 percent fixed-rate mortgages
- Loan servicing portfolio delinquency rate: 8.26 percent
The companies, Fannie Mae and Freddie Mac, have been hit hard by the mortgage foreclosure crisis. Their shares are plummeting and their borrowing costs are rising as investors worry that the companies will suffer losses far larger than the $11 billion they have already lost in recent months. Now, as housing prices decline further and foreclosures grow, the markets are worried that Fannie and Freddie themselves may default on their debt.
Under a conservatorship, the shares of Fannie and Freddie would be worth little or nothing, and any losses on mortgages they own or guarantee — which could be staggering — would be paid by taxpayers.
The government officials said that the administration had also considered calling for legislation that would offer an explicit government guarantee on the $5 trillion of debt owned or guaranteed by the companies. But that is a far less attractive option, they said, because it would effectively double the size of the public debt.
The officials also said that such a step would be ineffective because the markets already widely accept that the government stands behind the companies.
The officials involved in the discussions stressed that no action by the administration was imminent, and that Fannie and Freddie are not considered to be in a crisis situation. But in recent days, enough concern has built among senior government officials over the health of the giant mortgage finance companies for them to hold a series of meetings and conference calls to discuss contingency plans.
A conservatorship or other rescue operation would be the second time in four months that the Bush administration has stepped in to engineer a rescue to prevent the financial system from collapsing. Last March, it forced the sale of Bear Stearns to JPMorgan Chase to avert a bankruptcy of that venerable investment house.
Officials have also been concerned that the difficulties of the two companies, if not fixed, could damage economies worldwide. The securities of Fannie and Freddie are held by numerous overseas financial institutions, central banks and investors.
Under a 1992 law, Fannie or Freddie could be put into conservatorship if their top regulator found that either one is “critically undercapitalized.” A conservator would have sweeping powers to overhaul them, but would not have the authority to close them.
The markets showed fresh signs on Thursday of being nervous about the future of the companies. Their stock prices continued a weeklong slide, hitting their lowest level in 17 years. The debt markets, meanwhile, pushed up the two companies’ cost of borrowing — their lifeblood for buying mortgages.
The companies are by far the biggest providers of financing for domestic home loans. If they are unable to borrow, they will not be able to buy mortgages from commercial lenders. In turn, that would make it more expensive and difficult, if not impossible, for home buyers to obtain credit, freezing the United States housing market. Even healthy banks are reluctant to tie up scarce capital by offering mortgages to low-risk home buyers without Fannie and Freddie taking the loans off their books.
Together the two companies touch more than half of the nation’s $12 trillion in mortgages by either owning them or backing them. They hold more than $1.5 trillion of the mortgages as securities. Others are sold to investors in the form of mortgage-backed bonds.
In recent weeks, the companies have spiraled downward, undermined by declining confidence in their future and shaken by sharp declines in their assets as the housing markets have continued to slide and foreclosures have risen.
In the last week alone, Freddie has lost 45 percent of its value, and Fannie is off 30 percent. Expectations of default at the companies have also risen; it costs three times as much today to buy insurance on a two-year Fannie bond as it did three years ago.
Analysts expect the companies to announce a new round of write-downs and possibly be forced to raise capital by issuing additional shares, which would dilute their value for current shareholders.
Despite repeated assurances from regulators about the financial soundness of the two institutions, financial markets have concluded that by some measures they are deeply troubled.
Freddie, for instance, is technically insolvent under fair value accounting rules, in which the company puts a market value on assets as if it had to sell them now.
Although Treasury Secretary Henry M. Paulson Jr. and Ben S. Bernanke, the chairman of the Federal Reserve, passed up invitations by lawmakers on Thursday to seek legislation to deal with the crisis, officials said that the administration had been privately considering a government takeover should the markets continue to turn against the companies.
At a hearing of the House Financial Services Committee on Thursday, both Mr. Paulson and Mr. Bernanke were guarded, carefully trying not to say anything that could further erode confidence in Fannie and Freddie. They both said that the regulator of Fannie and Freddie had found that they were, in the words of Mr. Paulson, “adequately capitalized,” meaning that they had sufficient cash and other assets to withstand the turbulence in the markets.
“Fannie Mae and Freddie Mac are also working through this challenging period,” Mr. Paulson said.
Neither official would address a question posed by Representative Dennis Moore, Democrat of Kansas, who asked whether the failure of either institution would pose a risk to the financial system.
“In today’s world I don’t think it is helpful to speculate about any financial institution and systemic risk,” Mr. Paulson said. “I’m dealing with the here and now, and the important role that they’re playing and other financial institutions are playing.”
Mr. Bernanke said that Fannie and Freddie “are well-capitalized in the regulatory sense” but added that they, and other major financial institutions, needed to raise their capital levels further.
Despite repeated denials by officials in the Bush and prior administrations, financial markets have long assumed the government would stand behind Fannie Mae and Freddie Mac in times of difficulty, both because they are integral to the housing and financial markets and because the companies have a line of credit to the Treasury.
But Congress set that credit more than 38 years ago, long before the companies rose to such size and prominence, and its limit, $2.25 billion for each, has become a tiny fraction of the companies’ overall debt.
Some analysts have begun to propose that the Fed also permit the two companies to borrow from it, as Wall Street investment banks began doing after the rescue of Bear Stearns. But there is no indication that the Fed is contemplating such a move.
On Thursday, the rapid sell-off of shares of Fannie Mae and Freddie Mac came after a former central banker made comments that the companies might not be solvent, and an analyst at UBS issued a report critical of Freddie Mac.
The turmoil also shook the debt of the companies, with one main measure indicating that their cost of borrowing has risen to the highest level since mid-March, when the government rescued Bear Stearns. Throughout the day, senior officials sought to reassure the markets about the financial health of Fannie and Freddie.
Later in the afternoon, James B. Lockhart, the regulator who oversees the two companies, issued a statement that his agency was carefully watching the companies’ “credit and capital positions” and said that they were adequate to get through the current turmoil.
Fannie Mae issued a statement saying that it remained financially strong.
“Our company has raised more than $14 billion in capital since November 2007, including $7.4 billion most recently in May,” the company said. “As our regulator has stated, and has reiterated in public statements this week, we are adequately capitalized.”
Sharon McHale, vice president for public relations at Freddie Mac, said: “Our regulator has emphasized that we have continued to maintain the highest capital rating, and we are in the market every day. We’ll continue to do so.”
Shares of Freddie Mac plunged more than 30 percent and Fannie Mae’s more than 20 percent in the first hour of trading on Thursday. By the close of trading, Fannie shares had fallen nearly 14 percent, and Freddie shares had dropped 22 percent. It was the second straight day of declines for the companies.
While their stocks trade on the New York Stock Exchange, Congress created the two companies to promote housing, and the marketplace has long come to believe that they would be bailed out should they become insolvent. They hold a far lower level of capital than banks do. In recent years, they have both suffered from accounting scandals and management shake-ups.
Neither Mr. Paulson nor Mr. Bernanke, at the hearing on Thursday, would answer a question about whether Congress needs to give the regulators more tools to deal with the possible insolvency at either company.
“I don’t think we should be speculating or talking about what-if’s with any particular institutions, and so with Fannie or Freddie, what I’m emphasizing is that the tool that I want is the reform and the reform legislation that would inject confidence into the marketplace,” Mr. Paulson said, referring to a measure that would revamp the oversight of the companies.
The problems of the two companies spilled onto the campaign trail on Thursday when Senator John McCain, the presumptive Republican nominee for president, said he supported federal intervention to save Fannie or Freddie from collapsing.
“Those institutions, Fannie and Freddie, have been responsible for millions of Americans to be able to own their own homes, and they will not fail, we will not allow them to fail,” Mr. McCain said during a stop at the Senate Coney Island Restaurant in Livonia, Mich. “They are vital to Americans’ ability to own their own homes. And we will do what’s necessary to make sure that they continue that function.”
Jason Furman, the economic policy director for the Democratic presidential campaign of Senator Barack Obama of Illinois, said that Mr. Obama “believes the Bush administration’s willful neglect of warning signs in housing, in financial markets and in the job market, have compromised the nation’s housing finance system.”
“The challenges facing Fannie and Freddie are part of the broader weakness in our economy,” Mr. Furman said.
Senator Charles E. Schumer, Democrat of New York and chairman of the Joint Economic Committee, said that the markets should rest assured that the mortgage giants have a “federal lifeline” and would not be allowed to fail — though he said he thought a government rescue would not be needed and should be a last resort.
Until last week, Frank L. was an unknown 41-year old former policeman who worked in geriatric care to supplement his meager welfare stipend, and in his spare time enjoyed an occasional beer at the pub. Last Saturday, though, a moment of vandalism turned Frank L. into something of a national hero, mentioned by some in the same breath as the legendary Claus Schenk Graf von Stauffenberg, who led a failed assassination attempt against Hitler in 1944. Frank L. accomplished his extraordinary rise from obscurity to national celebrity through a simple act of decapitation.
Three minutes after the opening of the new Madame Tussauds in Berlin, Frank L., who had been second in the line to enter the waxwork museum, stormed past security and toward an exhibit that had aroused controversy during the weeks prior to the opening: a wax figure of Adolf Hitler, depicting the dictator as a broken man, sitting behind his desk during his last days in the "Führerbunker." The attacker shouted "No more War!" several times, while tackling the figure, and managed to yank off its head before being seized by the police.
Instead of condemning Frank L.'s action, many Germans expressed admiration for his attack. One commentator raved, "75 years after the 'seizure of power' and 63 years after the end of the Third Reich, finally an assassination attempt against Hitler succeeded ... a 41 year-old Berliner accomplished what Johann Georg Elser, Claus Schenk Graf von Stauffenberg ... and many others paid with their lives: he decapitated Hitler..." Even the policeman answering the questions of the gathered journalists at the scene of the crime couldn't suppress a gleeful smile when he announced: "Speaking as a human being, the attack was successful".
It turns out that Frank L. had been dared by his pub mates the previous night to destroy the waxen Hitler, and he returned home, after several hours of interrogation, to a hero's welcome from his girlfriend and neighbors. The man, who describes himself as "politically left-leaning, but not extreme" and has expressed regret about his deed since, told the German left-wing daily Die Tageszeitung, "Somebody had to do something. Berlin mustn't become a pilgrimage site for neo-Nazis."
Many Berliner's had expressed similar concerns after Madame Tussauds had announced plans to feature Hitler in its waxwork collection. The museum tried to mollify critics by banning visitors from taking pictures of the exhibit, and by depicting Hitler as the broken, deranged figure in his final days as portrayed by German actor Bruno Ganz in the 2004 movie The Downfall. Still, many voices, such as Johannes Tuchel, head of the German Resistance Memorial Center in Berlin, rejected the presence of a Hitler waxwork, and attacked Madame Tussauds' decision to restore it on show "as soon as possible", saying the museum was trivializing the Nazi terror.
"Hitler is not a leisure activity," Tuchel told TIME. But he said he was against putting Frank L. on a par with the likes of Stauffenberg or Elser. "Vandalism is not a argument in a political debate, of course, but on the other hand, the reaction shows how heated the debate is," Tuchel said.
But why has the arrival of a Hitler waxwork unleashed such passion in Berlin? After all, a waxen representation of the dictator has been on display in the German city of Hamburg for 60 years, without causing any serious disruptions. Some argue that it is the proximity to the site from which Hitler actually directed the Nazi terror that makes the issue particularly sensitive. But the German daily Suddeutsche Zeitung has a different theory: "Berlin cherishes a culture of civil disobedience", the newspaper wrote. Other commentators pointed out that Frank L. "of course" lived in Kreuzberg, a Berlin district known for its squatter and punk scene, and annual demonstrations and riots on May 1. The attacker told Tageszeitung that it was a demonstration on the occasion of Ronald Reagan's visit to Berlin in 1987 that prompted him to retire from his police job. "As a policeman it was my job to take action against the demonstrators," he said, "but I rather wanted to go with them."
It remains unclear what kind of legal action or punishment he'll face. "It depends on the actual damage, which remains to be assessed," said Natalie Rurss, spokeswoman of Madame Tussauds. She does not, however, believe that Frank L. will go down in German history as a national hero: "He is just not the type."
By Denis Pinchuk
ST PETERSBURG (Reuters) - A Russian woman in St Petersburg killed her drunk husband with a folding couch, Russian media reported on Wednesday.
St Petersburg's Channel Five said the man's wife, upset with her husband for being drunk and refusing to get up, kicked a handle after an argument, activating a mechanism that folds the couch up against a wall.
The couch, which doubles as a bed, folds up automatically in order to save space. The man fell between the mattress and the back of the couch, Channel Five quoted emergency workers as saying.
The woman then walked out of the room and returned three hours later to check on what she thought was an unusually quiet sleeping husband.
Police refused to comment.
The St Petersburg Emergency Services Ministry said a private rescue service removed the man's body.
Video on the television channel's website showed emergency workers sawing away the side panels of a couch to remove a man in his underwear lying headfirst between the cushions.
Emergency workers said the man died instantly.
(Additional reporting by Tatiana Ustinova, Writing by Chris Baldwin, editing by Alison Williams)
The Netherlands, with its permissive marijuana laws, may be known as the cannabis capital of the world. But a survey published this month in PLoS Medicine, a journal of the Public Library of Science, suggests that the Dutch don't actually experiment with pot as much as one would expect. Despite tougher drug policies in this country, Americans were twice as likely to have tried marijuana than the Dutch, according to the survey. In fact, Americans were more likely to have tried marijuana or cocaine than people in any of the 16 other countries, including France, Spain, South Africa, Mexico and Colombia, that the survey covered.
Researchers found that 42% of people surveyed in the United States had tried marijuana at least once, and 16% had tried cocaine. About 20% of residents surveyed in the Netherlands, by contrast, reported having tried pot; in Asian countries, such as Japan and China, marijuana use was virtually "non-existent," the study found. New Zealand was the only other country to claim roughly the same percentage of pot smokers as the U.S., but no other nation came close to the proportion of Americans who reported trying cocaine.
Why the high numbers? Jim Anthony, the chair of the department of epidemiology at Michigan State University and an author of the study, says U.S. drug habits have to do, in part, with the country's affluence — many Americans can afford to spend income on recreational drugs. Another factor may be an increasing awareness that marijuana may be less toxic than other drugs, such as tobacco or alcohol. (However, the study also found that the United States is among the leading countries in the percentage of respondents who tried tobacco and alcohol). As for the popularity of cocaine, the reason may simply be the close proximity of South America, the world's only coca plant producer. And, finally, Anthony notes, it's a matter of culture: the U.S. is home to a huge baby boomer population that came of age when experimenting with drugs was a part of the social fabric. "It became a more mass population phenomenon during a period when there were a large number of young people who were in the process of creating a culture of their own," Anthony says.
The survey also found that more Americans not only experimented with drugs, but also tended to try pot and cocaine for the first time at a younger age compared with people in other countries. Just over 20% of Americans reported trying pot by age 15 and nearly 3% had tried cocaine by the same age. Those percentages jumped to 54% and 16%, respectively, by age 21. That finding isn't surprising, says Dr. Richard Schottenfeld, a professor of psychiatry and a drug expert at the Yale University School of Medicine, since peer influence has a significant impact on the prevalence of drug use. In the Netherlands, for example, there is a large, vocal and homogeneous conservative population that is staunchly opposed to marijuana, says Schottenfeld. And anti-drug activists have made recent attempts to tighten the country's cannabis policies.
Yet experts say the findings of the new survey don't fairly reflect the success or failure of any particular drug policy. The survey asked only whether people had ever tried drugs in their lifetime — it did not ask about habitual use. "For drug policy, what you look at is regular use," says Tom Riley, a spokesman for the U.S. Office of National Drug Control Policy. "Somebody having tried pot in 1968 in college doesn't really have much to do with what the current drug use picture in the United States is."
Though current findings may not provide enough context to judge existing drug policy, Anthony says they do highlight some valid issues, especially since stringent laws don't appear to impact whether kids experiment with drugs. "One of the questions raised by research of this type is whether Americans will want to continue supporting the incarceration of young people who use small amounts of marijuana," Anthony says.
The ongoing study, which surveyed more than 85,000 people in 17 countries, is part of a larger project through the World Health Organization's World Mental Health Survey Initiative. Anthony says further research about the frequency of worldwide drug use, and new data from additional countries will be released in the future.
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How much information should Internet companies be able to collect about your Web activity in order to serve you more relevant and targeted advertising? An IP address? Search queries? Your system settings and browser of choice?
For most companies like Google and Microsoft, the collection of that type of data is de rigeuer. Though it is typically deleted 18 months after its collection, and executives swear that personally identifiable information will not be found in their databases, many have their doubts.
My IP address may not reveal my name or location, but if I happen to be Googling my own name, address, or place of employment, and Google retains those search terms, am I inadvertently telling the search engine exactly who I am?
"If my ISP said, 'Is it ok if we give everything you do to another company?' I'd say of course it's not ok," Sen. Byron Dorgan, a North Dakota Democrat, said during a Wednesday hearing before the Senate Commerce Committee. "Online advertising is important; I understand that [but] there are so many unanswered questions about [online] information and how people navigate the Web." Dorgan grilled Bob Dykes, CEO of NebuAd, an online advertising company that aggregates information to serve up targeted ads. "Maybe an ISP comes in and [says], 'Whenever anyone does something on our system, we're going to shovel all that information to you as its being done. What's the difference between that and wiretapping?" "We're compliant with the law," Dykes responded. "The information we're looking at as people surf the Web doesn't include any personally identifiable information. [We are taking] an IP address and transforming that into an anonymous number with a one-way hash. All we're keeping is the qualifications from the market segments" NebuAd is targeting. Leslie Harris, president and CEO at the Center for Democracy and Technology (CDT), was skeptical about the anonymity of the collected data. At best, the data collected by companies like NebuAd is "pseudo-nonymous," she said. Harris pointed to AOL, which in 2006 mistakenly released 20 million search queries that included indentifiable data. Dykes argued that that was basically because people were doing searches on houses in their neighborhoods using particular names and addresses. That is exactly the point, according to Harris. Sen. David Vitter, a Louisiana Republican, asked the two panelists if they believed that anyone data collection process on the Internet could ensure true anonymity. Dykes said yes, but Harris did not believe so. "If pure privacy is what you want, the Internet is probably the wrong thing for you," countered Clyde Wayne Crews Jr., vice president for policy at the Competitive Enterprise Institute, a conservative think tank.
"If my ISP said, 'Is it ok if we give everything you do to another company?' I'd say of course it's not ok," Sen. Byron Dorgan, a North Dakota Democrat, said during a Wednesday hearing before the Senate Commerce Committee. "Online advertising is important; I understand that [but] there are so many unanswered questions about [online] information and how people navigate the Web."
Dorgan grilled Bob Dykes, CEO of NebuAd, an online advertising company that aggregates information to serve up targeted ads. "Maybe an ISP comes in and [says], 'Whenever anyone does something on our system, we're going to shovel all that information to you as its being done. What's the difference between that and wiretapping?"
"We're compliant with the law," Dykes responded. "The information we're looking at as people surf the Web doesn't include any personally identifiable information. [We are taking] an IP address and transforming that into an anonymous number with a one-way hash. All we're keeping is the qualifications from the market segments" NebuAd is targeting.
Leslie Harris, president and CEO at the Center for Democracy and Technology (CDT), was skeptical about the anonymity of the collected data. At best, the data collected by companies like NebuAd is "pseudo-nonymous," she said.
Harris pointed to AOL, which in 2006 mistakenly released 20 million search queries that included indentifiable data. Dykes argued that that was basically because people were doing searches on houses in their neighborhoods using particular names and addresses. That is exactly the point, according to Harris.
Sen. David Vitter, a Louisiana Republican, asked the two panelists if they believed that anyone data collection process on the Internet could ensure true anonymity. Dykes said yes, but Harris did not believe so.
"If pure privacy is what you want, the Internet is probably the wrong thing for you," countered Clyde Wayne Crews Jr., vice president for policy at the Competitive Enterprise Institute, a conservative think tank.
Latest update at 3 p.m. Eastern Agence France-Presse has retracted the image as “apparently digitally altered.” More developments at the bottom of the post.
As news spread across the world of Iran’s provocative missile tests, so did an image of four missiles heading skyward in unison. Unfortunately, it appeared to contain one too many missiles, a point that had not emerged before the photo was used on the front pages of The Los Angeles Times, The Financial Times, The Chicago Tribune and several other newspapers as well as on BBC News, MSNBC, Yahoo! News, NYTimes.com and many other major news Web sites.
Agence France-Presse said that it obtained the image from the Web site of Sepah News, the media arm of the Iranian Revolutionary Guards, on Wednesday. But there was no sign of it there later in the day. Today, The Associated Press distributed what appeared to be a nearly identical photo from the same source, but without the fourth missile.
As the above illustration shows, the second missile from the right appears to be the sum of two other missiles in the image. The contours of the billowing smoke match perfectly near the ground, as well in the immediate wake of the missile. Only a small black dot in the reddish area of exhaust seems to differ from the missile to its left, though there are also some slight variations in the color of the smoke and the sky.
Does Iran’s state media use Photoshop? The charge has been leveled before. So far, though, it can’t be said with any certainty whether there is any official Iranian involvement in this instance. Sepah apparently published the three-missile version of the image today without further explanation.
For its part, Agence France-Presse retracted its four-missile version this morning, saying that the image was “apparently digitally altered” by Iranian state media. The fourth missile “has apparently been added in digital retouch to cover a grounded missile that may have failed during the test,” the agency said. Later, it published an article quoting several experts backing that argument.
Along with major doubts about the image, American intelligence officials had larger questions on exactly how many missiles were fired. One defense official said that “at least 7, and possibly up to 10″ had taken flight in all, though the intelligence data was still being sorted out. Only one of them was said to be a Shahab 3.
In a sentiment no doubt echoed by news organizations everywhere, an MSNBC editor acknowledged that the four-missile picture was initially welcomed with open arms. “As the media editor working the msnbc.com home page yesterday, I was frustrated with the quality of a fuzzy video image we published of the Iranian missile launch,” said Rich Shulman, the network’s associate multimedia editor. “So I was thrilled when the top image crossed the news wires.”
Mark Mazzetti contributed reporting from Washington.
Many Americans are struggling to make ends meet because of $75 and $100 trips to the gas station.
Executives at oil companies are getting rich because of those same trips. And what do those CEOs have to say for themselves?
"It's not our fault" -- or something along those lines.
Big Oil CEOs are pulling down record pay even as their companies tacitly concede they didn't do anything extra to earn it. When anyone asks why gasoline costs $4.50 a gallon, they cite factors beyond their control, such as speculators or global demand.
That doesn't stop these CEOs from cashing in. Their pay hinges largely on two things: profit and stock price. It's no surprise that an oil company's profit would rise with the price of oil, as would its stock price. The CEO doesn't have to be a genius. A pulse will suffice.
"They are getting a gift for being in the right place and being lucky," said Mark Van Clieaf of MVC Associates International, a consulting company that advises boards on pay for performance.
And don't buy the pleas of innocence. These CEOs negotiated pay packages that compensate them with millions of dollars during normal years -- and during times like now, stock awards propel their pay into the stratosphere.
Chief executives at big oil companies such as $INX) companies, according to The Corporate Library. Plus, these energy company CEOs are now sitting on hundreds of millions of dollars worth of incentive stock and options grants., and earned from $15 million to $21.7 million last year, well above the $9.9 million median for CEOs at S&P 500 (
They drink your milkshakeExxonMobil chief Rex Tillerson made $21.7 million last year, according to Equilar, an executive compensation research firm.
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Why did Tillerson make so much more than the average CEO last year? By the company's own admission, you can't attribute it to his management skills. Instead, Tillerson realized an enormous amount of wealth because much of his pay was linked to short-term metrics such as increases in ExxonMobil's stock price and net income, factors driven primarily by the price of oil.
After all, when it comes to the price of oil or gasoline at the pump, Tillerson or ExxonMobil have little control, said J. Stephen Simon, a company senior vice president and board member, when he testified in May before the Senate Judiciary Committee.
"It's not our profitability in this business that's driving the higher price that consumers pay. It's the raw materials that we have to purchase on the open market to produce those products for our customers," said Simon, blaming scarcity and geopolitical uncertainty.
ExxonMobil said executive pay isn't all linked to short-term metrics, though. Last year, for example, 60% of Tillerson's compensation consisted of restricted stock that wouldn't vest for 10 years or until retirement, whichever period was longer.
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It's popular to blame big oil-price gains on conspiracies, but the truth is that fundamentals are to blame, MSN Money's Jim Jubak says. Production is lagging, and that weak oil supply is driving up prices.
The company also links some portion of executive pay to strategy development and to improvements to safety, health and environmental impact. But it didn't say how much.
At Chevron, chief David O'Reilly made $15.7 million last year, according to Equilar, including $3.6 million in bonus pay. O'Reilly had $26.3 million worth of unvested stock grants at the end of the year.
Like Tillerson, much of O'Reilly's salary is linked to short-term metrics that include earnings and the movement of the stock price.
Chevron Vice Chairman Peter Robertson, in essence, conceded O'Reilly's bonus pay had little or nothing to do with his management skills. That's because, he said, Chevron isn't to blame for the soaring cost of crude in the world markets. Yet it's those same high crude prices that helped Chevron perform so well last year, leading to executive bonuses.
Chevron said O'Reilly got no increase in base pay last year and that it links executive pay to company performance relative to peers. However, the company makes it difficult to judge how challenging this hurdle is because it does not reveal how much the company has to outperform peers for Chevron executives to get bonuses.
Robertson drew laughs during the Judiciary Committee hearing when he said he couldn't remember whether he made more than $4 million. "You know, if I made over $4 million a year, I probably wouldn't remember either," Sen. Patrick Leahy, D-Vt., responded.
ConocoPhillips CEO James Mulva made $15 million last year, including a $3.4 million bonus. He also had at least $234 million worth of unvested performance stock, thanks to an increase in the company's stock price to $90 a share from $68 during 2007.
Like Chevron and Exxon Mobil, ConocoPhillips readily concedes Mulva benefited from rising oil prices. His pay is tied to shareholder return, return on capital and income per barrel of oil, factors that are affected by the price of oil.
Profiteering concernsPart of the problem is that U.S. oil companies aren't investing enough in the millions of acres of "untapped" lease holdings they have in the U.S., said Benjamin Cardin, D-Md., one of the senators who questioned energy company execs in the Judiciary Committee hearing in May. He also thinks they fail to put enough money into developing renewable-energy resources. Spending more in both of these areas could increase the security of the country's energy supplies or bring down the cost of energy in the long run, he said.
Cardin believes legislation may be needed to impose a "windfall" tax if oil companies fail to invest more in the U.S. and in renewable energy.
"They like the status quo," he said. "They are very happy with this. If energy prices go up even more, they are going to make even more money. I do think there is a legitimate concern about top management profiteering from the economic vulnerabilities of our country."
Exploration investments often take many years to pay off, said consultant Van Clieaf, whereas the executives' pay packages are typically tied to relatively short, three-year averages. "There is a disconnect," he said.
To fix the problem, he said, more compensation should be linked to long-term factors such as the average growth in proven reserves over three to five years, measures of how much is spent on exploration and whether it pans out, or consistent increases in the percentage of profits from renewable-energy sources.
Another part of the problem is that the rewards oil execs are enjoying now were set up years ago, when few people thought oil prices would go up so much.
"I don't think anybody ran a sensitively analysis and asked what would happen if oil went to $100 or $150 a barrel," Cardin said. "If they had, they would have said, 'Oh, shoot, that executive is going to get that much?'"
The energy companies all told the Judiciary Committee that they are doing their part.
Chevron's Robertson said his company's capital budget for new energy projects this year is $23 billion, triple what the company spent in 2004. "We're an investing machine," he said. He also said Chevron is a leading producer of geothermal energy.
ConocoPhillips' Lowe said his company has reinvested 106% of its income on average over the past six years to increase oil and gas supplies, expand refining capacity, and develop renewable fuels.
ExxonMobil's Simon said the company had invested $355 billion in new energy projects over the past five years, "which is more than we earned during this same period." But it's still not a huge number compared with its $1.7 trillion in revenues during that period.
Chevron does appear to be reinvesting in development at a decent rate. But in the cases of ConocoPhillips and ExxonMobil, I'm not buying it. The latter two are giving most of their newfound wealth back to shareholders rather than deploying it to find new reserves.
That's good for shareholders, including the well-heeled CEOs. But it doesn't do much to bring down energy prices by increasing production levels.
At the time of publication, Michael Brush did not own or control shares of any company mentioned in this column.
WASHINGTON, July 9 (Reuters) - Scientists working at California's San Andreas Fault have detected subtle geological changes occurring hours before an earthquake that could enable them to develop an early-warning system aimed at saving lives.
Their instruments detected geological changes most likely caused by tiny fractures forming in the rock ahead of an impending earthquake due to stress in the Earth's crust, according to seismologist Paul Silver of the Carnegie Institution in Washington, one of the researchers.
"It's the opening up of cracks before an earthquake," Silver said in a telephone interview.
The research, published on Wednesday in the journal Nature, was conducted using wells dug 0.6 miles (1 km) deep into the quake-prone fault at Parkfield, California.
Their equipment generated and recorded seismic waves before, during and after two small quakes, allowing them to observe these small, predictive geological changes.
In the first case, the geological signals occurred 10 hours before a magnitude 3 quake in December 2005. The same sort of signals also occurred two hours before a magnitude 1 quake that happened five days later, the researchers said.
"We are very encouraged by these observations, and we are planning for more experiments to confirm whether these changes are part of the general physical processes before an earthquake," seismologist Fenglin Niu of Rice University in Houston said in a telephone interview.
Scientists have made strides in understanding earthquakes, but finding changes in the Earth's crust that could allow for an advance prediction has remained difficult.
Current earthquake warning systems provide at best a few seconds notice before an earthquake strikes.
The findings were published just two months after a powerful earthquake in China. The May 12 quake in Sichuan province killed about 80,000 people, with many killed when buildings such as schools collapsed.
"To get the point where we have a practical early warning system for earthquakes, that's still a ways off -- 10 years, maybe 20," Silver said.
If more research finds this effect to be pervasive before earthquakes, these findings may make that goal attainable, the researchers said.
"No matter how much time you have, there's something you can do. Even with a few seconds, you can automatically turn off gas valves. You may even be able to get a hard hat on your head or run outside of a building," Silver said.
"But with something on the order of 10 hours, you could perhaps evacuate populations, you could certainly get people out of city centers and areas that are deemed dangerous."
(Editing by Maggie Fox and Sandra Maler)
Three times in the past two days, Sen. John McCain has proclaimed that 300 economists have enthusiastically endorsed his "Jobs for America" economic plan. The number, line, and message are highly misleading.
On Wednesday, Politico reported that a handful of those 300 had expressed reservations with McCain's "policy prescriptions." One wasn't even supporting the Arizona Republican for president.
Nevertheless, McCain again touted the support of the economists during a townhall event last night. So the Huffington Post decided to dig in a bit further, sending emails to roughly 150 members of the list. The response, from roughly a fifth of that group, was telling. Many of the economists whom McCain cited were generally supportive of his economic goals. But their support was tempered by strong objections towards specific proposals as well as deeper skepticism to the non-economic components of McCain's candidacy. Many felt compelled to clarify that their show of support for the Arizona Republican's economic proposals shouldn't be misinterpreted as an endorsement of his presidential campaign.
"Yes, I support the Jobs for America policy proposal, especially a simplified tax code, lower restrictions on trade, and energy development," said Michael Connolly, Professor of Economics, University of Miami. "[But] I am worried that continuing the wars in Iraq and Afghanistan will tear apart our social fabric and defeat any economic proposal to reduce the deficit and stimulate growth. Guns are crowding out butter."
This past week, the McCain campaign presented the list of the economists as backing a general statement outlining the Senator's economic objectives. But when asked to weigh in on specific proposals -- as opposed to the 403-word executive summary -- many in the group shuddered. Among individual policies, McCain's idea of a gas tax holiday was the one most scoffed at with nary an economist offering a defense.
"It would do nothing but increase the quantity demanded - and it wouldn't increase supply," wrote Dave Garthoff of the University of Akron. "So price would just go back up again until demand and supply approached equilibrium, and everyone would blame the oil companies."
Others, meanwhile, said they were not supportive of McCain's pledge to balance the budget by 2013. "No, I think some flexibility to run deficits and surpluses, although I agree that the deficit is too large," said Glenn MacDonald, Distinguished Professor of Economics and Strategy at Washington University in St. Louis.
One economist said his endorsement was for the "general economic principles only" before expressing disagreement with some of plan's specifics.
Do you support making the 2001 tax cuts permanent?," asked the Huffington Post. "No," replied Peter J Van Blokland, University of Florida.
Do you recommend a temporary gas tax holiday to address rising energy costs? "No."
Do you support a pledge to balance the budget by 2013? "No."
Do you consider your participation in the letter an endorsement of McCain for president? "No."
For several of the 300, McCain's economic proposals were overshadowed by their concerns about his foreign policy. In addition to Connolly, Professor Tom Lehman, of Indiana Wesleyan University, declined to endorse McCain's presidential candidacy.
"I have serious disagreements with McCain on the foreign policy issues, particularly the Iraq War," he said. "However, I support McCain's general approach to issues of economics, specifically his support of free trade, retention of tax cuts, balanced budget, and general free-market philosophy."
Others thought McCain was not conservative enough. One economist said he would not be supporting the presumptive Republican nominee because he (the economist) was a Libertarian. Stephen J. Dempsey, a professor at the University of Vermont's School of Business Administration, decried McCain's proposals as baby steps.
"Yes, I support making the tax cuts permanent," he wrote. "I think a gas tax holiday is a band-aid on an amputated limb. I am in full support of balancing the budget by reducing government expenditures on wasteful programs. My signing the letter is not an endorsement of McCain. We could have done much better (i.e., a true conservative)."
To be sure, more than a handful of those who responded to the Huffington Post said that their endorsement of the Jobs for America plan was, by extension, a pledge of support for McCain's candidacy. (This shouldn't come as a major surprise -- a review found that 166 of McCain's economist backers also signed a letter in 2000 trumpeting George W. Bush's economic agenda.)
"Speaking for myself only," wrote Martin Eichenbaum, Ethel and John Lindgren Professor of Economics at Northwestern University. "I support the general principals advocated by Senator McCain as well as many, but not necessarily all, of the detailed policy proposals he has made. I would very much like to balance the budget by 2013. I certainly consider my participation in the letter to be an endorsement of Senator McCain for president."
But clearly the list that the McCain campaign presented does not consist of enthusiastic endorsers. If anything it seems -- from this un-scientific sampling of responders -- that the economists who plan on voting for the Arizona Republican are doing so because he represents, for them, the lesser of two evils.
That is, except for Charles Rowley, a professor at George Mason University, who isn't an American citizen.
"I view my endorsement as an endorsement of the general economic principles so far outlined by John McCain," he wrote. "Since Barack Obama proposes significant increases in the size of government, significant hikes in tax rates, ongoing toleration for pork-barrel legislation, long-term budget deficits and, most seriously, a significant shift towards trade protection, evidently, in terms of the general principles outlined in the letter that I have endorsed, I must prefer John McCain as a presidential candidate in an imperfect world. However, because I am a British citizen, I cannot vote in this election."