2nd Amendment Watch

The Myth of 90 Percent: Only a Small Fraction of Guns in Mexico Come From U.S.

fairdawg — Thu, 02 Apr 2009 17:05:54 +0000

It looks like Obama and A.G. Holder will have to find a new argument for the reinstating of the Assault Weapons Ban.

While 90 percent of the guns traced to the U.S. actually originated in the United States, the percent traced to the U.S. is only about 17 percent of the total number of guns reaching Mexico.

By William La Jeunesse and Maxim Lott

FOXNews.com

Thursday, April 02, 2009

EXCLUSIVE: You’ve heard this shocking “fact” before — on TV and radio, in newspapers, on the Internet and from the highest politicians in the land: 90 percent of the weapons used to commit crimes in Mexico come from the United States.

– Secretary of State Hillary Clinton said it to reporters on a flight to Mexico City.

– CBS newsman Bob Schieffer referred to it while interviewing President Obama.

– California Sen. Dianne Feinstein said at a Senate hearing: “It is unacceptable to have 90 percent of the guns that are picked up in Mexico and used to shoot judges, police officers and mayors … come from the United States.”

– William Hoover, assistant director for field operations at the Bureau of Alcohol, Tobacco, Firearms and Explosives, testified in the House of Representatives that “there is more than enough evidence to indicate that over 90 percent of the firearms that have either been recovered in, or interdicted in transport to Mexico, originated from various sources within the United States.”

There’s just one problem with the 90 percent “statistic” and it’s a big one:

It’s just not true.

In fact, it’s not even close. By all accounts, it’s probably around 17 percent.

What’s true, an ATF spokeswoman told FOXNews.com, in a clarification of the statistic used by her own agency’s assistant director, “is that over 90 percent of the traced firearms originate from the U.S.”

But a large percentage of the guns recovered in Mexico do not get sent back to the U.S. for tracing, because it is obvious from their markings that they do not come from the U.S.

“Not every weapon seized in Mexico has a serial number on it that would make it traceable, and the U.S. effort to trace weapons really only extends to weapons that have been in the U.S. market,” Matt Allen, special agent of U.S. Immigration and Customs Enforcement (ICE), told FOX News.

A Look at the Numbers

In 2007-2008, according to ATF Special Agent William Newell, Mexico submitted 11,000 guns to the ATF for tracing. Close to 6,000 were successfully traced — and of those, 90 percent — 5,114 to be exact, according to testimony in Congress by William Hoover — were found to have come from the U.S.

But in those same two years, according to the Mexican government, 29,000 guns were recovered at crime scenes.

In other words, 68 percent of the guns that were recovered were never submitted for tracing. And when you weed out the roughly 6,000 guns that could not be traced from the remaining 32 percent, it means 83 percent of the guns found at crime scenes in Mexico could not be traced to the U.S.

So, if not from the U.S., where do they come from? There are a variety of sources:

– The Black Market. Mexico is a virtual arms bazaar, with fragmentation grenades from South Korea, AK-47s from China, and shoulder-fired rocket launchers from Spain, Israel and former Soviet bloc manufacturers.

– Russian crime organizations. Interpol says Russian Mafia groups such as Poldolskaya and Moscow-based Solntsevskaya are actively trafficking drugs and arms in Mexico.

- South America. During the late 1990s, the Revolutionary Armed Forces of Colombia (FARC) established a clandestine arms smuggling and drug trafficking partnership with the Tijuana cartel, according to the Federal Research Division report from the Library of Congress.

– Asia. According to a 2006 Amnesty International Report, China has provided arms to countries in Asia, Africa and Latin America. Chinese assault weapons and Korean explosives have been recovered in Mexico.

– The Mexican Army. More than 150,000 soldiers deserted in the last six years, according to Mexican Congressman Robert Badillo. Many took their weapons with them, including the standard issue M-16 assault rifle made in Belgium.

– Guatemala. U.S. intelligence agencies say traffickers move immigrants, stolen cars, guns and drugs, including most of America’s cocaine, along the porous Mexican-Guatemalan border. On March 27, La Hora, a Guatemalan newspaper, reported that police seized 500 grenades and a load of AK-47s on the border. Police say the cache was transported by a Mexican drug cartel operating out of Ixcan, a border town.

‘These Don’t Come From El Paso’

Ed Head, a firearms instructor in Arizona who spent 24 years with the U.S. Border Patrol, recently displayed an array of weapons considered “assault rifles” that are similar to those recovered in Mexico, but are unavailable for sale in the U.S.

“These kinds of guns — the auto versions of these guns — they are not coming from El Paso,” he said. “They are coming from other sources. They are brought in from Guatemala. They are brought in from places like China. They are being diverted from the military. But you don’t get these guns from the U.S.”

Some guns, he said, “are legitimately shipped to the government of Mexico, by Colt, for example, in the United States. They are approved by the U.S. government for use by the Mexican military service. The guns end up in Mexico that way — the fully auto versions — they are not smuggled in across the river.”

Many of the fully automatic weapons that have been seized in Mexico cannot be found in the U.S., but they are not uncommon in the Third World.

The Mexican government said it has seized 2,239 grenades in the last two years — but those grenades and the rocket-propelled grenades (RPGs) are unavailable in U.S. gun shops. The ones used in an attack on the U.S. Consulate in Monterrey in October and a TV station in January were made in South Korea. Almost 70 similar grenades were seized in February in the bottom of a truck entering Mexico from Guatemala.

“Most of these weapons are being smuggled from Central American countries or by sea, eluding U.S. and Mexican monitors who are focused on the smuggling of semi-automatic and conventional weapons purchased from dealers in the U.S. border states of Texas, New Mexico, Arizona and California,” according to a report in the Los Angeles Times.

Boatloads of Weapons

So why would the Mexican drug cartels, which last year grossed between $17 billion and $38 billion, bother buying single-shot rifles, and force thousands of unknown “straw” buyers in the U.S. through a government background check, when they can buy boatloads of fully automatic M-16s and assault rifles from China, Israel or South Africa?

Alberto Islas, a security consultant who advises the Mexican government, says the drug cartels are using the Guatemalan border to move black market weapons. Some are left over from the Central American wars the United States helped fight; others, like the grenades and launchers, are South Korean, Israeli and Spanish. Some were legally supplied to the Mexican government; others were sold by corrupt military officers or officials.

The exaggeration of United States “responsibility” for the lawlessness in Mexico extends even beyond the “90-percent” falsehood — and some Second Amendment activists believe it’s designed to promote more restrictive gun-control laws in the U.S.

In a remarkable claim, Auturo Sarukhan, the Mexican ambassador to the U.S., said Mexico seizes 2,000 guns a day from the United States — 730,000 a year. That’s a far cry from the official statistic from the Mexican attorney general’s office, which says Mexico seized 29,000 weapons in all of 2007 and 2008.

Chris Cox, spokesman for the National Rifle Association, blames the media and anti-gun politicians in the U.S. for misrepresenting where Mexican weapons come from.

“Reporter after politician after news anchor just disregards the truth on this,” Cox said. “The numbers are intentionally used to weaken the Second Amendment.”

“The predominant source of guns in Mexico is Central and South America. You also have Russian, Chinese and Israeli guns. It’s estimated that over 100,000 soldiers deserted the army to work for the drug cartels, and that ignores all the police. How many of them took their weapons with them?”

But Tom Diaz, senior policy analyst at the Violence Policy Center, called the “90 percent” issue a red herring and said that it should not detract from the effort to stop gun trafficking into Mexico.

“Let’s do what we can with what we know,” he said. “We know that one hell of a lot of firearms come from the United States because our gun market is wide open.”

Church Shooting Suspect Had Arsenal in Bedroom

fairdawg — Thu, 26 Mar 2009 12:36:21 +0000

Wednesday, March 11, 2009

ST. LOUIS —

A man accused of running down and shooting an Illinois pastor to death mid-sermon left an arsenal of guns in his bedroom as well as an index card marked “Last Day Will.”

The arsenal in accused gunman Terry Sedlacek’s room included two 12-gauge shotguns, a rifle and a box of 550 .22-caliber bullets, according to court documents filed Tuesday.

The inventory of items seized from Sedlacek’s Troy, Ill., home also lists the “Last Day Will” index card but does not detail what else was written on it. Sedlacek’s day planner also singled out Sunday as “death day,” prosecutor William Mudge has said.

Authorities have said Sedlacek, 27, fired four times from a .45-caliber Glock handgun, hitting the Rev. Fred Winters once with a bullet that ripped through the preacher’s heart before he collapsed and bled to death Sunday at First Baptist Church in Maryville, Ill.

Authorities said Sedlacek also brought to the church enough ammunition to perhaps kill 30 people.

Sedlacek is charged with first-degree murder and aggravated battery, the latter charges related to his alleged wounding with a knife of two congregants who wrestled him to the ground and subdued him after the shooting.

Sedlacek remained in serious condition Tuesday in a St. Louis hospital with self-inflicted stab wounds to the throat. One of the injured congregants, Terry Bullard, was upgraded to fair condition.

Investigators say they still haven’t pinpointed why Sedlacek allegedly strolled into the church during its early Sunday service, packing a pistol and 30 bullets — 10 in each of the three magazines he brought along.

A new affidavit by Illinois State Police detective James Walker said Sedlacek entered the sanctuary and walked down an aisle to the front of the church toward Winters, 45, who addressed him.

Walker wrote that Sedlacek then fired at Winters; investigators have said the first bullet clipped the top of the Bible the preacher held, sending pieces of it spraying like confetti and appearing to many of the roughly 150 onlookers to be part of a skit.

Winters then bolted toward the edge of the stage with Sedlacek running parallel to him, Walker wrote.

“Pastor Winters then jumped from the stage where he landed on the ground. Sedlacek then placed himself next to the pastor and fired multiple shots, striking Winters,” Walker’s affidavit read.

Investigators have said Sedlacek fired four rounds altogether before his gun jammed. After chasing and mortally wounding Winters, Walker wrote, Sedlacek tried to flee but was subdued by Bullard and Keith Melton.

“The way I feel in my heart is my pastor needed help and I had to help. I can’t relate that back to anything. That’s just how I feel about it,” Melton said. “I’ve been in car accidents before where it seems like it’s slow motion. But this was over so fast, it’s harder to make sense of it.”

It remains unclear whether Sedlacek even knew Winters, a married father of two who led First Baptist Church for nearly 22 years.

Authorities have not revealed the verbal exchange between the gunman and Winters, who was wearing a body microphone. Mudge, Madison County’s state’s attorney, has listened to the audio recording but won’t publicly discuss it, his spokeswoman Stephanee Smith said Tuesday.

Smith also said Sedlacek has previously been issued a firearm owner’s identification card, though Illinois State Police spokesman Scott Compton said Sedlacek did not have a valid one.

Sedlacek attended Southwestern Illinois College in Granite City from August of 2006 until May of 2008, pursuing an associate’s degree in computer information systems, but never graduated, registration clerk Julie Boeschen said Tuesday.

Calls to the home he shared with his mother and stepfather went unanswered Tuesday, as have repeated visits to the house since the shooting.

Sedlacek’s attorney, Ron Slemer, has told the Belleville News-Democrat that his client’s family is “very sorry for the pastor’s congregation.” Slemer also has said Sedlacek has deteriorated both mentally and physically since contracting Lyme disease.

The attorney has not returned numerous messages left by The Associated Press at his home and office.

Clinton: U.S. Shares Blame in Mexico Drug Wars (So we definitely need to reinstate the Assault Weapons Ban…with new provisions)

fairdawg — Thu, 26 Mar 2009 03:57:53 +0000

Clinton says the United States shares responsibility with Mexico for dealing with violence now spilling across the border and promised cooperation to improve security on both sides.

Wednesday, March 25, 2009

U.S. Secretary of State Hillary Rodham Clinton on Wednesday pledged to stand “shoulder to shoulder” with Mexico in its violent struggle against drug cartels, and acknowledged the U.S. shares blame because of its demand for drugs and supply of weapons.She said the United States shares responsibility with Mexico for dealing with violence now spilling across the border and promised cooperation to improve security on both sides.

“The criminals and kingpins spreading violence are trying to corrode the foundations of law, order, friendship and trust between us that support our continent. They will fail,” she told Mexican Foreign Relations Secretary Patricia Espinosa. “We will stand shoulder to shoulder with you.”

On Tuesday, the Obama administration pledged to send more money, technology and manpower to secure the border in the U.S. Southwest and help Mexico battle the cartels. Clinton also said Wednesday that the White House will seek an additional $80 million to help Mexico buy Blackhawk helicopters.

All that is in addition to a three-year, $1.4 billion Bush administration-era program to support Mexico’s efforts. Congress already has approved $700 million. President Barack Obama has said he wants to revamp the initiative.

Obama said Tuesday he wanted the U.S. to do more to prevent guns and cash from illicit drug sales from flowing into Mexico. But Clinton’s remarks appeared more forceful in recognizing the U.S. share of the blame. In the past, particularly under the Bush administration, Mexican officials have complained that Washington failed to acknowledge the extent that the U.S. drug demand and weapons smuggling fuels the violence.

“I feel very strongly we have a co-responsibility,” Clinton told reporters, adding: “Our insatiable demand for illegal drugs fuels the drug trade. Our inability to prevent weapons from being illegally smuggled across the border to arm these criminals causes the deaths of police officers, soldiers and civilians.”

Criminals are outgunning law enforcement officials, she said, referring to guns and military-style equipment such as night-vision goggles and body armor that the cartels are smuggling from the U.S.

“Clearly, what we have been doing has not worked and it is unfair for our incapacity … to be creating a situation where people are holding the Mexican government and people responsible,” she said. “That’s not right.”

Clinton said she would repeat her acknowledgment as loudly and as often as needed during her two-day visit to Mexico City and the northern city of Monterrey. Officials said her priorities included encouraging the administration of Mexican President Felipe Calderon to increase its battle against rampant corruption by promoting police and judicial reform.

Just hours before she arrived, the Mexican army announced it had captured one of the country’s most-wanted smugglers, a man accused of controlling the flow of drugs through Monterrey for the powerful Beltran-Leyva cartel.

The measures outlined Tuesday include increasing the number of immigrations and customs agents, drug agents and antigun-trafficking agents operating along the border, as well as sending more U.S. officials to work inside Mexico.

Those measures fall short of calls from some U.S. states that troops be deployed to prevent further spillover of the violence, which has surged since Calderon stepped up his government’s battle against the cartels.

1 dead, one injured in Miami Burger King shooting

fairdawg — Wed, 25 Mar 2009 02:22:46 +0000

By ROBERT SAMUELS AND JENNIFER LEBOVICH

jlebovich@MiamiHerald.com

One man was killed and another seriously wounded in a shootout inside a Miami Burger King on Tuesday, officials said.

Police said a man wearing a ski mask walked into the store at Biscayne Boulevard and 54th Street and demanded money from a clerk.

A customer, who has a concealed weapons permit, pulled a gun, said Officer Jeff Giordano, a Miami police spokesman.

The customer and robber exchanged fire.

The robber was shot dead at the scene.

The customer, who had several gunshot wounds, was taken to Ryder Trauma Center in serious but stable condition, said Lt. Ignatius Carroll, a Miami Fire Rescue spokesman.

At about 4 p.m., officials got several 911 calls reporting people shot inside the Burger King.

U.S. Seeks Expanded Power to Seize Firms

fairdawg — Wed, 25 Mar 2009 02:22:11 +0000

Goal Is to Limit Risk to Broader Economy

By Binyamin Appelbaum and David Cho
Washington Post Staff Writers
Tuesday, March 24, 2009; A01

The Obama administration is considering asking Congress to give the Treasury secretary unprecedented powers to initiate the seizure of non-bank financial companies, such as large insurers, investment firms and hedge funds, whose collapse would damage the broader economy, according to an administration document.

The government at present has the authority to seize only banks.

Giving the Treasury secretary authority over a broader range of companies would mark a significant shift from the existing model of financial regulation, which relies on independent agencies that are shielded from the political process. The Treasury secretary, a member of the president’s Cabinet, would exercise the new powers in consultation with the White House, the Federal Reserve and other regulators, according to the document.

The administration plans to send legislation to Capitol Hill this week. Sources cautioned that the details, including the Treasury’s role, are still in flux.

Treasury Secretary Timothy F. Geithner is set to argue for the new powers at a hearing today on Capitol Hill about the furor over bonuses paid to executives at American International Group, which the government has propped up with about $180 billion in federal aid. Administration officials have said that the proposed authority would have allowed them to seize AIG last fall and wind down its operations at less cost to taxpayers.

The administration’s proposal contains two pieces. First, it would empower a government agency to take on the new role of systemic risk regulator with broad oversight of any and all financial firms whose failure could disrupt the broader economy. The Federal Reserve is widely considered to be the leading candidate for this assignment. But some critics warn that this could conflict with the Fed’s other responsibilities, particularly its control over monetary policy.

The government also would assume the authority to seize such firms if they totter toward failure.

Besides seizing a company outright, the document states, the Treasury Secretary could use a range of tools to prevent its collapse, such as guaranteeing losses, buying assets or taking a partial ownership stake. Such authority also would allow the government to break contracts, such as the agreements to pay $165 million in bonuses to employees of AIG’s most troubled unit.

The Treasury secretary could act only after consulting with the president and getting a recommendation from two-thirds of the Federal Reserve Board, according to the plan.

Geithner plans to lay out the administration’s broader strategy for overhauling financial regulation at another hearing on Thursday.

The authority to seize non-bank financial firms has emerged as a priority for the administration after the failure of investment house Lehman Brothers, which was not a traditional bank, and the troubled rescue of AIG.

“We’re very late in doing this, but we’ve got to move quickly to try and do this because, again, it’s a necessary thing for any government to have a broader range of tools for dealing with these kinds of things, so you can protect the economy from the kind of risks posed by institutions that get to the point where they’re systemic,” Geithner said last night at a forum held by the Wall Street Journal.

The powers would parallel the government’s existing authority over banks, which are exercised by banking regulatory agencies in conjunction with the Federal Deposit Insurance Corp. Geithner has cited that structure as the model for the government’s plans.

EPA Says Global Warming a Public Danger (LOL)

fairdawg — Wed, 25 Mar 2009 02:21:35 +0000

Declaring that greenhouse gases are a significant threat to human health, the Environmental Protection Agency proposes regulating carbon dioxide and other greenhouse gases as pollutants.

Monday, March 23, 2009

Top of Form

WASHINGTON — The White House is reviewing a proposed finding by the Environmental Protection Agency that global warming is a threat to public health and welfare.

Such a declaration would be the first step to regulating carbon dioxide and other greenhouse gases under the Clean Air Act and could have broad economic and environmental ramifications. It also would likely spur action by Congress to address climate change more broadly.

The White House acknowledged Monday that the EPA had transmitted its proposed finding on global warming to the Office of Management and Budget, but provided no details. It also cautioned that the Obama administration, which sees responding to climate change a top priority, nevertheless is ready to move cautiously when it comes to actually regulating greenhouse gases, preferring to have Congress act on the matter.

The Supreme Court two years ago directed the EPA to decide whether greenhouse gases, especially carbon dioxide from burning fossil fuels, pose a threat public health and welfare because they are warming the earth. If such a finding is made, these emissions are required to be regulated under the Clean Air Act, the court said.

“I think this is just the step in that process,” said White House Press Secretary Robert Gibbs, noting the Supreme Court ruling. Another White House official, speaking anonymously in deference to Gibbs, predicted “a long process” before any rules would be expected to be issued on heat-trapping emissions.

But several congressional officials, also speaking on condition of anonymity because the draft declaration had not been made public, said the transmission makes clear the EPA is moving to declare carbon dioxide and other greenhouse gases a danger to public health and welfare and views them as ripe for regulation under the Clean Air Act.

Such a finding “will officially end the era of denial on global warming,” said Rep. Ed Markey, D-Mass., whose Energy and Commerce subcommittee is crafting global warming legislation. He said such an endangerment finding is long overdue because of the Bush administration’s refusal to address the issue.

The EPA action “signals that the days of ignoring this pressing issue are over,” said Sen. Barbara Boxer, D-Calif., whose Senate committee is working on a climate bill.

Many business leaders argue, as did President Bush, that the Clean Air Act is ill suited to deal with climate change and that regulating carbon dioxide would hamstring economic growth.

“It will require a huge cascade of (new clean air) permits” and halt a wide array of projects, from building coal plants to highway construction, including many at the heart of President Barack Obama’s economic recovery plan, said Bill Kovacs, a vice president for environmental and technology issues at the U.S. Chamber of Commerce.

Abigail Dillen, an attorney for the environmental advocacy group Earthjustice, which is involved in a number of lawsuits challenging permits for new coal plants, dismissed the dire economic warnings from business groups about carbon dioxide regulation.

“It’s to their interest to say the sky is falling, but it’s not. … The truth is we’ve never had to sacrifice air quality to maintain a healthy economy. The EPA has discretion to do this in a reasonable way.”

An internal EPA planning document that surfaced recently suggests the agency would like to have a final endangerment finding by mid-April. But officials have made clear actual regulations are unlikely to come immediately and involve a lengthy process with public comment.

Gibbs, when asked about the EPA document Monday, emphasized that “the president has made quite clear” that he prefers to have the climate issue addressed by Congress as part of a broad, mandatory limit on heat-trapping emissions.

But environmentalists said the significance of moving forward with the long-delayed endangerment issue should not be understated.

“This is historic news,” said Frank O’Donnell who heads Clean Air Watch, an advocacy group. “It will set the stage for the first-ever national limits on global warming pollution and is likely to help light a fire under Congress to get moving.”

Department of Defense directive relating to Obama’s “Civilian Paramilitary Force”

fairdawg — Wed, 25 Mar 2009 02:20:49 +0000

Here is a link to the recently promulgated Department of Defense directive pertaining to Obama’s “Civilian Paramilitary Force.” This one relates to civilian emergency services that will supply combat support, as well as other things. It’s a PDF file and is about 20 pages long. Make sure you have Adobe Acrobat Reader.

http://www.dtic.mil/whs/directives/corres/pdf/140410p.pdf

Geithner Aides Worked With AIG for Months on Bonuses

fairdawg — Wed, 25 Mar 2009 02:20:19 +0000

By MICHAEL M. PHILLIPS and SUDEEP REDDY

WASHINGTON — Since the fall, senior aides to Timothy Geithner have closely dealt with American International Group Inc. on compensation issues including bonuses, both from his time as president of the Federal Reserve Bank of New York and as Treasury secretary.

The extent of their involvement, which wasn’t widely known, raises fresh questions about whether Mr. Geithner could have known earlier about AIG’s $165 million in bonus payments. When the bonuses sparked a political firestorm last week, Mr. Geithner said he learned about their full scope in early March, just days before they were paid.

Mr. Geithner and Federal Reserve Chairman Ben Bernanke will be grilled by Congress on Tuesday in a hearing that is likely to focus heavily on AIG. The flap has prompted lawmakers to seek curbs on an array of bonuses, tested the Obama administration and undermined Mr. Geithner’s standing as he attempts to implement measures to stabilize the financial system.

Treasury officials say the department’s staff kept Mr. Geithner in the dark until March 10. “Secretary Geithner, who has been actively engaged in shaping and executing the president’s broad economic agenda, takes full responsibility for not being aware of these programs” before that date, Treasury spokesman Isaac Baker said Sunday in a written response to questions.

This account of how Mr. Geithner and his aides were apprised of the AIG bonuses was based on interviews with government officials, lawmakers and congressional testimony.

As New York Fed president, Mr. Geithner was central to AIG’s initial $85 billion bailout in September, which was carried out in a tumultuous four-day period.

After Edward Liddy took over as AIG chief executive, the company hired consultants to look at its payment plans around the world. One of Mr. Geithner’s top bank supervisors at the New York Fed, Sarah Dahlgren, became the government’s lead overseer of AIG. She sat in on AIG board meetings, joined at times by other top Fed staffers, and also participated in compensation-committee meetings. It isn’t clear whether the issue rose to the board level until this month.

AIG received an expanded government rescue in October and another in November, bringing the total to about $150 billion, including $40 billion in Treasury funds.

In early November, the Fed, outside auditor Ernst & Young and AIG officials began examining through a committee the bonuses set to be paid to AIG’s financial-products division, including those that sparked last week’s furor. The committee concluded that the bonuses, which were in contracts signed before the government takeover, couldn’t be legally blocked, according to a person familiar with the matter. The Obama administration has since agreed with that legal interpretation.

AIG cited the retention plan in a public filing in early November, and Fed officials were aware AIG planned to pay $55 million in bonuses to financial-products employees the next month. Mr. Geithner remained involved in major AIG matters, seeking updates from Ms. Dahlgren and other top Fed staffers. He recused himself from dealing with aid to specific companies around the time of his Nov. 24 nomination as Treasury secretary.

Fed officials declined to make Ms. Dahlgren available to comment on the bonus issue.

Lawmakers were also scrutinizing AIG’s operations. Some raised the matter of the AIG bonuses at a hearing in December where they grilled Neel Kashkari, a Bush Treasury official who remains at the department.

In late January, news outlets reported that AIG planned a total of $450 million in bonuses to help retain employees winding down the complex trades in the unit at the heart of the company’s collapse. In the weeks that followed, Mr. Liddy and other AIG officials briefed some lawmakers about the retention payments and other aspects of the AIG rescue.

On Feb. 28, as government officials worked on a fourth AIG bailout, the New York Federal Reserve Bank emailed Stephen Albrecht, a Treasury lawyer, laying out the AIG bonus issues and promising further detail, according to two people familiar with the email. Mr. Albrecht did not return a call seeking comment.

It was an intense weekend, as Treasury and Fed officials frantically prepared to close the AIG deal. “When we heard there was this executive compensation thing floating out there, we thought, ‘We’ll deal with this later,’” said one Treasury official.

On March 2, AIG announced both record losses and $30 billion in fresh Treasury aid.

The following day, Mr. Geithner appeared at a hearing of the House Ways and Means Committee. Rep. Joseph Crowley, a New York Democrat, asked the secretary about more than $160 million in bonuses that AIG would be paying to financial-products employees “in the coming weeks.”

Treasury officials say the AIG problem didn’t register with Mr. Geithner at the hearing amid the other issues he faced. Mr. Baker, the Treasury spokesman, acknowledged that information about the financial-products bonuses was “in the public arena…for many months.” But, he said, it wasn’t until March 10 — five days before the big batch of retention payments were due — that department staff spelled out the situation for the secretary.

The following day, March 11, Mr. Geithner, alert to the potential political fallout, called Mr. Liddy to protest the bonus payouts. At a congressional hearing last week, Mr. Liddy described the call as “open and frank.”

According to Mr. Liddy’s sworn testimony from that hearing, Mr. Geithner indicated on the call that he had learned about the bonus “situation about a week” earlier.

A Treasury spokeswoman said Mr. Liddy was “wrong.” An AIG spokeswoman said the CEO was passing on his impression from the conversation. “If that impression was incorrect, he certainly defers to the Treasury secretary,” she said.

Over the weekend, administration officials contended the uproar wouldn’t derail their efforts. President Barack Obama and a pair of Republican senators — Judd Gregg of New Hampshire and Charles Grassley of Iowa, the top Republican on the Finance Committee — disagreed with those calling for Mr. Geithner’s resignation.

“I think Geithner is going to survive this — I think he has the trust of the president,” Rep. Elijah Cummings (D., Md.), an Obama ally and early critic of AIG’s bonuses, said in an interview. But “he has to put a very high-powered microscope on AIG,” he added.

—Liam Pleven, Matthew Karnitschnig and Laura Meckler contributed to this article.

Write to Michael M. Phillips at michael.phillips@wsj.com and Sudeep Reddy at sudeep.reddy@wsj.com

China calls for new reserve currency

fairdawg — Wed, 25 Mar 2009 02:19:33 +0000

By Jamil Anderlini in Beijing

Published: March 23 2009 12:16 | Last updated: March 24 2009 00:06

China’s central bank on Monday proposed replacing the US dollar as the international reserve currency with a new global system controlled by the International Monetary Fund.

In an essay posted on the People’s Bank of China’s website, Zhou Xiaochuan, the central bank’s governor, said the goal would be to create a reserve currency “that is disconnected from individual nations and is able to remain stable in the long run, thus removing the inherent deficiencies caused by using credit-based national currencies”.

Analysts said the proposal was an indication of Beijing’s fears that actions being taken to save the domestic US economy would have a negative impact on China.

“This is a clear sign that China, as the largest holder of US dollar financial assets, is concerned about the potential inflationary risk of the US Federal Reserve printing money,” said Qu Hongbin, chief China economist for HSBC.

Although Mr Zhou did not mention the US dollar, the essay gave a pointed critique of the current dollar-dominated monetary system.

“The outbreak of the [current] crisis and its spillover to the entire world reflected the inherent vulnerabilities and systemic risks in the existing international monetary system,” Mr Zhou wrote.

China has little choice but to hold the bulk of its $2,000bn of foreign exchange reserves in US dollars, and this is unlikely to change in the near future.

To replace the current system, Mr Zhou suggested expanding the role of special drawing rights, which were introduced by the IMF in 1969 to support the Bretton Woods fixed exchange rate regime but became less relevant once that collapsed in the 1970s.

Today, the value of SDRs is based on a basket of four currencies – the US dollar, yen, euro and sterling – and they are used largely as a unit of account by the IMF and some other international organisations.

China’s proposal would expand the basket of currencies forming the basis of SDR valuation to all major economies and set up a settlement system between SDRs and other currencies so they could be used in international trade and financial transactions.

Countries would entrust a portion of their SDR reserves to the IMF to manage collectively on their behalf and SDRs would gradually replace existing reserve currencies.

Mr Zhou said the proposal would require “extraordinary political vision and courage” and acknowledged a debt to John Maynard Keynes, who made a similar suggestion in the 1940s.

China to Continue Buying U.S. Debt, Official Says

fairdawg — Wed, 25 Mar 2009 02:18:46 +0000

Monday, March 23, 2009

BEIJING — China will continue buying U.S. government debt while paying close attention to possible fluctuations in the value of those assets, a vice governor of Beijing’s central bank said Monday.Investing in U.S. Treasury bills is “an important component part of China’s foreign currency reserve investments,” People’s Bank of China Vice Governor Hu Xiaolian said at a news conference on Monday.

“So as an important component we are naturally relatively concerned with the safety and profitability of U.S. government bonds,” Hu said — a statement apparently aimed at concerns that rising debt to fund Washington’s stimulus package could spur inflation and weaken the dollar.

China is Washington’s biggest foreign creditor, holding an estimated $1 trillion in U.S. government debt. A weaker dollar would erode the value of those assets.

Hu’s comments follow remarks earlier this month from Chinese Premier Wen Jiabao that he was “a little bit worried” about China’s holdings of U.S. government debt. Wen called on the U.S. to honor its commitments, remain credit-worthy, and ensure the safety of Chinese assets.

China’s investments are likely to be a major topic of discussion when Chinese President Hu Jintao meets with President Barack Obama on the sidelines of an April 2 summit in London of the Group of 20 major economies called to discuss remedies for the global financial crisis.

The meeting will be the first face-to-face encounter between the two men, and a top Chinese diplomat appearing alongside Hu Xiaolian sought to set a positive tone for the talks.

China-U.S. relations have gotten off to an “excellent start” under Obama, Vice Foreign Minister He Yafei said, appearing to rule out any lasting damage from a confrontation earlier this month between Chinese boats and an unarmed U.S. Navy surveillance ship off China’s southeastern coast.

China accused the USNS Impeccable ship of operating illegally within its exclusive economic zone, while the U.S. said the Chinese boats had acted dangerously in blocking its passage and later assigned a destroyer to escort the ship.

He said Hu and Obama planned to discuss the global economic crisis, bilateral ties, and regional and global issues such as plans by North Korea to launch missile and Iran’s nuclear program.

Despite its massive holding of U.S. government debt, China has given no indication of any preferred changes to Washington’s policies, and Hu, the central bank’s vice governor — who is not related to the president — said China considered U.S. debt a good credit risk, even if market values fluctuate.

Analysts estimate China keeps nearly half of its $2 trillion in foreign currency reserves in U.S. Treasuries and notes issued by other government-affiliated agencies. That has sparked questions within China as to whether the government should continue to buy Treasuries, as well as debate on how Beijing might leverage that to boost its influence over the global financial system.

China’s continued purchase of Treasuries helps fund U.S. deficit spending aimed at averting a lengthy recession and helps keeps interest rates low to permit U.S. banks to continue lending.

At April’s London summit, leaders are expected to press for an overhaul of international financial institutions to help ward off future crises. That could include doubling the International Monetary Fund’s budget to US$500 billion and giving more say to China.

Hu said China supports efforts by the IMF to come up with new ways of raising capital, possibly including the sale of bonds. If bonds were issued, China would “actively consider” buying them, Hu said.