Fortisgate scandal topples Belgian government
Fortisgate, the growing scandal over the future of Belgian rump insurer Fortis, brought down the country's government soon after the justice minister resigned over suspected state meddling in legal decisions.
Jo Vandeurzen stood down after the court of cassation, Belgium's supreme court, said it had found "significant signs" but no hard evidence that the government had tried to influence judges ruling on the bail-out and sale of Fortis.
Within hours, prime minister Yves Leterme won a cabinet vote that the government should resign. King Albert now has to decide whether to accept the resignation.
Observers said the likely outcome would be a general election, an option few parties want amid deepening economic crisis.
Leterme's government had been accused of trying to block a court of appeal ruling to freeze the group's break-up.
Earlier, angry shareholders in Fortis, once Belgium's biggest financial services company, voted overwhelmingly to keep the business going in the desperate hope of brighter days.
As investors railed against an assault on democracy and the rule of law, Jan-Michiel Hessels, acting chairman, warned that Fortis would have gone bankrupt without nationalisation. It lost €23bn of value in a few days in early October. Hessels told about 3,000 shareholders at an extraordinary meeting: "We didn't have a choice and, if we didn't act then, there was a likelihood that the Belgian state would have gone bankrupt - like Iceland."
Shareholders voted against immediate liquidation - and 97% in favour of continuing operations.
The government's €11.2bn bail-out of Fortis, worth €40bn a year ago, failed as the bancassurer went into a liquidity crisis. Ministers handed over the group's Belgian banking and insurance operations, including substantial assets, for a knockdown price to France's BNP Paribas.
But last week the court of appeal ruled in favour of small activist shareholder lobbies who opposed the sale, and BNP this week froze its planned €14.5bn takeover.
Its shares, savaged by investment losses linked to the Madoff scandal, lost 30% in a day and were down more than 5% yesterday. Fortis shares were up marginally at €1.20, or double their all-time low.
BNP has said it could return to the Fortis deal if the court of appeal ruling is overturned, with judges last week freezing the deal for 65 days until mid-February. But, with lawyers warning that the case could take a year or more to unravel, Fortis's future is problematic.
* guardian.co.uk © Guardian News and Media Limited 2008
New Zealand recession deepens
New Zealand's economy has contracted for a third straight quarter as the combination of a weak housing market and a slowing global economy takes its toll.
By Bonnie Malkin
The country's gross domestic product contracted 0.4pc in the three months to the end of September and that follows a 0.2pc decline in the second quarter and a 0.3pc shrinkage in the first three months of the the year. The decline for the latest quarter was in line with economists' expectations.
Like that of its larger neighbour Australia, New Zealand's economy has enjoyed a booming housing market over the past decade. However, the bursting of the housing bubble has prompted New Zealanders to apply a sharp brake to their spending.
The drop in consumer spending in the third quarter was the third in a row and the worst run since the 1980s. The wider global slowdown is exacerbating New Zealand's woes by hitting demand for its key exports such as milk, timber and lamb.
Analysts said the figures make further cuts in interest rates likely. The central bank slashed the rate 1.5 percentage points on Dec 4, following a full point cut in late October, although interest rates remain high compared with other industrialised nations.
"The big judgments will be about what's happening in the [Group of Seven leading industrial nations] and emerging economies and whether what we've seen for the past three quarters locally is just the tip of the iceberg," Deutsche Bank chief economist Darren Gibbs said.
Finance Minister Bill English said it was essential that New Zealand's economy was put on a medium to long-term growth track as quickly as possible. "Our challenge for 2009 is to put New Zealand in the strongest possible position to take advantage of better economic times when they come internationally," he said.
New Zealand was last in recession in the second half of 1997 and early 1998 amid the Asian financial crisis.
Ukraine crisis heightens fears over European gas supplies
The political and economic crisis in Ukraine threatens to disrupt vital Russian gas supplies to Europe for the third winter in a row, senior European commission officials warned today.
Their warning came as the head of Gazprom, Russia's main producer, blamed Ukraine for a potential disruption to supplies in transit through the crisis-torn country.
Ukraine, bailed out with a $16.5bn (£11.14bn) loan from the IMF and EU, owes Russia €2.3bn (£2.17bn) and is unable to pay as its economy and currency go into meltdown despite the aid.
The situation has been compounded by open warfare between President Viktor Yushchenko and his premier Yulia Tymoshenko over the causes of the crisis which has seen the hryvnia, the currency, sink to historic lows.
Andris Piebalgs, EU energy commissioner, indicated he was ready to travel to Moscow early in the new year for emergency talks with the Russians. "I am very worried," he said.
High-level talks between Brussels and Moscow have already begun and now include Kiev, the Ukrainian capital. More than 80% of Russian gas, which provides more than a quarter of Europe's needs, transits through Ukraine.
Piebalgs said he had been assured in letters from the Russians that supplies to Europe would remain intact despite the Ukrainian crisis. The two sides are due to hold a summit in Moscow in January which is designed to ease acute tensions.
But Viktor Zubkov, Russia's first deputy prime minister and Gazprom chairman, said the near-monopoly supplier had offered to redeem Kiev's debt. "So far no solution has been found because of the non-constructive position of the Ukrainian side," he stated.
The Kiev authorities insisted that they could give guarantees of uninterrupted gas supplies in 2009 to European gas consumers. But Piebalgs said their current contract with Gazprom and another supplier, Naftogaz, runs out on 31 December.
EC officials say both the Ukrainians and Europeans have substantial levels of gas storage in case of disruption but admit that, if this winter is as cold as that of 2005 - the coldest for 60 years - the reliability of supplies will be in serious question.
http://www.guardian.co.uk/business/2008/dec/22/ukraine-russia-gazpromGrowing signs of workers’ unrest in China
By John Chan
22 December 2008
A series of protests in China, involving state enterprise workers, labourers laid off from export firms as well as teachers, taxi drivers and demobilised soldiers, point to growing social unrest as the global economic crisis impacts on jobs and living standards.
Last Friday, workers from the bankrupt Jianrong Suitcase Factory in Dongguan city evaded a police cordon and took to the streets to protest over unpaid wages. About 100 marched out of the factory, pushing through 30 or so riot police and shouting "We have no human rights here." One of the workers said: "They don't want us to come out and have the international media cover our protest."
Zhang Guohua told the Associated Press that the Japanese-owned factory had shut down suddenly last Monday. The owner fled with employees being owed up to two and a half months' pay. Zhang said his monthly salary was 2,000 yuan ($US290), although many others earned just half that amount. The laid-off workers held a protest outside the factory but the management refused to negotiate.
On Thursday, some 300 workers gathered outside the Dongguan city government office to demand action by local authorities. Determined to wait for a resolution, the protesters stayed outside the government office overnight before being driven back to the factory dormitories by riot police backed by police dogs. About a dozen protesters received hospital treatment after being injured in clashes with police.
Fearing that a prolonged protest could trigger broader unrest, the local government offered on Friday to pay 60 percent of the last month's wage. Workers, however, rejected the offer. With declining revenues from a slowing local economy, the Dongguan city government has limited resources to pay an ever-larger army of unemployed workers. The once booming manufacturing centre has been hit hard by declining export orders.
On December 9, 1,000 workers at the Hong Kong-based Wanxun factory in Dongguan suddenly found that the owner had disappeared with the assets. Equipment from the factory, which manufactured CDs and DVDs, had already been sold. In order to placate angry workers, the local government promised to pay three months in owed wages.
According to the Dongguan Labour Bureau, there were 117 cases involving 20,000 workers in September and October of factory owners vanishing without paying their employees. This figure is just the tip of the iceberg, however. The official Xinhua newsagency forecast last Thursday that 6.5 million rural migrant workers, the mainstay of China's manufacturing and construction industries, could lose their jobs next year.
The latest "2009 Social Blue Book" issued by the Chinese Academy of Social Sciences warned the urban unemployment rate could reach 9.4 percent next year—more than double the current official rate of 4 percent. It predicted that the joblessness rate among college graduates would be 12 percent. More than 4 million unemployed migrant workers have reportedly already returned home early before Chinese New Year in late January.
Factory closures are just one source of rising discontent. From December 8 to 10, hundreds of workers protested outside two electronics factories in Shanghai, demanding payment of overdue wages. The two plants making parts and batteries for laptop computers and printers are affiliated to Singapore-based Huan Hsin Holdings. Police cordoned off one of the factories and scuffles broke out with workers. Several employees were beaten up by gangsters hired by the firm.
The workers involved earned just 960 yuan ($US140) a month. They were demanding overtime payments and other bonuses as stipulated by law before moving to other plants owned by the same firm or undertaking further training. Under the country's Labour Contract Law, the company was liable to pay employees extra for working in temperatures over 33 degrees Celsius and for working on the 12-hour night shift.
The Labour Contract Law implemented earlier this year was drawn up when the Chinese economy was booming, with growth rates of more than 10 percent a year. The aim was to head off disaffection among workers over glaring social inequality and poor wages and conditions. Now that the demand for Chinese exports has plummeted, many companies are simply ignoring the law's requirements for extra payments and greater job security.
The labour discontent is not confined to export industries. On December 2, 500 workers at one of China's largest state-owned non-ferrous metals firms—Shaoguan Smelter (Shaoye) in Shaoguan city in Guangdong Province—blocked a major highway for more than two hours. They had been effectively laid off after the management refused to renew their contracts.
The fate of the Shaoye workers reflects the deep crisis in heavy industry as construction and manufacturing throughout China contracts. During the economic boom, wages at the smelter were not increased despite record prices of over 30,000 yuan a tonne for zinc and 1,800 yuan a tonne for sulphuric acid. Prices have now fallen to 18,000 yuan and 80 yuan respectively, reflecting the global collapse of commodity prices, and management has sacked the workers.
Global capitalism is heavily dependent on China as a source of cheap labour, raising concerns in financial circles about the political impact of widespread unemployment. The Financial Times warned on December 16: "The real threat to the [Chinese Communist] party-state would be large protests in urban areas that fed into each other and showed co-ordination. But the recent demonstrations have tended to be small and focused on local issues rather than showing general discontent."
Although, at this stage, it appears that protests are relatively small and isolated, most demonstrations are simply not reported. The international coverage of the protest by Jianrong Suitcase Factory workers is the exception, not the rule. The Chinese Communist Party (CCP) regime, which is deeply fearful of any movement in the working class, uses its police-state apparatus to censor and suppress any sign of discontent.
The last great upheaval of the Chinese working class was in May-June 1989, when millions of workers, angry over the social impact of pro-market policies, joined students in Beijing and other cities protesting the lack of democratic rights. Terrified that the movement was spiralling out of control, the regime sent troops and tanks against unarmed workers and youth in Tiananmen Square and cracked down on opposition around the country.
Zhou Xiaozheng, a sociologist at the People's University in Beijing, told the Los Angeles Times on December 12: "Definitely, this is the most serious problem we have seen since 1989. You have millions of college students who can't find jobs... You have migrant workers who have lost their jobs at factories and don't have land to go back to."
The working class is far larger and more concentrated than in 1989. Foreign capital has poured into the country over the past two decades because investors took the Tiananmen Square massacre as a sign that Beijing would do whatever was necessary to discipline workers. Since then, another 200 million peasants have been transformed into wage workers. Moreover, the social position of peasantry, on which the CCP has traditionally rested, has deteriorated dramatically. There is no reason to believe that the rural poor will sit passively by as urban workers protested—as happened in 1989.
Furthermore, the state apparatus itself is not immune from social discontent. Frustration over jobs, pay and conditions is widespread. On November 21, 1,000 demobilised troops, demanding to meet with government officials over jobs, clashed with 500 police in Tainan city. About 200 were subsequently arrested. On December 2, hundreds of traffic police in Leiyang city smashed the local CCP offices in protest over low pay—the first police demonstration since the 1970s.
The CCP regime is well aware that it is sitting on top of a social time bomb. That is why any even limited protest, such as that by Jianrong Suitcase Factory workers last Friday, is immediately repressed for fear that it may trigger a broader movement.
http://www.wsws.org/articles/2008/dec2008/chin-d22.shtml
Flying J, Oil Refiner, Transporter, Files Bankruptcy
By Steven Church
Dec. 22 (Bloomberg) -- Flying J Inc., an oil refiner, transporter and travel-center owner, filed for bankruptcy, blaming a cash crisis brought on by declines in oil prices.
The Ogden, Utah-based company listed assets of more than $1 billion and debt of $500 million to $1 billion in court documents filed today in Wilmington, Delaware.
Flying J expects to recover from “the precipitous drop in the price of oil” by reorganizing under Chapter 11 of the U.S. bankruptcy code, Chief Executive Officer J. Phillip Adams said in court papers.
The company employs about 16,000 people and is among the 20 biggest closely held companies in the U.S., with sales of more than $16.2 billion in 2007, according to court records. Founded in 1968 with four gasoline stations, it now operates 200 travel centers, two refineries and a 700-mile (1,126-kilometer) pipeline that carries gasoline and diesel from Houston to El Paso, Texas, according to court filings.
Flying J’s cash crisis has grown as oil prices have tumbled, Adams said in court documents. Since September, the company’s access to cash has dropped by $155 million.
On Dec. 19, Bank of American NA seized a “substantial sum of cash” from one of Flying J’s units because the company had allegedly violated loan terms. The bank is the agent for lenders owed $395 million. The next day, another agent refused to allow a different Flying J unit from withdrawing cash from an account, the company said.
Affiliates Longhorn Partners Pipeline LP, Longhorn Pipeline Holdings and Longhorn Pipeline, Big West of California, Big West Oil, Big West Transportation, also sought protection.
SemGroup Bankruptcy
Flying J is the latest energy company to file bankruptcy as prices fall. SemGroup LP filed for bankruptcy in July after margin calls on trades in energy futures and options sank the Tulsa, Oklahoma-based company, which had assets of $7.66 billion, according to court papers.
VeraSun Energy Corp. filed for bankruptcy protection in October, blaming swings in the price of corn, the main ingredient for ethanol.
In addition to the $395 million loan, Flying J and its units also owe $166 million on a note issued in 2006 to buy the oil pipeline and $188 million on a revolving credit account.
The 30 largest consolidated creditors without collateral supporting their claims include Zion Bank, owed $85.8 million; ConocoPhillips, owed $69.4 million; Berry Petroleum Co., owed $26.1 million; Houston Refining LP, owed $19.1 million; and BP Oil Co., owed $17.5 million.
The case is In re Longhorn Partners Pipeline LP, 08-13384, U.S. Bankruptcy Court, District of Delaware (Wilmington).
http://www.bloomberg.com/apps/news?pid=20601103&sid=aity2N8JKObo&refer=us
U.S. Economy: Home Prices Fall Near Depression Pace
Dec. 23 (Bloomberg) -- Sales of single-family houses in the U.S. dropped in November by the most in two decades and resale prices collapsed at a pace reminiscent of the Great Depression, dashing speculation the market was close to a bottom.
Purchases of both new and existing houses dropped 7.6 percent from the prior month, the biggest decline since January 1989, to an annual rate of 4.43 million, government and industry figures showed today. A 13 percent drop in the median resale price from a year earlier was the most since records began in 1968 and was likely the largest since the 1930s, the National Association of Realtors said.
“Housing is still in a freefall,” said Nariman Behravesh, chief economist at IHS Global Insight in Lexington, Massachusetts.
The figures were worse than economists had forecast and signal that the battered housing market that led the economy into a recession may be taking another lurch down. Sliding property values mean more Americans will be under water on their mortgages, destroying household wealth and undermining consumers’ purchasing power.
President-elect Barack Obama plans an unprecedented economic stimulus to restore growth, and pledged on Dec. 13 to limit foreclosures. One tenth of U.S. families who own a home are in financial distress, Obama said.
“We need desperately to get this economy moving,” Vice President-elect Joseph Biden, who is leading the incoming administration’s initiative to bolster the middle class, told reporters before a meeting with Obama’s economic advisers today. Transition officials are “getting very close” to an agreement with lawmakers on the size of the stimulus, Biden said.
Below Estimates
The Realtors’ figures showed home resales, including condos, fell 8.6 percent to an annual rate of 4.49 million, below all but one estimate in a Bloomberg News survey of 63 economists. The median resale price dropped to $181,300.
Separately, the Commerce Department reported that new-home sales fell 2.9 percent last month to a 17-year low of 407,000. The median sales price declined 11.5 percent from a year earlier to $220,400.
The Standard & Poor’s supercomposite of homebuilder stocks fell 2 percent to close at 205.44 in New York, the fourth straight decline. The index is down a third so far this year. The S&P 500 Stock Index, which fell as much as 22 percent in November, dropped 1 percent today.
Buyers Scared Off
Last month’s stock market collapse combined with rising unemployment to scare off home buyers, Lawrence Yun, the Realtors’ chief economist, said at a press conference.
“The economy was really starting to feel the smack-in-the- face blow from the financial crisis” during November, said David Resler, chief economist at Nomura Securities International Inc. in New York.
U.S. household wealth already fell in the third quarter by the most on record, Federal Reserve figures showed earlier this month. Net worth for households and non-profit groups decreased by $2.81 trillion, the most since the Fed’s data began in 1952.
The number of previously owned unsold homes on the market at the end of November represented 11.2 months’ worth at the current sales pace, up from 10.3 months’ at the end of the prior month.
Foreclosures and short sales accounted for 45 percent of last month’s home purchases, Yun said.
Regional Breakdown
Purchases of total existing homes declined in all regions of the country, led by drops of 12 percent in the Northeast and 10.9 percent in the South. Prices also fell throughout the country, led by a decline of 25.5 percent in the West.
Resales account for about 90 percent of the housing market. Sales of existing homes are compiled from contract closings and may reflect contracts signed one or two months earlier. New-home sales, recorded when a contract is signed, are considered by economists to be a more timely barometer.
The hew-home sales report showed builders succeeded in trimming inventories even faster than sales dropped. The number of new homes for sale fell a record 7 percent to a seasonally adjusted 374,000, the fewest since February 2004.
The supply of new homes at the current sales rate dropped to 11.5 months’ worth from 11.8 months the prior month.
Resler said today’s figures show the housing market has “not yet seen any of the impact from the drop in mortgage rates.”
The Fed on Dec. 16 cut its benchmark interest rate target to a range of zero to 0.25 percent and reiterated it stands ready to expand purchases of Fannie Mae, Freddie Mac and Federal Home Loan Bank debt under a program aimed at reducing mortgage costs. That program has helped drive mortgage rates lower.
Mortgage Rate
The average rate on a 30-year fixed-rate loan fell to 5.18 percent in the week ended Dec. 12, the lowest in more than five years, according to the Mortgage Bankers Association.
Ara Hovnanian, chief executive officer of Hovnanian Enterprises Inc., New Jersey’s biggest homebuilder, called on the government to provide an economic stimulus for the housing industry.
“If government wants to get to the root of the problem they need to fix housing first,” Hovnanian said in a conference call on Dec. 17. Hovnanian, whose company reported a fiscal fourth quarter loss, didn’t specify what type of government intervention he wants in the housing market.
http://www.bloomberg.com/apps/news?pid=20601087&sid=aQ7HBEgYCzUE&refer=home
Labour MPs revolt over Brown's plan to charge 27% interest on emergency loans to poor
Gordon Brown and his Work and Pensions Secretary James Purnell were last night accused of behaving ‘like loan sharks’ over plans to slap punishingly high interest rates on vital loans to the poor.
In an astonishing move, rebel Labour MPs joined forces with David Cameron’s Tories to accuse the Government of penalising hundreds of thousands of families on benefits who get interest-free cash advances to cover the cost of unforeseen crises.
More than one million individual loans worth over £600million were paid out from the Government’s social fund last year to hard-up people – many of them disabled – who struggled to afford to repair a broken boiler or cope with some other domestic emergency.
However, in a provocative move, Mr Purnell wants to start charging 26.8 per cent on new loans – the sort of punitive rate found on High Street store cards and way above normal credit-card rates.
This would add nearly £50 to the cost of an average £433 loan and saddle the borrowers, who are almost all on State benefits, with an extra four weeks of repayments.
Senior Labour MP Terry Rooney, chairman of the Commons Work and Pensions Select Committee, led an all-party attack on the proposal. ‘Whoever dreamed this up, particularly at this time of year, must have lost their moral compass,’ he said.
‘It cannot be right to start charging almost 27 per cent interest on loans to the poorest people, who currently pay zero interest.’
Mr Rooney believed that the plan, outlined in a consultation document produced by the Department for Work and Pensions, was a cynical cost-cutting ploy to stop poor families getting the money they need.
He added: ‘I fail to see how Mr Purnell can reconcile raising interest rates for the poor with the Prime Minister’s repeated calls to the banks to pass on interest-rate cuts to struggling mortgage holders. There will be one hell of a row over this.’
Ronnie Campbell, Labour MP for Blyth Valley, said: ‘James Purnell makes me ashamed to be a member of the Labour Party. It is a disgrace the way he is hitting the poor. Not even the Tories would try to do this.’
Labour MPs also suspect that Mr Purnell is worried that the cost of the social fund will rocket as unemployment soars and thousands more people apply for help.
In an embarrassing development for the Government, Labour MPs received support from Tory Work and Pensions spokesman
Chris Grayling, who called on the Government to scrap the plan. ‘This is beyond outrageous,’ he said. ‘It’s nothing more than James Purnell and Gordon Brown re-inventing themselves as loan sharks.
‘That any Government would even consider imposing swingeing interest rates on unemployed people in the middle of a recession is just extraordinary. It’s a sign that this Government is utterly out of touch with what is really going on in Britain.’
And Liberal Democrat Treasury spokesman Vince Cable said: ‘This proposal is perverse and inhumane. The principle of social funds is that they are interest-free to help people cope with emergencies.’
Mr Purnell’s document, which suggests that non-profit-making credit unions could run the loans, spells out in stark terms how the poorest families in Britain would be hit hard in the pocket under the new system. It says: ‘Interest would be charged ...at affordable rates compared to those charged by commercial lenders in the same market.
‘We propose to set it at the maximum charged by credit unions of two per cent per month – 26.8 APR.
‘In 2007-08, the average initial budgeting loan award was £433.30. The estimated average loan repayment for all loans was £10.54 a week. If interest were charged at two per cent a month, it would take 46 weeks instead of 42 to repay such a loan at such a repayment rate, with a total interest paid of £47.80.’
Mark Serwotka, general secretary of the Public and Commercial Services Union, whose members administer the social fund, said: ‘This might start with credit unions, but it will become a Trojan horse for the private sector to charge loan-shark rates for distributing public money.
‘It is scandalous that in these dire economic times, vulnerable people in financial difficulties could be exposed to profiteering. Interest of 26.8 per cent rates alongside some of the most expensive store cards.’
But the Government hit back last night, saying that under the proposed scheme, hard-up families would benefit from new advice on how to manage household budgets.
It said it would also be easier and quicker to get the loans, which would become available to working people on low incomes as well as those on benefits.
In the consultation document, Mr Purnell signalled that simply handing people interest-free loans without financial advice did little to help them manage their money.
‘We want to improve the help we give people when many are struggling,’ he said. ‘The social fund helps with money problems in the short term, but not the underlying problems of managing a limited budget.’
Last night, Work and Pensions Minister Kitty Ussher conceded that there was ‘very strong opposition’ to the plans.
But she dismissed the idea that the social fund was heading for loan-shark levels of interest, pointing out that ‘doorstep lenders can legally charge 180 to 240 per cent. Illegal loan sharks have been known to charge up to 1,000 per cent’.
It is not the first time Gordon Brown has been accused of betraying the poor. As Chancellor, he was criticised for approving a meagre 75p-a-week increase in the State pension. And this year, he was forced to climb down over his decision to scrap the 10p tax rate.
http://www.dailymail.co.uk/mailonsunday/article-1099183/Labour-MPs-revolt-Browns-plan-charge-27-emergency-loans-poor.html
U.S. Military Preparing for Domestic Disturbances
Tuesday, December 23, 2008 1:14 PM
By: Jim Meyers
A new report from the U.S. Army War College discusses the use of American troops to quell civil unrest brought about by a worsening economic crisis.
The report from the War College’s Strategic Studies Institute warns that the U.S. military must prepare for a “violent, strategic dislocation inside the United States” that could be provoked by “unforeseen economic collapse” or “loss of functioning political and legal order.”
Entitled “Known Unknowns: Unconventional ‘Strategic Shocks’ in Defense Strategy Development,” the report was produced by Nathan Freier, a recently retired Army lieutenant colonel who is a professor at the college — the Army’s main training institute for prospective senior officers.
He writes: “To the extent events like this involve organized violence against local, state, and national authorities and exceed the capacity of the former two to restore public order and protect vulnerable populations, DoD [Department of Defense] would be required to fill the gap.”
Freier continues: “Widespread civil violence inside the United States would force the defense establishment to reorient priorities in extremis to defend basic domestic order … An American government and defense establishment lulled into complacency by a long-secure domestic order would be forced to rapidly divest some or most external security commitments in order to address rapidly expanding human insecurity at home.”
International Monetary Fund Managing Director Dominique Strauss-Kahn warned last week of riots and unrest in global markets if the ongoing financial crisis is not addressed and lower-income households are beset with credit constraints and rising unemployment, the Phoenix Business Journal reported.
Sen. James Inhofe of Oklahoma and Rep. Brad Sherman of California disclosed that Treasury Secretary Henry Paulson discussed a worst-case scenario as he pushed the Wall Street bailout in September, and said that scenario might even require a declaration of martial law.
The Army College report states: “DoD might be forced by circumstances to put its broad resources at the disposal of civil authorities to contain and reverse violent threats to domestic tranquility. Under the most extreme circumstances, this might include use of military force against hostile groups inside the United States.
“Further, DoD would be, by necessity, an essential enabling hub for the continuity of political authority in a multi-state or nationwide civil conflict or disturbance.”
He concludes this section of the report by observing: “DoD is already challenged by stabilization abroad. Imagine the challenges associated with doing so on a massive scale at home."
As Newsmax reported earlier, the Defense Department has made plans to deploy 20,000 troops nationwide by 2011 to help state and local officials respond to emergencies.
The 130-year-old Posse Comitatus Act restricts the military’s role in domestic law enforcement. But a 1994 Defense Department Directive allows military commanders to take emergency actions in domestic situations to save lives, prevent suffering or mitigate great property damage, according to the Business Journal.
And Gen. Tommy Franks, who led the U.S. military operations to liberate Iraq, said in a 2003 interview that if the U.S. is attacked with a weapon of mass destruction, the Constitution will likely be discarded in favor of a military form of government.
http://www.newsmax.com/headlines/military_domestic_use/2008/12/23/164765.html?s=al&promo_code=%20763B-1
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