NYT > Home Page: Banks Win an Easing of Asset Rules

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Banks Win an Easing of Asset Rules
Jan 7th 2013, 00:44

A group of top regulators and central bankers on Sunday gave banks around the world more time to meet new rules aimed at preventing financial crises, saying they wanted to avoid the possibility of damaging the economic recovery.

The rules are meant to make sure banks have enough liquid assets on hand to survive the kind of market chaos that followed the collapse of Lehman Brothers in 2008. Meeting in Basel, Switzerland, the committee, made up of bank regulators from 26 countries, also loosened the definition of liquid assets.

The decision marks the first time regulators have publicly backed away from the strict rules imposed by the Basel Committee in 2010. The easing takes some pressure off banks, which have complained that the new guidelines would throttle lending and hurt economic growth.

Mervyn A. King, governor of the Bank of England and chairman of the group, said there was no intent to go easier on lenders. "Nobody set out to make it stronger or weaker," he said of the rules in a conference call with reporters, "but to make it more realistic."

Still, the decision was a public concession from the authors of the so-called Basel III rules that the regulations could hurt growth if applied too rigorously. It was endorsed unanimously by participants, including Ben S. Bernanke, chairman of the Federal Reserve, and Mario Draghi, president of the European Central Bank.

The rules were drafted by the Basel Committee on Banking Supervision, named after the Swiss city where many of the discussions have taken place. The Basel rules are not binding on individual countries, but there is substantial international pressure for countries to comply.

Much of the debate so far has focused on increasing the amount of capital that banks hold in reserve to absorb losses. After Lehman's collapse, trust among financial institutions evaporated and banks refused to lend to one another. Many banks discovered that they did not have enough cash or readily salable assets to meet short-term obligations. In some cases, banks that were otherwise solvent faced collapse.

The rules require banks to have enough cash or liquid assets on hand to survive a 30-day crisis, like a run on deposits or a credit rating downgrade. They will not take full effect on Jan. 1, 2015, as originally planned, but will be phased in more gradually and not take full effect until Jan. 1, 2019.

This so-called liquidity coverage ratio also defines what qualifies as liquid assets: the assets cannot be already pledged as collateral, for example, and they must be under the control of a bank's central treasury, so it can act quickly to raise cash if needed.

On Sunday the central bankers and regulators broadened the definition of liquid assets. For example, banks will be allowed to use securities backed by mortgages to meet a portion of the requirement.

A large majority of big banks already meet the requirements, but some do not, Mr. King said. The decision reduces pressure on those banks to hold more cash or buy high-quality government bonds to meet the rules on liquid assets.

The panel said it was continuing to discuss another set of regulations aimed at preventing banks from becoming overly dependent on short-term funds. But it did not announce any new decisions Sunday.

Before the Lehman bankruptcy, some institutions made long-term loans using money borrowed for very short periods. The practice is a normal part of banking, but it can, if carried to extremes, make a bank vulnerable to market disruptions.

Depfa, an Irish bank owned by Hypo Real Estate of Germany, issued long-term loans to governments using money it borrowed in short-term money markets. The bank made a profit from the difference between what it could charge for the long-term loans and what it paid to borrow short term. But after Lehman collapsed, Depfa was no longer able to roll over its obligations by borrowing on international money markets. Its parent company required a taxpayer bailout to survive.

The new rules seek to ensure that banks have a variety of fund sources and are not overly dependent on one market or lender.

Although the Basel Committee drafts global banking rules, it is up to individual countries to write them into law. The United States has lagged countries including China, India and Saudi Arabia in putting the rules into force, according to an assessment by the Basel Committee in September. The American delay has led to some grumbling from other members.

Bank industry representatives have argued that stricter capital and liquidity requirements increase banks' financing costs, which they must pass on to customers. One of the most vocal critics of the new regulations is the Institute of International Finance in Washington, whose members include many large American and European banks, including Goldman Sachs, Morgan Stanley and Deutsche Bank.

In October, the institute issued a report arguing that the rules would make banks less willing to issue longer-term loans or hold debt issued by smaller companies, whose bonds usually have lower credit ratings. The rules would also penalize banks in emerging countries, the institute said, because they have less access to low-risk assets.

Proponents of the new rules argue that banks will be able to raise money more cheaply if they are perceived as being less vulnerable, thus offsetting the cost of the new rules. They point out that American banks have generally recovered from the crisis more quickly than European banks because United States regulators forced them to raise new capital.

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NYT > Home Page: In Fields and Markets, Guatemalans Feel Squeeze of Biofuel Demand

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In Fields and Markets, Guatemalans Feel Squeeze of Biofuel Demand
Jan 6th 2013, 23:37

Richard Perry/The New York Times

José Antonio Alvarado and his family harvested corn in November on a highway median in Guatemala, where farmers struggle to find land.

GUATEMALA CITY — In the tiny tortillerias of this city, people complain ceaselessly about the high price of corn. Just three years ago, one quetzal — about 15 cents — bought eight tortillas; today it buys only four. And eggs have tripled in price because chickens eat corn feed.

Photographs

Mr. Alvarado's wife, Nora Maritza, with corn the family collected.

Trucks loaded with sugar cane.

Félix Pérez used to grow corn, beans and fruit behind his home. He now rents a hillside plot.

Meanwhile, in rural areas, subsistence farmers struggle to find a place to sow their seeds. On a recent morning, José Antonio Alvarado was harvesting his corn crop on the narrow median of Highway 2 as trucks zoomed by.

"We're farming here because there is no other land, and I have to feed my family," said Mr. Alvarado, pointing to his sons Alejandro and José, who are 4 and 6 but appear to be much younger, a sign of chronic malnutrition.

Recent laws in the United States and Europe that mandate the increasing use of biofuel in cars have had far-flung ripple effects, economists say, as land once devoted to growing food for humans is now sometimes more profitably used for churning out vehicle fuel.

In a globalized world, the expansion of the biofuels industry has contributed to spikes in food prices and a shortage of land for food-based agriculture in poor corners of Asia, Africa and Latin America because the raw material is grown wherever it is cheapest.

Nowhere, perhaps, is that squeeze more obvious than in Guatemala, which is "getting hit from both sides of the Atlantic," in its fields and at its markets, said Timothy Wise, a Tufts University development expert who is studying the problem globally with Actionaid, a policy group based in Washington that focuses on poverty.

With its corn-based diet and proximity to the United States, Central America has long been vulnerable to economic riptides related to the United States' corn policy. Now that the United States is using 40 percent of its crop to make biofuel, it is not surprising that tortilla prices have doubled in Guatemala, which imports nearly half of its corn.

At the same time, Guatemala's lush land, owned by a handful of families, has proved ideal for producing raw materials for biofuels. Suchitepéquez Province, a major corn-producing region five years ago, is now carpeted with sugar cane and African palm. The field Mr. Alvarado used to rent for his personal corn crop now grows sugar cane for a company that exports bioethanol to Europe.

By Jeff DelViscio

A large palm plantation and factory recently opened in the indigenous village where Ms. Quirix lives.

In a country where most families must spend about two thirds of their income on food, "the average Guatemalan is now hungrier because of biofuel development," said Katja Winkler, a researcher at Idear, a Guatemalan nonprofit organization that studies rural issues. Roughly 50 percent of the nation's children are chronically malnourished, the fourth-highest rate in the world, according to the United Nations.

The American renewable fuel standard mandates that an increasing volume of biofuel be blended into the nation's vehicle fuel supply each year to reduce carbon dioxide emissions from fossil fuels and to bolster the nation's energy security. Similarly, by 2020, transportation fuels in Europe will have to contain 10 percent biofuel.

Large companies like Pantaleon Sugar Holdings, Guatemala's leading sugar producer, are profiting from that new demand, with recent annual growth of more than 30 percent. The Inter-American Development Bank says the new industry could bring an infusion of cash and jobs to Guatemala's rural economy if developed properly. For now, the sugar industry directly provides 60,000 jobs and the palm industry 17,000, although the plantations are not labor-intensive.

But many worry that Guatemala's poor are already suffering from the diversion of food to fuel. "There are pros and cons to biofuel, but not here," said Misael Gonzáles of C.U.C., a labor union for Guatemala's farmers. "These people don't have enough to eat. They need food. They need land. They can't eat biofuel, and they don't drive cars."

By Jeff DelViscio

Ms. Siquic and her relatives sold their land to a palm plantation and now have to buy foods that they once grew.

In 2011, corn prices would have been 17 percent lower if the United States did not subsidize and give incentives for biofuel production with its renewable fuel policies, according to an analysis by Bruce A. Babcock, an agricultural economist at Iowa State University. The World Bank has suggested that biofuel mandates in the developed world should be adjusted when food is short or prices are inordinately high.

Concerned about the effects of its biofuel mandate on world hunger, the European Commission recently proposed amending its policy so that only half of its 2020 target could be met by using biofuels made from food crops or those grown on land previously devoted to food crops.

The current American mandate, established in 2007 by Congress, can be waived by the Environmental Protection Agency, but, according to law, such adjustments focus on domestic issues like cases in which biofuel "requirements would severely harm the economy of a state, a region or the United States," the agency said in an e-mail when asked for comment.

Once nearly self-sufficient in corn production, Guatemala became more dependent on imports in the 1990s as a surplus of subsidized American corn flowed south. Guatemalan farmers could not compete, and corn production dropped roughly 30 percent per capita from 1995 to 2005, Mr. Wise said.

But cheap imports disappeared once the United States started using corn to fulfill its 2007 biofuels standards. "The use of maize to make biofuel has led to these crazy prices," said Guy Gauvreau, head of the United Nations World Food Program in Guatemala. It "is not ethically acceptable," he added.

In part because the agency's primary food supplement is a mix of corn and soy, it cannot afford to help all of the Guatemalan children in need, Mr. Gauvreau said; it is agency policy to buy corn locally, but there is no extra corn grown here anymore. And Guatemalans cannot go back to the land because so much of it is being devoted to growing crops for biofuel. (Almost no biofuel is used domestically.)

The southwestern village of La Ayuda is now an island of rickety dwellings in the middle of a giant African palm plantation. Félix Pérez, 51, used to grow corn, beans and fruit behind his home. He now walks about three miles to a cheap hillside plot that he rents for four months of the year. "Every day it's more difficult to survive since we live off the land, and there's less and less," he said.

By Jeff DelViscio

Ms. Cosagua Pérez tends to corn and fruit grown on land belonging to the town church in an area where plantations are rapidly expanding.

Although African palm was practically nonexistent in Guatemala two decades ago, palm oil is now the country's third-largest export, after sugar and bananas, with exports rising by more than a third in 2011, according to United Nations trade statistics.

Although Susana Siekavizza, executive director of Grepalma, the local industry association, said that Guatemalan palm is currently exported for cooking oil, the high prices that it commands reflect heightened global demand for a crop also used in biofuel. It is exported in a raw form that can be distilled into biofuel in the receiving country, and Ms. Siekavizza said there was "interest" in manufacturing fuel in Guatemala.

Production of sugar cane, long a mainstay Guatemalan crop, has also skyrocketed as biofuels opened new market opportunities. Pantaleon Sugar Holdings, which once exported only food products, now uses 13 percent of its production for fuel. Local sugar prices have doubled.

For Guatemala's largest landowners, long-term leases with large biofuel companies are more profitable and easier to manage than cattle ranching or renting to subsistence farmers.

In small towns like San Basilio, representatives of one palm company are pressing farmers to lease their fields.

"I'm trying not to because I need that land to grow corn," said one farmer, Gilberto Galindo Morales, 46. But he added that farming has become difficult as nearby plantations divert and deplete rivers to feed industrial-scale irrigation systems. Ash from burning cane fields after harvest also damages his corn crop and irritates his children's lungs, he said.

By Jeff DelViscio

A palm company is trying to lease Mr. Galindo Morales's five acres of land.

With sometimes violent confrontations over land and labor, plantation gates are secured with armed guards. Still, Ms. Siekavizza of the trade group contends that the belief that palm cultivation is robbing people of food is "more myth than reality" since much of Guatemala's terrain and soil composition "is not well suited to growing corn."

In the remote Mayan villages in the north of the country, the incursion of plantations has brought a few good jobs and some training, but many complain of low wages and the backbreaking nature of the work, which mostly involves picking the small red fruits from African palm trees or off the ground. "We sold our land, so now we have to work, but I think it's better when you grow your own," said Juana Paula Tec Choc in the village of El Cancellero. "At least then you have some security."

A report last year by the United States Department of Agriculture noted Guatemala's potential for biofuel production, saying that palm plantations tended to be on "underutilized" agricultural land and applied no dangerous pesticides to the trees; that assessment could be important for getting palm-based fuel approved for use in the United States.

But villagers in El Cancellero disputed that, saying they suspected chemical poisoning was behind the mysterious deaths of four young children last year. On a recent afternoon, a crop duster buzzed overhead, and workers wearing tanks fitted with spray hoses trudged along a narrow road that separates what remains of the village from endless rows of squat palms.

Mike McDonald contributed reporting.

A version of this article appeared in print on January 6, 2013, on page A6 of the New York edition with the headline: As Biofuel Demand Grows, So Do Guatemala's Hunger Pangs.
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Germany Assuming A Greater Military Role On The World Stage

Germans with a Patriot missile battery. Germany has voted to send two Patriot missile batteries and 400 soldiers to Turkey. Tobias Schwarz/Reuters

Germany, for Decades a Pacifist Power, Faces the Need to Play a Military Role -- New York Times

BERLIN — When Chancellor Angela Merkel hosted a recent reception for military families, she greeted parents, wives and children whose loved ones were spending their holidays in Afghanistan, Lebanon, Kosovo and off the Horn of Africa. German deployments overseas, Ms. Merkel said, “will soon encompass the entire globe.”

On that same wintry afternoon, members of Parliament debated whether to add to the nearly 6,000 German troops currently serving abroad by sending up to 400 soldiers to Turkey, where they would operate two Patriot missile batteries to help protect their NATO ally from a potential escalation of the civil war across the border in Syria.

Read more
....

My Comment: The other former World War II axis power is also starting to assume a greater military role .... but for different reasons.

Impressive Rebel Tank Strike In Syria (Video)



Video Claims To Show An Impressive Rebel Tank Strike In Syria -- Business Insider

Free Syrian Army rebels are laying siege to Assad's Taftanaz airport, which they claim he uses to mount helibourne assaults on rebel positions.

This video claims to have caught a direct hit from a rebel tank on a Syrian army tank at that airport. The rebel tank looks like it could be a T-54, possibly from one of the bases the FSA raided. There are a couple cuts, but there's no doubt the video was all taken in the same place.

Read more ....

My Comment: That is an impressive rebel tank strike.

NYT > Home Page: Obama and G.O.P. Gear Up for Next Fiscal Fight

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Obama and G.O.P. Gear Up for Next Fiscal Fight
Jan 5th 2013, 21:07

WASHINGTON — In dueling weekly addresses, the White House and Republicans drew lines in the sand for their next fiscal showdown, which could be as soon as next month, when a Congressional fight is expected on raising the nation's borrowing limit.

President Obama with Vice President Joseph R. Biden Jr. last week after a deal averted tax increases and spending cuts.

Democrats have warned Republican leaders not to use the debt authorization for political leverage. In his weekly address, President Obama again said he would not trade spending cuts for an increase in the debt limit.

"One thing I will not compromise over is whether or not Congress should pay the tab for a bill they've already racked up," he said. "If Congress refuses to give the United States the ability to pay its bills on time, the consequences for the entire global economy could be catastrophic."

Mr. Obama also repeated his new demand that future spending cuts be met with commensurate tax increases. "Spending cuts must be balanced with more reforms to our tax code," he said. "The wealthiest individuals and the biggest corporations shouldn't be able to take advantage of loopholes and deductions that aren't available to most Americans."

A similar standoff over raising the debt limit in 2011 led Standard & Poor's for the first time to downgrade its rating of United States Treasury debt by one notch, suggesting a higher risk of default. The impasse caused a slump in the market, and analysts fear that another one could cause yet more damage.

Many Republicans have said they do not plan to lift the country's statutory borrowing limit unless Democrats agree to significant spending cuts, particularly to entitlement programs like Social Security and Medicare.

In the Republican address, Representative Dave Camp of Michigan, the chairman of the powerful Ways and Means Committee, argued that Congress needed to focus on cutting spending and simplifying the tax code.

"Many of our Democrat colleagues just don't seem to get it," he said. "Throughout the fiscal cliff discussions, the president and the Democrats who control Washington repeatedly refused to take any meaningful steps to make Washington live within its means. That position is irresponsible and fails to acknowledge what every family in America already knows: when you have no more money in your account and your credit cards are maxed out, then the spending must stop."

Just after the new year, Congress agreed to raise taxes on the wealthiest Americans and delay for two months significant cuts to the discretionary budget, brokering the deal to avoid the worst of the tax increases and spending cuts known collectively as the "fiscal cliff." But the deal, which will cut the deficit by an estimated $650 billion over 10 years, is far smaller than the trillions of dollars in deficit reduction initially sought by negotiators.

It also left several issues for the 113th Congress to resolve, including raising the debt ceiling, trying to defuse some of the mandated discretionary-spending cuts and averting a government shutdown. Those will come to a head in February and March. If Congress fails to lift the ceiling, a cash management crisis will result, as the Treasury will lack the money to pay all the country's bills on time.

A version of this article appeared in print on January 6, 2013, on page A25 of the New York edition with the headline: Obama and Republicans Gear Up for Next Fiscal Fight.
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NYT > Home Page: Aurora, Colo., Shooting Kills Four

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Aurora, Colo., Shooting Kills Four
Jan 5th 2013, 21:24

Bob Pearson/European Pressphoto Agency

Detectives investigated at the scene of the shooting on Saturday in Aurora, Colo.

Four people, including a gunman who was suspected of taking hostages inside a house in Aurora, Colo, died Saturday after a standoff with the police, the authorities said.

Bullet holes marked the second-floor window of the house on East Ithaca Place, about 16 miles southeast of downtown Denver.

People reacted near the scene of the shooting on Saturday.

The episode began about 3 a.m. when shots were heard on East Ithaca Place, about 16 miles southeast of downtown Denver, said Sgt. Cassidee Carlson, a spokeswoman for the Aurora Police Department.

A woman who had escaped from the house told officers that shots had been fired and "that she observed three people inside the home who appeared lifeless as she was leaving," according to a statement released by the police on Saturday afternoon.

About 50 officers, including members of a SWAT unit and hostage negotiators were called, Ms. Carlson said. When attempts to talk to the man by telephone and over a bullhorn were unsuccessful, the police statement said, officers moved in using an armored vehicle around 8 a.m., which was fired upon.

The police were unable to force the gunman out of the house using gas, Sgt. Carlson said, and about an hour later, officers shot him to death after he appeared in a second-floor window, she said.

Inside, the police said they also found the bodies of a woman and two other men. Sgt. Carlson did not identify the victims or the gunman, and said investigators did not know what set off the episode.

In July, 12 people were killed and 58 wounded in a shooting at an Aurora movie theater during midnight screening of the Batman sequel "The Dark Knight Rises." The gunman, wearing what the police described as ballistic gear, used an AR-15 assault rifle, a shotgun and a handgun in the shooting, the police said.

James Eagan Holmes, 24, was arrested outside the theater and has been charged in the killings. Prosecutors are scheduled to present their case against Mr. Holmes at a preliminary hearing on Monday that is expected to be attended by many of the survivors and family members of those who died.

Bob Broom, a member of the Aurora City Council, said memories of the movie theater shootings were still fresh but that life in the city had begun to resume its normal rhythms. He said he did not believe the shooting on Saturday shooting would reopen those wounds because it appeared to have been an act of domestic violence.

"When the theater shooting first happened, there was incredible grief," said Mr. Broom, who said he lives in the subdivision where the shooting on Saturday took place. "But time heals. And it has healed in this situation."

Barb Helzer, co-owner of the Rock Restaurant and Bar, said she tensed up when she heard news of the shooting on Saturday. "My whole staff, even the young staff, who normally don't pay attention, we all said, 'Oh my God, there's been another shooting,' " she said.

Ms. Helzer says she has friends whose Aurora businesses have struggled since the summer. Others will not go to the movies.

"It is all still a recent reality here. We're still nervous," Ms. Helzer said. "You find yourself looking at people differently. We're careful when we ask people to leave the bar. You don't take things for granted anymore."

The theater where the shootings took place, the Century 16, is scheduled to reopen on Jan. 17. The theater's operator, Cinemark, has been criticized for sending our invitations for the reopening to relatives of those who were killed.

Parents, grandparents, cousins and a widow of 9 of the 12 people killed said they were asked to attend an "evening of remembrance" followed by a movie on Jan. 17, according to an open letter to Cinemark published by The Denver Post.

In the letter, many of the relatives said the company had never offered its condolences and had refused to meet with them without the company's lawyers being present.

"Our family members will never be on this earth with us again, and a movie ticket and some token words from people who didn't care enough to reach out to us, nor respond when we reached out to them to talk, is appalling," the letter said.

The families, some of whom have sued Cinemark, described the invitation as a "thinly veiled publicity ploy" and called for a boycott of the theater. Cinemark did not immediately return a message seeking comment on Saturday.

Dan Frosch contributed reporting from Albuquerque, N.M.

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A Critical review Of 'Global Trends 2030'

U.S. Intelligence's New Year's Wish -- Tom Engelhardt, Real Clear World/TomDispatch.com

Think of it as a simple formula: if you've been hired (and paid handsomely) to protect what is, you're going to be congenitally ill-equipped to imagine what might be. And yet the urge not just to know the contours of the future, but to plant the Stars and Stripes in that future has had the U.S. Intelligence Community (IC) in its grip since the mid-1990s. That was the moment when it first occurred to some in Washington that U.S. power might be capable of controlling just about everything worth the bother globally for, if not an eternity, then long enough to make the future American property.

Read more ....

My Comment:
If you have 15 minutes to spare .... read and enjoy.