A 40,000-year-old figurine of a voluptuous woman carved from mammoth ivory and excavated from a cave in southwestern Germany is the oldest known example of three-dimensional or figurative representation of humans and sheds new light on the origins of art, researchers reported today.
The intricately carved headless figure is at least 5,000 years older than previous examples and dates from shortly after modern humans arrived in Europe. But it already exhibits many of the characteristics of fertility figurines carved millenniums later.
The figurine "radically changes our views of the context and meaning of the earliest Paleolithic art," its discoverer, archaeologist Nicholas J. Conard of the University of Tubingen in Germany, wrote in the journal Nature.
Experts are excited about the find because of what it tells us about early humans -- and about ourselves.
"The origin and evolution of figurative art, portable art, appear on most lists of what constitutes modern human behavior," said archaeologist Daniel Adler of the University of Connecticut, who was not involved in the research.
"Anytime you can push the clock back on some of these behaviors, we get a better understanding of why these were important and were developed, where they were developed . . . and the roles they played in the social glue that holds groups together," he said.
"For European archaeologists, it marks the appearance of behaviors they find familiar -- modern human behavior," said archaeologist John J. Shea of Stony Brook University in New York, who was also not involved. "It suggests the same values and ways of seeing the world existed among the earliest humans that migrated to Europe" as among humans today.
The figurine was excavated at Hohle Fels, a large cave in the Swabian Jura region of Germany about 14 miles southwest of Ulm. The cave shows evidence of a long period of prehistoric occupation and is probably best known for three ivory carvings previously discovered by Conard -- a horse's or bear's head, a water bird that may be in flight and a half-human, half-lion figurine, all dating from about 30,000 to 31,000 years ago.
The new figurine was found in September in six pieces in a lower layer of the cave floor about nine feet below the current floor. Nearby were flint-knapping debris, worked bone and ivory and remains of horses, reindeer, cave bears, mammoths and ibexes. Radiocarbon data indicate that the layer originated 35,000 to 40,000 years ago.
The Venus figure, about 2.4 inches tall, was carved from a mammoth tusk.
It has broad shoulders, prominent breasts and intricately detailed buttocks and genitalia, all grossly exaggerated.
Those features "are clearly more exaggerated than on others that come later," Adler said, "but many of the basic features that are seen later are already there. . . . It's a prototype for what you see later" from the Gravettian culture, which occupied France from 28,000 to 22,000 years ago. "The stylistic attributes are being carried on for many, many generations."
The figurine has carefully carved hands resting on the upper part of the stomach -- although the left arm and shoulder are missing. One hand has five fingers, the other four.
The legs are short, pointed and asymmetrical, with the left noticeably shorter than the right, typical of later Venus figurines. Also typical, the figure has no head. Instead, it has a carefully carved ring above the left shoulder. The polished surface of the ring suggests that the figurine was worn as an ornament around the neck.
The intricate detailing achieved with primitive stone tools indicates "the amount of energy these guys were willing to invest in these little objects -- tens if not hundreds of hours," Shea said. That suggests the objects were very important to them. Many researchers believe that they were fertility totems, but their ultimate meaning may remain a mystery.
Wednesday, May 13, 2009
Gov. proposes selling L.A. Coliseum, other properties to raise cash
Gov. Arnold Schwarzenegger wants to sell the Los Angeles Coliseum, San Quentin State Prison, the Orange County Fairgrounds and other state property to raise cash amid the state's growing fiscal crisis, according to a copy of a proposal reviewed by The Times.
Sale of the properties, to be included in the governor's revised budget plan on Thursday, would raise between $600 million and $1 billion, although it would not provide relief to state coffers for two to five years, according to the proposal.
Other items on the list for potential disposal include Cal Expo, site of the state fair in Sacramento; the Del Mar Fairground; the Cow Palace in Daly City; and the Ventura County Fairgrounds.
It's not clear whether lawmakers would be willing to part with the real state the governor has identified. Proposals to sell San Quentin and the Coliseum have not advanced in the Legislature in recent weeks.
Sale of the properties, to be included in the governor's revised budget plan on Thursday, would raise between $600 million and $1 billion, although it would not provide relief to state coffers for two to five years, according to the proposal.
Other items on the list for potential disposal include Cal Expo, site of the state fair in Sacramento; the Del Mar Fairground; the Cow Palace in Daly City; and the Ventura County Fairgrounds.
It's not clear whether lawmakers would be willing to part with the real state the governor has identified. Proposals to sell San Quentin and the Coliseum have not advanced in the Legislature in recent weeks.
Thriving Norway Provides an Economics Lesson
When capitalism seemed on the verge of collapse last fall, Kristin Halvorsen, Norway’s Socialist finance minister and a longtime free market skeptic, did more than crow.
As investors the world over sold in a panic, she bucked the tide, authorizing Norway’s $300 billion sovereign wealth fund to ramp up its stock buying program by $60 billion — or about 23 percent of Norway ’s economic output.
“The timing was not that bad,” Ms. Halvorsen said, smiling with satisfaction over the broad worldwide market rally that began in early March.
The global financial crisis has brought low the economies of just about every country on earth. But not Norway.
With a quirky contrariness as deeply etched in the national character as the fjords carved into its rugged landscape, Norway has thrived by going its own way. When others splurged, it saved. When others sought to limit the role of government, Norway strengthened its cradle-to-grave welfare state.
And in the midst of the worst global downturn since the Depression, Norway’s economy grew last year by just under 3 percent. The government enjoys a budget surplus of 11 percent and its ledger is entirely free of debt.
By comparison, the United States is expected to chalk up a fiscal deficit this year equal to 12.9 percent of its gross domestic product and push its total debt to $11 trillion, or 65 percent of the size of its economy.
Norway is a relatively small country with a largely homogeneous population of 4.6 million and the advantages of being a major oil exporter. It counted $68 billion in oil revenue last year as prices soared to record levels. Even though prices have sharply declined, the government is not particularly worried. That is because Norway avoided the usual trap that plagues many energy-rich countries.
Instead of spending its riches lavishly, it passed legislation ensuring that oil revenue went straight into its sovereign wealth fund, state money that is used to make investments around the world. Now its sovereign wealth fund is close to being the largest in the world, despite losing 23 percent last year because of investments that declined.
Norway’s relative frugality stands in stark contrast to Britain, which spent most of its North Sea oil revenue — and more — during the boom years. Government spending rose to 47 percent of G.D.P., from 42 percent in 2003. By comparison, public spending in Norway fell to 40 percent from 48 percent of G.D.P.
“The U.S. and the U.K. have no sense of guilt,” said Anders Aslund, an expert on Scandinavia at the Peterson Institute for International Economics in Washington. “But in Norway, there is instead a sense of virtue. If you are given a lot, you have a responsibility.”
Eirik Wekre, an economist who writes thrillers in his spare time, describes Norwegians’ feelings about debt this way: “We cannot spend this money now; it would be stealing from future generations.”
Mr. Wekre, who paid for his house and car with cash, attributes this broad consensus to as the country’s iconoclasm. “The strongest man is he who stands alone in the world,” he said, quoting Norwegian playwright Henrik Ibsen.
Still, even Ibsen might concede that it is easier to stand alone when your nation has benefited from oil reserves that make it the third-largest exporter in the world. The money flowing from that black gold since the early 1970s has prompted even the flintiest of Norwegians to relax and enjoy their good fortune. The country’s G.D.P. per person is $52,000, behind only Luxembourg among industrial democracies.
As in much of the rest of the world home prices have soared here, tripling this decade. But there has been no real estate crash in Norway because there were few mortgage lending excesses. After a 15 percent correction, prices are again on the rise.
Unlike Dublin or Riyadh, Saudi Arabia, where work has stopped on half-built skyscrapers and stilled cranes dot the skylines, Oslo retains a feeling of modesty reminiscent of a fishing village rather than a Western capital, with the recently opened $800 million Opera House one of the few signs of opulence.
Norwegian banks, said Arne J. Isachsen, an economist at the Norwegian School of Management, remain largely healthy and prudent in their lending. Banks represent just 2 percent of the economy and tight public oversight over their lending practices have kept Norwegian banks from taking on the risk that brought down their Icelandic counterparts. But they certainly have not closed their doors to borrowers. Mr. Isachsen, like many in Norway, has a second home and an open credit line from his bank, which he recently used to buy a new boat.
Some here worry that while a cabin in the woods and a boat may not approach the excesses seen in New York or London, oil wealth and the state largesse have corrupted Norway’s once-sturdy work ethic.
“This is an oil-for-leisure program,” said Knut Anton Mork, an economist at Handelsbanken in Oslo. A recent study, he pointed out, found that Norwegians work the fewest hours of the citizens of any industrial democracy.
“We have become complacent,” Mr. Mork added. “More and more vacation houses are being built. We have more holidays than most countries and extremely generous benefits and sick leave policies. Some day the dream will end.”
But that day is far off. For now, the air is clear, work is plentiful and the government’s helping hand is omnipresent — even for those on the margins.
Just around the corner from Norway’s central bank, for instance, Paul Bruum takes a needle full of amphetamines and jabs it into his muscular arm. His scabs and sores betray many years as a heroin addict. He says that the $1,500 he gets from the government each month is enough to keep him well-fed and supplied with drugs.
Mr. Bruum, 32, says he has never had a job, and he admits he is no position to find one. “I don’t blame anyone,” he said. “The Norwegian government has provided for me the best they can.”
To Ms. Halvorsen, the finance minister, even the underside of the Norwegian dream looks pretty good compared to the economic nightmares elsewhere.
“As a socialist, I have always said that the market can’t regulate itself,” she said. “But even I was surprised how strong the failure was.”
As investors the world over sold in a panic, she bucked the tide, authorizing Norway’s $300 billion sovereign wealth fund to ramp up its stock buying program by $60 billion — or about 23 percent of Norway ’s economic output.
“The timing was not that bad,” Ms. Halvorsen said, smiling with satisfaction over the broad worldwide market rally that began in early March.
The global financial crisis has brought low the economies of just about every country on earth. But not Norway.
With a quirky contrariness as deeply etched in the national character as the fjords carved into its rugged landscape, Norway has thrived by going its own way. When others splurged, it saved. When others sought to limit the role of government, Norway strengthened its cradle-to-grave welfare state.
And in the midst of the worst global downturn since the Depression, Norway’s economy grew last year by just under 3 percent. The government enjoys a budget surplus of 11 percent and its ledger is entirely free of debt.
By comparison, the United States is expected to chalk up a fiscal deficit this year equal to 12.9 percent of its gross domestic product and push its total debt to $11 trillion, or 65 percent of the size of its economy.
Norway is a relatively small country with a largely homogeneous population of 4.6 million and the advantages of being a major oil exporter. It counted $68 billion in oil revenue last year as prices soared to record levels. Even though prices have sharply declined, the government is not particularly worried. That is because Norway avoided the usual trap that plagues many energy-rich countries.
Instead of spending its riches lavishly, it passed legislation ensuring that oil revenue went straight into its sovereign wealth fund, state money that is used to make investments around the world. Now its sovereign wealth fund is close to being the largest in the world, despite losing 23 percent last year because of investments that declined.
Norway’s relative frugality stands in stark contrast to Britain, which spent most of its North Sea oil revenue — and more — during the boom years. Government spending rose to 47 percent of G.D.P., from 42 percent in 2003. By comparison, public spending in Norway fell to 40 percent from 48 percent of G.D.P.
“The U.S. and the U.K. have no sense of guilt,” said Anders Aslund, an expert on Scandinavia at the Peterson Institute for International Economics in Washington. “But in Norway, there is instead a sense of virtue. If you are given a lot, you have a responsibility.”
Eirik Wekre, an economist who writes thrillers in his spare time, describes Norwegians’ feelings about debt this way: “We cannot spend this money now; it would be stealing from future generations.”
Mr. Wekre, who paid for his house and car with cash, attributes this broad consensus to as the country’s iconoclasm. “The strongest man is he who stands alone in the world,” he said, quoting Norwegian playwright Henrik Ibsen.
Still, even Ibsen might concede that it is easier to stand alone when your nation has benefited from oil reserves that make it the third-largest exporter in the world. The money flowing from that black gold since the early 1970s has prompted even the flintiest of Norwegians to relax and enjoy their good fortune. The country’s G.D.P. per person is $52,000, behind only Luxembourg among industrial democracies.
As in much of the rest of the world home prices have soared here, tripling this decade. But there has been no real estate crash in Norway because there were few mortgage lending excesses. After a 15 percent correction, prices are again on the rise.
Unlike Dublin or Riyadh, Saudi Arabia, where work has stopped on half-built skyscrapers and stilled cranes dot the skylines, Oslo retains a feeling of modesty reminiscent of a fishing village rather than a Western capital, with the recently opened $800 million Opera House one of the few signs of opulence.
Norwegian banks, said Arne J. Isachsen, an economist at the Norwegian School of Management, remain largely healthy and prudent in their lending. Banks represent just 2 percent of the economy and tight public oversight over their lending practices have kept Norwegian banks from taking on the risk that brought down their Icelandic counterparts. But they certainly have not closed their doors to borrowers. Mr. Isachsen, like many in Norway, has a second home and an open credit line from his bank, which he recently used to buy a new boat.
Some here worry that while a cabin in the woods and a boat may not approach the excesses seen in New York or London, oil wealth and the state largesse have corrupted Norway’s once-sturdy work ethic.
“This is an oil-for-leisure program,” said Knut Anton Mork, an economist at Handelsbanken in Oslo. A recent study, he pointed out, found that Norwegians work the fewest hours of the citizens of any industrial democracy.
“We have become complacent,” Mr. Mork added. “More and more vacation houses are being built. We have more holidays than most countries and extremely generous benefits and sick leave policies. Some day the dream will end.”
But that day is far off. For now, the air is clear, work is plentiful and the government’s helping hand is omnipresent — even for those on the margins.
Just around the corner from Norway’s central bank, for instance, Paul Bruum takes a needle full of amphetamines and jabs it into his muscular arm. His scabs and sores betray many years as a heroin addict. He says that the $1,500 he gets from the government each month is enough to keep him well-fed and supplied with drugs.
Mr. Bruum, 32, says he has never had a job, and he admits he is no position to find one. “I don’t blame anyone,” he said. “The Norwegian government has provided for me the best they can.”
To Ms. Halvorsen, the finance minister, even the underside of the Norwegian dream looks pretty good compared to the economic nightmares elsewhere.
“As a socialist, I have always said that the market can’t regulate itself,” she said. “But even I was surprised how strong the failure was.”
Pakistan Gets Sensitive U.S. Drone Images, With Limits
The United States military for the first time has provided Pakistan with a broad array of surveillance information collected by American drones flying along the border of Pakistan and Afghanistan, American military officials said Wednesday.
But it is not clear whether the cooperation will continue. While American military drones flew a handful of noncombat surveillance missions along the border earlier this spring at the request of the Pakistani government, requests for additional flights abruptly stopped without explanation, the officials said.
The offer to give Pakistan a much larger amount of imagery, including real-time video feeds and communications intercepts gleaned by remotely piloted aircraft, was intended to help defuse a growing dispute over how to use the drones and which country should control the secret missions flown in Pakistani airspace, American officials said.
In meetings last week with President Obama and other American officials in Washington, Asif Ali Zardari, Pakistan’s president, repeated his insistence that Pakistan be given its own armed Predator drones to attack operatives of Al Qaeda and the Taliban in the country’s tribal areas along the border with Afghanistan. But the American intelligence operatives who fly the armed drones inside Pakistan remain opposed to joint operations with Pakistani intelligence services, pointing out that past attempts were a failure. Several years ago, American officials gave Pakistan advance word of planned Predator attacks, but stopped the practice after the information leaked to militants.
“We’re going after terrorists plotting directly against the United States and its interests,” said one American counterterrorism official. “Nobody wants to gamble with those kinds of targets. We tried a joint approach before, and it didn’t work. Those are facts that can’t be ignored.”
American military officials said Wednesday that there was no plan to allow the military to join the C.I.A. in operating armed drones inside Pakistan. They disputed a report in The Los Angeles Times on Tuesday that said Pakistan had been given joint control of armed American military drones inside Pakistan. Obama administration officials are vigorously resisting sharing the drone technology with Pakistani security forces, but officials from both countries said compromises were possible.
American and some Pakistani officials spoke anonymously because the C.I.A. drone operations are classified.
Pakistani officials said that Mr. Zardari wanted the drone technology partly to tamp down anger inside Pakistan over the campaign of C.I.A. airstrikes inside the country, which have killed civilians in addition to more than a dozen Qaeda leaders. If Pakistan had its own Predators, they said, the government in Islamabad could make a more plausible case to the public that Pakistani missiles, not American missiles, were being used to kill militants.
“Pakistan’s concerns about the drones do not relate to their ability to take out bad guys, they relate to the collateral damage and concerns about national sovereignty,” said Husain Haqqani, Pakistan’s ambassador to the United States.
As a compromise, the American military in Afghanistan a few months ago offered to increase the amount of sensitive surveillance information it shared with the Pakistani military. American officials said the information could help Pakistani forces combat an increasingly lethal militancy that was spreading not only in the tribal areas, but also in the settled areas of Swat and Buner, closer to Islamabad, the Pakistani capital. American and Pakistani officials said that such information-sharing initiatives could build trust between the security services of both nations.
In mid-March, the American military in Afghanistan flew a demonstration mission of a Predator drone along a stretch of the Afghanistan-Pakistan border to show the kind of imagery and communications information the Predator could provide. The Americans transmitted the information to a border coordination center near the Khyber Pass operated by American, Pakistani and Afghan personnel, and the information was sent through Pakistani security databases.
The test run went well enough that Pakistan subsequently requested a small number of additional Predator reconnaissance flights to support their operations in the border tribal areas.
But American officials said the requests for additional surveillance missions ended suddenly in early April. “There was no reason given, it just stopped,” said one senior American defense official. American officials suggested that the change could be the result of internal divisions in the Pakistani military over how closely to cooperate with the Americans on intelligence.
For its part, the Obama administration has provided the Pakistanis with the surveillance information but has resisted sharing detailed information about how the drones operate. “This is technology we haven’t given to our closest allies — the Brits or the Australians or NATO,” said one senior American official who is working on Pakistan issues.
Infusing this debate is a continuing suspicion by American intelligence officials of the premier Pakistani spy agency, the Directorate for Inter-Services Intelligence, or ISI. Because the Predators, and now an even more sophisticated drone called the Reaper, have been among the most successful weapons against Qaeda and other militant leaders, there is deep concern that any information about the drones’ operating patterns, blind spots, and takeoff and landing locations could be leaked to the insurgents and used to take down the drones.
As the fighting in Swat unfolded this week, missiles fired by a remotely piloted American drone killed 15 people, suspected of being militants, in a village in the Federally Administered Tribal Areas on Tuesday. The missiles, apparently three in all, hit a suspected safe house operated by local militants in Sra Khawra, a village that sits on the border between the tribal agencies of North and South Waziristan.
It was the 18th American drone attack in Pakistan so far this year, compared with 36 in all of last year.
But it is not clear whether the cooperation will continue. While American military drones flew a handful of noncombat surveillance missions along the border earlier this spring at the request of the Pakistani government, requests for additional flights abruptly stopped without explanation, the officials said.
The offer to give Pakistan a much larger amount of imagery, including real-time video feeds and communications intercepts gleaned by remotely piloted aircraft, was intended to help defuse a growing dispute over how to use the drones and which country should control the secret missions flown in Pakistani airspace, American officials said.
In meetings last week with President Obama and other American officials in Washington, Asif Ali Zardari, Pakistan’s president, repeated his insistence that Pakistan be given its own armed Predator drones to attack operatives of Al Qaeda and the Taliban in the country’s tribal areas along the border with Afghanistan. But the American intelligence operatives who fly the armed drones inside Pakistan remain opposed to joint operations with Pakistani intelligence services, pointing out that past attempts were a failure. Several years ago, American officials gave Pakistan advance word of planned Predator attacks, but stopped the practice after the information leaked to militants.
“We’re going after terrorists plotting directly against the United States and its interests,” said one American counterterrorism official. “Nobody wants to gamble with those kinds of targets. We tried a joint approach before, and it didn’t work. Those are facts that can’t be ignored.”
American military officials said Wednesday that there was no plan to allow the military to join the C.I.A. in operating armed drones inside Pakistan. They disputed a report in The Los Angeles Times on Tuesday that said Pakistan had been given joint control of armed American military drones inside Pakistan. Obama administration officials are vigorously resisting sharing the drone technology with Pakistani security forces, but officials from both countries said compromises were possible.
American and some Pakistani officials spoke anonymously because the C.I.A. drone operations are classified.
Pakistani officials said that Mr. Zardari wanted the drone technology partly to tamp down anger inside Pakistan over the campaign of C.I.A. airstrikes inside the country, which have killed civilians in addition to more than a dozen Qaeda leaders. If Pakistan had its own Predators, they said, the government in Islamabad could make a more plausible case to the public that Pakistani missiles, not American missiles, were being used to kill militants.
“Pakistan’s concerns about the drones do not relate to their ability to take out bad guys, they relate to the collateral damage and concerns about national sovereignty,” said Husain Haqqani, Pakistan’s ambassador to the United States.
As a compromise, the American military in Afghanistan a few months ago offered to increase the amount of sensitive surveillance information it shared with the Pakistani military. American officials said the information could help Pakistani forces combat an increasingly lethal militancy that was spreading not only in the tribal areas, but also in the settled areas of Swat and Buner, closer to Islamabad, the Pakistani capital. American and Pakistani officials said that such information-sharing initiatives could build trust between the security services of both nations.
In mid-March, the American military in Afghanistan flew a demonstration mission of a Predator drone along a stretch of the Afghanistan-Pakistan border to show the kind of imagery and communications information the Predator could provide. The Americans transmitted the information to a border coordination center near the Khyber Pass operated by American, Pakistani and Afghan personnel, and the information was sent through Pakistani security databases.
The test run went well enough that Pakistan subsequently requested a small number of additional Predator reconnaissance flights to support their operations in the border tribal areas.
But American officials said the requests for additional surveillance missions ended suddenly in early April. “There was no reason given, it just stopped,” said one senior American defense official. American officials suggested that the change could be the result of internal divisions in the Pakistani military over how closely to cooperate with the Americans on intelligence.
For its part, the Obama administration has provided the Pakistanis with the surveillance information but has resisted sharing detailed information about how the drones operate. “This is technology we haven’t given to our closest allies — the Brits or the Australians or NATO,” said one senior American official who is working on Pakistan issues.
Infusing this debate is a continuing suspicion by American intelligence officials of the premier Pakistani spy agency, the Directorate for Inter-Services Intelligence, or ISI. Because the Predators, and now an even more sophisticated drone called the Reaper, have been among the most successful weapons against Qaeda and other militant leaders, there is deep concern that any information about the drones’ operating patterns, blind spots, and takeoff and landing locations could be leaked to the insurgents and used to take down the drones.
As the fighting in Swat unfolded this week, missiles fired by a remotely piloted American drone killed 15 people, suspected of being militants, in a village in the Federally Administered Tribal Areas on Tuesday. The missiles, apparently three in all, hit a suspected safe house operated by local militants in Sra Khawra, a village that sits on the border between the tribal agencies of North and South Waziristan.
It was the 18th American drone attack in Pakistan so far this year, compared with 36 in all of last year.
Obama Pushes Broad Rules for Oversight of Derivatives
In its first detailed effort to overhaul financial regulation, the Obama administration on Wednesday sought new authority over the complex financial instruments, known as derivatives, that were a major cause of the financial crisis and have gone largely unregulated for decades.
The administration asked Congress to move quickly on legislation that would allow federal oversight of many kinds of exotic instruments, including credit default swaps, the insurance contracts that caused the near-collapse of the American International Group.
The Treasury secretary, Timothy F. Geithner, said the measure should require swaps and other types of derivatives to be traded on exchanges and backed by capital reserves, much like the capital cushions that banks must set aside in case a borrower defaults on a loan. Taken together, the rules would likely make it more expensive for issuers, dealers and buyers alike to participate in the derivatives markets.
The proposal will probably force many types of derivatives into the open, reducing the role of the so-called shadow banking system that has arisen around them.
“This financial crisis was caused in large part by significant gaps in the oversight of the markets,” Mr. Geithner said in a briefing. He said the proposal was intended to make the trading of derivatives more transparent and give regulators the ability to limit the amount of derivatives that any company can sell, or that any institution can hold.
The initiative was well received by senior Democrats in Congress with jurisdiction over the issue. The proposal had been expected, but some lawmakers, impatient with the pace of the new administration’s efforts, had begun moving ahead themselves.
Hinting at a lobbying campaign to come, Robert Pickel, the chief executive of the International Swaps and Derivatives Association, a trade group, said his organization “looked forward to working with policy makers to ensure these reforms help preserve the widespread availability of swaps and other important risk management tools.”
But some in the financial industry say that regulation is inevitable. “Nobody is in a ‘just say no’ mode,” said Steve Elmendorf, a former House Democratic leadership aide who represents several major financial institutions and groups. “Everybody understands that we’ve been through a financial crisis and that change has to happen. And the only question is how the change happens.”
The administration is seeking the repeal of major portions of the Commodity Futures Modernization Act, a law adopted in December 2000 that made sure that derivative instruments would remain largely unregulated.
The law came about after heavy lobbying from Wall Street and the financial industry, and was pushed hard by Democrats and Republicans alike. It was endorsed at the time by the Treasury secretary, Lawrence H. Summers, who is now President Obama’s top economic adviser.
At the time, the derivatives market was relatively small. But it soon exploded, and the face value of all derivatives contracts — a measure that counts the value of a derivative’s underlying assets — outstanding at the end of last year totaled more than $680 trillion, according to the Bank for International Settlements in Switzerland. The market for credit default swaps — a form of insurance that protects debtholders against default — stood around $38 trillion, according to the international swaps group. That represents the total amount of insurance that has been written on various kinds of debt, but the amount that would have to be paid out if the debt went into default is considerably less.
As the credit crisis has unfolded, trading in credit default swaps has cooled, market participants said. The collapse of A.I.G. took a huge player out of the market and banks, hobbled by loan losses, have curbed their activities in the market. Still, derivatives trading desks have been one of the few profit centers at major banks recently.
The biggest banks and brokerage firms like JPMorgan Chase, Citigroup and Goldman Sachs, as well as major insurers, are all major players in derivatives.
Derivatives are hard to value. They are virtually hidden from investors, analysts and regulators, even though they are one of Wall Street’s biggest profit engines. They don’t trade openly on public exchanges, and financial services firms disclose few details about them. The new rules are meant to change most, but not all, of that opacity.
Used properly, they can reduce or transfer risk, limit the damage from market uncertainty, and make global trade easier. Airlines, food companies, insurers, exporters and many other companies use derivatives to protect themselves from sudden and unpredictable changes in financial markets like interest rate or currency movements. Used poorly, derivatives can backfire and spread risk rather than contain it.
The administration plan would not require that custom-made derivative instruments — those with unique characteristics negotiated between companies — be traded on exchanges or through clearinghouses, though standardized ones would. If approved, the plan would require the development of timely reports of trades, similar to the system now used for corporate bonds.
The letter suggested that the Commodity Futures Trading Commission would play a leading role in the oversight of the market, although it would also leave important elements to the Securities and Exchange Commission. Over the years, the turf battle between those agencies contributed to the neglect of that market by government overseers.
Some lawmakers in the House and Senate have already introduced measures to regulate derivatives. But a number of members have pressed the administration to put out its own plan.
Representative Barney Frank of Massachusetts, the chairman of the House Financial Services Committee that oversees the S.E.C., and Representative Collin C. Peterson of Minnesota, chairman of the House Agriculture Committee with oversight of the C.F.T.C., on Wednesday released a joint statement saying, “we agree there must be strong, comprehensive and consistent regulation” of derivatives. “We will work closely together to achieve that goal,” they added.
While derivatives regulation will be a focus of some market players, of equal concern to many in the financial industry are what the Obama administration and Congress might do to regulate compensation for executives across the board, not just at institutions that have accepted federal bailout money.
The Treasury is acting on two paths. First, it plans as soon as next week to announce revised compensation rules for companies getting assistance, to make those rules conform with a law Congress passed in February that was more stringent than the Treasury’s own earlier guidelines.
Separately, Treasury officials have just begun discussing with the Federal Reserve and the S.E.C. what the government can do industry-wide – through incentives, restrictions or a mix of the two for corporate boards – to guard against eye-popping compensation that rewards excessive risk-taking of the sort that contributed to the current crisis.
The fear among many in the industry — and some in the administration — is that whatever limits Mr. Obama proposes, Congress will seek to add even more, in response to widespread public anger at Wall Street.
In addition to the regulatory changes it is seeking, the administration is also continuing to expand its bailout programs for various industries. Mr. Geithner announced on Wednesday that the administration would provide a new round of capital assistance to smaller community banks, and would increase the amount that they can borrow from the program.
Beyond derivatives, he also said that the administration would be presenting a comprehensive proposal to overhaul the regulation of the financial system. He provided few specifics, but said a central goal would be to eliminate the ability of companies to pick the least onerous regulator.
“We need a much simpler financial oversight structure,” he said. “It’s not going to be comfortable for everybody but it’s important to do.”
The administration asked Congress to move quickly on legislation that would allow federal oversight of many kinds of exotic instruments, including credit default swaps, the insurance contracts that caused the near-collapse of the American International Group.
The Treasury secretary, Timothy F. Geithner, said the measure should require swaps and other types of derivatives to be traded on exchanges and backed by capital reserves, much like the capital cushions that banks must set aside in case a borrower defaults on a loan. Taken together, the rules would likely make it more expensive for issuers, dealers and buyers alike to participate in the derivatives markets.
The proposal will probably force many types of derivatives into the open, reducing the role of the so-called shadow banking system that has arisen around them.
“This financial crisis was caused in large part by significant gaps in the oversight of the markets,” Mr. Geithner said in a briefing. He said the proposal was intended to make the trading of derivatives more transparent and give regulators the ability to limit the amount of derivatives that any company can sell, or that any institution can hold.
The initiative was well received by senior Democrats in Congress with jurisdiction over the issue. The proposal had been expected, but some lawmakers, impatient with the pace of the new administration’s efforts, had begun moving ahead themselves.
Hinting at a lobbying campaign to come, Robert Pickel, the chief executive of the International Swaps and Derivatives Association, a trade group, said his organization “looked forward to working with policy makers to ensure these reforms help preserve the widespread availability of swaps and other important risk management tools.”
But some in the financial industry say that regulation is inevitable. “Nobody is in a ‘just say no’ mode,” said Steve Elmendorf, a former House Democratic leadership aide who represents several major financial institutions and groups. “Everybody understands that we’ve been through a financial crisis and that change has to happen. And the only question is how the change happens.”
The administration is seeking the repeal of major portions of the Commodity Futures Modernization Act, a law adopted in December 2000 that made sure that derivative instruments would remain largely unregulated.
The law came about after heavy lobbying from Wall Street and the financial industry, and was pushed hard by Democrats and Republicans alike. It was endorsed at the time by the Treasury secretary, Lawrence H. Summers, who is now President Obama’s top economic adviser.
At the time, the derivatives market was relatively small. But it soon exploded, and the face value of all derivatives contracts — a measure that counts the value of a derivative’s underlying assets — outstanding at the end of last year totaled more than $680 trillion, according to the Bank for International Settlements in Switzerland. The market for credit default swaps — a form of insurance that protects debtholders against default — stood around $38 trillion, according to the international swaps group. That represents the total amount of insurance that has been written on various kinds of debt, but the amount that would have to be paid out if the debt went into default is considerably less.
As the credit crisis has unfolded, trading in credit default swaps has cooled, market participants said. The collapse of A.I.G. took a huge player out of the market and banks, hobbled by loan losses, have curbed their activities in the market. Still, derivatives trading desks have been one of the few profit centers at major banks recently.
The biggest banks and brokerage firms like JPMorgan Chase, Citigroup and Goldman Sachs, as well as major insurers, are all major players in derivatives.
Derivatives are hard to value. They are virtually hidden from investors, analysts and regulators, even though they are one of Wall Street’s biggest profit engines. They don’t trade openly on public exchanges, and financial services firms disclose few details about them. The new rules are meant to change most, but not all, of that opacity.
Used properly, they can reduce or transfer risk, limit the damage from market uncertainty, and make global trade easier. Airlines, food companies, insurers, exporters and many other companies use derivatives to protect themselves from sudden and unpredictable changes in financial markets like interest rate or currency movements. Used poorly, derivatives can backfire and spread risk rather than contain it.
The administration plan would not require that custom-made derivative instruments — those with unique characteristics negotiated between companies — be traded on exchanges or through clearinghouses, though standardized ones would. If approved, the plan would require the development of timely reports of trades, similar to the system now used for corporate bonds.
The letter suggested that the Commodity Futures Trading Commission would play a leading role in the oversight of the market, although it would also leave important elements to the Securities and Exchange Commission. Over the years, the turf battle between those agencies contributed to the neglect of that market by government overseers.
Some lawmakers in the House and Senate have already introduced measures to regulate derivatives. But a number of members have pressed the administration to put out its own plan.
Representative Barney Frank of Massachusetts, the chairman of the House Financial Services Committee that oversees the S.E.C., and Representative Collin C. Peterson of Minnesota, chairman of the House Agriculture Committee with oversight of the C.F.T.C., on Wednesday released a joint statement saying, “we agree there must be strong, comprehensive and consistent regulation” of derivatives. “We will work closely together to achieve that goal,” they added.
While derivatives regulation will be a focus of some market players, of equal concern to many in the financial industry are what the Obama administration and Congress might do to regulate compensation for executives across the board, not just at institutions that have accepted federal bailout money.
The Treasury is acting on two paths. First, it plans as soon as next week to announce revised compensation rules for companies getting assistance, to make those rules conform with a law Congress passed in February that was more stringent than the Treasury’s own earlier guidelines.
Separately, Treasury officials have just begun discussing with the Federal Reserve and the S.E.C. what the government can do industry-wide – through incentives, restrictions or a mix of the two for corporate boards – to guard against eye-popping compensation that rewards excessive risk-taking of the sort that contributed to the current crisis.
The fear among many in the industry — and some in the administration — is that whatever limits Mr. Obama proposes, Congress will seek to add even more, in response to widespread public anger at Wall Street.
In addition to the regulatory changes it is seeking, the administration is also continuing to expand its bailout programs for various industries. Mr. Geithner announced on Wednesday that the administration would provide a new round of capital assistance to smaller community banks, and would increase the amount that they can borrow from the program.
Beyond derivatives, he also said that the administration would be presenting a comprehensive proposal to overhaul the regulation of the financial system. He provided few specifics, but said a central goal would be to eliminate the ability of companies to pick the least onerous regulator.
“We need a much simpler financial oversight structure,” he said. “It’s not going to be comfortable for everybody but it’s important to do.”
India exit poll gives Congress slim lead
Preliminary exit polls released after the final phase of voting in India's month-long elections showed a narrow lead for the ruling Congress-led coalition over the Hindu-nationalist Bharatiya Janata party (BJP) alliance, but indicated that neither party would have a clear majority.
The first poll to be published, conducted for India TV by C-Voter polling agency, showed the left of centre Congress-led alliance winning 193-205 seats, with the opposition BJP-led alliance taking 181-193 of the 543 seats at stake.
A national projection by the Headlines Today news channel also gave Prime Minister Manmohan Singh's Congress coalition a lead, but below its showing in the 2004 election.
Exit polls in India are notoriously unreliable, given the difficulty of assessing how 714 million people have voted. Such polls were particularly misleading in the run up to the 2004 elections, when they suggested that the Congress party, which subsequently claimed a victory, would remain in opposition.
Despite these caveats, politicians in Delhi were paying close attention to these tentative, early indications, and attempts to secure post-poll alliances took on a frenzied pace.
BJP and Congress leaders have long anticipated that they may secure insufficient seats to form a strong government. Backroom negotiations with regional parties have intensified this week as each main party tries to forge ties to the most powerful regional blocs. In order to form a government, an alliance would need at least 272 seats in parliament.
If the result is very close once the votes are counted and announced, around midday on Saturday, the two rival parties may still need several days to secure firm commitments of support from potential allies. The capacity of one side or the other to form a government may not be immediately clear. A new parliament must be in place by 2 June, according to the constitution.
If both the Congress-led alliance and the BJP-led National Democratic Alliance (NDA) are unable to scrabble together enough backing from other parties to govern, India could see a hung parliament led by a new bloc, the Third Front. It comprises regional parties and the communists, who withdrew support from the Congress-led government over the nuclear deal signed last year with the US.
Analysts warn that a government that is heavily dependent on the unstable support of diverse, fragmented, local groups will be unable to push through its policies and may be short-lived.
The process of negotiating alliances is fraught and conducted in great secrecy. The powerful regional parties are in demand from both the BJP and Congress but are anxious not to burn their bridges by making premature commitments to one side or the other.The clandestine nature of talks has caused politicians to behave in strange ways. The leader of the Janata Dal (Secular) party, HD Kumaraswamy, who is a key player in the southern state of Karnataka and a crucial figure in the Third Front, was yesterday recognised driving through the gates of the home of the Congress party leader, Sonia Gandhi, despite his attempts to hide by draping a handkerchief (or perhaps a towel) over his head.
When confronted by Third Front politicians, he insisted he had not been trying to hide but had merely been wiping sweat from his face, denied that he had been there to discuss possible alliances, and described the visit as nothing more than "a courtesy call".
courtsey...the guardian u.k
The first poll to be published, conducted for India TV by C-Voter polling agency, showed the left of centre Congress-led alliance winning 193-205 seats, with the opposition BJP-led alliance taking 181-193 of the 543 seats at stake.
A national projection by the Headlines Today news channel also gave Prime Minister Manmohan Singh's Congress coalition a lead, but below its showing in the 2004 election.
Exit polls in India are notoriously unreliable, given the difficulty of assessing how 714 million people have voted. Such polls were particularly misleading in the run up to the 2004 elections, when they suggested that the Congress party, which subsequently claimed a victory, would remain in opposition.
Despite these caveats, politicians in Delhi were paying close attention to these tentative, early indications, and attempts to secure post-poll alliances took on a frenzied pace.
BJP and Congress leaders have long anticipated that they may secure insufficient seats to form a strong government. Backroom negotiations with regional parties have intensified this week as each main party tries to forge ties to the most powerful regional blocs. In order to form a government, an alliance would need at least 272 seats in parliament.
If the result is very close once the votes are counted and announced, around midday on Saturday, the two rival parties may still need several days to secure firm commitments of support from potential allies. The capacity of one side or the other to form a government may not be immediately clear. A new parliament must be in place by 2 June, according to the constitution.
If both the Congress-led alliance and the BJP-led National Democratic Alliance (NDA) are unable to scrabble together enough backing from other parties to govern, India could see a hung parliament led by a new bloc, the Third Front. It comprises regional parties and the communists, who withdrew support from the Congress-led government over the nuclear deal signed last year with the US.
Analysts warn that a government that is heavily dependent on the unstable support of diverse, fragmented, local groups will be unable to push through its policies and may be short-lived.
The process of negotiating alliances is fraught and conducted in great secrecy. The powerful regional parties are in demand from both the BJP and Congress but are anxious not to burn their bridges by making premature commitments to one side or the other.The clandestine nature of talks has caused politicians to behave in strange ways. The leader of the Janata Dal (Secular) party, HD Kumaraswamy, who is a key player in the southern state of Karnataka and a crucial figure in the Third Front, was yesterday recognised driving through the gates of the home of the Congress party leader, Sonia Gandhi, despite his attempts to hide by draping a handkerchief (or perhaps a towel) over his head.
When confronted by Third Front politicians, he insisted he had not been trying to hide but had merely been wiping sweat from his face, denied that he had been there to discuss possible alliances, and described the visit as nothing more than "a courtesy call".
courtsey...the guardian u.k
Bank of England believes recession has probably bottomed out
The Bank of England said today that the recession had probably bottomed out, but warned that any recovery would be hampered by the ongoing reluctance of banks to lend to consumers and businesses.
Releasing a quarterly inflation report likely to cement expectations that interest rates could stay at record lows for a long time, the monetary policy committee forecast that inflation would probably remain below its 2% target for at least two years even if it kept rates at 0.5% and flooded the economy with £125bn of "quantitative easing".
"The economy will eventually heal but the process may be slow," said Bank governor Mervyn King.
"A number of indicators have clearly picked up," he said, adding that the economy would be helped by the big monetary and fiscal stimulus, the sharp drop in the pound's value, which would boost exports, and the process of companies rebuilding stocks that they ran down at the turn of the year.
"All of this will lead to a recovery. But there are solid reasons to believe that spending will take a long time to return to more normal levels. This is not like the typical business cycle of the post-war period," said King. "It is likely that the supply of credit will continue to be restricted for some while, with banks being risk-averse and aiming to raise capital ratios."
The Bank's inflation report sees consumer price inflation (CPI) tumbling to just 0.5% later this year, from the current 2.9%, as the effect of the big oil price falls of the past year feed through.
The gloomy report sent sterling and gilt yields down sharply while the FTSE 100 fell further into negative territory. The pound shed over a cent against the dollar to $1.517 and half a cent against the euro to €1.11. The 10-year benchmark gilt yield fell to 3.47% from 3.65% but two-year yields fell to historic lows of below 1%, something that could feed through into cheaper two-year fixed-rate mortgages.
The Bank said it thought the bottom of the growth fall had now been reached, with a drop of 4.5% from a year ago.
Turning to the Bank's quantitative easing process, King said the MPC added £50bn last week to the £75bn it had planned not because it was disappointed with the effects so far, but because nominal spending in the economy had turned out worse than expected.
"No one can know the effect because it is far too early to judge," he said.
King also said that as and when the recovery became entrenched, the MPC was prepared to raise interest rates and take back its quantitative easing. "The exit strategy is very simple – it's a combination of raising Bank rate and selling some of the assets we have purchased. We're ready to do that whenever we think it is appropriate to do so."
Analysts were surprised by the downbeat nature of the report. "The Bank of England is not buying the 'it's all over' mood that seems to be sweeping over investors and market pundits," said Rob Carnell, economist at ING Financial Markets.
Separate figures from the eurozone showed that the recession there seems to be deepening. Industrial production in the 16 countries fell by a worse-than-expected 2% in March from February, leaving it a record 20% down from a year earlier.
"March's sharp decline in eurozone industrial production confirms that the recession deepened in Q1. Indeed, last quarter's economic contraction is likely to have been even greater than that seen in the US and UK," said Ben May at Capital Economics.
"Given the dismal start to 2009, we expect the eurozone economy to contract by about 5% this year and by a further 0.5% or so in 2010
Releasing a quarterly inflation report likely to cement expectations that interest rates could stay at record lows for a long time, the monetary policy committee forecast that inflation would probably remain below its 2% target for at least two years even if it kept rates at 0.5% and flooded the economy with £125bn of "quantitative easing".
"The economy will eventually heal but the process may be slow," said Bank governor Mervyn King.
"A number of indicators have clearly picked up," he said, adding that the economy would be helped by the big monetary and fiscal stimulus, the sharp drop in the pound's value, which would boost exports, and the process of companies rebuilding stocks that they ran down at the turn of the year.
"All of this will lead to a recovery. But there are solid reasons to believe that spending will take a long time to return to more normal levels. This is not like the typical business cycle of the post-war period," said King. "It is likely that the supply of credit will continue to be restricted for some while, with banks being risk-averse and aiming to raise capital ratios."
The Bank's inflation report sees consumer price inflation (CPI) tumbling to just 0.5% later this year, from the current 2.9%, as the effect of the big oil price falls of the past year feed through.
The gloomy report sent sterling and gilt yields down sharply while the FTSE 100 fell further into negative territory. The pound shed over a cent against the dollar to $1.517 and half a cent against the euro to €1.11. The 10-year benchmark gilt yield fell to 3.47% from 3.65% but two-year yields fell to historic lows of below 1%, something that could feed through into cheaper two-year fixed-rate mortgages.
The Bank said it thought the bottom of the growth fall had now been reached, with a drop of 4.5% from a year ago.
Turning to the Bank's quantitative easing process, King said the MPC added £50bn last week to the £75bn it had planned not because it was disappointed with the effects so far, but because nominal spending in the economy had turned out worse than expected.
"No one can know the effect because it is far too early to judge," he said.
King also said that as and when the recovery became entrenched, the MPC was prepared to raise interest rates and take back its quantitative easing. "The exit strategy is very simple – it's a combination of raising Bank rate and selling some of the assets we have purchased. We're ready to do that whenever we think it is appropriate to do so."
Analysts were surprised by the downbeat nature of the report. "The Bank of England is not buying the 'it's all over' mood that seems to be sweeping over investors and market pundits," said Rob Carnell, economist at ING Financial Markets.
Separate figures from the eurozone showed that the recession there seems to be deepening. Industrial production in the 16 countries fell by a worse-than-expected 2% in March from February, leaving it a record 20% down from a year earlier.
"March's sharp decline in eurozone industrial production confirms that the recession deepened in Q1. Indeed, last quarter's economic contraction is likely to have been even greater than that seen in the US and UK," said Ben May at Capital Economics.
"Given the dismal start to 2009, we expect the eurozone economy to contract by about 5% this year and by a further 0.5% or so in 2010
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