Friday, August 29, 2008

VPGILF A Ron Paul Fan

Wow, she compares herself to ron paul? awesome!
Published by MTV News on Friday, August 29, 2008 at 1:58 pm.

Sarah PalinBy Jocelyn Vena, with reporting by Dani Carlson

Back in February, on Super Tuesday, MTV News Street Teamer Dani Carlson did a Flixwagon interview with Alaska Governor — and now presumptive Republican vice-presidential candidate — Sarah Palin, who had some interesting things to say about energy policy and the “party machinery.”

In this interview, Palin calls controversial Republican presidential hopeful Ron Paul “cool.” “He’s a good guy,” she added. “He’s so independent. He’s independent of the party machine. I’m like, ‘Right on, so am I.’ ”

She also spoke about feeling allegiance with former presidential hopeful Mitt Romney. “He said all the right things about resource development in Alaska,” she said. “I didn’t have an opportunity to speak to all the candidates, but again, it’s not my job to speak to all the candidates and tell Americans who to vote for. That’s Americans’ jobs, to figure out what candidates are standing for. That’s the voters’ jobs.”

Check out Dani Carlson’s video interview with Gov. Sarah Palin after the jump!

She went on to say that she hoped the needs of her state would be addressed in Washington. “I talk about involvement by Americans having a say in where the nation is going to go,” she said. “This is an exciting day. And for Alaska, you know, I hope we register on somebody’s radar screen.”

She also spoke about Alaska’s natural resources, and urged the next president to look to her state for relief from the country’s reliance on foreign oil. “We have so much oil we are just sitting on,” she said. “We would be less reliant on foreign sources of energy [if we utilized that] — we need to have the ability to tap into it and produce for rest of the United States.”

Friday, August 15, 2008

Krugman's vision, the destruction of progress.

Sounds like a recipe for disaster.
Op-Ed Columnist
The Great Illusion

By PAUL KRUGMAN
Published: August 14, 2008

So far, the international economic consequences of the war in the Caucasus have been fairly minor, despite Georgia’s role as a major corridor for oil shipments. But as I was reading the latest bad news, I found myself wondering whether this war is an omen — a sign that the second great age of globalization may share the fate of the first.

If you’re wondering what I’m talking about, here’s what you need to know: our grandfathers lived in a world of largely self-sufficient, inward-looking national economies — but our great-great grandfathers lived, as we do, in a world of large-scale international trade and investment, a world destroyed by nationalism.

Writing in 1919, the great British economist John Maynard Keynes described the world economy as it was on the eve of World War I. “The inhabitant of London could order by telephone, sipping his morning tea in bed, the various products of the whole earth ... he could at the same moment and by the same means adventure his wealth in the natural resources and new enterprises of any quarter of the world.”

And Keynes’s Londoner “regarded this state of affairs as normal, certain, and permanent, except in the direction of further improvement ... The projects and politics of militarism and imperialism, of racial and cultural rivalries, of monopolies, restrictions, and exclusion ... appeared to exercise almost no influence at all on the ordinary course of social and economic life, the internationalization of which was nearly complete in practice.”

But then came three decades of war, revolution, political instability, depression and more war. By the end of World War II, the world was fragmented economically as well as politically. And it took a couple of generations to put it back together.

So, can things fall apart again? Yes, they can.

Consider how things have played out in the current food crisis. For years we were told that self-sufficiency was an outmoded concept, and that it was safe to rely on world markets for food supplies. But when the prices of wheat, rice and corn soared, Keynes’s “projects and politics” of “restrictions and exclusion” made a comeback: many governments rushed to protect domestic consumers by banning or limiting exports, leaving food-importing countries in dire straits.

And now comes “militarism and imperialism.” By itself, as I said, the war in Georgia isn’t that big a deal economically. But it does mark the end of the Pax Americana — the era in which the United States more or less maintained a monopoly on the use of military force. And that raises some real questions about the future of globalization.

Most obviously, Europe’s dependence on Russian energy, especially natural gas, now looks very dangerous — more dangerous, arguably, than its dependence on Middle Eastern oil. After all, Russia has already used gas as a weapon: in 2006, it cut off supplies to Ukraine amid a dispute over prices.

And if Russia is willing and able to use force to assert control over its self-declared sphere of influence, won’t others do the same? Just think about the global economic disruption that would follow if China — which is about to surpass the United States as the world’s largest manufacturing nation — were to forcibly assert its claim to Taiwan.

Some analysts tell us not to worry: global economic integration itself protects us against war, they argue, because successful trading economies won’t risk their prosperity by engaging in military adventurism. But this, too, raises unpleasant historical memories.

Shortly before World War I another British author, Norman Angell, published a famous book titled “The Great Illusion,” in which he argued that war had become obsolete, that in the modern industrial era even military victors lose far more than they gain. He was right — but wars kept happening anyway.

So are the foundations of the second global economy any more solid than those of the first? In some ways, yes. For example, war among the nations of Western Europe really does seem inconceivable now, not so much because of economic ties as because of shared democratic values.

Much of the world, however, including nations that play a key role in the global economy, doesn’t share those values. Most of us have proceeded on the belief that, at least as far as economics goes, this doesn’t matter — that we can count on world trade continuing to flow freely simply because it’s so profitable. But that’s not a safe assumption.

Angell was right to describe the belief that conquest pays as a great illusion. But the belief that economic rationality always prevents war is an equally great illusion. And today’s high degree of global economic interdependence, which can be sustained only if all major governments act sensibly, is more fragile than we imagine.

Thursday, August 14, 2008

Julia Child. a spook?!?!

Always knew that broad wasn't on the level.

Newly released files show Julia Child was a spy
WASHINGTON—Before Julia Child became known to the world as a leading chef, she admitted at least one failing when applying for a job as a spy: impulsiveness.

At 28 as an advertising manager at W&J Sloane furniture store in Beverly Hills, Calif., Child clashed with new store managers and left her job abruptly.

"I made a tactical error and was out," she explained in a handwritten note attached to her application to join the Office of Strategic Services, a World War II-era spy agency. "However, I learned a lot about advertising and wish I had been older and more experienced so that I could have handled the situation, as it was a most interesting position."

Child was not yet married and was applying for the job under her maiden name, McWilliams, according to previously top-secret records released by the National Archives on Thursday. She was hired in the summer of 1942 for clerical work with the intelligence agency and later worked directly for OSS Director William Donovan, the personnel records show.

Details about Child's background and nearly 24,000 other OSS employees are revealed in the newly released documents, withheld from public view as classified records for decades by the CIA.

The 750,000 documents identify the vast spy network managed by the OSS, which later became the CIA. President Franklin Roosevelt created the OSS, the country's first centralized intelligence operation.

The OSS files offer details about other agents, including Supreme Court Justice Arthur Goldberg, major league catcher Moe Berg, historian Arthur Schlesinger Jr. and film actor Sterling Hayden.

Other notables identified in the files include John Hemingway, son of author Ernest Hemingway; Kermit Roosevelt, son of President Theodore Roosevelt; and Miles Copeland, father of Stewart Copeland, drummer for the band The Police.

Some of those like Child on the list have been identified previously as having worked for the OSS, but their personnel records never have been available before. Those records would show why they were hired, jobs they were assigned to and perhaps even missions they pursued while working for the agency.

The release of the OSS personnel files unmasks one of the last secrets from the short-lived wartime intelligence agency, which for the most part was later folded into the CIA after President Truman disbanded it in 1945.

"I think it's terrific," said Elizabeth McIntosh, 93, a former OSS agent now living in Woodbridge, Va. "They've finally, after all these years, they've gotten the names out. All of these people had been told never to mention they were with the OSS."

The CIA long resisted releasing the records. But a former CIA director, William Casey, himself an OSS veteran, cleared the way for transfer of millions of OSS documents to the National Archives when he took over the spy agency in 1981. The personnel files are the latest documents to be made public.

Information about OSS involvement was so guarded that relatives often could not confirm a family member's work with the group.

Walter Mess, who handled covert OSS operations in Poland and North Africa, said he kept quiet for more than 50 years, only recently telling his wife of 62 years about his OSS activity.

"I was told to keep my mouth shut," said Mess, now 93 and living in Falls Church, Va.

The files provide new information even for those most familiar with the agency. Charles Pinck, president of the OSS Society created by former OSS agents and their relatives, said the nearly 24,000 employees included in the archives far exceed previous estimates of 13,000.

The newly released documents will clarify these and other issues, said William Cunliffe, an archivist who has worked extensively with the OSS records at the National Archives.

"We're saying the OSS was a lot bigger than they were saying," he said.

------

On the Net:

CIA OSS page: http://tinyurl.com/6bvmhf

Index to National Archives OSS personnel files: http://www.archives.gov/research/arc/
© Copyright 2008 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.

Sunday, August 10, 2008

The EMP Threat

How hard it is to make one of these?
REVIEW & OUTLOOK

The EMP Threat
August 9, 2008; Page A10

Imagine you're a terrorist with a single nuclear weapon. You could wipe out the U.S. city of your choice, or you could decide to destroy the infrastructure of the entire U.S. economy and leave millions of Americans to die of starvation or want of medical care.

The latter scenario is the one envisioned by a long-running commission to assess the threat from electromagnetic pulse, or EMP. The subject of its latest, and little discussed, report to Congress is the effect an EMP attack could have on civilian infrastructure. If you're prone to nightmares, don't read it before bedtime.

An EMP attack occurs when a nuclear bomb explodes high in the Earth's atmosphere. The electromagnetic pulse generated by the blast destroys all the electronics in its line of sight. For a bomb detonated over the Midwest, that includes most of the continental U.S. Few, if any, people die in the blast. It's what comes next that has the potential to be catastrophic. Since an EMP surge wipes out electronics, virtually every aspect of modern American life would come to a standstill.

The commission's list of horribles is 181 pages long. The chapter on food, for instance, catalogs the disruptions up and down the production chain as food spoils or has no way to get to market. Many families have food supplies of several days or more. But after that, and without refrigeration, what? The U.S. also has 75,000 dams and reservoirs, 168,000 drinking water-treatment facilities, and 19,000 wastewater treatment centers -- all with pumps, valves and filters run by electricity.

Getting everything up and running again is not merely a matter of flipping a switch, and the commission estimates that many systems could be out of service for months or a year or more -- far longer than emergency stockpiles or batteries could cover. The large transformers used in electrical transmission are no longer built in the U.S. and delivery time is typically three years. "Lack of high voltage equipment manufacturing capacity represents a glaring weakness in our survival and recovery," the commission notes.

Many industries rely on automated control systems maintained by small work forces. In emergencies -- say, during a blackout -- companies often have arrangements in place to borrow workers from outside the affected area to augment the locals and help with manual repairs. After an EMP attack, those workers would be busy in their home regions -- or foraging for food and water for their families.

The commission offers extensive recommendations for how industry and government can protect against the effects of an EMP attack and ensure a quicker recovery. They include "hardening" more equipment to withstand an electromagnetic pulse; making sure replacement equipment is on hand; training recovery personnel; increasing federal food stockpiles; and many others.

If not, our vulnerability "can both invite and reward attack," the commission's chairman, William Graham, told Congress last month. Iran's military writings "explicitly discuss a nuclear EMP attack that would gravely harm the United States," he said. James Shinn, an assistant secretary of defense, has said that China is developing EMP weapons. The commission calls an EMP attack "one of a small number of threats that can hold our society at risk of catastrophic consequences." The threat is real. It's past time to address it.

See all of today's editorials and op-eds, plus video commentary, on Opinion Journal.

And add your comments to the Opinion Journal forum.

Saturday, August 09, 2008

the shrinking world

It's all getting smaller.

Cost of Living
The Price Is the Same; It’s the Size That Shrinks

By M. P. DUNLEAVEY
Published: August 8, 2008

IMAGINE what would happen if the price of gasoline remained the same, but instead of selling it by the gallon, gas stations knocked down the size a few ounces.

It might seem that you were paying the same amount — about $4 a gallon — but you wouldn’t be. You would be getting, say, a mere 120 ounces instead of 128, and you would be paying more for gas.

If gas stations labeled the change clearly, would there be riots in the street? Would weary consumers simply shrug and pay the same for less at the pump?

We don’t really know how people would react. But something very much like this is already occurring at the supermarket, what Tod Marks, a senior editor at Consumer Reports, calls “the incredibly shrinking package” strategy.

The repackaging trick isn’t new. Who hasn’t opened a box of cereal or a bag of chips and marveled at the abundance of air with the food? But Mr. Marks, who tracks the grocery industry, said, “It’s definitely happening a lot more than it used to.”

According to a study conducted this summer by the Consumer Reports National Research Center, shrinkage is occurring across a broad spectrum of goods, Mr. Marks said. The study will be published by Consumer Reports in October.

Some of the worst offenders are canned tuna, paper towels, chewing gum, butter-type spreads, candy bars — and, perhaps most drastically, coffee and ice cream. In many cases, he said, the traditional one-pound can of coffee has dwindled to 10 or 11 ounces. And many ice cream containers have shrunk from a half-gallon to 1.5 quarts.

Having just bought what I thought was a half-gallon of ice cream, I checked my freezer and was taken aback when I read the label. No 64 ounces here, just a mere 48 ounces dolled up to look like a half-gallon.

I felt snookered, but it was my own fault. I had not checked the container’s actual size or the unit pricing label, steps Mr. Marks says are essential if you are going to get your money’s worth in groceries these days.

Also, he advises, look sideways at a package before you buy it. “Companies won’t change the height or length of a container. It’s the width,” he said. “The Hershey’s bar you pick up at the register looks like the old 3-ounce bar but it’s only 1.5 ounces. Hold it up. It’s as thin as a wafer.”

THE incredible shrinking package game is hardly amusing when one contemplates a rapidly expanding grocery bill. But, in a funny way, it may be a good idea for food manufacturers and shoppers alike, said Harry Balzer, a vice president of the NPD Group, a marketing research firm based in Port Washington, N.Y.

With the soaring cost of wheat, corn, eggs, milk and other staples, grocery producers are faced with a dilemma, said Mr. Balzer, who studies food consumption. “People hate paying more for groceries. How do manufacturers deal with rising food costs without passing it along directly to the consumer?

“One option that you’re seeing, they keep the price the same but lower the amount. In effect, it’s a price increase,” he said, “but it’s not an increase in out-of-pocket expenses.”

Actually, I pointed out to Mr. Balzer, it is certainly an increase in what I pay out of pocket if my half-gallon of ice cream lasts only 1.5 quarts’ worth of servings or my box of cereal runs out after a week instead of two.

Mr. Balzer agreed. “There’s no question that you’re paying more for food,” he said. But, he added, consider the challenge facing food producers. “They have to make a decision: Do you raise the price of a product and risk that customers may not buy it, or do you modify the packaging and risk that people might feel deceived?”

As flawed as the system sounds, Mr. Marks of Consumer Reports believes that the grocery dance keeps everyone happy, more or less. “In effect, grocery manufacturers are still raising prices, yet people are paying the same — which is somehow appealing to the American psyche.”

M. P. Dunleavey is the author of “Money Can Buy Happiness” (Broadway Books, 2007).

Wednesday, August 06, 2008

White House spy scare?

SPOOKY!!

Robert Eringer

August 2, 2008 12:00 AM

The Investigator

Few noticed that President George W. Bush quietly revamped the role of the President's Foreign Intelligence Advisory Board earlier this year. But nobody knows, until now, that a spy scare was one of the reasons to precipitate this change.

The role of the advisory board, which President Eisenhower created in 1956, has been to monitor U.S. intelligence services and offer non-partisan, expert advise to the president on its conduct. In the mid-1970s, after the exposure of CIA abuses by the Church Committee, PFIAB's clout expanded to investigate crimes within the intelligence community, empowered by President Ford to report criminal activity directly to the attorney general.

On Feb. 29, President Bush signed an executive order that diminishes PFIAB's authority and transfers the investigative powers to the director of national intelligence.

This followed a lengthy FBI counterintelligence investigation into the activities of a retired U.S. Air Force colonel who they suspected of spying on PFIAB for Russia.

It is believed in some quarters that Russian Prime Minister Vladimir Putin personally recruited this colonel while Mr. Putin was posted to Dresden, East Germany, as a KGB intelligence officer. From 1985 to 1990 it was Mr. Putin's job to recruit spies in Germany, where U.S. military officers serving at NATO air bases were considered high priority targets.

At that time, the colonel was based at Borfink Air Force Base, where he supervised top-secret U-2 and SR-71 reconnaissance flights over the Soviet Union.

Soon after retiring from the Air Force, this colonel, in 1992, organized a trade delegation of Russians to the Principality of Monaco. Included in this delegation was an obscure political functionary from St. Petersburg. His name was Vladimir Putin. (Mr. Putin had resigned from the KGB a year before.) This delegation marked a Russian entry into Monaco, a tax haven that provides a variety of shielded opportunities to the very rich.

A Russian presence in Monaco has greatly proliferated during the past two years. As if to consummate the relationship, Prince Albert II of Monaco last August vacationed for a week in Russia with Mr. Putin, as the Russian president's guest. More recently, the Russian state "gifted" Prince Albert with a two-story, three-bedroom dacha, which Russian builders constructed from scratch on the grounds of Roc Agel, the bachelor prince's country hideaway in the French Alps, high above his glamorous principality.

Back to the mid-1990s, the Air Force colonel created a business entity in Monaco with a member of a prominent Monegasque family. Over a five-year period this entity is understood to have laundered $600 million through Monaco's banks for corrupt Russian interests -- funds reputedly channeled into real estate around Western Europe and further laundered through coded accounts at banks in Malta, the Bahamas, and the Turks & Caicos Islands. An estate in Ireland was allegedly purchased on behalf of one "Andrey Vasiliyev," an alias that Mr. Putin, while president, was known to use in correspondence with his intelligence chiefs.

The colonel was also known to carry suitcases full of cash -- presumably on behalf of Russians, maybe for Mr. Putin personally -- from Switzerland to Monaco for deposit in local banks.

Although his last annual salary in the Air Force as an attachè was about $60,000 -- and that by his own admission he "retired broke" -- the colonel quickly amassed $10 million worth of real estate in Monaco, London, Malibu and Whistler, Canada, plus luxury cars, and a collection of ultra-pricey Ming Dynasty antiques.

One of the Russians who figured into the colonel's Monaco-based Russian money laundering scheme was Viktor Bout, a former major in the GRU (Soviet military intelligence), nicknamed "The Bill Gates of Arms Dealing" and now in custody in Thailand, fighting extradition to the United States.

Trouble for both the colonel and Mr. Bout, 41, first began in February 2001 when a prosecutor in Belgium, under pressure from the United States government, issued an arrest warrant for Mr. Bout alleging that this merchant of death had laundered millions of dollars from illegal arms sales, including the sale of Russian military aircraft to the Taliban in Afghanistan, pre-9/11.

The colonel and his Monegasque partner, who has since died, liquidated their entity four months later and are understood to have destroyed the company's documentation. The colonel then left Monaco to lay low in his other homes.

However, the colonel still maintained a link to PFIAB, whose meetings he had occasionally attended while in the Air Force to "flap charts" for senior officers conducting presentations. The colonel, in retirement, had been known to boast to others that he was attached to PFIAB, and that he was engaged in running secret missions on its behalf.

But he was lying. The colonel neither sat on PFIAB's 16-member board nor was he on its staff; nor does PFIAB have operational authority or capability to run missions.

Yet when annual PFIAB meetings rolled around every December, the colonel traveled first-class to Washington, D.C., for precisely the same dates and holed up in five-star hotels -- The Willard or the Hay Adams -- a stone's throw from PFIAB's venue, the Old Executive Office Building adjacent to the White House.

It is believed the colonel knew someone at PFIAB -- a board member or staffer -- whom he wined and dined at expensive restaurants and from whom he weaseled intelligence gossip about PFIAB briefings and discussions. And then reported everything he collected to the Russians.

The colonel has apparently gotten off scot-free, unless the FBI turned him into a double agent. Obviously, they're not saying, and are otherwise preoccupied celebrating their 100th anniversary with a PR campaign.

A call from The Investigator to PFIAB for comment was referred to the White House Media Office, which did not call back.

If you have a story idea for The Investigator, contact him at reringer[at]newspress.com. State if your query is confidential.

Tuesday, August 05, 2008

marx cafe tonight?

damn good question. I'm willing to bet that Marx hasn't gotten their permit issue sorted, one has to stop and wonder if I'll ever be dropping records there again. I'll most likely still be there tonight, for a bite to eat and some beers. -m

kiss the dollar menu goodbye!!

An amazingly tragic reversal of fortune for those dollar-menu-aires!!

McDonald's Tests Changes
In $1 Burger As Costs Rise
By JANET ADAMY
August 4, 2008; Page B1

OAK BROOK, Ill. -- McDonald's Corp. is testing modifications to its popular $1 double cheeseburger, and higher prices for the sandwich, as it prepares to change its Dollar Menu by next year.

In an interview, Don Thompson, president of McDonald's U.S. business, said the company has tested ways to make the burger less expensive to make. Some restaurants are selling it with one slice of cheese instead of two, and billing it as a "double hamburger with cheese." Others are offering a double hamburger without cheese. Some are selling the traditional double cheeseburger at prices ranging from $1.09 to $1.19.

The company is also considering expanding what it considers the middle tier of its menu, items ranging from about $1.30 to $2. "We know customers are facing tough times in this economy," Mr. Thompson said.

Launched in 2003, the Dollar Menu has been a key driver of sales at McDonald's 14,000 U.S. restaurants and has helped it ride out dips in consumer spending. But recently, franchisees have complained that the menu has brought too much unprofitable traffic into their restaurants.

The biggest question for the eight-item menu is what to do with the double cheeseburger, considered its anchor. High dairy prices have pushed up the cost of cheese, and McDonald's predicts more pressure because its beef costs will be higher this year. Mr. Thompson said if McDonald's moves the double cheeseburger off that menu, there would still be some type of $1 burger.

Internal sales documents reviewed by The Wall Street Journal show that, as of late June, sales of the chain's lattes, cappuccinos and other espresso drinks were off their peak in several main markets where they're being sold. Mr. Thompson said "the numbers really don't tell the story."

Lower-priced beverages, including $1.89 iced coffee and a $1 fountain-drink and sweet-tea promotion, have pulled some sales away from the espresso drinks, which range from about $2 to $3. That was something the company hadn't anticipated, he said.

McDonald's overall beverage expansion, adding espresso drinks, smoothies, cold tea, bottled drinks and ice-blended coffee beverages at U.S. locations, is on track to exceed the company's goal of adding $125,000 a year in sales per restaurant, even though it doesn't yet have national advertising behind it, Mr. Thompson said. He sees McDonald's target of the drinks adding $1 billion a year to the company's sales as "definitely achievable." The rollout will be complete at the end of 2009.

Write to Janet Adamy at janet.adamy@wsj.com

Friday, August 01, 2008

the fed steps in

Oh great, now with the Federal Reserve backing up the FDIC we can just print more money to cover for the debt crisis.
Fed Loans to Banks Made Easier By Fannie Mae Rescue (Update1)

By Craig Torres
More Photos/Details

July 31 (Bloomberg) -- The Federal Reserve will be able to lend more easily to failed banks under government control because of a provision in legislation that bailed out Fannie Mae and Freddie Mac.

In the rescue signed into law by President George W. Bush yesterday, the Fed will no longer have to pay penalties on loans it makes to institutions taken over by the Federal Deposit Insurance Corp.

The measure may mean more use of the central bank's balance sheet to prop up the U.S. financial system, after the Fed began lending to investment banks in March, analysts said. The FDIC has taken over seven banks this year, with 90 on a watch-list of troubled firms as lenders are hit by the surge in credit losses.

``We are pushing forward the line on what the government will backstop, and what the Federal Reserve will backstop,'' said Vincent Reinhart, former director of the Fed's Monetary Affairs Division who is now at the American Enterprise Institute in Washington.

Fed officials yesterday also extended their two lending programs to Wall Street through January, after judging that markets are still ``fragile.''

The Federal Reserve Act's Section 10B penalizes the Fed for loans to undercapitalized institutions exceeding specific time periods. The original provision was aimed at preventing the central bank from keeping failing banks open.

FDIC Request

The exemption in the new law, which was requested by the FDIC without objection by the Fed's Board of Governors, was aimed at making clear that once banks are taken over by the FDIC, capital rules no longer apply because they are effectively owned, operated and in liquidation by the government.

``It is more of a clarification,'' said FDIC spokesman Andrew Gray in Washington. ``It removes any ambiguity from the current statutory language.''

Fed spokesman David Skidmore declined to comment.

For some, the exemption opens up the Fed to more political pressure to lend to government agencies, instead of forcing Congress, the FDIC, or the Treasury to explain to taxpayers why they need more money.

``Once the Fed starts lending to a bridge bank, or indirectly to the FDIC, where is the incentive to ever stop?'' said Walker Todd, a former Cleveland Fed attorney and visiting research fellow at the American Institute for Economic Research in Great Barrington, Massachusetts.

Raise Money

The FDIC had $52.8 billion in its deposit-insurance fund as of March 31. The FDIC could raise more money by tapping a $40 billion credit line it has with the U.S. Treasury, increasing assessments on its members, or turning to Congress.

``Throughout this crisis, the government is gradually taking care of anybody who is not insured,'' said Tom Gallagher, senior managing director at ISI Group in Washington. ``The Fed seemed to be limiting its role after Bear Stearns. Now, there seems to be some backsliding.''

``Like any open depository institution, there will be short-term borrowing needs by the bridge bank,'' which may need to ``tap the discount window,'' Gray said, referring to the name for the Fed's direct loans to commercial banks. ``Longer-term borrowing needs would typically be met by a loan from the FDIC.''

The Fed enjoys wide discretion in discount-window lending, and demands collateral, sometimes in excess of the loan's value, to insure against the risk of default.

A request by the FDIC could always be rejected by the central bank. Still, the removal of the penalties may open up the Fed to more political pressure, possibly encroaching on its independence, analysts said.

`Costly and Difficult'

``Why should they be doing it?'' said Robert Eisenbeis, former Atlanta Fed research director and now chief monetary economist at hedge fund Cumberland Advisors LLC. ``The whole idea'' of the rules in the Federal Reserve Act is ``to make it costly and difficult to support an insolvent institution.''

This month, the Fed board voted unanimously to allow direct lending to government-sponsored housing agencies Fannie Mae and Freddie Mac ``should such lending prove necessary,'' at the request of U.S. Treasury Secretary Henry Paulson.

Yesterday the central bank extended until Jan. 30 the Primary Dealer Credit Facility for direct loans to securities firms and the Term Securities Lending Facility for loans of Treasuries, both begun in March. The programs will be canceled when the Fed deems that markets ``are no longer unusual and exigent,'' according to a statement from the central bank.

The Fed will start auctions of options of as much as $50 billion in the TSLF on top of the $200 billion program, which loans Treasuries to securities firms in exchange for asset- backed securities and other collateral.

New York Fed officials plan to consult with the primary dealers of U.S. government bonds on the TSLF options program, the district bank said in a statement yesterday. The options plan is aimed at providing liquidity for two weeks or less surrounding key financing periods to be identified. Further details are planned on or before Aug. 8, the New York Fed said.

To contact the reporter on this story: Craig Torres in Washington at ctorres3@bloomberg.net
Last Updated: July 31, 2008 11:20 EDT