http://finance.yahoo.com/banking-budgeting/article/105838/Plan%27s-Basic-Mystery-What-Is-All-This-Stuff-Worth
Plan's Basic Mystery: What's All This Stuff Worth?
by Vikas Bajaj
Thursday, September 25, 2008
What would you pay, sight unseen, for a house that nobody wants, on a hard-luck street where no houses are selling?
That question is easy compared to the one confronting the Treasury Department as Washington works toward a vast bailout of financial institutions. Treasury Secretary Henry M. Paulson Jr. is proposing to spend up to $700 billion to buy troubled investments that even Wall Street is struggling to put a price on.
A big concern in Washington — and among many ordinary Americans — is that the difficulty in valuing these assets could result in the government's buying them for more than they will ever be worth, a step that would benefit financial institutions at taxpayers' expense.
Anyone who has tried to buy or sell a house when the market is falling, as it is now, knows how difficult it can be to agree on a price. But valuing the securities that the Treasury aims to buy will be far more difficult. Each one of these investments is tied to thousands of individual mortgages, and many of those loans are going bad as the housing market worsens.
"The reality is that we are not going to know what the right price is for years," said Andrew Feltus, a bond portfolio manager at Pioneer Investments, a mutual fund firm based in Boston. "It might be 20 cents on the dollar or 60 cents on the dollar, but we won't know for years."
While prices of most stocks are no mystery — they flicker across PCs and televisions all day — the troubled investments are not traded on any exchange. The market for them is opaque: traders do business over the telephone, and days can go by without a single trade.
Not only that, many of these instruments are extremely complex. Consider the Bear Stearns Alt-A Trust 2006-7, a $1.3 billion drop in the sea of risky loans. Here's how it worked:
As the credit bubble grew in 2006, Bear Stearns, then one of the leading mortgage traders on Wall Street, bought 2,871 mortgages from lenders like the Countrywide Financial Corporation.
The mortgages, with an average size of about $450,000, were Alt-A loans — the kind often referred to as liar loans, because lenders made them without the usual documentation to verify borrowers' incomes or savings. Nearly 60 percent of the loans were made in California, Florida and Arizona, where home prices rose — and subsequently fell — faster than almost anywhere else in the country.
Bear Stearns bundled the loans into 37 different kinds of bonds, ranked by varying levels of risk, for sale to investment banks, hedge funds and insurance companies.
If any of the mortgages went bad — and, it turned out, many did — the bonds at the bottom of the pecking order would suffer losses first, followed by the next lowest, and so on up the chain. By one measure, the Bear Stearns Alt-A Trust 2006-7 has performed well: It has suffered losses of about 1.6 percent. Of those loans, 778 have been paid off or moved through the foreclosure process.
But by many other measures, it's a toxic portfolio. Of the 2,093 loans that remain, 23 percent are delinquent or in foreclosure, according to Bloomberg News data. Initially rated triple-A, the most senior of the securities were downgraded to near junk bond status last week. Valuing mortgage bonds, even the safest variety, requires guesstimates: How many homeowners will fall behind on their mortgages? If the bank forecloses, what will the homes sell for? Investments like the Bear Stearns securities are almost certain to lose value as long as home prices keep falling.
"Under the current circumstances it's likely that you are going to take a loss on these loans," said Chandrajit Bhattacharya, a mortgage strategist at Credit Suisse, the investment bank.
The Bear Stearns bonds are just one example of the kind of assets the government could buy, and they are by no means the most complicated of the lot. Wall Street took bonds like those of Bear Stearns and bundled and rebundled them into even trickier investments known as collateralized debt obligations, or C.D.O.'s
"No two pieces of paper are the same,"said Mr. Feltus of Pioneer Investments.
On Wall Street, many of these C.D.O.'s have been selling for pennies on the dollar, if they are selling at all. In July, Merrill Lynch, struggling to bolster its finances, sold $31 billion of tricky mortgage-linked investments for 22 cents on the dollar. Last November, Citadel, a large hedge fund in Chicago, bought $3 billion of mortgage securities and other investments for 27 cents on the dollar.
But Citigroup, the financial giant, values similar investments on its books at 61 cents on the dollar. Citigroup says its C.D.O.'s are relatively high quality because they were created before lending standards weakened in 2006.
A big challenge for Treasury officials will be deciding whether to buy the troubled investments near the values at which the banks hold them on their books. That would help minimize losses for financial institutions. Driving a hard bargain, however, would protect taxpayers.
"Many are tempted by a strategy of trying to do both things at once," said Lawrence H. Summers, a former Treasury secretary in the Clinton administration. As a hypothetical example, Mr. Summers suggested that an institution could have securities on its books at $60, but the current market price might only be $30. In that case, the government might be tempted to come in at about $55.
Many financial institutions are so weak that they must sell their troubled assets at prices near the value on their books, Carlos Mendez, a senior managing director at ICP Capital, an investment firm that specializes in credit markets. Anything less would eat into their capital.
"Depending on your perspective on the economy, foreclosure rates and home prices, the market may eventually reflect that price. But most buyers are not willing to make that bet right now," he said. "And that's why we have these low prices."
Ben S. Bernanke, the chairman of the Federal Reserve, told Congress on Tuesday that the government should avoid paying a fire-sale price, and pay what he called the "hold-to-maturity price," or the price that investors would bid if they expected to keep the bond till it was paid off.
The government would buy the troubled investments with the intention of eventually selling them back to the market when prices recover.
The Treasury has suggested it might conduct reverse auctions to determine the price for securities that are not trading in the market.
Unlike in a traditional auction in which would-be buyers submit bids to the seller, in a reverse auction the buyer solicits bids from would-be sellers. Often, the buyer agrees to pay the second-highest bid submitted to encourage sellers to compete by lowering their bids for all the assets submitted. The buyer often also sets a reserve price and refuses to pay any more than that price.
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But Mr. Paulson told Congress on Tuesday that the government would use many other means in addition to auctions, suggesting that it would exercise wide discretion over the final prices to be paid.
Financial institutions will have an incentive to sell their worst assets to the government, a risk that the Treasury will have to guard against, said Robert G. Hansen, senior associate dean at the Tuck School of Business at Dartmouth College.
"I am worried that the people who are going to offer the securities to the government will be the ones that have the absolute worst toxic waste," Professor Hansen said. Even so, he added, the government could actually make a profit on its purchases — provided the Treasury buys at the right prices. Richard C. Breeden, a former chairman of the Securities and Exchange Commission, said the auctions could thaw parts of the markets that have been frozen since late last year.
"One of the problems that many institutions are having is finding any bid for some of these assets, even though they are not without value," said Mr. Breeden, who is chairman and chief executive of Breeden Capital Management, an investment firm in Greenwich, Conn.
"What are these assets worth?" asked Mr. Breeden. "Sometimes, because of fear or extreme uncertainty in the markets, you get in a situation in which there are no bids at all, or at least no realistic bids."
Edmund L. Andrews contributed reporting.
Thursday, September 25, 2008
Bailout plan's big mystery
Chavez gets cozy with U.S. enemies
Chad Groening - OneNewsNow - 9/24/2008 9:35:00 AM
The founder of a conservative military think tank believes that Venezuela is a present and growing danger as its radical leader continues to reach out to countries and groups that are not friendly to the United States, including Russia.
During the Cold War, Latin America was an ideological battleground between the United States and the Soviet Union. Recently the Kremlin has once again moved to intensify contacts with Venezuela, Cuba, and other Latin American countries.
Venezuelan President Hugo Chavez has been very cozy with Moscow. A Russian Navy squadron set off for Venezuela this week and will conduct joint military maneuvers with the Venezuelan Navy. That deployment follows a weeklong visit to the Latin American country by a pair of strategic Russian bombers.
Frank Gaffney is president of the Center for Security Policy and is a former member of the Ronald Reagan defense team. He says Chavez is courting U.S. enemies around the world.
"You have a guy in Chavez who is in our proverbial back yard," Gaffney contends. "His anti-Americanism and his radicalism and his support for our enemies -- both in the region and beyond Iran and Hamas and Hezbollah, most especially, but increasing now [in] China and Russia as well -- is a present and growing danger."
Chavez reportedly said in an interview with Russian television that Latin America needs a strong friendship with Russia to help reduce U.S. influence and keep peace in the region.
Explosion rattles Yangon amid tight security
The Associated Press
Thursday, September 25, 2008
YANGON, Myanmar: An explosion went off in Myanmar's main city Thursday amid tight security to mark the one-year anniversary of the junta's crackdown on pro-democracy protesters.
Three people appeared to have been lightly wounded by the morning blast near Yangon's City Hall, said witnesses who spoke on condition of anonymity fearing reprisals from the junta.
The explosion occurred at a bus stop near City Hall, which was central to street protests led by Buddhist monks a year ago
Riot police poured into the area and sealed it off with yellow tape, adding to the already-tight security in place around the city since late August.
"The explosion shook my building and made a very loud noise," said Thein Myint, who owns a stationary shop about 100 yards (meters) from where the blast went off.
The junta, which has been in power since 1962, sparked global outrage last year when it showed it would kill its own people in order to maintain power.
At least 31 people were killed when troops fired on protesters Sept. 26-27, 2007, violently crushing the peaceful uprising against the military government. The anti-government protests were the biggest demonstrations in the country in 20 years.
Japan reports rare trade deficit
ReutersPublished: September 25, 2008
TOKYO: The Japanese trade balance slid into deficit in August, according to data released Thursday, as sky-high oil prices ramped up import costs while exports slowed to a crawl, adding to the pain for an economy already teetering on the brink of recession.
Excluding the month of January, when Japanese exports tend to drop on slower factory activity during the New Year holidays, the August results were the first monthly deficit since 1982, when Japan was reeling from the aftermath of an oil crisis.
In a further sign of trouble for an export-reliant economy, exports to the United States posted their sharpest fall ever from the same month a year earlier, while a Bank of Japan board member warned of more turmoil in the U.S. economy.
"The data really showed that economic conditions both in Japan and overseas are weakening," said Satoru Ogasawara, a strategist at Credit Suisse. "Demand from not only the United States, but also Europe and Asia has been faltering, and it is likely to continue at least until the end of this fiscal year."
Japanese exports edged up 0.3 percent in August from a year earlier, short of a median forecast for a 2.4 percent rise, data from the Japanese Ministry of Finance showed.
Today in Business with Reuters
Bush seeks support for bailout; Paulson gives in on executive payU.S. economic activity slowing in many areas Japan reports rare trade deficit
Exports have been losing steam this year as the yearlong mortgage crisis has taken its toll on U.S. financial markets, as well as Europe and Asia, hurting the main driver of the Japanese economy.
A Bank of Japan policy board member, Tadao Noda, cautioned that the U.S. economy could face a deeper adjustment after several major American financial institutions either collapsed or came close to it in recent weeks.
"Just as Japan learned in the 1990s, financial institutions whose capital has been damaged have no choice but to be cautious about corporate lending," Noda, a banking industry veteran, said in a speech.
"Finance serves as the lifeblood of the economy, so if there is clogging that is bound to have an impact on the real economy."
While repeating the bank's standard line that the Japanese economy will eventually return to growth, Noda said he expected world economic growth to recover only in 2010 after slowing in 2008 and 2009.
Hirokata Kusaba, a senior economist at Mizuho Research Institute, said: "The overall tone sounded bearish. He spent more time explaining downside risks for the economy as the situation including developments in the U.S. economy is becoming precarious, while crude oil prices have shown signs of peaking."
Noda's comments did not move financial markets, which are focusing on details of Washington's plan to help banks offload toxic assets.
Investors expect the Bank of Japan to keep rates on hold at 0.50 percent for at least a year.
Japanese exports to the United States fell a record 21.8 percent in August, marking the 12th straight month of annual declines, on sluggish shipments of automobiles.
Exports to the European Union slipped, the third fall in four months, leaving solid demand from emerging economies including oil-producing nations as the only cushion against blows to exports.
Exports to Asia were up 6.7 percent, and those to China, Japan's largest export destination, rose 8.8 percent.
But economists say an easing of oil prices since July, while positive for Japanese consumers and companies in the long run, bodes ill for Japanese exports to resource-rich countries.
"Given the recent retreat of oil prices from the peak level, growth in exports to resource-rich nations may also slow down, adding to the downward momentum of overall exports," said Tatsushi Shikano, senior economist at Mitsubishi UFJ Securities.
The Japanese economy shrank in the second quarter at its sharpest rate in seven years as crumbling U.S. and European export markets hit factories, and consumers tightened their belts in the face of high energy and grocery prices.
New Japan finance minister Nakagawa in hot seat
Reuters
NEWSMAKER-New Japan finance minister Nakagawa in hot seat
09.24.08, 8:24 AM ET
Japan - By Yuzo Saeki
TOKYO, Sept 24 (Reuters) - Japan's new finance minister, Shoichi Nakagawa, is landing in the hot seat as he seeks to rescue the world's No.2 economy from recession while also taking charge of Japanese financial markets in the midst of a Wall Street meltdown.
The former banker and close ally of newly elected Prime Minister Taro Aso is an outspoken proponent of tax cuts and increased spending in troubled times -- a new approach for the finance ministry which has been more focused on cutting Japan's sky-high public debt.
"Reforms should be carried out with eye on people's livelihoods and economic conditions. If those circumstances change, it is natural that we reassess the content of reforms," Nakagawa, 55, wrote in a magazine article last month arguing the government should take stimulatory steps in tough times.
He argued that debt reduction efforts should not be abandoned but his approach may clash with his colleague, Economy Minister Kaoru Yosano, who is known as a fiscal hawk keen to keep a promise to balance the government's budget within three years.
Japan's economy suffered its biggest quarterly contraction in seven years in the second quarter and, with stormclouds building over the economy of key customer the United States, Japan is heading towards a recession.
Nakagawa is a former farm minister and a vocal nationalist, and, like many Japanese lawmakers, comes from a family of politicians.
He will also serve as financial services minister in Aso's cabinet, in charge of the agency that regulates Japan's financial markets.
"Looking at developments in the United States, coordination between the fiscal and financial authorities is very important," said Kyohei Morita, chief economist at Barclays (nyse: BCS - news - people ) Capital Japan.
"While the financial affairs minister is not a regular participant of meetings of the Group of Seven finance ministers, we need someone who can attend the meeting and, at the same time, consider policy for the financial sector."
But others, looking longer term, pointed out the Financial Services Agency (FSA) was separated from the the powerful finance ministry a decade ago with the aim of separating markets regulation from government fiscal imperatives.
Nakagawa backs using some of Japan's foreign exchange reserves to create a sovereign wealth fund, seeking to emulate the returns obtained by similar funds in Singapore and other nations that actively manage such government cash.
Creation of sovereign wealth fund has been a contentious issue being widely debated in the political and academic circles, and opposed as too risky by the finance ministry, which manages the country's foreign reserves.
Nakagawa, whose former cabinet portfolio includes trade minister, has also headed the ruling Liberal Democratic Party's powerful policy research council.
Outside economics, Nakagawa has been an outspoken critic of China, once warning that Beijing's growing military capabilities could result in Japan becoming just another Chinese province in the future.
Similar comments now could have diplomatic fallout.
"The danger is that someone talks off-topic in a semi-private venue," said Phil Deans, a professor at Temple University in Tokyo, referring to the appointment of Nakagawa and other staunch conservatives. "This may not impact on the fundamentals of the relationship (with China), but it means the danger is there."
Nakagawa is a son of a late former farm minister Ichiro Nakagawa and a graduate of the prestigious University of Tokyo.
He worked for Industrial Bank of Japan, a precursor of Mizuho Financial Group (nyse: MFG - news - people ) for five years before entering parliament in 1983, taking over the seat of his father who had committed suicide. (Editing by Rodney Joyce)
Copyright 2008 Reuters, Click for Restriction
China plans first spacewalk
http://www.usatoday.com/tech/science/space/2008-09-24-chinaspace_N.htm?csp=34
Yahoo! Buzz Digg Newsvine Reddit FacebookWhat's this?By Calum MacLeod, USA TODAY
BEIJING — From a secretive desert town in China's northwest, the country will launch its third manned spaceflight Thursday, which will feature the nation's first spacewalk.
Chinese television will broadcast the takeoff from the Jiuquan satellite launch center in Gansu province, as well as the spacewalk, for the public to view another milestone soon after last month's Olympic Games in Beijing.
Russian technicians will provide support for the spacewalk during the Shenzhou 7 mission, according to the state-run Xinhua News Agency.
Two of the three "taikonauts" on board will suit up, but only one will step into space for about 40 minutes, 213 miles above Earth. The spacewalk could be Friday or Saturday.
"We are confident, determined and able to take the first step of Chinese people in space," astronaut Jin Haipeng told reporters Wednesday. Jin and the two other astronauts — including Zhai Zhigang, who is likely to make the spacewalk — are fighter pilots, all age 42, and have lived and trained together for the past decade.
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China's "Divine Vessel" spacecraft, powered by China's Long March rockets, will blast off at around 9 a.m. Thursday ET (9 p.m. in China), weather permitting, for a mission that will last three to five days.
The Shenzhou 7 is scheduled to land in the central area of Inner Mongolia in northern China.
The spacewalk marks a milestone in China's fast-developing space program, a multimillion-dollar, military-backed operation that has excited this nation of 1.3 billion people, and whose secrecy has worried NASA and China's Asian neighbors.
Chinese officials deny any military purpose to its space program.
"So far, China's manned space program hasn't carried out a single military task," said Cui Jijun, director of the Jiuquan center, according to Xinhua. Cui said the manned space program is scientific exploration that could boost technology and innovation.
In the 1950s, Chairman Mao Zedong complained that China could not even shoot a potato into space, but the nation has caught up quickly in recent years.
In 2003, China became the third nation after the United States and Russia to send a man into space. China sent two astronauts up in 2005 for its second spaceflight.
Top Chinese scientists have openly discussed long-term plans to land a man on the moon and to build a space station.
NASA chief Mike Griffin told a U.S. congressional hearing in February that China is becoming a more serious competitor in manned spaceflight.
The spacewalk "is a big technical step forward," said Joan Johnson-Freese, an expert on China's space program at the U.S. Naval War College in Newport, R.I. "If they show it live (on TV), that shows a marked increase in their own confidence."
The payoffs can be considerable, Johnson-Freese said.
The Chinese "basically studied our Apollo program playbook and want those multiple benefits," she said. China's space program "gives the communist government great prestige and credit from its people, just like the Olympic Games. Economically, it shows the rest of the world that if you can do space technology, you can do a lot more than knock off designer clothing."
The spacewalk is being closely watched at Beijing University of Aeronautics and Astronautics, where one-third of the 23,000 students are directly involved in aerospace.
"Some people may say that China still has many poor people and the space program is expensive, but we need all-round development," says student Chen Shichun, 21. "Space can help develop technologies that boost the economy for everyone."
One example is the "space vegetable" experiment, in which scientists sent plant seeds into space, then cultivated them into super-large vegetables on Earth.
This latest mission will release a communication satellite to film the spacewalk and could be used for a future space station.
The Chinese spacecraft borrows heavily from the Soviet Soyuz design, and Chinese astronauts have trained in Russia.
In the future, China may train foreign astronauts, said Chen Shanguang, the head of the China Astronaut Research and Training Center, according to Xinhua.
"International cooperation is an inevitable trend in manned space flights, which are large-scale projects with complex technologies and huge investment," he said.
The United States remains far ahead of China's program. "What China is doing is pretty spartan and prudent," Johnson-Freese said.
A Year After Protests, Burma's Military Remains Firmly in Control
By Ron Corben
Bangkok
24 September 2008
A year after Burma's military crushed protests led by Buddhist monks, human rights groups accuse the government of continuing to harass of the clergy. As Ron Corben reports from Bangkok, experts on Burma see little sign of change in the country, despite the recent release of thousands of prisoners.
Rain-drenched Buddhist monks march in Burma's largest city, Rangoon, 22 Sep 2007
A year ago this week thousands of Buddhist monks left their temples in Burma and led massive demonstrations against the military's mismanagement of the economy.
This monk, at a demonstration last year, calls for a countrywide protest, and urges people go to the revered Shwedagon Pagoda in Rangoon.
The protests began after the military dramatically raised fuel prices, which hit people hard in one of the world's poorest nations.
They culminated with up to 100,000 people marching through Rangoon on September 24.
Protesters call on the government to end the hardships the people face and to release political prisoners, including opposition leader Aung San Suu Kyi, who is under house detention.
But the military swiftly moved against the protesters. Many Burmese using mobile phones and cameras captured images of the military moving against the crowds and beating protestors. The images were soon sent to the outside world.
Picture received by MoeMaka Media internet blog shows debris at Ngwe Kyar Yan monastery after security forces stormed the building in eastern part of Rangoon, 27 Sept 2007
Soldiers broke into monasteries and arrested hundreds of monks. Thousands of other people were arrested. The United Nations says at least 30 people were killed in the crackdown. The military government says 10 died. The protests were the largest seen in Rangoon since the military killed hundreds of protesters calling for democracy in 1988.
Debbie Stothardt, spokeswoman for the rights group, the Alternative ASEAN Network, says last year's protests showed the bravery of the people.
"It was a very inspiring situation because most people in the international community assumed that people in Burma where too afraid or too intimidated to stand up against the regime," she said.
The world reacted with condemnation and calls for Burma to release all political prisoners. But efforts to impose tougher sanctions against the government died in the United Nations Security Council.
And while most Western countries ban trade with Burma, its giant neighbors, India and China, continue to pay the military for Burma's natural gas, timber and gems.
Burma's government says it has a "road map to democracy," including elections in 2010. But human rights groups and Burmese exiles say the election process and the new constitution are flawed because the military retains vast powers.
Carl Thayer, a security analyst and Burma expert at Australian National University, says he sees little prospect for change.
"They're pursuing their roadmap to democracy as they see it," he said. "There will be elections and they have a variety of political parties that are in a constellation backing the military regime with the regime mass organizations that will dominate the elections. But I think they can wait out international pressure."
In some ways, life has gotten harder in Burma. In May, Cyclone Nargis killed more than 130,000 people and left hundreds of thousands homeless. For weeks, Burma's government blocked international relief efforts. In desperation, people turned to the monasteries and private donors for shelter and food, only, in many cases, to be forced away by soldiers.
Burmese journalist Win Tin after his release, 23 Sep 2008
This week, the government released more than 9,000 prisoners in what it called a goodwill gesture. Among them were at least seven political prisoners, including 78-year-old U Win Tin, who had been jailed since 1989. He declares he will continue to press for democracy.
Rights advocates say Burma still holds as many as 1,900 political prisoners, an increase of more than 65 percent since July 2007.
Some experts on Burma, however, do think last year's crackdown may have fired up public anger, which ultimately could erupt.
Thayer at Australian National University says the bloody crackdown shocked him. And, he says, it may have shaken average soldiers in the devoutly Buddhist country.
"Of course I don't think the average conscript inside the Myanmar military would be happy at how the monks were treated, to see the monks defrocked, to see some killed, others in prison - must be disheartening to them," said Thayer.
Saw Steve is with the Committee for the Karen People, an advocacy group for ethnic Karen refugees from Burma. He says the crackdown hardened attitudes against the military.
"It should not be like that. For us it is very sad. It doesn't show like the way to democracy," he said. "It is not the peaceful means. It's very terrorizing so it doesn't show the way to the peace and that will create more hostility."
The military has ruled Burma for nearly 50 years, and the current government has been in power since 1988. It ignored the May 1990 election that gave a landslide victory to Aung San Suu Kyu and her National League for Democracy. Instead, it jailed, killed or forced into exile thousands of NLD supporters.
Where did the 'Asian century' vanish to?
http://nationmultimedia.com/2008/09/25/opinion/opinion_30084327.php
EDITORIAL
By The Nation
Published on September 25, 2008
Regional bickering, historical baggage and poor leaders conspire to darken Asia's bright future
Not long ago, just before the turn of the millennium, many people were talking about the coming of the Asian century. They pointed to burgeoning Asian economies, military modernisation, the rise of China and India, along with the economic might of Japan and South Korea. But eight years into this millennium, things don't seem that pretty.
Thais are bickering with neighbours, and among themselves. Sixteen years ago the Thais took to the streets to demand the return of electoral democracy. Today, we appear to be back to square one. People are back on the streets, but this time they are saying they don't want what they had demanded in 1992. And by the time we Thais figure out what we want, we will probably still be bickering with our neighbours, be it the Cambodians or the Burmese.
Over the past four years, we have had several spitting contests with Malaysia over the violence in the restive South - and they didn't get us anywhere.
In the lower region of Southeast Asia, Malaysia and Singapore still can't come to terms over the latter's independence. Indonesia and Malaysia, in spite of sharing the same language, are bickering over a cultural song that is being use to promote tourism. Would it not be smarter to jointly promote the two countries? Tourists are always suckered by a two-for-the-price-of-one destination deal.
In the Philippines, there were high hopes that peace in Mindanao could be achieved, but President Gloria Arroyo could not find it within herself to stand up to the nationalists, who forced the government to scrap the entire peace process and to come up with an entire new blueprint. This will not see the light of day for some time yet.
In northeast Asia, Japan and China appear to be moving in the right direction after some soul-searching moments over the past few years that brought bilateral ties to their knees. Today, overall ties are on the right track. The two countries like to point to their trade volumes. But the people still hate each other as much as ever.
Paradoxically, the entire region is more integrated. Whether it is Japanese fads and Korean fashion or satellite television, Asian countries are closer to each other than ever before. Still, infectious nationalism rears its ugly head in many countries in the region, stirring up hatred that justifies small-minded agendas. The recent suggestion from Cambodian strongman Hun Sen that Thailand should relinquish its chairmanship of Asean, or Tokyo Governor Shintaro Ishihara calling China's space programme "outdated", are just two examples.
Officials who get paid to be optimistic often boast about "e" this and "e" that - be it e-commerce or e-tourism - and that information is just a click on your computer screen. But while this information may be just a click away, our knowledge and understanding of our neighbours has not improved.
Part of the problem is that Asia does not have enough dynamic leaders who are willing to make bold moves or take initiatives that may come at the expense of their popularity. This means letting go of some of the historical baggage and coming clean with people about the current, real situation.
Moreover, Asian powers are fixated on "win-win" diplomacy while turning a blind eye to the fact that such an approach comes as the expense of progress. Asean's dealings with Burma, whether in diplomacy or humanitarian crises, are a case in point.
Asian countries often talk about how a united Asia, through its regional and sub-regional groups and forums, could counter US influence in the region. But suspicion and wariness continue to characterise relationships between most Asian governments.
Few Asian leaders would admit to it but there appears to be a general satisfaction with the US role as security guarantor and economic partner. The problem with this arrangement is that when Asian powers get too comfortable, they do not want to give anything up. They forget that leadership comes with certain tasks, risks and costs. They forget, too, the part about commitment.
Freed Myanmar dissident calls for more releases
Photo: AFP
PARIS (AFP) - Freed Myanmar dissident Win Tin said Wednesday two decades of torture and isolation in jail had not dented his determination to fight on for the political prisoners held by his country's military regime.
"It's not enough, this release of political prisoners, because there are some 2,000 prisoners," the 79-year-old journalist and activist said, in an interview with Radio France International one day after his release.
Until Tuesday, when the military junta released more than 9,000 prisoners from its jails in an amnesty ahead of elections promised for 2010, Win Tin had been the longest serving political prisoner in Myanmar.
Campaigners say few of those released were political prisoners, and Amnesty International shares Win Tin's estimate of 2,000 imprisoned dissidents.
Speaking with good humour and in fluent English, Win Tin described his harsh treatment and his plans to resume a political career cut short in 1989 when he was arrested for advising opposition leader Aung San Suu Kyi.
Asked how he was feeling, he said: "Not too bad altogether, 19 years and three months. See, I'm now 79 and that's rather old for a Burmese. So I try to be healthy, I try to be normal.
"I tried to survive by keeping some political convictions. That is: the release of political prisoners, the convention of parliament and political dialogue between us and the government," he said.
"There were many tortures and mistreatments in the prison," he said.
"I was interrogated for five days at a stretch. Sleep deprivation, that was very hard. I was hooded and I was interrogated and somebody hit me. I was beaten many, many times.
"And of course from 1996 until now I was kept in solitary confinement, but it wasn't too bad," he added, explaining that he had no contact with other prisoners but could see his family for 15 minutes per fortnight.
Asked whether he thought Myanmar was ready for democratic reform, he said he would attempt to play a role, but warned: "I'm rather pessimistic because the army is so big in every structure of Burmese life."
SPIRALING CORRUPTION,China's robber-baron ways
http://www.iht.com/articles/2008/09/23/opinion/edhill.php
SPIRALING CORRUPTION
China's robber-baron ways
By Steven Hill Published: September 23, 2008
Only a short time after China's magnificent Olympic coming-out party, the land of Mao's successors found itself making less celebratory news.
"Tainted Milk Formula Sickens Thousands of Chinese Infants" read one of many recent headlines. Twenty-two companies that produce or distribute milk powder had been secretly adding melamine, normally used for making plastics and glue, into milk powder, making thousands of infants sick and causing several deaths.
It is one of the puzzling questions about China: How can a country that organized such a splendid Olympic splash be the same country that produces deadly food scares on a regular basis?
The answer says a lot about today's China. In its March to modernity, Beijing's ruling Communist Party took off the economic shackles of the Mao years and relaunched the country as a capitalist-communist state - a real oddball coupling, if ever there was one. Part of this process involved the radical devolution of economic power to over 30 provinces, fostering a kind of anarchic federalism.
As with American federalism, the national government in China is responsible for certain duties and the country's provincial governments are responsible for others. But in China, none of this arrangement is written down or spelled out anywhere, as it is in the U.S. Constitution.
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Instead, it is still a work in progress, with provincial officials taking as much rope as they dare. Power at the provincial level is still vested in the local Communist Party, but also intertwined with personal and family networks, motivated by the former leader Deng Xiaoping's maxim, "to get rich is glorious."
That's an odd motivation for the heirs of Karl Marx, and in practice it's led to lots of cronyism and corruption.
The scale of corruption in China is startling. The Chinese researcher Sun Yan has written that the average "take" in the 1980s was $5,000, but now it is over $250,000. The number of arrests of senior Communist Party members quadrupled between 1992 and 2001. Four provincial governors and one provincial party secretary recently were charged with corruption.
Even at the level of the central government, corruption has been debilitating and helps set the national tone. High-level officials, including the mayor of Beijing, a vice chairman of the National People's Congress, the former president of the Bank of China, the vice governor of the People's Bank of China and the director of China's foreign exchange administration, were arrested and imprisoned for embezzlement and fraud. One of them eventually was executed, and another leaped to his death.
To put that in perspective, says the author Will Hutton, it would be as if the mayor of New York, the speaker of the House of Representatives, and the chief executives of Goldman Sachs and Citibank, along with a governor of the Federal Reserve, were all either imprisoned for fraud, executed or committed suicide.
The Chinese economist Hu Angang has estimated an annual economic loss due to corruption of approximately 15 percent of GDP. In this climate, cutting foreign substances into milk formula, pet food or medicine becomes standard operating procedure, like a drug dealer looking to maximize the street value of his stash by mixing in filler material.
To be fair, not all the provinces and not all the business people or bureaucrats engage in such illicit behavior. And China's leadership has taken steps to crack down. Punishments have been increased, tougher laws have been passed. Officials now are forbidden to enter business relationships with family members. Audits and anti-corruption screenings have been introduced.
But when I questioned a Chinese official about corruption, his defense - "we're not as bad as Burma" - was hardly convincing.
Yes, the central government in Beijing can use its authoritarian power to pull off a brilliant Olympics party. And over the past 30 years, the Chinese leadership has accomplished the remarkable feat of lifting 400 million people out of poverty. But China is still very much a developing country, plagued by a mess of contradictions.
It is difficult to imagine how the country's anarchic, robber-baron ways will serve China well for the next 30 years. Either political reform and accountability will slowly take root, or China's modernization will falter.
Steven Hill is director of the Political Reform Program of the New America Foundation.
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