William D. Cohan’s
House of Cards chronicles the demise of Bear Stearns. Its first
half describes events in the final weeks before its take-over
by JPMorgan Chase for less than the value of Bear’s head office building
across the street of JPMorgan’s; in that part, nobody, incl. Bernanke,
Paulson, Geithner & Dimon, comes out looking professional. The second
half describes the goings on in the two hedge funds that brought it
down. A big headline this week screamed “EX-BEAR STEARNS MANAGERS
NOT GUILTY” after a jury in a New York District Court, following a
month-long trial & less than a day’s deliberations, acquitted
the hedge funds’ two managers of charges of conspiracy, securities
fraud & wire fraud. Going by Cohan’s book, this was a miscarriage
of justice, with either the prosecution having done an abominable bad
job, or the jury having smoked something else than tobacco or been bought.
Judge for yourself from three relevant paragraphs in the book :
- “on May 30, Cioffi
(the senior ot the two managers) told an investor that he had
convinced other investors who had put in June redemption requests “of
note (other than about $5 million) to pull their redemptions”, but
quite the opposite was true” (page 342 of the 2009 Doubleday edition);
- “Even though between
March 1 and May 3, thirteen investors, including two of the largest
investors and Cioffi himself, had requested redemptions, Tannin (Cioffi’s
No.2 & the other accused) told a repo lender ‘the fund anticipated
no large redemptions’.” (Page 340); and
- “He (i.e. Cioffi)
told the Bank of America on June 7 the fund was up ‘approximately
1.7 percent in May’ and the next day Barclays the fund was up ‘2.7%’
... (while) The fund was actually down 38 percent in May.”
(Page 346)
The recent shooting at
Fort Hood was significant for many reasons. Among those seldom mentioned
are the following. What are the chances of those Muslims becoming part
of North American society who declare themselves, as did the shooter,
“Muslim first and American (or
Canadian for that matter) second.”? (this has already shown up
in Canada in attempts for Muslims to have the ‘right’ to have sharia-,
rather than Canadian-, law, apply to them &, more recently, in several
“honour killings”). The fact that the gunman was a practicing Muslim
will complicate life for every Muslim in the US armed forces & feed
a paranoia in some quarters in the US vis is vis anything connected
to Islam. And, given that the authorities apparently had been aware
of potential problems with the shooter, one must wonder how much value
the US is really getting for the US$50BN the 16 federal agencies
involved in security & intelligence work are currently spending.
One of you drew my attention
to an item in the London Times last July. While it may, or may
not, be an ’urban myth’, I have long since learnt that reality is
often stranger than fiction. And at worst it is both good for a chuckle
& at best a tribute to human ingenuity & evidence that’s it
not the meek but the bold ‘who shall inherit the earth’. Under the
heading “A well-planned retirement” the Times last July told
the story of a parking lot outside the Bristol Zoo where for 25 years
a pleasant attendant relieved car owners of £1 & coach chauffeurs
of £5 for the privilege of parking there. When, one day, he failed
to show up, the Zoo phoned the City Council to send a replacement only
to be told the parking lot was its responsibility & to find its
own replacement. To make a long story short, it turned out that pleasant
attendant had been an enterprising fellow who had adopted the parking
lot & had cleared an estimated quarter of a millions dollars a year
for 25 years. Hard to believe, but, as noted above, ... truth can be
stranger than fiction.
I have again bunched
a lot of interesting stuff as a sort-off appendix, this time on the
evolving Israeli-Palestinian situation, at the end since, while it was
time sensitive & too good to throw away, would have eaten up most
of my five pages & might be useful to read separately in a reverse
sequential order (i.e. the most recent first - please remember that
my comments were also written in reverse order).
GLEANINGS VERSION
II
No. 337 - November
12th, 2009
UP AGAINST A WALL
OF DEBT (NW, Robert J. Samuelson)
∙ An IMF report,
“The State of Public Finances Cross-Country Monitor : November 2009"
concludes that many wealthy countries will soon be in worse shape than
major developing countries, due to both increased (stimulus) spending
& devastated tax revenues (which will linger for a long time). It
expects total government debt (incl. local as well as central government
debt)-to-GDP ratios by 2014 to decline for Brazil & India (from
67% to 59% & 81% to 79% respectively), remain the same for China,
at 20%, rise a bit for Canada (64% to 69%), Mexico (38% to 44%) &
South Korea (30% to 35%) & rocket skyward for France (64% to 96%),
Germany (63% to 89%), Italy (104% to 129%), Japan (188% to 246%), the
UK (44% to 98%) & the US (62% to 108%). It believes that these countries
now have major ‘structural deficits’ (i.e. those that will persist
even after their economies recover), ranging from 3.7% for the US to
7.8% for the UK and that these will subsequently be driven still higher
by their aging populations. So in its view spending cuts, tax increases
& cutbacks in benefits are inevitable since the governments won’t
be able to inflate their way out from under this debt because much of
it is short-term & must be rolled over frequently.
The IMF scenario would
spell bad news for the US dollar, accelerate the US’ decline as a
super power & increase the risk of serious social unrest in the
US. And in an interview with Reuters, David Riley, Fitch’s Co-Head
of Global Ratings said Britain is most at risk to lose its triple-A
rating, that Fitch will review Japan’s AA- rating if its debt issuance
rises materially above this year’s US$490BN & that in France
“There is some pressure starting to build.”
CENTRAL BANKERS
PULLING BACK THE REIN (G&M, Brian Milner)
∙ The ECB &
Bank of England on November 6th joined the Fed & the
central banks of Canada & Japan in leaving interest rates at their
historic lows. But ECB President Jean-Claude Trichet warned reporters
the Eurozone countries face “stronger-than-anticipated risks though
confidence may improve” & said the one-year loans made to commercial
banks as emergency relief will be withdrawn from the market, possibly
as early as next month, since “not all our liquidity measures will
be needed to the same extent as in the past.”
Trichet’s message
is not what the G-20 Summit in Scotland sought to convey. But the ECB
has inherited, & perpetuates with a vengeance, two Bundesbank traditions
: a near-total disregard of what politicians may, or may not, think
desirable, & a near-paranoid fear of inflation.
WORLD’S NEEDS
‘DIRTY OIL : AGENCY (CanWest, Peter O’Neil)
∙ The IEA sees demand
“soaring” 40% by 2030 (to 112MM bbld), mostly in the developing
world, & predicts long-term growth in Canada’s oilsands since
they “represent one of the few growth areas outside OPEC”. But emissions
must be cut to protect the environment & enhance energy security
(which will have many countries, incl. the US & China, looking for
more of the oil sands output to reduce their dependence on Persian Gulf
oil). So it proposes a carbon levy of US$50/tonne that would add US$5
to the cost of a barrel of oilsands oil.
Headline writers often
don’t capture the essence of an article. In this case, the article
says nothing about oilsands oil remaining
“dirty”; to the contrary it suggests an incentive to make it cleaner.
NINE U.S. STATES
FACE CALIFORNIA-TYPE BUDGET CRISES (Bloomberg)
∙ Arizona, Florida,
Illinois, Michigan, Nevada, New Jersey, Oregon, Rhode Island & Wisconsin
are experiencing lower tax revenues and higher deficits, unemployment
& home foreclosures, and in all but Illinois, New Jersey & Wisconsin
a two-thirds legislative vote for tax increases. In California, which
accounts for 13% of US GDP, spending has been slashed by 30+% by cutting
funding for universities, schools & welfare programs, and taxes
have been raised by US$12.5BN to enable Governor Schwartzenegger to
sign a US$85BN budget (that is still expected to generate a US$14BN
deficit over the next 19 months).
With California these
nine states account for one-third of the 50 states’ total population.
FANNIE, FREDDIE
WARN OF MORE LOSSES (G&M, Nick Timiraos)
∙ So far the two
have needed capital injections of US$112BN since the government took
them over in September 2008. And they would have needed more but for
their collecting on claims from mortgage insurance companies whose ability
to meet their liabilities are becoming increasingly suspect (last month
S&P downgraded Mortgage Guaranty Insurance Corp., the largest insurer
for both Fannie & Freddy, and put seven others on credit watch).
Since then Fannie
announced it had lost US$19BN in the Third Quarter (vs. US$29.4BN in
the year-earlier period) & had asked the Treasury for another US$15BN
capital injection (bringing the total to US$60BN). Freddie lost only
US$6.3BN & said that it doesn’t need a capital injection right
now but intimated it will need one later, over & above the US$51BN
it has already received. The the OMB recently warned they may
need US$100BN more next year, the Wall Street Journal predicted that
this “dynamic duo” will continue to
“roll snake eyes for tax payers for years to come” & the government-owned
FHA (Federal Housing Administration), that provides mortgage insurance
to private sector mortgage lenders, whose credit exposure has grown
by 40% to US$5.3TR in the past three years, recently announced its financial
cash cushion has dipped to the point where it too soon will need a bailout
(it has reserves of US$3.6BN vs. US$685BN in guarantees outstanding,
i.e. a ratio of 0.53%, whereas Congress in 1990 mandated it to maintain
it at a minimum 2.00%).
US UNEMPLOYMENT
HITS 10.2% (CNNMoney, Chris Isodore)
∙ In October it
jumped far more than expected, from 9.8% in September, as employers
continued trimming jobs despite GDP having grown in the Third Quarter
for the first time in 18 months. 7.3MM jobs have been lost since
January 1st, 2008, almost 12x the 640,000 jobs the Obama
Administration claims have been created or saved. Millions of people
now have been unemployed for over six months & many of
them for over two years.
Many of the jobs created
are lower-paying than those lost. And with households now having 3x
the debt & < half the savings than in 1982, those who lose their
jobs today are more vulnerable than they would have been then, even
though unemployment benefits are now much better.
PRESIDENT CALLS
LOWER-THAN-EXPECTED JOBLESS CLAIMS A
‘HOPEFUL SIGN’
(AP)
∙ First-time claims
for unemployment benefits fell from 514,000 to 502,000, the lowest level
since January 3rd. But 4.1+MM unemployed Americans have exhausted
the 26 weeks of benefits the states pay & get the ‘extended benefits’
for up to 73 weeks paid by Washington.
The minimum level
compatible with employment growth is 400,000..
BROADER MEASURE
OF U.S. UNEMPLOYMENT STANDS AT 17.5%
(NYT, David Leonhardt)
∙ The Labor Department’s
broadest measure of unemployment & underemployment now stands at
17.5%, an all-time record One striking aspect of this recession is how
it has affected only a small group of workers. For unemployment has
soared in part because there is no hiring, making finding a new job
impossible. And contrary to past recessions wages for those who still
have jobs have continued to rise (by 1½% to 2½% in the past year).
The economists prattling
about the recession being over presumably are in the latter group.
MCDONALD’S SALES
DIP IN U.S. (EJ, Business Browser)
∙ In October, at
outlets open at least 13 months, sales were up 3.3% worldwide but down
0.1% in the US as even newly introduced menu items couldn’t induce
cash-strapped diners to spend more. While this was the first time in
18 months that same-store sales fell in its home market, the company
claimed ‘we are doing better than the rest of the industry’.
The weak dollar helps
its bottom line. So next year it plans to add 1,000 outlets, most of
them in Australia, China, France, Germany & Russia, to the 32,000
it currently operates in 100 countries.
PAY CZAR CONCERNED
FIRMS COULD LOSE TALENT (AP)
∙ Following mutterings
by AIG’s CEO Robert Benmosche, since rescinded, that he might
quit because he didn’t like his ‘pay oversight’, Ken Feinberg
said he was “very concerned” about scaring away top talent at the
seven firms that took down most of the bailout money, since that increased
the risk tax payers won’t get their money back.
He forgot that no
one is truly indispensable & Benmosche that
AIG is 85% taxpayer-owned. Such ‘top talent’, like professional
athletes, has limited options. If they quit, dozens
of others are waiting in the wings, willing, & likely capable, to
do the job as well, if not better, for less money. And even if their
talents were really ‘unique’ & they went elsewhere, that might
actually be beneficial to the system.
STIMULUS FAILS
TO REACH AREAS THAT NEED IT MOST ((G&M, Heather Scoffield)
∙ In six Canadian
provinces areas with unemployment rates well below the provincial averages
have gotten most of the stimulus money, one (PEI) is too small for comparisons,
and in Manitoba, Newfoundland & Ontario, while the winning regions
have higher-than-average unemployment, they didn’t always have the
highest in those provinces. Using a weighted point system the Toronto
economic region scored highest; this makes sense given the size of its
population & its 9.5% unemployment rate (vs. 6.9% a year ago) that
was well above the provincial & national averages of
8.9% & 8.1% respectively. But the runner-up, Ottawa, makes less
sense; for its 5.7% unemployment rate is the lowest in Ontario.
In all fairness, in
some high unemployment regions it is largely structural, rather than
recession-driven. The focus on the big cities was to be expected; for
in the last election Prime Minister Harper’s Conservative Party was
shut out in the centre city ridings of Canada’s biggest cities (Toronto,
Montreal & Vancouver). And Ottawa’s high ranking is just traditional
‘featherbedding’.
PM OFF TO ASIA
WITH AMBITIOUS AGENDA (CanWest)
∙ Steven Harper
left on November 12th for the weekend summit of Pacific Rim
leaders in Singapore, followed by three days in India that Canadian
officials hope will lead to a “brand new era of partnership”
with the world’s largest democracy. Apart from the usual tourist-type
activities, incl. a visit to the Golden Temple in Amritsar (to appease
Canada’s large, politically active Sikh minority?), he will meet
with Prime Minister Manmohan Singh & Sonia Gandhi.Trade between
Canada & India, whose economy is rapidly expanding, is a minute
$2BN/year but officials in both countries believe the time is ripe to
increase that.
Apart from the Harper
government appearing to be ‘persona non grata’ in Beijing, there
may be more potential in India for Canada (& many other countries)
than in China.
‘NEW JAPAN’
CHALLENGES OLD US POLICY (NP, Peter Goodspeed)
∙ President Obama
doesn’t needs or want another foreign policy challenge. But
that is what he’ll get when he visits Japan this week. For Prime Minister
Yukio Hatoyama wants to take a more assertive global role & to recalibrate
its military alliance with the US (that Washington has taken for
granted for 54 years). This threatens the presence of the nearly 50,000
US troops stationed in Okinawa that has long been key to the US strategy
for the region.
Hatoyama is said to
be targeting a relationship in which Japan would be less
‘subservient’. The US presence on Okinawa has long been a thorn
in the Japanese side (which has not been helped by the occasional rape
of a local woman by members of the US military). And with China’s
star rising fast, commercially & militarily, Hatoyama knows
which side Japan’s bread is buttered on.
OBAMA’S FIRST
VISIT TO CHINA HIGHLIGHTS TRICKY TIES (WP, Andrew Higgins)
∙ For decades America’s
China policies have run the gamut from Nixon’s “tacit allies”
against the Soviet Union to George Bush’s “strategic competitors”.
Earlier, after weeks of haggling, White House & Chinese officials
agreed on defining the two countries’ relationship as “positive,
cooperative & comprehensive”, avoiding the term “candid” which
Beijing dislikes since it implies that each side could criticize the
other (wordcraft has been critical in Chinese diplomacy since Confucius,
2,500 years ago - are you listening, Prime Minister Harper?)
While Senator Obama declared that “They’re neither an enemy, nor
a friend. They’re competitors”, his Deputy Secretary of State James
B. Steinberg in September trotted out a new concept, that of a “tacit
bargain”, whereby Washington wouldn’t criticize China’s growing
power while Beijing would ease Washington’s concerns about its global
intentions.
Some argue the US
& Chinese economies have become two sides of the same coin, with
one consuming & borrowing and the other producing & lending;
if so, as the former, the US holds the weaker hand. Beijing may be displeased
with travel arrangements that have it being the third stop on the President’s
tour & with him not only having the usual meetings with officials
& doing the usual touristy things (like visiting the Great Wall),
but also having a townhall-like meeting in Shanghai.
FRENCH FACTORIES
AT 9-YEAR HIGH (EJ, Business Browser)
∙ Factory output
rose for the fourth month in a row, fueled by the consumer & intermediate
sectors. The Markit/CDAF final manufacturing purchasing managers’
index rose to 55.6, its highest level in almost three years, up from
53.0 in September, and its output component to 60.0, its highest level
since September 2000.
‘Green shoots’
everywhere, but the US? A sign of ‘uncoupling’?
BANK BAILOUT CHANNELLING
IRISH ANGER AS STRIKES LOOM (Reuters)
∙ The Irish government,
its majority in Parliament weakened by resignations & by-election
losses, is nevertheless trying to ram through a bill to take US$81BN
of ‘toxic assets’ off the banks’ books & transfer them to
a ‘bad bank’ to be known as NAMA (National Asset Management Agency).
This may create a ‘Winter of Discontent’ as public sector workers
are threatening to go on strike, and the IMF is calling for its
GDP this year to shrink by 7½%, the world’s worst but for Iceland
(& Zimbabwe?)
Opponents have a rallying
cry of astounding simplicity, namely
‘would you & your family not rather have that US$18,000 each,
rather than having it handed to the banks’ (which conveniently ignores
that in due course some money at least is likely to be recovered from
selling these assets).
EUROPE SPLIT ON
EVE OF COPENHAGEN CLIMATE TALKS (G&M, Bill Curry)
∙ Until recently
the EU, in pushing for international emission control targets, spoke
with one voice on its expectations for Copenhagen. But while Britain
keeps pushing to keep expectations high, Norway’s chief negotiator
said on October 30th “I don’t believe we will get a full,
ratifiable, legally binding agreement in Copenhagen”, due to a lack
of clear targets from China & the US Senate’s failure to approve
emissions targets for the US.
When the captain of
the Titanic & its band deemed they had no option but go down with
the ship, in that case there were at least life boats for some of their
shipmates..
CHINA PROMISES
BILLIONS IN AID, LOANS TO AFRICA (AP)
∙ On November 8th
at the two-day Forum on China-Africa Cooperation Summit in Sharm el-Sheik,
Egypt, China Premier Wen Jiabao promised US$10BN in concessional loans
to African nations over the next three years (vs. US$5BN at the last
summit in 2006 in Beijing), to cancel the debt of some of the poorest
among them & to eliminate tariffs on 95% of the products African
nations export to China (at a rapidly increasing rate).
Its critics called this an attempt to deflect criticism that its past
investments were driven by greed, & with justification
complain that in its quest for resources it is ignoring the human rights
record of many African regimes (incl. those of Sudan’s Omar el-Bashir
& Zimbabwe’ s Robert Mugabe, both of whom were in attendance).
China is broadening
& deepening its presence in Africa, funding it from its surfeit
of US dollars, while the West sits on its hands, despite the promises
made at the 2005 Gleneagles G-8 Summit.
STRAWS IN THE WIND
∙ Vegas strip revenue
YTD is down 12%, vs. the 11% record drop for all of 2008.
But movie houses are
doing well as people spend their recreational dollars closer to home.
∙ The Globe &
Mail reports that the Montreal Exchange futures suggest the market expects
the price of gold one year hence to be US$1,104.40 vs. US$1,095.40 today,
oil US$82.74 vs US$77,43 today & three months’ interest rates
1.78% vs. 0.445% today.
It would not
be surprising if it were to be underestimating all three.
-o-o-o-o-o-o-o-
PALESTINIAN RIVALS
MOVE CLOSER TO AGREEMENT (G&M, Patrick Martin)
∙ Senior Hamas officials
indicated on November 11th that their movement will soon
sign a reconciliation agreement with Mahmoud Abbas’ ruling Fatah party,
paving the way for full elections in both the West Bank &
Gaza, and for a Hamas-, or Hamas-Fatah coalition-, government. This
was confirmed in an interview published that same day in the London-based
al-Quds al-Arabi newspaper with Aziz Dwaik, the Hamas Speaker of the
Palestinian Legislative Council (see below under
“Missed Chances”) in which he said in part that
“The Hamas government will sign the reconciliation agreement at the
end of November.”
∙ But, while this
clears the way for elections, Ahmed Yousef, Hamas’ Deputy Foreign
Minister & a senior adviser to Hamas’ Prime Minister, Ismail Hanya,
said they “will be postponed to what we have agreed to in the
reconciliation document ... June, not January.” Further that Hamas’
partaking in a government of national unity will depend on the “Quartet’s”
stand on its three pre-conditions for dealing with Hamas, renouncing
violence, recognizing Israel’s right to exist & accepting all
previous agreements entered into by the PLO & the PA (which Hamas
so far has refused to formally accede to).
∙ And he said a
lot more. One, following the June election, “we would like the world
community to engage with the [new] government, whether Hamas is in it
or not ... because we are representing, if not the majority of the Palestinian
people, then half the population, and there’s not going to be a peaceful
settlement if you’re going to ignore Hamas.” Two, that “We in
Hamas have said we will accept a Palestinian state within the 1967 borders
(implying that it would accept the existence of a Jewish state?)
and, as an extra bonus ...a truce for 20 years ... (and) if you
don’t have bloodshed for 20 years ... people will find the magic solution
for their suffering. Maybe they come up after these 20 years, with a
one-state solution, a bi-national state.” And Three, when asked how
he would convey this approach to leaders such as Canada’s Prime Minister
Harper, “We’re going to tell him it’s time to be fair ...
in any conflict, if you take sides and do not have an even-handed policy,
that means you will be considered part of the conflict ... We know of
Canada as taking part in the blue helmets and as part of the United
Nations and helping to solve the problems... Now we are seeing
Canada giving Israel all kinds of support and keeping blaming Hamas
and the Palestinians. This is unfair and it doesn’t help Canadian
interests.” And Four that “the Muslim community all over the world
is very attached to the al-Aqsa mosque and so on, and I don’t think
that Canada would like to been seen by the Muslims all over the world
as being part of the aggressor.”
Meanwhile, the (West
Bank Fatah) Palestinian election officials, blaming Hamas, are drum
beating that the January 24th elections should
be postponed (to enable Abbas to stay
‘in power’ ignoring that, even if he did, he will be
a lame duck like none before). Paraphrasing a term made famous in The
Godfather One, Hamas may have made
“an offer the world cannot refuse”, thereby making Netanyahu’s
worst dreams come true, the more so given Yousef’s reference to an
eventual one-state/binational state solution (the writer is currently
in Gaza, i.e. inside the Hamas ‘tent’).
U.S. KEEPS PRESSURE
ON NETANYAHU TO RESUME PEACE TALKS (Reuters, J. Heller)
∙ While Netanyahu’s
November 9th after-hours White House visit was widely portrayed
as having been ‘frosty’, & in the Israeli media as a ‘snub’
& a sign of strained relations, Israeli officials spun it as “actually
an icebreaker”, saying that during their 60 minute one-on-one the
two men “established a real rapport”, & rationalized the visit’s
low-key nature as intended not to upset the Palestinians or undermine
Mahmoud Abbas. And, sure enough, Obama’s Chief of Staff, Rahm
Emanuel, told US Jewish leaders the next day the Israeli-Palestinian
peace talks, suspended for nearly a year, should get underway “without
preconditions”. But the day after that Abbas reiterated in a speech
that settlement construction must come to a complete stop, on the very
same day that Netanyahu’s National Security Adviser attributed the
change in Washington’s tone to the fact that the US is a “pragmatic
nation” that understands & respects Israel’s ‘red lines’
on the issue.
∙ Much depends on
Abbas’ plans. While he has said he would rather not run in the January
24th election (this is
not what he said : he was quite specific that he wouldn’t
run). But many believe he is bluffing; for he has threatened quitting
before.
Since this despatch
came for Reuters’ Paris office, the positive spin put on the Obama-Netanyahu
confab may well be a bit of Israeli misinformation. Be that as it may,
it seems strange that much is made of the Palestinian insistence
on a pre-condition for the peace talks to start up again, while little
or none is made of Netanyahu’s insistence that East Jerusalem is now
part of Israel & his repeating, in a speech while in Washington,
that any Palestinian state cannot have an army.
ABBAS DECISION
TO QUIT BLINDSIDES PEACE TALKS (DT, Adrian Blomfield)
∙ On November 5th
Mahmoud Abbas (aka Abu Mazen) announced that, frustrated by White
House policy shifts on Israeli settlement construction, he wouldn’t
stand for re-election in the January 24th election. The loss
of one of the Palestinians’ most conciliatory voices leaves Obama’s
Middle East peace efforts in a shambles. And it raises questions about
Obama’s handling of the situation; for his critics contend he fatally
undermined Abbas by conceding political ground to Israel & pressuring
him into making unpopular decisions (most recently by withdrawing his
initial endorsement of the Goldstone Report, only to have to reverse
that reversal after an enormous backlash among Palestinians & Arabs
generally). For while he & the Arab world had been encouraged by
Obama’s initial call for a total freeze on all Jewish settlement construction
in the West Bank (& by his apparent reaching out to the Muslim
world in his Cairo speech), they were disheartened by his subsequent
softening of that language to merely asking for ‘restraint in its
settlement construction’. While the US would like to see Prime Minister
Salam Fayyad to seek the Presidency, it is more likely that someone
less in tune with (or subservient to) US desires will succeed
Abbas.
It is actually quite
surprising that Abbas didn’t throw in the towel long ago. For pushing
him around & undermining his domestic position often almost seemed
like a national pastime in the Bush White House, picked up pace when
Netanyahu became Israel’s Prime Minister & now may have infected
the Obama White House. But, as Henry Kissinger pointed out years ago
on CNN’s Larry King Live, in negotiations lasting solutions
are more likely when there are ‘hard cases’ on both sides than when
there is a hard case on one side & a patsy on the other.
And as far as recognizing, & negotiating with, Hamas is concerned,
it wouldn’t be the first instance in the post WW II period of yesterday’s
reviled terrorist becoming tomorrow’s internationally acceptable statesman.
MISSED CHANCES,
BROKEN PROMISES (G&M, Patrick Martin)
∙ Abbas staked his
career on the two-state solution. In the late 50's he co-founded Fatah.
In 1974 he sought out the Israeli left as a partner in peace. In the
early 90's he helped bring about the Oslo peace accord. And he &
Israeli cabinet minister Yossi Beilin formulated the Beilin-Abu Mazen
plan, the template for many subsequent peace proposals.
∙ But since taking
over the PA in 2004, he has been a disappointment. He promised to create
Palestinian institutions & end corruption but did neither. In 2005,
after Israel vacated Gaza, when the world was ready to help its people,
he didn’t grasp the opportunity & instead escalated tensions
with Hamas. He let the people of Gaza down again when he stayed mute
when Israel attacked them & when he had his security forces break
up protest demonstrations in the West Bank. Overall, he seemed to care
less about what his own people than what Israel & the US thought
of him. So most Palestinians react to his name with a shrug & the
only ones to bemoan his planned departure are those who owe their positions
to him. While he set a date for the election, it isn’ clear there
will be one. For the Palestinian Election Committee says it should include
Gaza & East Jerusalem, and Hamas so far has ruled out participating
& Israel is unlikely to let Jerusalem Palestinians participate.
∙ His leaving may
do more good than harm. For his successor starts with a clean slate
& can put off talks until Hamas is on board, something
that Abbas couldn’t because of his visceral hatred for them. But it
is likely to strengthen Hamas’ hand among Palestinian voters.
∙ The popular choice
to succeed him would be Marwan Barghouti but he is in an Israeli jail.
Another possibility is the 57 year-old Prime Minister; as a technocrat
and a former IMF & World Bank official he has support in both Washington
& Jerusalem and he may benefit from having successfully promoted
order & economic development in the West Bank; but is not a member
of Fatah. A third is the 48 year-old Mohammed Dahlan, Fatah’s former
security chief; he has a strong institutional support base & some
support in Washington & Jerusalem because he reined in the second
intifada; but he hails from Gaza & may not draw enough support in
the more vote-rich West Bank. A fourth is Marwan Barghouti’s cousin,
the 57 year-old Dr. Mustafa Barghouti, who, with 19% voter support,
was second to Abbas in the 2005 election; his main strength is that
he runs a network of medical relief committees that provide a modicum
of healthcare for the Palestinians & he is known to favour non-violent
resistance. Finally, there is the 59 year-old Aziz Dwaik, a former geography
professor & Hamas’ political leader in the West Bank, who, according
to the Palestinian Constitution should have become Acting President
last January when Abbas’ term ran out; his popularity in Islamic circles
was demonstrated by the huge rallies occasioned by his release from
jail last June & his public support for the idea of living in peace
alongside Israel could win him votes in the secular community.
Abbas knows he wouldn’t
be re-elected. Of the four above, Dwaik may have the least
“baggage” (incl. a US/Israeli endorsement) & the most voter
support (especially since polls have consistently shown Fatah trailing
Hamas). Be that as it may, whoever succeeds Abbas will need to
leave less of an impression of being a US/Israeli toady (which, in a
perverse way, may actually benefit the peace process by waking up Netanyahu
et. al. to the reality that the Chinese water torture process isn’t
working & Obama to the unpleasant reality that, if he really wants
peace in the region, he’d better start playing hardball with the Israelis).
For Israel, with the concurrence of first the Bush White House, &
more recently seemingly with that of Obama, has been
‘pitching above its form’; for when push comes to shove, it is losing
‘the battle of the cradle’ & is in the same unenvious position
that the US is vis a vis China : in Sen. Hilary Clinton’s words ,“you
don’t pick a fight with your banker.”
ABBAS DEPARTURE RAISES FEARS OF
COLLAPSE AT PALESTINIAN AUTHORITY
(NYT, Ethan Bonner)
∙ He has threatened
many times before to quit but this time seems to mean it. For as Saeb
Erakat, the chief Palestinian peace negotiator puts it, “He is realizing
that he came all this way with the peace process in order to create
a Palestinian state, but he sees no state coming ... So he doesn’t
really think there is a need to be president or to have an Authority.
This is not about who is going to replace him. This is about us leaving
our posts. You think that anybody will stay after he leaves?”
∙ Many of those
who owe their position to him fear his departure & are urging him
to stay. But four top officials in separate interviews made the same
point : he feels there is an impass in the negotiations because Prime
Minister Netanyahu won’t commit to a Palestinian state based on the
1967 borders, incl. East Jerusalem. And he was disillusioned when Obama
backpedalled on his demand for a freeze on settlement construction in
the West Bank.
∙ According to Martin
Indyk of the Brookings Institution, & an adviser to George Mitchell,
Obama’s Special Envoy for the Middle East, ‘More than likely, we
are entering a new era.”
A new era alright.
Abbas’ leaving will mean less a collapse of the PA than its possible
seizure by those less amenable to Israeli stonewalling & American
arm-twisting. Small wonder Prime Minister Netanyahu snuck into the White
House to see President Obama during the evening of November 9th
for a visit in which Mr. Abbas’ threat
to leave office was said to be ‘a part of their talks’ (while in
reality it couldn’t help but be the main topic of conversation). Netanyahu
seems intent on continuing to ignore the reality that the pendulum is
swinging in the Palestinians’ favour & somehow has gotten Obama
to buy into his erroneous vision, at least to some degree.
