Thursday, July 31, 2014

Zanu-PF Bigwigs in Midnight Meets
Republic of Zimbabwe President Robert Mugabe greets politburo
members for ZANU-PF.
July 31, 2014
Tendai Mugabe Senior Reporter
Zimbabwe Herald

Some Zanu-PF bigwigs are jostling for power and clandestinely approaching President Mugabe pleading with him to influence their election or appointment to certain positions at the party’s National People’s Congress in December. It has also emerged that some party officials are holding secretive meetings at night, while others are using money and other dirty tricks to buy support ahead of the congress.

This came out at the Zanu-PF Politburo meeting yesterday where the President said he was aware of such manoeuvres and urged members to desist from doing so.

Addressing journalists after the meeting, Zanu-PF spokesperson Cde Rugare Gumbo said President Mugabe, who is also the party’s First Secretary and President, said no one could cheat the system because people knew who represented their interests.

“The President expressed concern on those in leadership who on a daily basis cherish indiscipline in the party,” he said.

“It was apparent that there are some who hold clandestine meetings, seeking positions in the party largely because we are going to congress. They use dirty money, they use dirty tricks in order to influence the outcome of congress.

“The President said he is aware of such people in our midst. Some have even come to him with their ambitions for leadership at congress. The people know who is who and who will represent their interests. You can never cheat us, you can never cheat the people and it is important that people be careful about what they do.”

President Mugabe’s remarks came in the wake of unconfirmed reports that there is a tussle for power within the party, with groups organising themselves to upset each other at the congress.

Cde Gumbo said the Politburo also discussed preparations for the youth and women’s conferences set for next month.

Dates for the women’s conference were changed together with the venue of the youth conference.

“The youth conference will be held from the 7th to the 10th of August,” he said.

“It will now be held at the Harare International Conference Centre and no longer at the City Sports Centre.

“The women’s conference will be held from the 12th to the 15th of August, instead of the 20th to the 22nd. Opening will be on the 13th and closing on the 14th.”

Cde Gumbo said the venue of the women’s conference was yet to be finalised, although it was likely to be HICC.

He said the Women’s League inter-district elections would be held next Wednesday and Thursday.

Cde Gumbo said the Politburo received a report from the party’s national chairman Cde Simon Khaya Moyo relating to candidates for the Youth League and Women’s League submitted by the provinces.

He said names of the approved candidates would be announced next week after the party’s Central Committee meeting.

“We have the list of people who were qualified and who were not qualified,” he said. “I may just say the majority of people who did not qualify, particularly for the youths, is because of the age limit or the fact that they have not served in the provincial executive for five years.

“For the women, most of them to a larger extent qualified, but maybe one or two did not qualify.”

Cde Gumbo said the Politburo endorsed Cde Kudakwashe Sinto from Mashonaland Central who was facing a disciplinary hearing to stand as a candidate at the youth conference.

He said the Mashonaland Central leadership was also tasked to address challenges bedevilling their province.

Cde Gumbo said another discussion centred on the roll-out of the electronic cards by the party’s commissariat department.
Gaza Faces Alarming Humanitarian Crisis
A center for disabled children was bombed by the IDF.
Thu Jul 31, 2014 7:31AM GMT

People residing in the besieged Gaza Strip are facing a crippling humanitarian crisis due to Israel’s merciless strikes on the blockaded enclave, Press TV reports.

According to the report, the blockaded area is now facing a life-threatening situation due to lack of crucial supplies including food, fuel, medicine and medical equipment.

“We are standing here for hours now for bread. We lost our homes and are staying with our relatives. This queue is endless,” a Gazan woman told Press TV.

Life is getting harder for Palestinians not only because of the recent offensive but also due to the ongoing crippling siege there.

“We have been here for more than six hours now just searching for food. It's just not available. Neither is fuel, electricity or water,” a Gazan man said.

Despite having a fertile soil, Gazan farmers cannot access their farms, resulting in the shortage of fruits and vegetables. Moreover, there are concerns over the availability of other goods like flour due to the Israeli siege.

“There is no availability of goods in the market. Farmers can't go to their farms and harvest fruits and vegetables because they fear they may get attacked,” another Gazan man said.

Israeli warplanes have been pounding numerous sites in the Gaza Strip since July 8, demolishing houses and burying families under the rubble. Israeli forces also began a ground offensive against the impoverished Palestinian land on July 17.

So far, more than 1,364 people have been killed and thousands others injured by the Israeli regime’s offensive against the coastal sliver despite pressure from the international community.

Gaza has been blockaded by the Israeli regime since June 2007, a situation that has caused a decline in the standards of living, unprecedented levels of unemployment, and unrelenting poverty.

The apartheid regime of Israel denies about 1.8 million people in Gaza their basic rights.
Gaza Conflict: Israel Calls Up 16,000 Reserve Soldiers
Children who survived the bombing of a United Nations school
where 3,000 sought refuge.
Israel is calling up 16,000 extra reservists to bolster its military as the conflict in Gaza continues.

The deployment brings the total called up by Israel to 86,000. Officials told Israeli media the call-up gave the military "room to breathe".

The move comes as Israel pledged to investigate a strike on a UN-run school that killed at least 16 people.

In all, more than 100 people in Gaza were killed on Wednesday, Palestinian officials said.

Spokesman Mark Regev told the BBC Israel would apologise if it discovered that its fire was responsible for the strike on the school.

"We have a policy - we don't target civilians," he said.

The US and UN condemned the attack, with UN Secretary General Ban Ki-moon calling it "unjustifiable".

On Wednesday, Israel's security cabinet met to approve the continuation of strikes against Palestinian militant group Hamas, which controls Gaza.

Operations would continue against suspected militants, suspected rocket sites and a network of tunnels discovered leading into Israel, the military said.

At least 19 air strikes were carried out overnight, officials said.

Israel began Operation Protective Edge on 8 July. Since then at least 1,360 Palestinians have been killed. Most have been civilians.

Some 58 Israelis have been killed, 56 soldiers and two civilians. A Thai worker in Israel has also died.

'Hostile fire'

The attack on the school in the Jabaliya refugee camp, which was sheltering more than 3,000 civilians, took place on Wednesday morning.

UN Secretary-General Ban Ki-moon said "all available evidence" suggested Israeli artillery was the cause.

Speaking to the BBC's Newsnight, Israeli government spokesman Mark Regev said: "It's not clear to us that it was our fire but we know for a fact there was hostile fire on our people from the vicinity of the school."

He accused Hamas of hiding weapons in civilian facilities and UN shelters.

Chris Gunness, spokesman for the UN Relief and Works Agency (Unrwa) told the BBC that Israel had been told 17 times that the school was housing displaced people, saying the attack caused "universal shame".

The US state department also criticised the attack on the school. It also condemned those who hid weapons in UN facilities, a spokeswoman said.

Also on Wednesday, an attack on a market in Shejaiya killed 17 people, while an Israeli air strike killed seven people in Khan Younis, Palestinian officials said.

Those attacks came during a four-hour humanitarian ceasefire called by the Israelis after the school incident.

However, Israel said the truce was only partial. Hamas rejected it as meaningless.

Israel said Palestinian militants continued to fire rockets from Gaza, with more than 50 launched on Wednesday.

'Strong support'

The current conflict, now in its 24th day, is the longest between Israel and militants from Gaza.
A 2012 offensive lasted for eight days, and the 2008 conflict went on for 22 days.

The Gaza Strip, sandwiched between Israel and Egypt, has been a recurring flashpoint in the Israel-Palestinian conflict for years.

Hostilities increased after the abduction and killing of three Israeli teenagers in June. Israel blamed Hamas and carried out a crackdown on the group in the West Bank. Hamas denied being behind the killings.

Tensions rose further after the suspected revenge killing of a Palestinian teenager in Jerusalem on 2 July. Six Jewish suspects were arrested over the youth's abduction and murder.
Recent opinion polls in Israel suggest strong support for the military operation.

Hamas says it will not stop fighting until a blockade, maintained by both Israel and Egypt, is lifted.
Israel occupied Gaza in the 1967 Middle East war and only pulled its troops and settlers out in 2005. Israel considered this the end of the occupation, but it still exercises control over most of Gaza's borders, water and airspace. Egypt controls Gaza's southern border.

Are you in Gaza or Israel? Are you affected by the violence? You can send us your experiences by emailing using the subject line "Gaza Israel".
Argentina Braces for Market Reaction to Second Default in 12 Years
Signs says "No to the Debt" in Argentina which faces further
attacks by the banks.
1:58am EDT
By Sarah Marsh

BUENOS AIRES (Reuters) - Argentina defaulted for the second time in 12 years after hopes for a midnight deal with holdout creditors were dashed, setting up stock and bond prices for declines on Thursday and raising chances a recession could worsen this year.

After a long legal battle with hedge funds that rejected Argentina's debt restructuring following its 2002 default, Latin America's third-biggest economy failed to strike a deal in time to meet a midnight deadline for a coupon payment on exchange bonds.

Even a short default will raise companies' borrowing costs, pile more pressure on the peso, drain dwindling foreign reserves and fuel one of the world's highest inflation rates.

"It is going to complicate life for businesses like YPF which were going to look externally for financing," said Camilo Tiscornia, a former governor of Argentina's central bank. State-controlled energy company YPF (YPFD.BA: Quote, Profile, Research, Stock Buzz) needs funds to develop Argentina's huge Vaca Muerta shale formation.

Argentina had sought in vain to win a last-minute suspension of a ruling by U.S. District Judge Thomas Griesa in New York to pay holdouts $1.33 billion plus interest. He ruled Argentina could not service its exchange debt unless it paid holdouts at the same time.

A proposal for Argentina banks to buy out the hedge funds' non-performing debt also fell through, sources told Reuters.

"This is a very particular default, there is no solvency problem, so everything depends on how quickly it is solved," said analyst Mauro Roca of Goldman Sachs.

As dire as it is, the situation is a far cry from the mayhem following the country's economic crash in 2001-2001 when the economy collapsed around a bankrupt government. Millions of Argentines lost their jobs.

This time the government is solvent. How much pain the default inflicts on Argentina, which is already in recession, will depend on how swiftly the government can extricate itself from its obligations.

Buenos Aires had argued that agreeing to the hedge funds' demands to pay them in full would break a clause barring it from offering better terms than those who accepted steep writedowns in the 2005 and 2010 swaps.

However, that clause expires on Dec. 31, after which the government would be able reach a deal with the funds. Many investors and economists still hope for a separate solution before then between the holdouts and private parties.

"Our base case is that a default would be cleared by January 2015," said Alberto Bernal, a partner at Miami-based Bulltick Capital Markets. He projected that a default would cause the economy to shrink 2 percent this year compared with a previous market consensus for a 1 percent contraction.

Failure to strike a deal will not cause financial turmoil abroad because Argentina has been isolated from global credit markets since its 2002 default on $100 billion, but domestic markets that had rallied on hopes of a deal in recent days will probably reverse course.

Yields on Argentina's key dollar bond due 2033 fell to the lowest level in about three and a half years on Wednesday, and the country's MerVal index .MERV hit a record.

"The correction will depend on perceptions of how long the default will take to solve," said Roca.


The default could get much messier and take longer to clear up if creditors force an "acceleration" for early payment on their bonds.

"How bad the outcome ends up being depends on whether bondholders accelerate," said Alejo Costa, strategy chief at local investment bank Puente.

"Acceleration would open a new legal battle for the government that could end up in a new restructuring."

Argentina has foreign currency restructured debt worth about $35 billion while its foreign exchange reserves stand at $29 billion.

U.S. ratings agency Standard & Poor's on Wednesday downgraded the country's long- and short-term foreign currency credit rating to "selective default". The default rating will remain until Argentina makes its overdue June 30 coupon payment on its discount bonds maturing in 2033, the agency said.

Holders of insurance against an Argentine credit default will have their eyes peeled for an announcement from the International Swaps and Derivatives Association (ISDA). If ISDA declares an Argentine default, the total amount of money that would be paid out is just over $1 billion.

After two days of talks with holdouts in New York, Argentine Economy Minister Axel Kicillof on Wednesday evening told reporters that Argentina was not in default because it had made the June $539 million interest payment to holders of exchanged bonds - even if this had not reached creditors by July 30, at the end of the month-long grace period.

Judge Griesa called the payment illegal and blocked the funds' onward transfer to creditors. It remains in limbo in the Buenos Aires account of trustee agent Bank of New York Mellon.

Argentines were sanguine about news of the default.

"We have been in a similar situation before, and we will make it through," said a 27-year old employee at an automobile firm who declined to give his full name. "The sun rises each day. It will get resolved, be it next week, or next month."

(Additional Reporting by Richard Lough and Eliana Raszewski; Editing by Ken Wills)
Detroit Emergency Manager Drops Proposal for Bankruptcy 'Plan Monitor'
Detroit Freedom Friday marching around Campus Martius.
Robert Snell
The Detroit News

PANW Editor: This article suggests that the proposed "monitor" for the City of Detroit exiting bankruptcy may not be necessary since the provisions within the legislative "Grand Theft Bargain" is adequate for keeping the majority African American municipality under the control of outside forces within the state bureaucracy that would ensure payment to the banks and corporations for their irrational and exploitative policies. At present with a pro-business, blue dog Democrat mayor they feel this will be enough to keep people under control.

It does not matter if an official is "democratically elected" or not if the program they pursue is in contravention to the interests of the people who are victimized by the wholesale dismemberment of the city and the selling off of its assets such as the Detroit Water & Sewerage Dept., the Detroit Institute of Arts, Detroit Public Lighting, Belle Isle and the stealing of the deferred wages of workers, i.e, their pensions and healthcare programs.

Was it not the City Council which voted in favor of a 8.7 percent hike in water rates right before the issue of shut-offs became a national and international exposure of the real agenda of emergency management? What has the City Council and the Mayor said in defense of the hundreds of thousands terrorized by the water shutoffs, healthcare eliminations and pension thefts?

Making it appear as if the dictator Orr and his director Rick Snyder are relinquishing "authority" to Mike Duggan is part of the overall scheme for the continued de facto emergency management of Detroit. None of these hired agents of the capitalist system have any history of doing anything in the interests of working people and the nationally oppressed masses of African Americans.

We are sure that there will be more of such announcements in the coming weeks. However, what people must stay focused on is the economic and political program of those who are purportedly being handed "power." Real power must be won through struggle and will not be given to those who say they represent the people, when in fact they represent the same interests as Orr and Snyder.

Abayomi Azikiwe
The city dropped plans late Tuesday to install a court-appointed official to oversee compliance with Emergency Manager Kevyn Orr's plan to shed more than $7 billion in debt.

The so-called “plan monitor” was eliminated from an updated version of Detroit’s debt-cutting plan filed Tuesday in bankruptcy court. The position was scrubbed because it was unnecessarily given financial oversight and other provisions included in legislation governing the “grand bargain” — a $660.8 million plan to soften pension cuts and shield the Detroit Institute of Arts collection from creditors.

“After discussing it with the mayor and with the state of Michigan, the emergency manager (Kevyn Orr) determined such a monitor would have been superfluous to the financial oversight and reporting requirements already required as part of the 'Grand Bargain' legislation that was signed into law,” city spokesman Bill Nowling said Wednesday. “The plan monitor idea came from discussions that occurred before the Grand Bargain legislation passed.”

The move came five days after the city’s bankruptcy team first publicly revealed the proposal, which would have left Detroit under prolonged and apparently unprecedented court oversight.

The plan monitor idea was a response to concerns raised by U.S. Bankruptcy Judge Steven Rhodes. The post-bankruptcy monitoring proposal was included originally to give Rhodes an option for long-term oversight.

The monitor, appointed by Rhodes, would have filed quarterly reports with the court and have power to subpoena records and answers from the mayor, City Council, pension fund trustees and officials overseeing health-care trusts.

Orr's legal team proposed the monitor as being a neutral expert skilled in restructuring, accounting, municipal finance and budgeting, preferably for municipalities with "annual revenues of $250 million or more," according to the filing.

Several types were excluded from consideration: "The plan monitor shall not be an appointed or elected official of any governmental unit currently serving in such capacity and shall not be a former appointed or elected official of the city or the state."

That would seemingly eliminate Orr, a Washington, D.C., bankruptcy expert, who was appointed by Gov. Rick Snyder in March 2013 to takeover the city.

Aside from the monitor, city officials also would be under the scrutiny of a new nine-member Financial Review Commission the Legislature established last month as a string attached to $195 million in state aid for city pensions.

The commission, which will be dominated by state government appointees, will have veto power over city contracts exceeding $750,000 and could remain active for at least the first three years after Detroit exits bankruptcy. Under the new oversight law, if Detroit can meet certain financial benchmarks, the commission would go away after a 10-year period of dormancy.

From The Detroit News:

Wednesday, July 30, 2014

Detroit’s Drought of Democracy
Freedom Friday demonstration outside the Detroit Water &
Sewerage Dept.
New York Times
JULY 29, 2014

PANW Editor's Note: Although this author does raise several important philosophical points, his assumptions that the austerity imposed on Detroit is aimed at financial efficiency is flawed. There is no evidence to suggest that privatization or the measures of slashing healthcare programs, pensions, jobs, home seizures and water shut-offs will improve the city's budget sheet.

In fact just the opposite has proven to be the case in other similar instances both inside the United States and abroad. Over $100 million has been wasted on "consultants" since the assumption of power by the Gov. Snyder and his overseer Kevyn Orr. These resources could have been utilized to keep workers on the job and to support pensioners who are left with no healthcare as a result of the actions of the emergency manager.

The issue of the legitimacy of the bank debt is not addressed. This debt is based upon predatory activity by the financial institutions and corporations who are given free reign over the affairs of the city. In reality there has been no pursuit by Orr of the criminal actions of the banks and corporations.

Since the debt is not legitimate then the only conclusion that this author could reach is a call for its cancellation. Not only should the debt be cancelled but the banks and corporations should be held accountable for the destruction they have caused in the city over decades.

Abayomi Azikiwe

On Tuesday, Kevyn Orr, the emergency manager of Detroit, transferred control of the city’s water and sewage board to the elected mayor, Mike Duggan. In his statement, Orr wrote, “As the Detroit Water and Sewerage Department works to operate more efficiently and communicate more effectively with customers, it is important to ensure there are clear lines of management and accountability.” Orr’s actions are a result of sustained and heroic activism by Detroit citizens, and a concomitant international outcry. Still, any victory they may be tempted to claim remains tenuous. Clause 6 of the order reads, “The EM may modify, amend, rescind, replace, supplement, or otherwise revise this Order at any time.” So, for example, Orr remains in control of any decision about eventual privatization of the utility. Nevertheless, Orr’s provisional move of transferring authority back to an elected official is a step in the direction of recognizing the wisdom of our founding fathers.

In “Federalist No. 10,” James Madison addressed the “dangerous vice” of faction, the “common impulse of passion, or of interest, adversed to the rights of other citizens, or to the permanent and aggregate interests of the community.” Madison rejected appointing unelected experts to solve the problems raised by factions, and offered, as the best solution to the thorny difficulty of competing interests, the idea of representative government as a way of “controlling its effects.” Madison’s solution to the problem of factionalism is a government of representatives, who are accountable to the people via the mechanism of elections.

Elections, however, can be problematic, as people can make choices that are not in their own best interests. The state of Michigan has undertaken a remarkable course to deal with the inefficiencies inherent in democratic accountability by appointing “emergency” managers who are essentially free from such accountability, in the hopes that they will be able to make politically unpopular decisions for the sake of overall efficiency — and allegedly the public good.

It’s worthwhile to examine Michigan’s experiment in challenging the wisdom of our founding fathers with an eye toward addressing two questions. First, has Michigan’s experiment resulted in policy that does maximally serve the public good? And second, in what sense is Michigan’s experiment consistent with the basic principles of democracy?


On March 16, 2011, the Republican Michigan State Legislature, with the backing of the Republican governor of Michigan, Rick Snyder, passed Public Act 4. The bill provides “for the appointment of an emergency manager” who will replace democratically elected local officials in making decisions about “expenditures, investments, and the provision of services by units of local government,” including “modification or termination of contracts,” in cases of supposed financial emergency. In November 2012, the citizens of the state of Michigan voted to repeal Public Act 4. The Michigan Legislature responded to the rejection of Public Act 4 by passing Public Act 436, essentially reinstating it, and the governor signed it into law in December 2012.

In March 2013, Governor Snyder appointed Orr as emergency manager of Detroit. Orr claims that Detroit has over 18 billion dollars in long-term debt. However, extensive independent analysis by the think tank Demos has raised troubling questions about the accuracy of the claims of financial exigency; the Demos report calls the figure of $18 billion, “irrelevant to analysis of Detroit’s insolvency and bankruptcy filing, highly inflated and, in large part, simply inaccurate.” In any case, speculative assumptions about long-term debt are irrelevant to the question of bankruptcy, which is a matter not of eventual long-term debt, but of cash flow shortfall, currently pegged at $198 million. The Demos report argues that “[t]he biggest contributing factor to the increase in Detroit’s legacy expenses is a series of complex deals it entered into in 2005 and 2006” with banks. The deals made with Detroit are widely regarded as suspicious.

Orr has not vigorously challenged the legality of the contracts that have led Detroit and the utilities that serve it to transfer huge sums to the banks. He has also not attacked the state’s decision to invest $284 million dollars of taxpayer money in a new hockey arena in Detroit. Orr has chosen instead to make the citizens of Detroit bear the brunt of the financial pain. City services have been slashed. Detroit is a city that sits atop the world’s greatest reserve of fresh water, the Great Lakes. Yet Detroit is shutting off water to customers who are more than two months late on their bills and who owe $150 or more. So far, about 2 percent of Detroit’s citizens have had their water cut off; nearly half are under threat. Single mothers are heating up (expensive) store-bought water in microwaves to clean their children’s faces; the disabled are hobbling down the streets to fill buckets to flush their toilets. During this time, the debts of golf clubs and hockey arenas have largely been ignored.

Shutting off water for nonpayment is technically legal. As a matter of public administration, however, rapidly cutting off water to such a large percentage of a city is extraordinary. Writing for The Guardian, Martin Lukacs argues that Orr’s focus on privatizing the water utility, “a prized resource worth billions,” turns the shut-offs into “a way to make the balance-sheet more attractive in the lead up to its privatization.” But privatizing the water utility is a further step in removing public accountability. The discretion inherent in executive power is being exercised to maximize financial efficiency. But there is no obvious connection between financial efficiency and the public good. It is true that debt to future generations is a kind of restriction on their freedom. But so is cutting off their access to water, even though that step may be financially efficient. In general, one can expect that the most draconian possible interpretation and execution of the legal code will be carried out if the goal is to maximize profit, and the mechanism for public accountability is lifted.

The 19th-century French political philosopher Benjamin Constant worried that appeals to the common good were often not made for democratic purposes, but rather served to “supply weapons and pretexts to all kinds of tyranny.” One may suspect Michigan’s appeal to financial efficiency has a similar purpose. This brings us to the second question, that of its democratic legitimacy.


A democratic culture is one that values free individual choice in making a life plan. In the case of a community, as the Rev. Dr. Martin Luther King reminds us in “Letter From Birmingham Jail,” this means that the policies that are binding on citizens are decided by those citizens or (as in our own democracy) representatives who are accountable to citizens. Such a system requires a culture of political equality among the citizens, what some call a culture of equal respect. As Plato wrote in “The Republic”: “The utmost freedom for the majority is reached in [a democratic city] when bought slaves, both male and female, are no less free than those who bought them. And I almost forgot to mention the extent of the legal equality of men and women and of the freedom in the relations between them.”

Plato was a harsh critic of democracy, a position that derived from the fact that his chief value for a society was social efficiency. In Plato’s view, most people are not capable of employing their autonomy to make the right choices, that is, choices that maximize overall efficiency. Michigan is following Plato’s recommendation to handle the problems raised by elections. Though there are many different senses of “liberty” and “autonomy,” none mean the same thing as “efficiency.” Singapore is a state that values efficiency above all. But by no stretch of the imagination is Singapore a democratic state. A society ruled by technocrats who make decisions on behalf of the masses is, since Plato’s time, regarded as a system that is opposed to democracy, rather than one exemplifying it.

Plato’s ideal state involves rule by experts, city planners guided by the principles of justice, who rule over skilled craftsmen and mere physical laborers. The philosophers decide which pursuits are suited for which members of society, and educate them accordingly. Plato chose those with a “philosophical nature” to play this role, because he argued that only “a lover of learning and wisdom” could be “gentle toward his own and those he knows.”

Plato was aware of the need, in his ideal state, for the rulers to be selfless. There is good reason to believe that in Michigan the financial managers who are supposed to ensure “efficiency” are not like Plato’s philosophers. After all, for whom are these policies efficient? Surely not for the Detroit residents whose children cannot drink water, bathe or flush toilets in the midst of summer. Or for those who suffer from the drastic cutbacks in all city services. This is not to deny that the Detroit emergency manager’s policies are efficient for some people. For example, they are efficient for the banks that are being paid back for what look to be ethically dubious loans, as well as for those who stand to benefit from the potentially huge profits of privatizing one of the world’s great freshwater supplies at a time of increasing global water scarcity.

But let us suppose for the sake of argument that the emergency manager, like Plato’s philosopher rulers, made decisions that were efficient for all. For example, suppose the benefits of privatizing southeastern Michigan’s freshwater utility were to flow not to private investors in the company, but to the nearly four million Michigan residents it serves. It matters not. The actions of Michigan’s governor and Legislature would be no less anti-democratic. In a democracy, one cannot replace democratically elected officials in the interest of efficiency. It is not that Public Acts 4 and 436 are morally wrong. Rather, they have no place in a democracy. It is simply no surprise at all that a democratic state can be less efficient than some nondemocratic states. In a democracy, someone who would be a good doctor is allowed to be a bad lawyer. Autonomy cannot be subsumed to efficiency in a democracy.

The Nazi political theorist Carl Schmitt was a fierce critic of liberal democracy. He argued that liberal democracy was incoherent because of what he called the problem of the exception. In emergency situations, there is not enough time to act democratically. In an emergency, someone would have to declare an exception to suspend the normal democratic process and handle the emergency. Schmitt argued that whoever had the power to declare an emergency situation and override the democratic process would be tempted to overuse that power, and declare nonemergency situations to be states of exception. This person would be in effect the sovereign.

The language of the emergency manager laws is that of exception. Calling the situation an “emergency,” and the undemocratically selected financial manager an “emergency manager” is nothing other than a declaration of the anti-democratic nature of what has occurred. Detroit does not face an immediate threat from a hostile invading army. To suppose that financial exigency or advancing an agenda of privatization for corporate gain are reasons to suspend democracy is to capitulate to its worst enemies.

The chief values of democracy are freedom and equality. The willingness to subsume freedom to claims of efficiency is one sign of an undemocratic culture. Toleration of the denial of fresh water to others is another. After all, it is hard to imagine denying fresh water to those one regards as political equals. The pressure that has resulted in the decision by Detroit’s emergency manager to turn back control of the water department to the mayor, however temporary, is, one can hope, one small sign that the drought in Detroit’s democracy may be ending.

Jason Stanley is a professor of philosophy at Yale University. He is the author of “Knowledge and Practical Interests,” “Know How,” “Language in Context” and the forthcoming “Why Propaganda Matters.”
‘World Stands Disgraced’: 20 Killed in Israeli UN School Shelling
Another United Nations school bombed in Gaza, 20 people were
July 30, 2014 04:20

Twenty people have been killed after a shell hit the UNRWA girls' school in Jabalia refugee camp, emergency services say. The UN condemned Israeli actions in the strongest possible terms, calling them a serious violation of international law.

A UN official confirmed the shelling, saying that the missile hit a bathroom and two classrooms in the school, AFP reported.

The outer wall of the complex was damaged by shellfire, and in a targeted classroom people were picking body parts off the blood-soaked floor, according to the agency’s correspondent in the area.

More than one shell hit the school. The first in the courtyard and the second a section primarily used by female pupils, RT contributor Harry Fear reported from the scene. Currently, over five UN schools are caught in the fighting, he added.

The shelling happened after 5:30am local time (02:30 GMT).

Almost 15,000 Palestinians were forced to seek shelter in 83 UNRWA schools, according to the UN refugee agency.

The UN relief and works agency for Palestine refugees in the Near East (UNRWA) has strongly condemned the Israeli shelling of a UN school last night.

“Children killed in their sleep; this is an affront to all of us, a source of universal shame. Today the world stands disgraced,” UNRWA Commissioner-General Pierre Krähenbühl said in a statement on Wednesday.

“I condemn in the strongest possible terms this serious violation of international law by Israeli forces,” he said, calling on the international community to take deliberate international political action to put an immediate end to the continuing carnage.

All in all, 43 people have been killed in Gaza overnight in shelling carried out by Israeli forces.

On Wednesday, the IDF announced a unilateral four-hour humanitarian ceasefire in Gaza beginning from 3pm local time (12:00 GMT).

The IDF also warned Gaza residents not to return “to areas from which they have been asked to evacuate.”

It’s not the first time that an UNRWA facility has been targeted in Gaza: on Tuesday, the UN refugee agency stated that it had found a cache of rockets at one of its schools in the Gaza Strip.

The agency condemned those responsible for the action.

“We condemn the group or groups who endangered civilians by placing these munitions in our school. This is yet another flagrant violation of the neutrality of our premises. We call on all the warring parties to respect the inviolability of UN property," UNRWA spokesman Chris Gunness said in a statement.

Israel holds no responsibility for the deaths of people during the shelling of the Gaza school, Israel’s ambassador to Russia said in her official statement on the issue.

“Regarding the Hamas accusing Israel of shelling and inflicting damage on the school, after a probe by the Israeli army, it turned out that the school in Beit Hanoun was empty during the shelling,” Dorit Golender said.

She added that Hamas allegedly regularly uses civilian buildings like schools and hospitals to store weaponry.

“Three missiles were found hidden in UN schools. The latest incident was reported at 3am on Wednesday,” Golender said.

The shelling came as a Palestinian delegation was preparing for a trip to Cairo to discuss a temporary humanitarian ceasefire.

The conflict, so far just over three weeks old, has seen over 1,260 people killed, according to figures provided by Gaza authorities.
NAM, China, G77 Strongly Slam Israel War on Gaza
IDF bombs the people of Gaza killing over 1,200 so far.
Wed Jul 30, 2014 10:26AM GMT

The Joint Coordinating Committee of the Non-Aligned Movement (JCC), the Group of 77 and China have strongly condemned Israel’s war on the Gaza Strip , urging an immediate end to the Tel Aviv regime’s attacks on the besieged coastal sliver.

In a communiqué on Tuesday, members of the JCC, the Group of 77 and China called on the international community and, in particular, the United Nations Security Council, to exert all efforts to bring Israel’s war to an end.

“The Security Council must uphold its Charter duties with an immediate viewing to saving and protecting innocent civilian lives and averting the further destabilization of the situation, which constitutes a threat to regional and international peace and security, and must adopt a resolution to this effect,” said the communiqué.

“Israel must be demanded to abide forthwith by all of its obligations under international law, particularly the 4th Geneva Convention, and by all relevant United Nations resolutions,” it added.

NAM is an international organization with 120 member states that is not formally aligned with or against any major power bloc. Nearly two-thirds of the member states of the United Nations are also NAM members.

The Group of 77 is a coalition of developing nations, designed to promote its members’ collective economic interests and create an enhanced joint negotiating capacity in the UN.

At least 1,262 people have been killed in the Israeli aggression against the Gaza Strip since July 8. Over 7,000 people have also been injured.

Over 80 percent of the Palestinian fatalities have been reportedly civilians, including nearly 300 children.

Gaza is also under Israel’s blockade since June 2007, a situation that has caused a decline in the standards of living and poverty. The Rafah border crossing, linking Gaza to Egypt, is the only escape route that does not lead into Israel and can be used for the delivery of food and medical stuff to the besieged coastal strip but it has been kept shut by Egypt since 2007. 

Tuesday, July 29, 2014

Detroit Trial on Bankers "Plan of Adjustment" Delayed Again Amid Escalation in Public Pension Thefts From the United States to Quebec
Detroit retirees, workers demonstrate against bankruptcy theft of
pensions, healthcare and public assets chanting "Make the Banks Pay!"
Chad Livengood
Detroit News Lansing Bureau

U.S. Bankruptcy Judge Steven Rhodes on Tuesday delayed by another week the trial over Detroit’s debt-cutting bankruptcy exit plan.

Rhodes moved the trial to Aug. 21, more than a month later than originally planned.

The judge also trimmed the number of possible trial days from 28 days to 23 days and scheduled an Aug. 19 pretrial conference and hearing over the legality of the city’s settlement with the insurers of unlimited tax general obligation bonds.

Rhodes had initially planned to start a trial over Detroit’s plan to dump $7 billion in bankruptcy court in mid-July, but he has twice delayed the start of the proceedings.

The last delay was due to disputes between Detroit and bond insurer Syncora Guarantee Inc. over the holdout creditor’s massive documents requests.

Syncora had pushed to have the trial delayed until late September to allow for more time to gather evidence and take depositions of the city’s witnesses.
From The Detroit News:

Montreal police call in sick to protest planned pension changes

Around 100 Montreal police officers called in sick Saturday, a new pressure tactic to protest a proposed pension reform law.

The ongoing dispute about planned changes to Montreal police pensions took a new turn overnight Friday when more than 100 officers chose to call in sick simultaneously.

The province's labour relations board had to call an emergency meeting with the police union when they caught wind of the plan. The talks between the board and the Montreal Police Brotherhood union began at 2 a.m. and ran until 6 a.m.

The board declared the action illegal and ordered all the officers back to work. But many stayed home regardless.

Early Saturday morning, the city of Montreal received word that 100 police officers would be calling in sick, an apparent pressure tactic to voice their displeasure with a proposed pension reform law.

The Police Brotherhood denied encouraging its members to call in sick. Montreal Mayor Denis Coderre called this latest pressure tactic unacceptable.

"I've been in politics for 30 years. They can yell at me, they can boo me, they can talk against issues, that's democracy. We can have those kinds of discussions. But if they're using some tactics that will have a direct impact on the citizens, there will be consequences," he told CTV Montreal.

Montreal police say that despite the high number of officers who called in sick, they were able to ensure that the usual number of officers were out on the streets. But they say they had to call in several officers to work overtime to make it happen.

Coderre says it will be the police union who will have to pay for all that overtime.

The officers are angry about Bill 3, which would see municipal workers begin contributing 50 per cent of their pensions. Montreal police officers currently contribute 24 per cent. Other municipal workers such as firefighters and bus drivers have also spoken out loudly against Bill 3.

Earlier this month, police officers chose to protest the bill by wearing red ball caps and "non-standard issue trousers," such as camouflage pants, while on the job.

The province says the current system is not sustainable because the municipal pension plan is already running a $3.9-billion deficit. Municipal Affairs Minister Pierre Moreau has said that Bill 3 will bring balance.

The bill enters public hearings at the end of August.

With a report from CTV Montreal's Kevin Gallagher

Read more:

L.A. Will Appeal Pension Rollback, Mayor’s Office Says

By James Nash - Jul 29, 2014

Los Angeles will appeal an administrative panel’s decision to roll back changes in public employee pensions that were expected to save as much as $4.3 billion over 30 years, a spokesman for Mayor Eric Garcetti said.

The second most-populous city’s Employee Relations Board concluded yesterday that officials failed to properly consult with municipal employee unions before pushing through the changes in a City Council vote in October 2012.

“This drives a stake through” the city’s efforts to change retirement benefits for new hires, said Ellen Greenstone, a lawyer for the Coalition of LA City Unions, which represents about 20,000 civilian employees. “The city has to meet and confer if it wants to change pension benefits.”

The city will appeal the board’s 5-0 vote in court, Jeff Millman, a spokesman for the mayor, said by e-mail. Millman said Garcetti, a 43-year-old Democrat, disagreed with the ruling, although Millman didn’t spell out the reasons.

The council’s 2012 vote was part of a national movement by state and local governments to reduce pension benefits and whittle down unfunded promises to retirees that the Pew Charitable Trusts estimated at more than $1 trillion at the time. The funding gap for state pension plans grew 14 percent between 2010 and 2012, Pew said.

Garcetti voted for the pension rollback as a member of the City Council in 2012, and then-Mayor Antonio Villaraigosa signed the measure into law.

Liability Increase

Without reducing pensions for new employees, Los Angeles faced a 45 percent increase in its contribution toward employee pensions and similar growth in the pension’s unfunded liability, City Administrative Officer Miguel Santana said in a 2012 report. The reduced benefits, along with higher retirement ages and income caps, would save $3.9 billion to $4.3 billion over 30 years, according to the report.

A month before the Los Angeles City Council’s vote, California Governor Jerry Brown signed into law changes to state pensions projected to save as much as $55 billion over 30 years.

The state measure capped at $110,100 the portion of salary used to calculate pension benefits, boosted the retirement age for civilian employees to 67 from 55, and made formulas for calculating retirement income less generous.

The Los Angeles measure, which took effect in July 2013, also took aim at formulas that had allowed employees to retire at 55 with pensions equal to 65 percent of income with 30 years of tenure.

Under the change, a deputy city attorney earning $129,927 and retiring at 65 with 30 years of service would have his or her pension reduced to $77,974 a year from $84,212, according to Santana’s report. The city has hired about 800 new civilian workers since the change went into effect last year, Santana said.

To contact the reporter on this story: James Nash in Los Angeles at

To contact the editors responsible for this story: Stephen Merelman at Pete Young, Jeffrey Taylor

Judge suggests Stockton worker pensions could be reduced in city’s bankruptcy case

By Dale Kasler
Monday, Jul. 14, 2014 - 8:56 am

Government pensions were once considered untouchable, ironclad, off limits even if the employer went bankrupt.

On Tuesday, a federal bankruptcy judge in Sacramento inched closer to changing all that. Commenting during a hearing on Stockton’s bankruptcy case, U.S. Bankruptcy Judge Christopher Klein suggested that employees and retirees could have their pensions reduced to facilitate the city’s financial reorganization.

“I might be persuaded that … the pensions can be adjusted,” Klein said.

The judge stressed he hasn’t made a ruling yet, and said “I’ve been sharing with you my thinking.” Nonetheless, his remarks could have broad implications for public pensions and bankruptcy law in California and beyond.

Klein acknowledged that Stockton’s retirees are facing “a haircut” if he rules that pensions can be reduced. His comments sparked concern from Steven Felderstein, a Sacramento lawyer representing Stockton retirees in the bankruptcy.

“It’s very troubling, but he does recognize that the retirees are the ones who are going to suffer,” Felderstein said.

In a prepared statement, CalPERS said it “will continue to protect the benefits promised to our members. We welcome the opportunity to respond to the questions Judge Klein raised in court (Tuesday), to discuss the implications of the California laws that govern pensions and that create a stable retirement system that provides significant value to cities and their employees.”

The dispute over pensions stems from Stockton’s plan to exit bankruptcy protection. The city reached agreement with most of its creditors last fall to restructure about $200 million in debts. Many creditors accepted around 50 cents on the dollar. But negotiations fell apart with Franklin Templeton Investments of San Mateo, and the city told the court it would give the firm barely a penny on the dollar on a $36 million debt.

Franklin went to war, launching a full-scale legal challenge to the city’s plan. At a trial last month, Franklin suggested that Stockton scale back its $29 million-a-year pension contribution to CalPERS.

CalPERS said that could not happen. The powerful California Public Employees’ Retirement System has long stood as a defender of government pensions in court, and said Stockton had to keep paying in full to remain in good standing.

Not paying in full, according to CalPERS and city officials, would lead to chaos. If Stockton defaulted on its obligations to CalPERS, pension benefits could be slashed by 60 percent, according to trial testimony last month. City officials say that would lead to a mass exodus of police, firefighters and other municipal employees, making the city essentially ungovernable.

City officials said it’s far from certain that the judge will force a cutback in pensions.

“He’s thinking about it; I don’t believe he’s made up his mind,” said one of the city’s bankruptcy lawyers, Marc Levinson.

Even if Klein does rule that pensions can be reduced, that doesn’t necessarily mean Stockton’s retirees will get hit. He could conceivably decide that the Stockton reorganization plan is fine even if it leaves pensions unaffected.

The legal turmoil over public pensions has been building for some time. Last fall, the judge overseeing Detroit’s bankruptcy said pensions could be scaled back to conserve money. CalPERS has argued that the Detroit case is irrelevant and California public pensions have broader legal protections.

In court Tuesday, the judge seemed to chip away at some of CalPERS’ defenses. For instance, CalPERS has said that it could place a lien on some of Stockton’s municipal assets to cover nonpayment of pension contributions. Klein indicated he doesn’t think CalPERS has that power.

“Why should I take that lien seriously?” he said.

The city did raise its offer to Franklin. The judge ruled Tuesday that Franklin’s collateral on its debt – a couple of golf courses and a city park – were worth $4 million. Levinson said the city would pay Franklin that amount in cash.

But that still amounts to a little more than 10 cents on the dollar, and it was uncertain if that would appease Franklin. The firm’s lawyer, James Johnston, referred a reporter to a company spokeswoman, who couldn’t be reached for comment.

A formal decision is months away; Klein scheduled a hearing on the pension issue for Oct. 1 in U.S. Bankruptcy Court in Sacramento.

In the meantime, CalPERS has been making peace with California’s other bankrupt city, San Bernardino, which had threatened to tackle the issue of pension costs. Last month the two sides reached an “interim agreement” that could stave off a separate legal battle over pensions in that city. No details have been released, but city attorneys have indicated that San Bernardino will repay CalPERS for overdue pension contributions.

After filing for bankruptcy protection in 2012, the city withheld payments from CalPERS for several months and still owes $13.5 million plus interest.

Read more here:
Memphis Cops and Firefighters Call in Sick in New Tactic to Stop Cuts
Memphis firefighters protest Mayor Wharton over the theft of their
pensions and healthcare benefits.
By Margaret Newkirk - Jul 28, 2014

Police and firefighters in Memphis are calling in sick by the scores as a new Tennessee law kicks in requiring cities to stop shortchanging workers’ pensions.

Their beef: Memphis’s plan to comply. Tennessee’s largest city, which for years has failed to save enough to support promised retirement checks, plans to make up that sum by eliminating retirees’ health insurance, which has fewer legal protections. At one point, 558 police officers stayed home, one fourth of the force, in a city that had the sixth-highest incidence of violent crime in the U.S. last year. At the end of last week, 131 were out.

The workers say Memphis should find money to shore up their pensions by rolling back business-tax breaks, which cost more than the city pays for their insurance each year. It’s an argument unions want to advance nationally to parry challenges to their benefits by cash-strapped governments.

“Memphis is the place where we are trying to change the debate,” said Scott Treibitz, spokesman for the International Association of Firefighters in Washington.

Public-worker retirement benefits have been a target of politicians since the recession. As investment losses forced state and local governments to deal with a $1.4 trillion shortfall in their pension funds, officials from California to New York rolled back promised benefits they said taxpayers couldn’t afford.

Losing Jobs

Memphis, a majority-black city of 653,000 on the eastern bluffs of the Mississippi River, is the former home of rock and roll legend Elvis Presley and where civil-rights leader Martin Luther King Jr. was assassinated in 1968 during a municipal sanitation worker strike.

The city has lost 35,700 jobs in the past seven years and loses 2,000 people annually to other cities, according to figures from Greater Memphis Chamber. Now, it’s under pressure to increase retirement contributions after a law passed in April requiring cities to fully fund their annual portions within six years or risk losing state aid.

“It’s an extremely difficult decision but it’s a necessary decision,” said David Lillard, the state treasurer who championed the measure.

“A hallmark of virtually every distressed plan is that at some point in time they made the decision to skip payments or to underfund payments to the pension plan,” he said. “And then, once you spend that money in your budget for something else, it gets hard to replace that income back up to 100 percent payment of the annual funded amount. And that’s what’s playing out in Memphis.”

Consequences Delayed

The city scrimped on contributions before with no immediate consequences. In 2008, it paid about three-quarters of the $21 million that actuaries recommended and the pension was still 104 percent funded.

The pension was hurt by a drop in stock prices in 2008, when the Standard & Poor’s 500 Index fell 38 percent. That tripled the size of the contribution the city needed to pay the next year. Memphis continued to underpay. By 2013, the requirement had snowballed to $95 million, of which it paid just 20 percent.

“Delayed payments are always, always going to cost you,” said Adam Tatum, research director for California Common Sense, a nonpartisan fiscal research group in Mountain View.

Tax Cut Race

The Memphis City Council further eroded its financial wherewithal by cutting property taxes to be more competitive with adjacent Arkansas and Mississippi. It threw finances into crisis, said George Little, the chief administrative officer.

“Our expenditures were out of line with our revenues, structurally,” he said.

The city gave blandishments to business, offering property-tax breaks of as much as 90 percent for as long as 15 years for companies willing to locate in, expand in or simply not leave Memphis. That’s curbing tax growth, state Comptroller of the Treasury Justin Wilson said in a letter to Mayor A.C. Wharton last year.

Police and firefighter unions have run ads decrying the tax breaks. The argument has resonated with workers and retirees.

“They kicked us under the bus for their own mixed-up priorities,” said Jim Music, 74, who retired from the police force in 1994 and whose insurance premiums will more than quadruple. “This isn’t about too much being promised. It’s about mismanagement.”

Millions Foregone

In a union-commissioned report in June, Good Jobs First, a Washington research group that tracks economic-development subsidies, said the city was losing $42 million a year, or about 14 percent of its property-tax base, through tax breaks for business. The report recommended that the city re-evaluate the incentives, and council members have said they will.

The Greater Memphis Chamber has pushed back. It released a video defending breaks as a way to counter competition in a market dominated by site-selection consultants who give heavy weight to incentives. The chamber has lobbied to shore up the retirement system by cutting benefits.

The pension “is cannibalizing our city’s budget,” said Phil Trenary, the chamber’s president and chief executive. “The only alternative is higher taxes, and we already have the highest taxes in the state. To keep the businesses we have, we have to stop the bleeding.”

Workers Pay

For now, the cost is set to fall on the roughly 4,000 retirees, 1,100 of whom are older than 65 and have no Medicare, according to Mike Lee, a spokesman for retirees. The council voted June 17 to stop paying toward their health insurance at year-end and use the money for the pension.

Thirteen days later, city police began calling in sick. The protest peaked July 9, when one of every four officers didn’t show up.

Wharton declared a crisis. He canceled all scheduled days off for the remaining officers, reassigned specialists to patrol the streets and got help from neighboring Shelby County in policing Beale Street, the downtown blues and restaurant mecca.

The number of absent officers has dropped since.

Premiums Soar

For Danny Parris, 54, a policeman who retired last year after 29 years, his monthly insurance premium will rise to almost $1,650 from $350. The cost is more than half his retirement income. The average Memphis pension is about $30,000 a year. Retirees do not get Social Security.

After suffering spine injuries on the job, once while diving into a flooded culvert where two children were reported trapped, Parris requires regular medical care. Comparable insurance under the Affordable Care Act is prohibitively expensive, he said.

“My kids will tell you, I always had a plan,” he said. “I taught them that you had to set a goal and work toward your future. I had reached my goal only to be cast aside.”

Workers say they hope the council will reconsider its decision this week.

“We’re trying not to panic,” said Richard Walker, 64, a retired firefighter, who said the cost of staying on the city plan will take all but $600 of his monthly pension check.

“They are just pulling the rug out from under a bunch of old folks who have served years and years,” he said.

To contact the reporter on this story: Margaret Newkirk in Atlanta at

To contact the editors responsible for this story: Stephen Merelman at William Selway
Window Closing to Challenge Wall Street Over Swaps: Muni Credit
Detroit demonstration against banks outside federal court.
By Darrell Preston - Jul 24, 2014

The clock is running out on a way for U.S. states and cities to try to recoup payments to Wall Street on bond deals that blew up in the financial crisis.

Six years after credit-market turmoil began hitting local governments with rising bills for bond and derivative deals that backfired, the time limit will soon lapse for issuers to seek to claw back their losses by arguing that banks misled them about the risks, said former Congressman Bradley Miller, an attorney with Grais & Ellsworth LLP in New York.

With a six-year statute of limitations closing, officials in Los Angeles may vote to press Bank of New York Mellon Corp. and Dexia SA (DEXB) to renegotiate or terminate interest-rate swaps costing $4.9 million a year. Harris County, Texas, which encompasses most of Houston, is hiring an adviser to look at whether risks were presented fairly when it entered deals that are costing about $7 million a year.

“It’s one of the things from the financial crisis that keeps reverberating,” said Houston attorney David Peterson, a partner at Susman Godfrey who has handled litigation related to the collapse of the auction-rate securities market. “Municipalities are wondering what they got in return for taking the risk. It’s the issuers who end up suffering, and at the end of the day the taxpayers who end up paying.”

The Unraveling

The costs resulted from complex financings that Wall Street banks pitched as a way to cut borrowing expenses and that unraveled after the 2008 financial crisis. States and localities have paid more than $4 billion to banks to back out of the agreements, while issuers such as Chicago and Baltimore opted to remain in the money-losing trades.

With the transactions, municipalities sold bonds with floating interest rates, then entered into related derivative contracts to protect against the risk borrowing costs would jump. Through the derivatives, municipalities received payments based on indexes such as the London interbank offered rate, or Libor, meant to cover the cost of the bonds. In return, they made fixed interest payments to the banks.

The tactic turned costly in 2008, when borrowers faced soaring interest bills as credit markets seized up. At the same time, the payments they received under the swaps fell as the Federal Reserve pushed its benchmark overnight rate close to zero.

’70s Vintage

Miller, a former North Carolina Democratic representative who sat on the House Financial Services Committee, said banks may have violated rules requiring them to deal fairly with local governments that hire them to arrange bond sales.

He said that under those rules, first put in place in the 1970s, underwriters must explain complex transactions in an understandable way and disclose the material risks. Issuers have six years to bring arbitration cases from the time they determine the deals backfired, under Financial Industry Regulatory Authority guidelines.

While issuers were told of risks of entering swaps sold along with variable-rate debt, the magnitude of what could go wrong may not have been sufficiently explained, Peterson said.

“It appears they rarely, if ever, showed how vulnerable issuers were to the variables,” said Joseph Fichera, chief executive officer of New York-based Saber Partners LLC, which is poised to be hired by Harris County. “Savings were calculated without adjusting for the risks that could affect the savings, which is a core financial principle that should have been followed.”

Uphill Fight

Public officials in cities such as Oakland have tried to pressure banks into breaking the decades-long contracts with little success. In Los Angeles, finance officials already met with at least one swap provider and were told they “will be unlikely to offer a significant discount,” according to a June 27 memo to the mayor and city council from Miguel Santana, the city administrative officer.

A last-ditch effort to fight the contracts through arbitration may also prove difficult.

Miller said he was aware of only one municipal issuer, a nonprofit insurer in Louisiana, that tried to recoup money from banks in arbitration by arguing it was misled. It lost the decision. In other cases, issuers pursued claims in court instead of arbitration, after being challenged by banks, Miller said.

“It doesn’t take a very close reading of the contracts to realize that these kinds of cases are difficult to pull off,” said Robert Fuller, a principal at Capital Markets Management LLC, a Hopewell, New Jersey-based swaps adviser.

Alabama Precedent

Some municipalities may find a road map in a case settled by an Alabama sewer company. In March, Baldwin County Sewer Services LLC was able to recover losses after an arbitration panel ruled that a failed swap deal amounted to “a continuing but hidden fraud.” Arbitrators told Birmingham-based Regions Financial Corp. (RF) to pay $7.4 million, the net amount of swaps payments the utility made.

Katrina Cavalli, spokeswoman for the Securities Industry and Financial Markets Association, which represents banks that underwrite municipal securities and in some cases serve as counterparties for swaps, declined to comment in an e-mail.

In Los Angeles, the challenge to the city’s swap deals is being led by Councilman Paul Koretz, who filed an ordinance that may be considered after the council’s recess ends later this month.

Bank Expenses

His proposal was in response to a report by the Fix LA coalition. The group, which includes local labor unions and community groups, found that the city spent $204 million on bank fees in 2013, including swap payments, investment-management fees, the cost of bond insurance and remarketing fees, letters of credit and service fees. That year, Los Angeles spent $163 million on streets, the report said.

Paul Neuman, a spokesman for Koretz, said the swaps have been a drain on the city as it pushed through budget cuts in the recession’s aftermath.

“It is a shame that some financial institutions are benefiting when we face such difficulties, especially when we followed their advice,” he said in an e-mail.

Kevin Heine, a Bank of New York Mellon spokesman, declined to comment on the measure. Phone messages left after business hours at the Brussels and Paris press offices of Dexia, as well as e-mails to the bank’s press address, weren’t returned.

In Harris County, Treasurer Orlando Sanchez said he’s hiring Saber Partners to review swaps and decide whether the county should pursue an arbitration claim. The county will have paid about $31 million to Citibank from 2010 to 2014, according to county documents, plus $19 million in interest on the bonds to which the swaps are attached.

Scott Helfman, spokesman for New York-based Citigroup Inc., declined to comment.

“We need to get to the bottom of what happened with our swaps,” said Sanchez. “I want an independent set of eyeballs to look at it.”

To contact the reporter on this story: Darrell Preston in Dallas at

To contact the editors responsible for this story: Stephen Merelman at William Selway, Mark Tannenbaum
Hamas Military Wing Rejects Truce With Israel
Ezzedine al-Qassam Brigades on the front line against the IDF.
Wed Jul 30, 2014 12:17AM GMT

The military wing of the Palestinian resistance movement Hamas has rejected a ceasefire with Israel unless the seven-year blockade on the Gaza Strip is removed.

Mohammad Deif, the commander of the Ezzedine al-Qassam Brigades, made the remarks in an audiotape broadcast on the al-Aqsa television network on Tuesday.

"There will be no ceasefire without lifting of the siege,” Deif said, adding, “Victory will be ours."

The Israeli regime will never feel secure as long as the Palestinians are in pain, the Palestinian commander noted.

He also referred to rockets fired into Israel from Gaza, saying that the power balance has changed and Hamas is capable of striking back at Tel Aviv effectively.

Israeli warplanes have been carrying out incessant airstrikes against the blockaded Gaza Strip since July 8. On July 17, thousands of Israeli soldiers launched a ground invasion into the densely-populated strip.

So far, more than 1,200 people have been killed and thousands others injured by the Israeli regime’s offensive against the coastal sliver despite pressure from the international community.

The Ezzedine al-Qassam Brigades has been launching retaliatory attacks against Israel.

Gaza has been blockaded since June 2007, a situation that has caused a decline in the standards of living, unprecedented levels of unemployment, and unrelenting poverty.

The apartheid regime of Israel denies about 1.8 million people in Gaza their basic rights, such as freedom of movement, jobs that pay proper wages, and adequate healthcare and education.
Dozens of Palestinians Killed As Assault on Gaza Enters 4th Week
Smoke rises from bombings by the IDF on the Gaza sea port on
July 29, 2014. Over 1,100 Palestinians have been killed in three weeks.
AFP, Tuesday 29 Jul 2014

Bloodshed in Gaza surged on Tuesday with dozens more Palestinians killed as the assault raged into a fourth week and Iran accused Israel of genocide.

Israel's military has struck numerous targets in the Gaza Strip after Netanyahu, the Israeli prime minister, said his country needed to be prepared for a long conflict in the Palestinian territory.

By daybreak on Tuesday at least 30 people were killed in the Israeli assaults from air,land and sea, in the most widespread night of attacks so far.

At least 1,110 Palestinians, most of them civilians, have died in the ongoing Israeli offensive.

By the time dawn broke on the second day of the Muslim holiday of Eid al-Fitr, at least 24 people had been killed, among them nine women and four children, medics said, as the assault now in its 22nd day, showed no sign of letting up.

With the Palestinian death toll passing the 1,100 mark, Iran's supreme leader accused Israel of committing "genocide in Gaza, and demanding the Islamic world arm those Palestinians involved in fighting Israel.

In a speech Tuesday marking the Eid festival, Ayatollah Ali Khamenei said Israel was acting like a "rabid dog" and "a wild wolf" and causing a human catastrophe in Gaza, where people should be helped to defend itself.

"The world and especially the Islamic world should arm ... the Palestinian people," he said.

Following a relatively quiet weekend, the violence surged again on Monday, drawing increasingly urgent international demands for an end to the fighting

"In the name of humanity, the violence must stop," pleaded UN Secretary General Ban Ki-moon.

But the calls appeared to be falling on deaf ears, with Israeli Prime Minister Benjamin Netanyahu warning Monday it would be "a lengthy campaign" that would not end before troops destroyed cross-border tunnels used for staging attacks on southern Israel.

"Israeli citizens cannot live with the threat from rockets and from death tunnels -- death from above and from below," he said.

On the ground, hundreds of Palestinians could be seen leaving their homes after the army warned residents of five areas to flee and take refugee in central Gaza City, an AFP correspondent said.

Many headed for already-cramped UN schools in the north, where children ran barefoot around a dirty school yard alongside stinking piles of rubbish.

"We came yesterday after the army warned us to leave," said 46-year-old Ghassan Abed who fled from his home in the northern town of Beit Lahiya with his wife and six children.

"About 200 people just from our street have fled," he said.

UN statistics published Monday showed 215,000 Palestinians had already fled their homes, with 170,461 staying in 82 of the agency's schools.

Also Tuesday, Israel confirmed another five soldiers had been killed in an ambush by militants on Monday evening after they sneaked into southern Israel by a tunnel the overall toll on the Israeli side to 56.

On Tuesday, several tank shells struck Gaza's sole power plant, causing damage and a fire, bringing it grinding to a halt, a senior official with the power authority said.

Another air strike targeted the home of top Hamas leader Ismail Haniya in Gaza City's Shati refugee camp, officials said.

Tensions rose sharply on Monday after a shell landed inside the Shifa hospital compound in Gaza City, followed by a blast at a children's playground in the city's Shati refugee camp, that killed 10, eight of them children.

As the violence soared, top diplomats from Britain, France, Germany, Italy and the United States pledged to "redouble their efforts" and step up the pressure to persuade the sides to accept a truce.

And Palestinian president Mahmud Abbas was expected to visit Cairo with representatives of Hamas and Islamic Jihad, for fresh talks with the Egyptians on ending the violence in Gaza, a senior source in Ramallah told AFP, without saying when.

*This story has been edited by Ahram Online.
Libyan Counter-revolutionaries Overrun Benghazi Special Forces Base as Chaos Deepens
Smoke billowing from Benghazi as fighting among
counter-revolutionaries continues.

BENGHAZI Libya--Militant fighters overran a Libyan special forces base in the eastern city of Benghazi on Tuesday after a battle involving rockets and warplanes that killed at least 30 people.

A special forces officer said they had to abandon their main camp in the southeast of Benghazi after coming under sustained attack from a coalition of Islamist fighters and former rebel militias in the city.

"We have withdrawn from the army base after heavy shelling," Saiqa Special Forces officer Fadel Al-Hassi told Reuters.

A separate special forces spokesman confirmed the militants had taken over the camp after the troops pulled out. Part of the area is Camp 36 in the Bu Attni district and the special forces school.

Intense fighting in Benghazi, Libya's second city, and battles between rival militias in the capital Tripoli have pushed the nation deeper into chaos after two weeks of the fiercest violence since the imperialist-led war of regime change which ousted Muammar Gaddafi in 2011.

Benghazi has been at the centre of fighting between special forces and ex-rebel fighters of the Benghazi Shura Council who have joined up with the Ansar al Sharia, a militant Islamist group, residents said.

Ansar al Sharia, classified as a terrorist organisation by Washington, has been blamed by authorities for attacking the U.S. consulate in Benghazi in 2012 when the U.S. ambassador was killed.

Special forces and some regular air force units had recently joined forces with a renegade former army general, Khalifa Haftar, who had launched a self-declared campaign to clear the city of Islamist militants.

A government MiG warplane crashed during Tuesday's fighting in Benghazi. A Reuters reporter saw the pilot parachuting to ground after hearing an explosion.

Since clashes erupted two weeks ago, foreign states followed the United States and the United Nations in pulling diplomats out of the North African oil-producing state. Fighting in Tripoli between two rival brigades of former anti-Gaddafi rebels closed the capital's international airport.

A rocket hit a fuel depot near Tripoli airport two days ago, igniting a huge blaze that fire-fighters were still trying to put out. Italy's government and Italian oil group ENI had agreed to help them, the government said.

A member of the new Libyan parliament Mustafa Abushagor, due to take office in August, was kidnapped in Tripoli on Tuesday by unknown assailants, the state news agency LANA reported, citing security sources.


Three years after Gaddafi's brutal assassination at the hand of CIA-Pentagon-NATO backed counter-revolutionaries, the OPEC nation has failed to control ex-rebel militias who refuse to disband and who are threatening the unity of the country. The extent of recent hostilities has increased Western worries that Libya is sliding towards becoming a failed state and may once again go to war.

Despite the violence, Libya's oil production remained at around 500,000 barrels per day, and its oilfields are secure, Samir Salim Kamal, director of planning at the oil ministry told Reuters on Tuesday.

That was an increase from earlier this year when unrest pushed output as low as about 200,000 bpd, but it remains well below the usual 1.4 million bpd.

While the tribal way of life declined as growing oil wealth attracted Libyans to towns and cities, traditional power structures remain strong in the nation of about six million people.

Gaddafi's rule resulted in Libya becoming the leading economy in Africa. Gaddafi was the chair of the African Union in 2009 when he traveled to New York to address the United Nations.

In Egypt, the army has proved to be the supreme political force but in the post-Gaddafi era the Libyan militias are fighting for power, influence and oil wealth.

Tripoli was quieter on Tuesday than over the last fortnight during which the two brigades of former rebels, mainly from the towns of Zintan and Misrata, have pounded each other's positions with Grad rockets, artillery fire and cannons, turning the south of the capital into a battlefield.

Nearly 200 people have died in Tripoli and Benghazi during the clashes in the two cities, according to the health ministry and local medical officials.


A spokesman for the National Oil Corporation said on Tuesday the armed factions in Tripoli had agreed to a brief cease-fire to allow emergency services to fight the blazing fuel storage tanks containing millions of litres of fuel.

The tanks are operated by Brega oil company, which is owned by NOC, and store oil for consumption in Libya.

Black smoke billowed from one of the tanks hit by a rocket on Sunday near the airport road. The highway and surrounding areas were empty after homes in the area were evacuated, except for occasional militia roadblocks.

Fire-fighters were spraying the area with water to cool down storage depots near the fuel tank that was set ablaze to try to extinguish the inferno.

The United States, whose embassy is near the contested airport, evacuated its embassy staff in Tripoli on Saturday, driving diplomats across the border into Tunisia under heavy military guard including air support from warplanes.

Britain, other European governments, Turkey and the Philippines have also pulled out diplomatic staff or left just a few representatives behind in Tripoli, where the violence is also causing fuel and power shortages.

France and Spain on Tuesday were evacuating more nationals and some diplomats from Tripoli, according to LANA. Canada is temporarily pulling out its diplomats due to fears about their safety, Foreign Minister John Baird said on Tuesday.
Tripoli Fire Rages as Libyan Fighter Crashes During Benghazi Fighting
Building damaged in Tripoli due to factional rebel fighting.
AFP, Tuesday 29 Jul 2014

A massive blaze continued to rage at a fuel depot near Tripoli's crippled airport on Tuesday while a Libyan paramilitary fighter jet crashed in the eastern city of Benghazi during fighting with Islamist groups.

Authorities said the Italian government and national energy giant ENI were to send seven fire-fighting planes to help combat an inferno raging at an oil depot on the outskirts of the capital.

Italy will also send teams to help firefighters tackle the blaze, which was sparked during fighting Sunday night between Libyan militias and has been raging ever since, a government statement said.

In Benghazi, General Sagr al-Jerouchi, chief of air operations for dissident ex-general Khalifa Haftar, said it was not immediately clear if the plane had been hit by gunfire or suffered a malfunction before crashing and exploding.

He added that the pilot had safely ejected, which was confirmed by a witness who said he saw a parachute open before the plane crashed.

The witness said the warplane had just attacked Islamist positions.

Two weeks of fighting between militias for control of Tripoli airport and between Islamists and a former general in Benghazi has killed scores of people and prompted several countries to urge their citizens to leave Libya.

The Tripoli fire erupted when a rocket struck a tank containing more than six million litres (1.6 million gallons) of fuel before spreading to a second storage site in what the government called a "very dangerous" development.

The authorities feared the blaze could spread still further to a natural gas reservoir, where 90 million litres are stored, amid fears that a huge fireball could cause carnage over a wide area.

While the oil burns, motorists in Tripoli are suffering severe petrol shortages, as service stations have closed over fears for the safety of staff in light of the fighting.

On Monday, the government appealed to several countries for help and Italy, as well as Greece, said aid would be contingent on a halt in the fighting.

In its statement Tuesday, the government again called for a ceasefire.

Combat raged overnight, with a number of explosions heard, but the situation was relatively calm on Tuesday morning.

On Monday, top world leaders urged an immediate ceasefire and called on the UN "to play an essential role in facilitating the political process" to restore stability to Libya.

The clashes, the most violent since the 2011 revolt, started with a July 13 assault on the airport by armed groups, mainly Islamists.

The attackers are battling to flush out fellow former rebels from the hill town of Zintan, southwest of Tripoli, who have controlled the airport for the past three years.

Weekend fighting in Benghazi, cradle of the 2011 revolution that ousted dictator Moamer Kadhafi, killed dozens of people, mostly soldiers.

Combat erupted Saturday when Islamists attacked the headquarters of a special forces unit near the city centre. One of the few regular army units located in Benghazi, it backs an anti-Islamist campaign launched by Haftar in May but has not placed itself under his command.

Since May, clashes have taken place in Benghazi on an almost daily basis.

As the lawlessness spreads, France was evacuating its nationals from Libya, a government source said.

There are fewer than 100 French nationals in Libya and they will be taken out of the country by ship, the source said, adding that the operation would be over by the afternoon.

Several countries, including Britain, Germany and Egypt, at the weekend advised their nationals to leave immediately.

The United States for its part evacuated its embassy, citing a real risk because of fighting between troops loyal to the Libyan government and Islamists.

The exodus of foreign workers will further hit the strife-torn country, with the health ministry warning of a shortage of medical staff after the Philippines announced it was withdrawing its citizens, including 3,000 doctors and other healthcare workers.