Warning: 1-in-3 chance that S&P will lower AAA rating on U.S. debt

An unexpected warning about America's soaring debt jolted financial markets and threatens wider consequences for the U.S. economy, even as a new sense of realism emerges in the stalemate between President Obama and congressional Republicans over fiscal policy.

The shot across the government's bow came from Standard & Poor's, a leading credit rating firm, which served notice that there was a 1-in-3 chance that it would lower the now-sterling AAA rating on U.S. debt in the next two years.

The mere prospect of such a downgrade, which until recently was considered unthinkable, could drive most U.S. interest rates higher, imposing new strains on consumers and the still-fragile economic recovery.

S&P said it still considered the U.S. to be worthy of the highest credit rating, but that failure to address mounting budget deficits by 2013 would leave the country's finances "meaningfully weaker" than those of other AAA-rated nations, such as Germany and Singapore.

Because of that risk, S&P reduced its outlook for the U.S. rating to "negative" from "stable." Changing the outlook often is a first step toward cutting a rating.

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SECRET MEMOS: Paper exposes link between oil firms and invasion of Iraq!

Plans to exploit Iraq's oil reserves were discussed by government ministers and the world's largest oil companies the year before Britain took a leading role in invading Iraq, government documents show. 

The papers, revealed here for the first time, raise new questions over Britain's involvement in the war, which had divided Tony Blair's cabinet and was voted through only after his claims that Saddam Hussein had weapons of mass destruction.

The minutes of a series of meetings between ministers and senior oil executives are at odds with the public denials of self-interest from oil companies and Western governments at the time.

The documents were not offered as evidence in the ongoing Chilcot Inquiry into the UK's involvement in the Iraq war. In March 2003, just before Britain went to war, Shell denounced reports that it had held talks with Downing Street about Iraqi oil as "highly inaccurate". BP denied that it had any "strategic interest" in Iraq, while Tony Blair described "the oil conspiracy theory" as "the most absurd".

But documents from October and November the previous year paint a very different picture.

Five months before the March 2003 invasion, Baroness Symons, then the Trade Minister, told BP that the Government believed British energy firms should be given a share of Iraq's enormous oil and gas reserves as a reward for Tony Blair's military commitment to US plans for regime change.

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Leuren Moret Discusses HAARP & Japan's Fukushima Nuclear Disaster

Leuren Moret is a nuclear power whistleblower who is telling all who will listen about the dangers of nuclear power. Like playing with fire... mankind has not learned as can be seen in the engineering mistakes made in building the Fukushima Plant in Japan. Nuclear radiation is very dangerous and we will be stuck with the consequences for a long time to come. There are certain measures you can take to protect yourself.

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Japan report: “Nuclear fuel has melted in three reactors” — Risk of “massive radioactive release”

ENENEWS

Nuclear fuel has melted in three reactors at Japan's Fukushima Daiichi nuclear power plant and fallen to the lower sections of their container vessels, raising the specter of overheated material compromising a container and causing a massive radiation release, the Atomic Energy Society of Japan said in a report released on Friday (see GSN, April 15).

The group played down the possibility of a container breach, though, noting that only a small amount of fuel had melted so far and affected material had assumed a granulated structure and remained relatively cool, Kyodo News reported. The six-reactor plant was crippled by the 9.0-magnitude earthquake and devastating tsunami that hit Japan on March 11; the confirmed death toll from the events now exceeds 12,000 people.

The melted fuel was thought to have dispersed uniformly across the lower portions of the containers of reactors No. 1, No. 2 and No. 3, making the material highly unlikely to resume the fission process in a "recriticality," according to the organization, which said fuel rods in all three reactors had been harmed. Fuel in the No. 1 and No. 2 reactors has made contact with air, while the No. 3 reactor's rods have remained underwater, the group said.

Bringing the fuel under control could take between two and three months if restoration work moved forward as expected, said Takashi Sawada, the group's deputy chairman. The organization based its assessment on information provided by the Japanese Nuclear and Industrial Safety Agency and by Tokyo Electric Power, the plant's operator.

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Obama Is Likely to Lose

WSJ

What if everything we think we know about the president's political position is wrong? That's what I think became clear this week.

You know the conventional wisdom. It is that unemployment ticking down, plus the economy inching back, plus the power of the presidency to affect events, equals a likely Obama victory in 2012. Smart people, especially Republicans, believe this. But how about this for a thought: It's not true. It's all wrong. Barack Obama can be taken, and his adversaries haven't even noticed. In fact, he will likely lose in 2012. Only one thing can save him. More on that further down.

Let's start with the immediate and go to the overarching. The president is immersed in another stressed and unsuccessful spring after a series of losing seasons. Internationally, he's involved in a confused effort that involves bombing Libyan government troops and sometimes their rebel opponents, leaving the latter scattered and scurrying. Responsibility to protect is looking like tendency to deflect.

Domestically, the president's opponents seized the high ground on the great issue of the day, spending and debt, and held it after the president's speech this week. In last week's budget duel, the president was outgunned by Republicans in the House and outclassed by Paul Ryan, who offered seriousness and substance as a unique approach to solving our fiscal problems.

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U.S. Meat Widely Contaminated with Drug-Resistant Bacteria

LA TIMES

Meat in the U.S. may be widely contaminated with strains of drug-resistant bacteria, researchers reported Friday after testing 136 samples of beef, chicken, pork and turkey purchased at grocery stores.

Nearly half of the samples — 47% — contained strains of Staphylococcus aureus, the type of bacteria that most commonly causes staph infections. Of those bacteria, 52% were resistant to at least three classes of antibiotics, according to a study published in the journal Clinical Infectious Diseases.

DNA testing suggested the animals were the source of contamination. Environmental health scientist Lance Price, the study's leader, said the animals most likely harbored these drug-resistant pathogens because antibiotics routinely are fed to livestock to promote growth and prevent disease in crowded pens on large farms.

"These findings really point to serious problems with the way food animals are raised in the U.S. today," said Price, who directs the Center for Food Microbiology and Environmental Health at the Translational Genomics Research Institute, a nonprofit biomedical research center in Phoenix.

Last summer, the Food and Drug Administration urged the meat industry to cut back on antibiotic use out of concern that the practice breeds drug-resistant bacteria in stockyards and makes antibiotics less effective in humans.

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A New Economic Order?

WASHINGTON POST

BOAO, CHINA — With the United States and Europe still reeling from the 2008 financial crisis, five disparate developing countries led by China — large, populous, with growing economies — are using their combined clout to demand a larger voice and to upend the world’s traditional councils of power.

Brazil, Russia, India, China and newcomer South Africa, collectively known by the acronym BRICS, used their third summit meeting here on this southern Chinese resort island to call for a restructuring of the World War II-era global financial system and an eventual end to the long reign of the U.S. dollar as the world’s reserve currency.

The five run the gamut politically, from vibrant democracies to authoritarian regimes. Economically, they are as much competitors as partners. But what they share is a common sense of exclusion, and the idea that the main institutions of global governance — the World Bank, the International Monetary Fund, the World Trade Organization and the U.N. Security Council — were formed in a different era when the countries were economically weak and the United States was the world’s dominant superpower.

“They were really the biggest countries kind of left out,” said Amar Bhattacharya, a former World Bank official who now runs the Washington-based Group of 24 forum of developing countries.

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Maryland moves closer to extending tuition breaks to illegal immigrants

WASHINGTON POST

With anti-illegal-immigrant sentiment rising in the United States, a growing number of states are considering legislation that would forbid public universities from offering in-state tuition breaks to illegal immigrants.

But this week, the Maryland legislature, dominated by Democrats, took a step in the opposite direction, voting to guarantee in-state tuition to illegal immigrants. Gov. Martin O’Malley (D) is expected to sign the bill.

Sponsors overcame years of entrenched opposition with a provision that steers undocumented students to community colleges instead of the increasingly competitive flagship school, the University of Maryland, lessening the risk that they will crowd out others for coveted spots.

Whether illegal immigrants should reap the benefits of residency at public universities is one of the more contentious issues to emerge in the national immigration debate. In this legislative session alone, at least eight states took up bills to extend in-state tuition to illegal immigrants and as many considered bills to deny it, according to the National Conference of State Legislatures. Maryland is the only state this year to pass a bill extending benefits.

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Report Criticizes Banks for Handling of Mortgages

Banks did a poor job of handling the flood of foreclosures over the last several years, in some cases even moving ahead with evictions when they clearly should not have, according to a long-awaited report released Wednesday by federal regulators.

In response to the problems detailed in the report, 14 mortgage servicers have now signed consent agreements promising changes, including new oversight procedures.

Regulators said the enforcement actions were tough measures that would make the banks accountable. “The banks are going to have to do substantial work, bear substantial expense, to fix the problem,” the acting comptroller of the currency, John Walsh, told reporters in a conference call.

JPMorgan Chase, one of the servicers signing the agreement, said that it was adding as many as 3,000 employees to meet the new regulatory demands. Jamie Dimon, its chief executive, called it “a lot of intensive manpower and talent to fix the problems of the past.”

Other servicers who signed agreements included Bank of America, Citigroup and GMAC. Two firms that handle aspects of the foreclosure process, Lender Processing Services and Mortgage Electronic Registration Systems, also signed consent agreements. But consumer activists were unimpressed, saying the reforms let the banks police themselves.

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In Financial Crisis, No Prosecutions of Top Figures

NY TIMES

It is a question asked repeatedly across America: why, in the aftermath of a financial mess that generated hundreds of billions in losses, have no high-profile participants in the disaster been prosecuted?

Answering such a question — the equivalent of determining why a dog did not bark — is anything but simple. But a private meeting in mid-October 2008 between Timothy F. Geithner, then-president of the Federal Reserve Bank of New York, and Andrew M. Cuomo, New York’s attorney general at the time, illustrates the complexities of pursuing legal cases in a time of panic.

At the Fed, which oversees the nation’s largest banks, Mr. Geithner worked with the Treasury Department on a large bailout fund for the banks and led efforts to shore up the American International Group, the giant insurer. His focus: stabilizing world financial markets.

Mr. Cuomo, as a Wall Street enforcer, had been questioning banks and rating agencies aggressively for more than a year about their roles in the growing debacle, and also looking into bonuses at A.I.G.

Friendly since their days in the Clinton administration, the two met in Mr. Cuomo’s office in Lower Manhattan, steps from Wall Street and the New York Fed. According to three people briefed at the time about the meeting, Mr. Geithner expressed concern about the fragility of the financial system.

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Dr. Michio Kaku: Fukishima is a Ticking Time Bomb

In the United States, nuclear power is uninsurable. Or at least it would be, without an explicit law that limits operator liability and puts the taxpayer on the hook for paying the costs of a meltdown.

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Bankers Running Rings Around Regulators

In 2009, as the financial crisis entered its darkest days, G20 leaders descended on London for a meeting aimed at bringing the world economy back from the brink.

President Obama outlined the "unprecedented steps to restore growth and prevent a crisis like this from happening again."

Banker bashing was rife, with Gordon Brown comparing the masters of the universe to children who needed some tough love.

"In our families we raise our children to work hard, to do their best, and do their bit. We don't reward them for taking risks that... put them or others in danger," said Brown as he hosted the G20 meeting which was painted at the time as the summit that saved the global economy.

Last weekend Brown admitted the great and the good meeting at the G20 that week in March 2009, when global equity markets bottomed, didn’t really understand what was going on.

“We didn't understand how risk was spread across the system, we didn't understand the entanglements of different institutions with the other and we didn't understand even though we talked about it just how global things were, including a shadow banking system as well as a banking system,” said Brown in a speech in New Hampshire in the United States.

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Jobless Claims Unexpectedly Rise; Inflation Pressure Grows

New claims for unemployment benefits unexpectedly rose last week, bouncing back above the key 400,000 level, while core producer prices clumbed faster than expected in March, government reports showed on Thursday.

Initial claims for state unemployment benefits rose 27,000 to a seasonally adjusted 412,000, the Labor Department said.

Economists polled by Reuters had forecast claims slipping to 380,000.

The prior weeks figure was revised up to 385,000 from the previously reported 382,000.

The four-week moving average of unemployment claims—a better measure of underlying trends—climbed 5,500 to 395,750.

The rise in claims interrupted a downward trend that had kept them below the 400,000 threshold for four weeks. That level is normally associated with steady job growth. Despite last weeks rise, the four-week average held below the 400,000 mark for a seventh straight week.

A Labor Department official said claims tend to rise the first week of a new quarter.

The number of people still receiving benefits under regular state programs after an initial week of aid fell 58,000 to 3.68 million in the week ended April 2, the lowest level since September 2008.

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Banks Face $3.6 Trillion 'Wall' of Debt: IMF

The world's banks face a $3.6 trillion "wall of maturing debt" in the next two years and must compete with debt-laden governments to secure financing, the IMF warned on Wednesday.

Many European banks need bigger capital cushions to restore market confidence and assure they can borrow, and some weak players will need to be closed, the International Monetary Fund said in its Global Financial Stability Report.

The debt rollover requirements are most acute for Irish and German banks, with as much as half of their outstanding debt coming due over the next two years, the fund said.

"These bank funding needs coincide with higher sovereign refinancing requirements, heightening competition for scarce funding resources," the IMF said.

Overall, the IMF said global financial stability has improved over the past six months.

The most pressing challenges in the coming months will be funding of banks and sovereigns, particularly in vulnerable euro area countries, it said.

The IMF and European Union bailed out Greece and Ireland, and are in talks with Portugal on a lending program as sovereign borrowing costs surge.

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The Presidential Divider: Obama's toxic speech and even worse plan for deficits and debt

WSJ

Did someone move the 2012 election to June 1? We ask because President Obama's extraordinary response to Paul Ryan's budget yesterday—with its blistering partisanship and multiple distortions—was the kind Presidents usually outsource to some junior lieutenant. Mr. Obama's fundamentally political document would have been unusual even for a Vice President in the fervor of a campaign.

The immediate political goal was to inoculate the White House from criticism that it is not serious about the fiscal crisis, after ignoring its own deficit commission last year and tossing off a $3.73 trillion budget in February that increased spending amid a record deficit of $1.65 trillion. Mr. Obama was chased to George Washington University yesterday because Mr. Ryan and the Republicans outflanked him on fiscal discipline and are now setting the national political agenda.

Mr. Obama did not deign to propose an alternative to rival Mr. Ryan's plan, even as he categorically rejected all its reform ideas, repeatedly vilifying them as essentially un-American. "Their vision is less about reducing the deficit than it is about changing the basic social compact in America," he said, supposedly pitting "children with autism or Down's syndrome" against "every millionaire and billionaire in our society." The President was not attempting to join the debate Mr. Ryan has started, but to close it off just as it begins and banish House GOP ideas to political Siberia.

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Busby: 400,000 to develop cancer in 200 km radius of Fukushi

'Manning needs UK consular visit'

The mother of a US soldier detained on suspicion of leaking US military secrets has urged British consular officials to visit her son, whose "physical and mental health is deteriorating."

Private Bradley Manning's Welsh mother, Susan Manning, has written a letter to British Foreign Secretary William Hague, expressing grave concerns over the health of her 23-year-old son, the Guardian reported on Wednesday.

She called on the UK consular officials to visit and check on the health of the US Army soldier who has been held since last July in a maximum security cell in Virginia.

The American soldier, who faces a military court-martial on charges of providing the website WikiLeaks with classified information, has been in custody under inhumane conditions that has promoted criticism worldwide.

In her letter, Susan Manning said that she visited her son in Quantico marine base in Virginia in February, travelling along with a number of relatives, who "were not allowed to see him."

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New C.I.A. Drone Attack Draws Rebuke From Pakistan

WASHINGTON — C.I.A. drones fired two missiles at militants in Pakistan’s tribal areas on Wednesday, two days after Pakistan’s spy chief threatened to curtail the drone strikes and demanded more information about the Central Intelligence Agency’s operations there.

The strikes drew a sharp rebuke from a Pakistani government that is increasingly public in its criticism of the C.I.A.’s covert role in its country.

“Pakistan strongly condemns the drone attack,” according to a statement from the Foreign Ministry in Islamabad, which said it had lodged “a strong protest” with the United States ambassador there, Cameron P. Munter. “We have repeatedly said that such attacks are counterproductive and only contribute to strengthen the hands of the terrorists.”

On Monday, the chief of Pakistan’s main spy agency, Lt. Gen. Ahmed Shuja Pasha, met with the C.I.A. director, Leon E. Panetta, and Adm. Mike Mullen, the chairman of the Joint Chiefs of Staff, to try to resolve tensions between the two counterterrorism allies, most recently over the arrest in Pakistan of Raymond A. Davis, a C.I.A. security officer who killed two Pakistani men in January during what he said was a robbery attempt.

After the meeting, American and Pakistani officials said that Pakistan’s request for advance notice of C.I.A. missile strikes, for fewer strikes over all, and for a fuller accounting of C.I.A. officers and contractors working in Pakistan “is being talked about.” The American official added: “The bottom line is that joint cooperation is essential to the security of the two nations.  The stakes are too high.”

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Bahraini woman willing to die if family is not released

A Bahraini woman who witnessed her father, a well-known human rights activist, being seized by masked soldiers, beaten unconscious and then taken into custody, has told the Guardian that she is willing to die on hunger strike unless he is released.

Zainab al-Khawaja, 27, will today enter her fourth day without food in protest at the violent arrest and subsequent disappearance of the outspoken dissident Abdulhadi al-Khawaja, 50, along with her husband and brother-in-law.

Zainab, who was brought up in exile in Denmark, is taking only water, and told the Guardian she is already feeling weak, with breast-feeding sapping her strength faster than she had expected. She says she will leave her 18-month-old child with family members if she dies.

Around a dozen masked and heavily armed soldiers, apparently from Bahrain's special forces, stormed her apartment in the capital, Manama, at 2am on Saturday. Her father had previously called for Bahrain's king to face trial for murder, torture and corruption.

The family's attempts to find out from the police what has happened to the men have failed and they fear they are being tortured. Zainab, who started her fast on Monday, said she now dreams about her father's fate.

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Mortar attack jolts US base in Iraq

A mortar attack has rocked a US military base in southern Iraq, with the number of possible casualties still unknown.

This is the third such attack on US forces in Iraq over the past week. On Sunday, three rockets targeted a US camp in Diwaniyah, a city south of the capital Baghdad.

In August 2010, the United States declared an end to its combat mandate in Iraq but left 50,000 of American troops in the country for what it called "advising and training" purposes.

The United States and its allies invaded Iraq in 2003, citing concerns over alleged weapons of mass destruction wielded by the executed Iraqi dictator Saddam Hussein's Ba'athist government.

No such weapons were ever found in Iraq. However, nearly 50,000 American troops still remain in the country.

The US forces, however, are expected to fully withdraw from the Iraqi soil by the end of 2011 despite a recent plea by US Secretary of Defense Robert Gates for further extension of their troop's deployment in the war-torn country.

American troop presence in Iraq is widely unpopular in the country. Iraqi politicians were quick to reject the American request for a longer stay of its forces.