As Mexican Army Battles Narco-Cartels, Cartels Threaten US Law Enforcement

By Anthony L. Kimery

As Mexican President Felipe Calderon struggles to regain control of the escalating narco-cartel violence that has at the very least plunged his nation’s northernmost states into blood soaked chaos and this week forced him to send more than 10,000 military troops and federal law enforcement into Ciudad Juarez, the Obama administration is having to come to grips with the magnitude of the threat that Mexico’s widespread crisis poses to US security. READ MORE...

» The Savage Struggle, Part I: The Unknown War on America’s Doorstep READ MORE...

» The Savage Struggle, Part II: Could Mexico Fail? READ MORE...

» The Savage Struggle, Part III: The War for Mexico’s Future READ MORE...

» Border Patrol: ‘An All-Threats Agency’ read more...

ACLU Labels Defending the U.S. Against Terrorists as ‘Discrimination’

(Compiler's note: A must read article.)

by John Armor

The ACLU has attacked an information-sharing center in Dallas for "discrimination" against Muslims for reporting facts about associations between Muslim terrorists abroad, and Muslim groups in the United States. If it prevailed, the ACLU position would cripple the effectiveness of these 58 Homeland Security centers around the country.

The facts for this article, but not its legal conclusions, come from an article in the Dallas Morning News on February 26, 2009. The ACLU was objecting to the contents of a memo, leaked from inside a "Fusion Center."

To back up and explain: Fifty-eight Fusion Centers were set up around the country by the Homeland Security Department where information could be gathered and shared between different enforcement agencies, federal, state and local. The reasoning was that the attacks of 9/11 might have been discovered in advance and prevented except for barriers against interagency sharing of information, set up by Jamie Gorelick, Assistant Attorney General under President Bill Clinton.

One of these Fusion Centers was set up in Dallas. And a memo was leaked from that Center, the February 19th Prevention Awareness Bulletin, which cautioned readers that "Middle Eastern terrorist groups and their supporting organizations have been successful in gaining support for Islamic goals in the United States and providing an environment for terrorist organizations to flourish."

This summary statement falls in the category of “everybody knows that.” What got the ACLU riled up was the example of CAIR’s cooperation with terrorists that was cited. CAIR is the Council on American-Islamic Relations. It bills itself as a "civil rights" organization. However, it was named as an unindicted co-conspirator in the Holy Land criminal indictments of various officials of the Holy Land Foundation for raising some $12 million for the terrorist organization Hamas, under the pretense of charitable giving.

In a separate action, the ACLU is seeking to get CAIR’s name removed from the indictment which resulted in the conviction of Holy Land and its officers.

In short, the ACLU is claiming that it "discriminates against Muslims" to state the obvious point that Muslim terrorists from the Middle East are more likely to seek and get aid and comfort from Muslim groups in the U.S. than any other types of groups. And the ACLU claims that it is discrimination for the investigators to pay close attention to CAIR because of the established close ties between its organizers and officers with convicted terrorists.

How Do We Reach Muslims who are Susceptible to Islamist Propaganda?

Dr. Sami Alrabaa

I think all of us, including FamilySecurityMatters.org, the Front Page Magazine, Jihad Watch, Faith Freedom, Islam Watch, Europe News, Islamist Watch, Canada Free Press, South Asia Forum, The New Media Journal and all the others, are preaching to the converts.

Who reads what Daniel Pipes, Robert Spencer, Ali Sina, Nonie Darwish, Ayaan Hirsi Ali and the other anti-Islamists? From comments on articles by these writers, you can tell that it is predominantly readers who already agree with these writers.

According to a survey by Bielefeld University, Germany, which was conducted in five Arab countries, in 2008, the majority of Arabs – all of them adult Muslims of different occupations, education, and social classes – more than 80% of them consume Saudi and Qatari- owned international TV channels, like Al Jazeera, Al Arabiya, and MBC. Seven percent read Arabic newspapers, and only 2% checkout diverse websites. 186 of them check out once in a while articles by the aforementioned writers.

Hence, the mass of Muslims – the great majority of them are illiterate – are easy prey for Islamist chaplains, who preach hatred and violence against non-Muslims all over the Arab media.

If we are really interested in rooting out Islamism, which is spreading like an epidemic disease across the world, we must find ways to reach ordinary Muslims and gain their hearts and minds.

Many of those ordinary Muslims told a media research team from Bielefeld University, they would like to check out alternative media to the oil sheikhs’ outlets – TV and Internet – but there are almost none of those outlets are around.

The only Arabic Internet websites available at present are Al Hiwar Al Mutammaden (Modern Discussion) and Shabaket Al ‘Ilmanieen Al Arab (Web of Secular Arabs). Both are provided for and run by selfless volunteers, living on meager donations. “Modern Discussion” provides translation to its articles.

I checked out both and found them balanced and enlightening and pose a real alternative to Islamist propaganda.

As a sample, check out in “Modern Discussion” the articles of Kamil Al Najjar. He refutes many of Islamists’ allegations with quotations from the Koran and the Hadith.

From here, I appeal to all those who are interested in really fighting radical Islam to support the aforementioned websites and help creating as many like them as possible. Only such sites could help gaining the hearts and minds of ordinary Muslims before it is too late.

Arab liberal writers like Walid Phares and As’ad Abu Khaleel, who live and write in the West, and others could be a great asset to help limit the spread of the Islamist political virus, active the world over. Bilingual writers are needed.

In Bangladesh, where over 150 million Muslims live and where radical Islam is rapidly spreading, liberal enlightening publications like the Weekly Blitz can hardly survive. Such people need our concrete help, not just our rhetoric.

Dr. Richard Benkin, an American Jewish human rights activist, has been trying relentlessly to rally support for moderate Muslims in Bangladesh for years. He even affected the release of Salahuddin Shoaib Choudhury, editor in chief of the Weekly Blitz, a friend of Israel, and a liberal Muslim, from prison. But Dr. Benkin’s efforts remain a one-man show in a country which has suffered from Islamic terrorism more than any other.

If my appeal does not meet any positive response then my belief will be confirmed that we are not serious and interested in effectively fighting Islamism. Our English-medium sites are maybe outlets to vent our indignation toward a virus, but not to out root radical Islam, the core of the matter.

Only enlightening the Muslim masses would make the Islamist propaganda shrink and push it into the insignificance. Only then we can help creating tolerant moderate Muslim societies.

If we are unable to establish alternative TV channels to those owned by Saudi and Qatari tycoons, we should at least support Arabic outlets on the Internet, the medium of the future, which more and more Muslims are turning to.

I wrote to all those well-known anti-Islamists who live in the West about the above, but I hit deaf ears. They never bothered to respond. I have the impression that some anti-Islamists in the West have found in this area a kind of “business” and they hate to have “competition.”

We eventually need both the Western public and the Muslim public in support of the fight against radical Islam. I would even say that we need the Muslim support more because it is susceptible to consume Islamism and join its ranks, and there lies the real peril of Islamism.

FamilySecurityMatters.org Contributing Editor Dr. Sami Alrabaa, an ex-Muslim, is a professor of Sociology and an Arab-Muslim culture specialist. Before moving to Germany he taught at Kuwait University, King Saud University, and Michigan State University. He also writes for the Jerusalem Post.

U.S. Muslim Brotherhood Reacts to California Mosque Infiltration

Dear Reader,

The article below reports that a brother-in-law of Osama bin Laden’s bodyguard was arrested on terrorist-related charges after being fingered by an informant. How the U.S. Muslim Brotherhood (The Muslim Public Affairs Council, MPAC) and CAIR (the Council on American-Islamic Relations) reacted is a perfect illustration of “properly understanding the times.”

Did the MPAC and CAIR denounce the alleged activities of the man who was arrested? Of course not. Following their predictably worn-out script, these two organizations attacked the FBI and law enforcement authorities for “violating the trust” of Muslims by working with an informant who infiltrated a mosque. Here’s one sentence from MPAC’s response:

“Federal law enforcement cannot establish trust with American Muslim communities through meetings and townhall forums, while at the same time sending paid informants who instigate violent rhetoric in mosques.”

Notice the insinuation, that the man arrested was “instigated” by a paid federal informant. The man arrested isn’t responsible — the “devil made him do it!” This is the same kind of response organizations like MPAC and CAIR make whenever a Muslim is arrested or suspected of terrorist-related activities. They attack law enforcement, or politicians, or groups and people they call “Islamophobic.” They play the “offended victim” card, complaining that the latest action violates “trust” between Muslims and law enforcement.

This is the same script Islamic militants and leaders have followed for years in Europe and Great Britain.

Here’s what violates trust — Islamic organizations and spokespeople who refuse to acknowledge that there a lot of people in their community of faith who want to hurt America, kill Americans, and impose shariah law on America.

Here’s what violates trust — Islamic organizations and spokespeople who claim perpetual victim status for Islamic radicals, and who claim that Americans are the aggressors, when in fact it is the radicals who are the aggressors and Americans are the victims.

We don’t see FBI informants and undercover criminal investigations inside churches and synagogues, and there’s an obvious reason why. If MPAC and CAIR are genuinely and sincerely concerned about “trust,” they would do well to stop attacking Americans and law enforcement and start denouncing the real violators of our trust – the radical Muslims in our midst who intend us harm.

But don’t hold your breath waiting for that to happen. And that gives us an advantage – because we can predict with a high degree of accuracy what the Islamists will do next. Their “script” isn’t hard to read. We just have to expose them and refuse to play the role they’re trying to foist on us.
===========================================================

From the Global Muslim Brotherhood Daily Report:

The U.S. Muslim Brotherhood is reacting to the arrest of a brother-in-law of Osama bin Laden’s bodyguard on charges of lying about his ties to terrorist groups on his citizenship and passport applications. An AP report describes the case as follows:

In the California case, information about the informant who spied on the Islamic Center of Irvine came out last week at a detention hearing for a brother-in-law of Osama bin Laden’s bodyguard, an Afghan native and naturalized U.S. citizen named Ahmadullah Niazi. Niazi, 34, was arrested Feb. 20 on charges of lying about his ties to terrorist groups on his citizenship and passport applications. He will be arraigned Monday in U.S. District Court in Santa Ana. FBI Special Agent Thomas J. Ropel III testified at the hearing that an FBI informant infiltrated Niazi’s mosque and several others in Orange County and befriended Niazi. Ropel said the informant recorded Niazi on multiple occasions talking about blowing up buildings, acquiring weapons and sending money to the Afghan mujahadeen. Niazi has not been charged with terrorism and it’s not yet clear if the FBI was focused on anything beyond his activities. Neither the mosque nor any other of its members have been charged. A 46-year-old fitness instructor told The Associated Press last week he was the informant. Craig Monteilh of Irvine said Niazi talked about blowing up buildings and discussed sending Monteilh to a terrorist training camp in Yemen or Pakistan. Monteilh said his tenure as an informant ended after Niazi and other members of the Islamic Center of Irvine reported him to authorities. A Muslim advocacy group has demanded a federal investigation into whether Niazi was arrested because he refused to become an FBI informant after telling the agency about Monteilh.

The Muslim Public Affairs Council (MPAC) has reacted by stating that the use of informants in mosques “stigmatizes” the mosques and erodes trust. According an article on the MPAC website:

Trust is the cornerstone of any partnership between law enforcement and communities. It can only be established and maintained through clear and open communication. Without this, trust is eroded and suspicions arise on all sides. This clearly does not serve anyone’s interests.Federal law enforcement cannot establish trust with American Muslim communities through meetings and townhall forums, while at the same time sending paid informants who instigate violent rhetoric in mosques. This mere act stigmatizes American mosques and casts a shadow of doubt and distrust between American Muslims and their neighbors. It has also led many mosques and community groups to reconsider their relationship with the FBI, including most recently the Islamic Shura Council of Southern California. It is now up to the FBI and law enforcement agencies to re-engage with the Muslim American community, and re-build trust and respect. MPAC will continue to raise these community concerns with federal law enforcement officials in its efforts to help form policies that preserve civil liberties while also protecting our nation.

The Council on American Islamic Relations (CAIR) announced that is planning to file a request for the U.S. Attorney General to launch an investigation into the FBI’s arrest:

On Tuesday, February 24, the Greater Los Angeles Area chapter of the Council on American-Islamic Relations (CAIR-LA) will host a news conference to announce the filing of a request for the U.S. Attorney General to launch an investigation into the FBI’s arrest last week of Ahmad Niazi. The news conference will immediately follow a court hearing Tuesday for Niazi in Santa Ana, Calif. Members of his family will take part in the news conference. Mr. Niazi is charged with perjury, naturalization fraud, misuse of a passport obtained by fraud, and making a false statement to a federal agency. He claims the charges are in retaliation for his refusal to become an FBI informant. Mr. Niazi previously reported to CAIR-LA and other community members that, during a raid of a friend’s house, an FBI agent urged Mr. Niazi to work with the agency, saying that if he refused to cooperate his life would be made a “living hell.”

MPAC was established in the mid 1980’s by individuals whose backgrounds are likely rooted in the Egyptian Muslim Brotherhood and since its inception has acted in concert with the U.S. Muslim Brotherhood. The organization, like other U.S. Brotherhood organizations, has a long history of fundamentalism, anti-Semitism, and support for terrorism. The organization has long enjoyed generally good relations with the U.S. government and functions essentially as the political lobbying arm of the U.S. Brotherhood.

Documents released in the Holy Land Trial have revealed that the founders and current leaders of CAIR were part of the Palestine Committee of the Muslim Brotherhood as well as identifying the organization itself as being part of the U.S. Brotherhood. Investigative research posted on GMBDR had determined that CAIR had it origins in the U.S. Hamas infrastructure and is an integral part of the U.S. Muslim Brotherhood with a long history of support for fundamentalism, anti-Semitism, and terrorism. Numerous earlier posts have reported on the relationship between the FBI and CAIR which appears to have been terminated by the FBI.

Both organizations have long histories of opposing almost all elements of U.S. counterterrorism strategy. CAIR in particular has defended numerous individuals accused and/or convicted of terrorism offenses and a number of CAIR employees have also been convicted of terrorism.

Critic Says Islamic Extremism Gets Whitewashed in American Textbooks

by Eric Shawn and Shira Bush

NEW YORK — An education expert is warning that some American textbooks present a biased view of Islam and offer a sugarcoated picture of Islamic extremism, a trend that has parents worried about what's being taught in public schools.

In numerous history textbooks, "key subjects like jihad, Islamic law, the status of women are whitewashed," said Gilbert T. Sewall, director of the American Textbook Council, an independent group that reviews history books and other education materials.

Cindy Ross, the mother of a junior high school student in Marin County, Calif., said she couldn't believe her eyes when she read her son's textbook last school year.

"I was very shocked by what I saw, looking through the book," she said — shocked at how Islam was portrayed in her son's seventh grade history text.

"What did strike me was that all the other religions seemed to be lumped together, where there is an inordinate emphasis on Islam specifically," Ross said.

• Click here for video.

Sewall claims that publishers have been pressured by Islamic activists to portray the religion in the most favorable light, while Islamic terrorism is downplayed or glossed over.

"The picture is incomplete ... and the reason for this is that publishers are afraid of the Islamist activists. They don't want trouble," he told FOX News.

Sewall, who authored a report on how textbooks teach and present Islam, singled out one book that he said failed to explain what the story of the September 11 terrorist attacks.

In a section discussing Islamic fundamentalism, the textbook "World History: The Modern World," published by Prentice Hall, omits direct mention of the 9/11 hijackers' religion, referring to the 19 Islamic fundamentalists as "teams of terrorists."

"On the morning of September 11, 2001," the book reads, "teams of terrorists hijacked four airplanes on the East Coast. Passengers challenged the hijackers on one flight, which they crashed on the way to its target. But one plane plunged in to the Pentagon in Virginia, and two others slammed into the twin towers of the World Trade Center in New York. More than 2,500 people were killed in the attacks."

Video

• Islam in the Classroom

In his report on the text, Sewall called the passage "dismaying" in its flatness and brevity. "In terms of content, so much is left unanswered. Who were the teams of terrorists and what did they want do to? What were their political ends? Since 'The Modern World' avoids any hint of the connection between this unnamed terrorism and jihad," he wrote, "why September 11 happened is hard to understand."

But Muslim advocacy groups say students need to learn more about Islam to correct misconceptions and help turn away a wrongheaded focus on extremism.

"It's wrong to show an entire faith community from the lens of a small extremist community, which is really a fringe. It's a fraction of a fraction of a fraction of the Muslim community, and that's not how Muslims want to be framed," said Daisy Khan, executive director of the American Society for Muslim Advancement.

"I think there is an unbalanced portrayal of Islam seen mostly through a political lens, but that is not the reality of who a majority of Muslims are," she told FOX News.

Khan said when it comes to teaching about Islam, "I think the more important issue is American values of tolerance, respect and mutual understanding," which can best be imparted with accurate information about the religion.

But the content of those religious lessons also has Sewall concerned, particularly on the controversial topic of jihad.

Sewall says the violent aspects of Islamic jihad are glossed over and that it is presented as an internal struggle or a fight for protection in books like "History Alive! The Medieval World and Beyond," published by the Teachers Curriculum Institute.

"Jihad is defined as a struggle within each individual to overcome difficulties and strive to please god. Sometimes it may be a physical struggle for protection against enemies," the book reads, noting that Islam teaches "that Muslims should fulfill jihad with the heart, tongue and hand. Muslims use the heart in their struggle to resist evil."

It's a lesson that Sewall says needs to change.

"What is frustrating is that repeatedly the textbook publishers have been called on their bias on the sunny, doctored view of Islam" but have refused to balance their books, he said.

None of the textbook publishers contacted by FOX News regarding their books responded to requests for statements or interviews.

Parent Cindy Ross told FOX News she is concerned that unpleasant facts are being ignored for the sake of political correctness in her son's textbooks.

"When you are talking about a history textbook, that is supposed to be talking about historical facts and they are talking about jihad in terms of spiritual terms ... I think it would be completely inappropriate for a public school."

As Mexican Army Battles Narco-Cartels, Cartels Threaten US Law Enforcement

by Anthony L. Kimery

Cartels have ordered operatives in the US to directly engage US law enforcement who get in their way

As Mexican President Felipe Calderon struggles to regain control of the escalating narco-cartel violence that has at the very least plunged his nation’s northernmost states into blood soaked chaos and this week forced him to send more than 10,000 military troops and federal law enforcement into Ciudad Juarez, the Obama administration is having to come to grips with the magnitude of the threat that Mexico’s widespread crisis poses to US security.

In Homeland Security Today’s groundbreaking January cover story, “Savage Struggle on the Border,” written in mid-October during an on the ground investigation of Mexico’s cartel-fueled societal deterioration, it was noted that the Mexican cartels’ warring was beginning to reach across the border into the US.

In the wake of increasingly effective, strengthened Border Patrol enforcement and federal, state and local law enforcement operations to bust up Mexican cartel operations in the United States, US counter-narcotics and counterterrorism officials and law enforcement told HSToday.us this week that intelligence – some gleaned in cooperation with Mexico’s intelligence services – indicates that Mexico’s two dominant cartels have ordered its operatives in the US to directly engage US law enforcement officers who get in their way.....

Senator: Prez Eligibility is up to the voters

By Bob Unruh

Republican Martinez implies constitutional requirement for presidency can be bypassed

A U.S. senator has suggested that voters have made Barack Obama eligible to occupy the Oval Office, whether or not he meets the constitutional mandate of being a "natural born" citizen.

The comments from Sen. Mel Martinez, R-Fla., came in an e-mail sent to a constituent shortly after the election, which just now was forwarded to WND.

...."This is frightening in its implications and should alarm every freedom-loving American and military member. I myself am a veteran of the U.S. Air Force (1979-84). Senator Martinez has said, in essence, that it doesn't matter what the laws are or what the Constitution says. If the people elected him, Obama is president – period."

Was 'Lady Macbeth' behind Barack Obama's snub of Gordon Brown?

Foreign ties of nominee questioned

byEli Lake

An independent inspector general will look into the foreign financial ties of Chas W. Freeman Jr., the Obama administration's pick to serve as chairman of the group that prepares the U.S. intelligence community's most sensitive assessments, according to three congressional aides.

The director of national intelligence, Dennis C. Blair, last Thursday named Mr. Freeman, a veteran former diplomat, to the chairmanship of the National Intelligence Council, known inside the government as the NIC. In that job, Mr. Freeman will have access to some of America's most closely guarded secrets and be charged with overseeing the drafting of the consensus view of all 16 intelligence agencies .....

Georgia state legislators have NOT filed federal, state taxes in 2 years

Nearly 10 percent of Georgia state legislators are late filing or paying their state taxes ....

Fed Refuses to Release Bank Data, Insists on Secrecy (Update1)

(Compiler's note: Yes, this is a must read - (1) remember the "Feds" being talked about here are no more federal than Federal Express and (2) economic security relates to national security.)

By Mark Pittman

March 5 (Bloomberg) -- The Federal Reserve Board of Governors receives daily reports on loans to banks and securities firms, the institution said in response to a Freedom of Information Act lawsuit filed by Bloomberg News.

The Fed refused yesterday to disclose the names of the borrowers and the loans, alleging that it would cast “a stigma” on recipients of more than $1.9 trillion of emergency credit from U.S. taxpayers and the assets the central bank is accepting as collateral.

The bank provides “select members and staff of the Board of Governors with daily and weekly reports” on Primary Dealer Credit Facility borrowing, said Susan E. McLaughlin, a senior vice president in the markets group of the Federal Reserve Bank of New York in a deposition. The documents “include the names of the primary dealers that have borrowed from the PDCF, individual loan amounts, composition of securities pledged and rates for specific loans.”

The Board of Governors contends that it’s separate from its member banks, including the Federal Reserve Bank of New York which runs the lending programs. Most documents relevant to the Bloomberg suit are at the Federal Reserve Bank of New York, which isn’t subject to FOIA law, according to the Fed. The Board of Governors has 231 pages of documents, which it is denying access to under an exemption under trade secrets.

“I would assume that information would be shared by the Fed and the New York Fed,” said U.S. Representative Scott Garrett, a New Jersey Republican. “At some point, the demand for transparency is paramount to any demand that they have for secrecy.”

‘Financial Crisis’

Bloomberg sued Nov. 7 under the U.S. Freedom of Information Act, requesting details about the terms of 11 Fed lending programs.

The Bloomberg lawsuit said the collateral lists “are central to understanding and assessing the government’s response to the most cataclysmic financial crisis in America since the Great Depression.”

The Fed stepped into a rescue role that was the original purpose of the Treasury’s $700 billion Troubled Asset Relief Program. The central bank loans don’t have the oversight safeguards that Congress imposed upon the TARP.

Total Fed lending exceeded $2 trillion for the first time Nov. 6 after rising by 138 percent, or $1.23 trillion, in the 12 weeks since Sept. 14, when central bank governors relaxed collateral standards to accept securities that weren’t rated AAA. Fed lending as of Feb. 25 was $1.92 billion.

Commercial, Consumer Loans

On Feb. 23, the Fed disclosed a breakdown by broad categories for $1.81 trillion of collateral pledged by banks and bond dealers as of Dec. 17 after Congress demanded more transparency from the central bank.

The largest portions of collateral being held by the Fed at that time were $456 billion in commercial loans, $203 billion in consumer loans and $159 billion in residential mortgages, according to the central bank’s Web site. It didn’t identify any loans or provide their credit ratings and said it will update the figures about every two months.

Government loans, spending or guarantees to rescue the country’s financial system total more than $11.7 trillion since the international credit crisis began in August 2007, according to data compiled by Bloomberg. In return, banks left collateral with the central bank that effectively acts as a credit line that lenders can draw on without posting additional assets.

Bank Opposition

Bloomberg News, a unit of New York-based Bloomberg LP, on May 21 asked the Fed to provide data on collateral posted from April 4 to May 20. The central bank said June 19 that it needed until July 3 to search documents and determine whether it would make them public. Bloomberg didn’t receive a formal response that would let it file an appeal within the legal time limit.

On Oct. 25, Bloomberg filed another request, expanding the range of when the collateral was posted. It sued Nov. 7.

In response to Bloomberg’s request, the Fed said the U.S. is facing “an unprecedented crisis” in which “loss in confidence in and between financial institutions can occur with lightning speed and devastating effects.”

Fed Chairman Ben S. Bernanke and then Treasury Secretary Henry Paulson said in September they would meet congressional demands for transparency in a $700 billion bailout of the banking system.

The Freedom of Information Act obliges federal agencies to make government documents available to the press and public. The Bloomberg lawsuit, filed in New York, doesn’t seek money damages.

Banks oppose any release of information because that might signal weakness and spur short-selling or a run by depositors, the Fed argued in its response.

“You could make everything a trade secret,” said Lucy Dalglish, executive director of the Arlington, Virginia-based Reporters Committee for Freedom of the Press.

The case is Bloomberg LP v. Board of Governors of the Federal Reserve System, 08-CV-9595, U.S. District Court, Southern District of New York (Manhattan).

FDIC -- Insurance Fund Could Be Insolvent This Year (Update1)

(Compiler's note: Must read.)

By Alison Vekshin

March 4 (Bloomberg) -- Federal Deposit Insurance Corp. Chairman Sheila Bair said the fund it uses to protect customer deposits at U.S. banks could dry up amid a surge in bank failures, as she responded to an industry outcry against new fees approved by the agency.

“Without these assessments, the deposit insurance fund could become insolvent this year,” Bair wrote in a March 2 letter to the industry. U.S. community banks plan to flood the FDIC with about 5,000 letters in protest of the fees, according to a trade group.

“A large number” of bank failures may occur through 2010 because of “rapidly deteriorating economic conditions,” Bair said in the letter. “Without substantial amounts of additional assessment revenue in the near future, current projections indicate that the fund balance will approach zero or even become negative.”

The FDIC last week approved a one-time “emergency” fee and other assessment increases on the industry to rebuild a fund to repay customers for deposits of as much as $250,000 when a bank fails. The fees, opposed by the industry, may generate $27 billion this year after the fund fell to $18.9 billion in the fourth quarter from $34.6 billion in the previous period, the FDIC said.

The fund, which lost $33.5 billion in 2008, was drained by 25 bank failures last year. Sixteen banks have failed so far this year, further straining the fund.

Angry Bankers

Smaller banks are outraged over the one-time fee, which could wipe out 50 percent to 100 percent of a bank’s 2009 earnings, Camden Fine, president of the Independent Community Bankers of America, said yesterday in a telephone interview.

“I’ve never seen emotions like this,” said Fine, adding that he’s received more than 1,000 e-mails and telephone messages from angry bankers.

“The FDIC realizes that these assessments are a significant expense, particularly during a financial crisis and recession when bank earnings are under pressure,” Bair wrote. “We did not want to impose large assessments when the industry and economy are struggling. We searched for alternatives but found none better.”

The agency, which has released the change for 30 days of public comment, could modify the assessment to shift the burden to the large banks “that caused this train wreck,” Fine said. “Community bankers are feeling like they are paying for the incompetence and greed of Wall Street,” he said.

Legal Constraints

Bair dismissed that suggestion.

“For risk-based assessments, our statute restricts us from discriminating against an institution because of size,” Bair wrote.

The deposit insurance fund won’t dry up because the government can get funds from the industry and congressional appropriations, and borrow from the Treasury, Chip MacDonald, a partner specializing in financial services at law firm Jones Day, said today in a telephone interview.

“As a depositor, I am not worried in the least,” MacDonald said. “No one is going to let the FDIC go without any money.”

Consumers should watch this issue closely, said Edmund Mierzwinski, consumer program director at U.S. PIRG, a Boston- based consumer-watchdog group.

“I wouldn’t take their money out of the bank yet,” Mierzwinski said. “If the FDIC is saying that there is this serious problem, then we should all be concerned. I think there is a chance the FDIC is going to have to ask taxpayers for money in the future.”

No Taxpayer Funds

Bair rejected arguments that the agency should use government aid to rebuild the fund. The FDIC has authority to tap a $30 billion line of credit at the Treasury Department and legislation pending in Congress would boost the amount to $100 billion.

“Banks, not taxpayers, are expected to fund the system,” Bair said. Asking for taxpayer support “could paint all banks with the ‘bailout’ brush.”

The FDIC “will revise the interim rule, if appropriate, in light of the comments received,” the agency said in a Federal Register notice.

'Israel is mulling Iran military action'

By HILARY LEILA KRIEGER

Israel is seriously considering taking unilateral military action to stop Iran from acquiring nuclear weapons, according to a report by top US political figures and experts released Wednesday.

The report also says Israel's time frame for action is growing shorter, not only because of Iranian advances, but because Teheran might soon acquire upgraded air defenses and disperse its nuclear program to additional locations.

The report, "Preventing a Cascade of Instability," was put out by the Washington Institute for Near East Policy (WINEP). It also argues that international sanctions against Iran need to be intensified urgently for the engagement the Obama administration is planning with Teheran to be effective.

An early draft of the report was endorsed by Dennis Ross before he withdrew upon joining the Obama administration, in which he is serving as a special representative dealing with various countries in the region, including Iran. Senator Evan Bayh of the Senate Select Committee on Intelligence, and Congressman Gary Ackerman, chairman of the House Foreign Affairs subcommittee on the Middle East, were among the signatories.

The bipartisan group also recommended increasing security guarantees and the supply of missile defenses and other protective measures to allies in the Middle East, both to reassure them of America's commitment to them and to dampen the perceived effectiveness, and hence appeal, of nuclear weapons for Iran.

But the report, several of whose authors met with high-level Israeli officials to assess their perspective, notes that Israel is not interested in becoming part of an American nuclear umbrella, even as Gulf countries want more assurances on that front.

"A declared US guarantee would clarify a situation of ambiguity that may already work to Israel's advantage," the report notes. Also, "many Israelis fear that a declared US guarantee could come at the price of circumscribing Israel's freedom of action in confronting existential dangers."

"It's quite serious in acting on its own about a nuclear-armed Iran," former US ambassador to the United Nations Nancy Soderberg, one of the task force members who traveled to the region to research the report, said at a WINEP event held Wednesday on the report's release.

She noted that the timetable for an Israeli attack might be "significantly" moved up if Jerusalem believed Russia was going to make good on its pledge to supply Iran with the S-300 surface-to-air missile system, which would greatly complicate any Israeli attack.

If the delivery does occur, the report recommends more arms sales to Israel, such as more modern aircraft, so it can maintain its military edge.

Later, she said that the aim of the report was to come up with strategies where neither the United States nor Israel was at the point of launching military action.

"You've kind of lost the ballgame at that point," she said.

To that end, the 10-page document urges more international sanctions and expanding financial pressure taken by the US Treasury, by creating similar programs at the US Commerce and State Departments.

The study stresses the importance of having a united global front and pushes for intensified diplomacy with Russia to both make sanctions more effective and to persuade the Russians not to deliver the S-300 system.

"Iran does not want to be isolated on the international stage: It is not North Korea. The broader the international consensus, the better. The repeated shows of unanimity by the UN Security Council seem to have impressed Iran more than the limited economic or security impact of the sanctions imposed thus far," the report states, in making the case for more sanctions.

At the same time, it contends that aggressive engagement is needed because "another important goal is to show the Middle East and the world that the United States will go the extra mile to resolve the Iranian nuclear issue. Some circles in countries friendly to the United States now wonder - without reason - if Washington is as much an obstacle to resolving the nuclear impasse as is Teheran."

Even if engagement, sanctions and other measures prove ineffective, the report warns against sanctioning a "fallback" policy where Iran is allowed to have some, even if limited, capacity to enrich uranium in its territory.

"Iran's having a latent capability to quickly make nuclear weapons could lead to much the same risk of cascading instability as an Iran with an actual weapon," it reads, pointing to the risk for nuclear proliferation, Iranian regional hegemony and more.

The report makes no mention of the presidential elections in Iran this June, which could see the more moderate Muhammad Khatami replace fiery current President Mahmoud Ahmadinejad.

Some analysts have suggested that the Obama administration wait to either engage or press for further sanctions until after the campaign, so as not to increase the likelihood of Admadinejad winning.

But the task force calls for immediate action, arguing that the president is less important than Iran's supreme leader, Ayatolla Ali Khamenei, in making decisions and that the top priority should be creating leverage heading into negotiations.

An Iranian professor in the audience at Wednesday's WINEP conference, however, said that increasing pressure would increase extremism and Iranian hard-line leaders' sticking to the nuclear program.

WINEP executive director Robert Satloff, who presided over the conference, responded that the report's recommendations also included many incentives for Iran should it cooperate with the United States.

He also said Iran was already beginning to reap some of the rewards of influence just by having been successful in advancing its nuclear program, and that this report was intended to stanch that progress.

"Even without testing a nuclear weapon or declaring the ability to do so, Iran's progress toward nuclear weapons capability is already having a substantial impact on the Middle East," it says. "Time is short if diplomatic engagement is to have a chance of success."