Did Bernard Madoff act alone? Investors doubt it

NEW YORK – Bernard Madoff's contention that he pulled off one of the biggest financial frauds in history without any help is being met with disbelief by his investors and experts in the securities industry. It normally takes a team of accountants, stock brokers, lawyers and more to operate the kind of multibillion-dollar investment fund that Madoff ran from the 17th floor of his Manhattan headquarters.

Bernard Madoff, chairman of Madoff Investment Securities, returns to his Manhattan apartment after making a court appearance Wednesday, Dec. 17, 2008 in New York. The judge in Madoff's fraud case has set new conditions for his bail, including a curfew and ankle-monitoring bracelet for the disgraced investor

The firm had clients around the globe. Simply generating the detailed financial statements investors got in the mail every month would have been a monumental effort for just one person, observers said, even if those reports were pure fantasy.

"Someone had to create them. Someone had to create the appearance that there were returns," said attorney Harry Susman, who represents several Madoff investors.

"The guy was 70 years old. Could he have done it himself? The computer systems would have needed to be extensive. Supposedly, he's selling puts, buying puts, selling calls, buying stocks. Somebody had to sit there and buy stocks. Where are these people?"

Federal investigators are still in the early stages of trying to answer those same questions as they decipher Madoff's operation. Already, they have discovered multiple sets of books and what appear to be fraudulent documents in his Manhattan offices, raising the question of who prepared them. It may take time before they can say whether he had accomplices.

Investigators have started serving grand jury subpoenas requiring witnesses to testify and seeking documents, according to an official familiar with the case. The official, who spoke on condition of anonymity because the investigation is ongoing, declined to identify who was served or specify what documents were wanted.

The investigation has been unfolding in a Manhattan office that was once Madoff's sanctuary but is now the site of a nonstop hunt for incriminating documents, with boxes of confiscated records stacked in the hallway.

"Every time I go out my office door to go to the ladies' room I've been tripping over FBI agents," said Muriel "Mickie" Siebert, whose namesake brokerage firm shares the 17th floor of the office building.

The investigation is being led by the FBI and Securities and Exchange Commission — agencies already challenged with unearthing other financial scandals since the Wall Street meltdown.

One potential subject of the inquiry is the role played by Frank DiPascali, a top financial officer at Madoff's investment advisory business.

Several investors, their lawyers and a former Madoff employee who spoke to The Associated Press described DiPascali, of Bridgewater, N.J., as the man who appeared to be most responsible for the day-to-day operations of the business.

When clients had questions about the firm's investment strategy or its performance, DiPascali was the one who got on the phone. If they wanted to add or subtract money from their accounts, DiPascali made the arrangements and distributed the checks.

Authorities haven't publicly accused DiPascali of any wrongdoing. His attorney, Marc Mukasey, on Thursday declined to discuss his client's role or say whether he became aware of the fraud prior to Madoff's arrest.

"We are sitting with our client and reviewing his career at Madoff and his duties and responsibilities," said Mukasey, the son of U.S. Attorney General Michael Mukasey. "I understand that people are extremely frustrated and upset ... We would love to see people get as much of their money back as possible."

Questions also loom about Madoff's auditor, Friehling & Horowitz, a relatively unknown accountant in the city's northern suburbs who appeared to operate from a one-room office with irregular business hours and a bare-bones staff.

Those audits apparently failed to detect the fraud, which Madoff told investigators was a Ponzi scheme that lost an estimated $50 billion.

The firm's principal, David G. Friehling, has not answered his telephone in days. His attorney, Andrew Lankler, declined to comment Thursday.

Investigators were also expected to look at the potential involvement of several Madoff relatives who worked for his firm, including his brother, two sons and others who worked for his various business entities. His wife has also come under scrutiny.

To date, however, they also have not been formally accused of any wrongdoing.

The law firm representing Madoff's sons, Andrew and Marc, released a statement saying they first learned of the fraud just days ago, when their father tearfully confessed, and immediately turned him in. The two are said to have worked predominantly in another division of their father's company, not in the secretive unit that handled investor money.

By some accounts, Bernard Madoff appeared to take unusual steps to limit the number of people and outside companies that had a hand in running the business.

Much of the recruiting of new investors to his funds was done informally, by friends, or through a group of large, independently managed feeder funds, who also took most of the management fees for handling the investments. They included the Fairfield Greenwich Group, which put all $7.3 billion of its Fairfield Sentry Fund in Madoff's hands.

It was unclear whether authorities were looking to see whether any of those funds, whose investors have emerged as some of Madoff's largest victims, may have been complicit in the scheme. Each has claimed no knowledge that anything was amiss.

Usually, a fund like Madoff's would use an outside brokerage firm to complete its stock trades. In his case, those duties — if they actually occurred — were apparently handled in-house.

He appeared not to have hired outside professional services firms to help calculate his performance or to produce electronic data for investors.

"He was still doing it the way you did it in the 1960s, with a paper ticket," said Suzanne Murphy, a hedge fund consultant who had examined Madoff's business two years ago before deciding not to invest in it.

"In most hedge funds, you have many partners in deals, but he was doing everything in a self-contained way," said Jake Walthour, head of advisory services for the due diligence firm Aksia LLC, which also examined Madoff's operation and decided something was wrong.

That lack of partners made it tough to verify that Madoff's business was really achieving good returns. It may also reflect an effort to limit the number of possible accomplices.

Free market ‘farce’

Let’s get the facts right. It does look as if the foundations of US capitalism have shattered. For the past 144 years, American Banks - whether commercial banks and investment banks, dominated the global dollar market. But now that’s changing. Bear Stearns, Lehman Brothers, Merrill Lynch, some of the biggest names on Wall Street have disappeared into thin air.

Goldman Sachs and Morgan Stanley are the only giants left standing. Recent news indicates that even they have been hurt by the slumps in prices, (at least in Morgan Stanley’s case) and have prepared themselves for the end.

Many economists are drawing comparisons with the Great Depression in 1929, the national trauma that has been the benchmark for everything since. “I think it has the chance to be the worst period of time since 1929,” financing legend Donald Trump told CNN recently.

But what’s really happening? What exactly went wrong? Experts have so far been unable to agree on any conclusions. Is this the beginning of the end? Or is it just a painful, but normal cycle correcting the excesses of recent years? These are questions asked by everyone.

Our gaze might be on the markets melting down, but the upheaval we are experiencing is more than a financial crisis, however large. Here is a historic geo-political shift, in which the balance of power in the world is being altered irrevocably.

Impunity

You can see it in the way US dominion has slipped away in its own backyard, with Venezuelan President Hugo Chávez taunting and ridiculing the superpower with impunity. Yet the setback of US standing at the global level is even more striking. With the almost nationalisation of crucial parts of the financial system, the US free-market creed has self-destructed while countries that retained overall control of markets have been vindicated.

In a change as far-reaching in its implications as the fall of the Soviet Union, an entire model of government and the economy has collapsed.

Ever since the end of the Cold War, successive US administrations have lectured other countries on the necessity of sound finance. Indonesia, Thailand, Argentina and several African states endured severe cuts in spending and deep recessions as the price of aid from the International Monetary Fund, which enforced the American orthodoxy.

China in particular was pushed around relentlessly on the weakness of its banking system. But China’s success has been based on its consistent contempt for Western advice and it is not Chinese banks that are currently going bust. How symbolic recently to watch those Chinese astronauts take a spacewalk while the US Treasury Secretary is on his knees.

What Next?

According to conservative analysts the U.S. economy faces four cascading threats: First, the sharp decline in consumer spending on houses, autos and other durables, following the sharp decline in lending to households, will cause a recession as construction of new buildings and production of consumer durables nose dive.

Second, many homeowners will default on their mortgage payments and consumer loans, especially as house values fall below the mortgage values. Third, the banking sector will cut back sharply on its lending in line with the fall in its capital following the write-off of bad mortgage and consumer loans.

Those capital losses will push still more financial institutions into bankruptcy. Fourth, the tightening of lending now threatens even the shortest-term loans, which banks and other institutions lend to each other for working capital.

The fourth threat is by far the worst. If the short-term money markets were to break down, the economy could go into a severe collapse because solvent and profitable businesses would be unable to attract working capital.

Recession

The third threat could cause a severe recession. Unemployment might rise, for example, up to 10 percent from the current 6 per cent, which would create enormous social hardships. The ongoing fall in bank capital as the housing boom turns to bust is already forcing banks to cut back their outstanding loans significantly, because they must keep the lending in proportion to their now-shrunken capital base.

Major investment projects, such as acquisition of new buildings and major machinery, will be scaled back. Some major nonfinancial companies will likely go bankrupt as well.

The second threat, the financial distress of homeowners, will certainly be painful for millions of households, especially the ones that borrowed heavily in recent years. Many will lose their homes; some will be pushed into bankruptcy. Some may see their credit terms eased in renegotiations with their banks.

The first threat, the cutback in sales of housing and other consumer durables, is the Humpty-Dumpty of the economy that cannot be put back together. The inventory of unsold homes is now large; housing demand and new construction will be low for many years. Consumer spending will eventually come tumbling down.

A deadly sin

If you analyse in simple terms, greed is the cause of the current crisis. It was the greed of those who took easy money to buy houses beyond their means and the greed of bankers who lent to people borrowing beyond their means.

The depth of this depravity can be seen in the Wall Street bankers who were collecting salaries over US$100 million per year even as their banks were collapsing.In the 1930’s many thought that Capitalism was the barrier for development. Many looked to Communism as an answer.

As the economy crashes around us some are questioning Capitalism again. We know that Communism did not work either. In the same vein, Capitalism seems to be not working either.

Communism wrapped itself in the language of the people and the public good. In the same way, large companies tell us that they serve us. They tell us that they are good stewards. If they are pushed, they tell us that they act for their shareholders. Communism made all the key decisions in huge central bureaucracies. No power was allowed to escape to the edge or to the local. Planning and power control at the centre was everything. Is this not the same for large companies today?

Communism was in effect bureaucracy. Decisions were divorced from the reality of life as they were taken only in the context of what is right for the bureaucracy - that it that all must defend the institution and its top leaders.

Is this not the same for large companies today?

While communism used the language of community, comrade and the patriotism, the elite lived a completely different life from the people. In large companies the same is true. The CEO maybe called Siva or Sugi but he is an autocrat and he lives like a king.

The Soviet Union collapsed in 1989 because such a system could no longer cope with the complexity of the modern world - it could not deal with its energy needs and keeping up with the consumer and military spending.

The disparity between what was promised and what was delivered became too much for the people to accept the doctrine any more.

Having created the conditions that produced history’s biggest bubble, political leaders of USA appear unable to grasp the magnitude of the dangers their country now faces.

Caught up in their forefather’s American dream and the free market concept, they seem oblivious to the fact that US global leadership is fast ebbing away. A new world is coming into being almost unnoticed, where USA is only one of several great powers, facing an uncertain future it can no longer shape.

by Lionel WIJESIRI

Obama: Probe shows no contact in Ill. gov scandal

CHICAGO – President-elect Barack Obama said Monday a review by his own lawyer shows he had no direct contact with Illinois Gov. Rod Blagojevich about the appointment of a Senate replacement, and transition aides did nothing inappropriate.

President-elect Barack Obama speaks about energy with Vice President-elect Joe Biden at a press conference in Chicago, Monday, Dec. 15, 2008.

Obama pledged to make the review public, but said he decided to hold off because prosecutors asked for a delay and "I don't want to interfere with an ongoing investigation." U.S. Attorney Patrick Fitzgerald released a statement confirming the request.

Controversy has swirled around the president-elect and his incoming White House chief of staff, Rep. Rahm Emanuel, following Blagojevich's arrest last week on charges he schemed to trade Obama's Senate seat for personal gain.

Obama, fielding questions at a news conference, sidestepped when asked whether Emanuel had spoken with aides to the governor about potential Senate appointees.

Emanuel was one of several aides who watched the news conference from the wings.

The president-elect pledged the results of the investigation by his incoming White House counsel, Gregory Craig, would be released "in due course."

He said the probe was complete and thorough, but did not say which of his aides Craig interviewed, whether any of them was under oath at the time, or any other details.

Obama appeared before reporters to announce his environmental and natural resources team.

It was disclosed last week that he selected Steven Chu for energy secretary, Lisa Jackson for Environmental Protection Agency administrator, Carol Browner as his energy and climate "czar," and Nancy Sutley to lead the White House Council on Environmental Quality.

Separately, officials familiar with the selection of Obama's Cabinet said the president-elect has chosen Chicago schools chief Arne Duncan as education secretary, and Colorado Sen. Ken Salazar as interior secretary. These officials spoke on condition of anonymity, saying they were not authorized to disclose any personnel decisions not yet announced.

In personally disclosing the results of the investigation he ordered, Obama said, "As I said in a press conference last week, I had no contact with the governor's office and I had no contact with anybody in the governor's office. What I indicated last week was there was nothing that my office did that was in any way inappropriate or related to the charges that have been brought."

Blagojevich has authority under Illinois state law to name a Senate replacement for Obama, who resigned his seat as he prepares to become president. Senate Democrats have warned the governor not to use his power, hinting they may refuse to allow his selection to take the oath of office.

There also has been talk of the legislature passing a law that would strip the governor of the power to name a replacement, and call for a special election instead.

Separately, Blagojevich has come under heavy pressure to resign, from Obama as well as Democrats nationally and in Illinois. Earlier in the day, the Legislature took the first step toward possible impeachment.

Obama held his news conference shortly after his transition office released a statement by spokesman Dan Pfeiffer saying the internal review had found no wrongdoing.

Like the president-elect, the statement left several issues uncovered.

It did not say whether Emanuel was heard on a wiretap providing the governor's top aide with a list of names that the president-elect favored. Nor did it say who, if anyone, on Obama transition's team had made contact with the governor or his aides concerning a replacement for Obama or whether Craig interviewed people under oath, or to whom he talked.

Pfeiffer said the review "affirmed the public statements of the president-elect that he had no contact with the governor or his staff, and that the president-elect's staff was not involved in inappropriate discussions with the governor or his staff over the selection of his successor as U.S. Senator."

Earlier in the day, Obama met privately with his national security team, including Vice President-elect Joe Biden, incoming Secretary of State Hillary Rodham Clinton and Defense Secretary Robert Gates.

The president-elect's transition office said the meeting was held to discuss opportunities and challenges around the globe and was designed to help the new administration hit the ground running as of Inauguration Day, Jan. 20.

In recent days, Obama's staff has declined to respond even to basic questions about the Blagojevich review, like how long it would take, who was leading it and what issues were explored.

Two people who have been briefed on the investigation had told The Associated Press that Emanuel is not a target of the probe. They spoke on condition of anonymity because the criminal investigation is ongoing. One is a person close to Emanuel, who said he has been told by investigators that he's not a subject of their probe.

There are no suggestions that Obama or his aides were involved in the alleged sale of his seat. Fitzgerald has said prosecutors were making no allegations that Obama was aware of any scheming. And Blagojevich himself, in taped conversations cited by prosecutors, suggested Obama wouldn't be helpful to him and called him a vulgar term. Even if the governor were to appoint a candidate favored by the Obama team, Blagojevich said, "they're not willing to give me anything except appreciation."

House OKs $14B auto bill — but it's still in peril

WASHINGTON – A $14 billion rescue package for the nation's imperiled auto industry sped to approval in the House Wednesday night, but the emergency bailout was still in jeopardy from Republicans who were setting out roadblocks in the Senate.

White House Deputy Chief of Staff Joel Kaplan briefs reporters, Wednesday, Dec. 10, 2008, at the White House in Washington, about negotiations on a bill to provide government assistance to the financially ailing auto industry.

Democrats and the Bush White House hoped for a Senate vote as early as Thursday and enactment by week's end. They argued that the loans authorized by the measure were needed to stave off disaster for the auto industry — and a crushing further blow to the reeling national economy.

The legislation, approved 237-170 by the House, would provide money within days to cash-starved General Motors Corp. and Chrysler LLC. Ford Motor Co., which has said it has enough to stay afloat, would also be eligible for federal aid.

Republicans were preparing a strong fight against the aid plan in the Senate, not only taking on the Democrats but standing in open revolt against their party's lame-duck president on the measure.

The Republicans want to force the companies into bankruptcy or mandate hefty concessions from autoworkers and creditors as a condition of any federal aid. They also oppose an environmental mandate that House Democrats insisted on including in the measure.

House Speaker Nancy Pelosi said the House-passed bill represented "tough love" for U.S. auto companies and "giving a chance — this one more chance — to this great industry."

The White House, struggling to sell the package to congressional Republicans, said earlier that a carmaker bankruptcy could be fatal to the auto industry and have a devastating impact on workers, families and the economy.

"We believe the legislation developed in recent days is an effective and responsible approach to deal with troubled automakers and ensure the necessary restructuring occurs," said Dana Perino, the White House press secretary.

But the measure faces a difficult road in the Senate, where it needs 60 votes to advance. Rank-and-file Senate Republicans skewered the bill during a closed-door luncheon with White House Chief of Staff Josh Bolten, who was dispatched to Capitol Hill to make a case for the rescue package.

Even among Senate Democrats, the level of support was still uncertain. In the House, 20 Democrats joined 150 Republicans in voting "no," while 32 Republicans sided with 205 Democrats to back the bill.

Besides providing cash for the auto companies, it would create a government "car czar," to be named by President George W. Bush to dole out the loans, with the power to take back the money and force the carmakers into bankruptcy next spring if they didn't cut quick deals with labor unions, creditors and others to restructure their businesses and become viable.

"To give up on the auto industry now would be to condemn the American economy at one of its most vulnerable periods in our economic history to a degree of further hurt," said Rep. Barney Frank, D-Mass, the Financial Services Committee chairman.

Behind the scenes, Senate Democratic and Republican leaders scrambled for a deal that would allow votes on the bill on Thursday. Some GOP senators were demanding votes on an alternative that would order the automakers to take specific actions to restructure — including steep wage cuts and debt restructuring — in return for any federal money.

Opposition from Republicans reflected the tricky task of pushing yet another federal rescue through a bailout-weary Congress, with Bush's influence on the wane.

"People realize that this bill is an incredibly weak bill (and) is the product of an administration that wants to kick the can down the road and let somebody else deal with it," said Sen. Bob Corker, R-Tenn.

The auto aid debate was replete with echoes of the tense, early-October drama surrounding the $700 billion Wall Street bailout, when a marathon set of negotiations yielded a much-celebrated deal that came apart quickly amid GOP opposition and public outrage. That bill ultimately passed after much arguing, cajoling, threatening and lobbying among lawmakers, and Bush signed it.

Before passing the auto measure Wednesday, the House voted to add language requiring that banks that are bailed out by the government report quarterly on how much they have increased or decreased lending.

In the Senate, opposition to the auto rescue wasn't limited to Republicans.

Democratic Sen. Max Baucus of Montana announced he was against the measure because of a provision to bail out transit agencies that were involved in transactions that are now considered unlawful tax shelters.

House Republicans swiftly voiced their opposition and called for a plan that would instead provide government insurance to subsidize new private investment in the Big Three automakers, demand major labor givebacks and debt restructuring at the companies and encourage them to declare bankruptcy.

Under the House-passed measure, the carmakers would have to submit blueprints on March 31 to the industry overseer showing how they would restructure to ensure their survival, although they could be given until the end of May to negotiate with the government on a final agreement.

The carmakers initially asked Congress for $25 billion, then returned two weeks later to plead for as much as $34 billion. But with the White House refusing to dole out new spending for the Big Three, congressional Democrats agreed to use an existing program that was to help carmakers retool their factories to make more fuel-efficient cars.

That fund yielded only $15 billion in emergency loans, and when negotiators agreed to leave some money in the environmental program, the amount fell to $14 billion.

Democrats agreed to scrap language — which the White House had called a deal-breaker — that would have forced the carmakers to drop lawsuits challenging tough emissions limits in California and other states. But they kept a provision to force the automakers to abide by those states' limits — a kind of consolation prize for environmentalists, who already were livid at the raid of the fuel-efficiency program.

Senate Democrats unveiled a nearly identical measure that omitted the requirement, but that bill still faced long odds.

At the White House, Deputy Chief of Staff Joel Kaplan said the Bush administration would work with President-elect Barack Obama's team on choosing industry czar.

Obama defended the auto bailout as necessary given the threat a potential Big Three collapse could pose to an already battered economy.

"As messy as it may be, I think there's a sense of, 'Let's stabilize the patient,'" he said in an interview published in Wednesday's Chicago Tribune and Los Angeles Times.

The car czar would have say-so over any major business decisions by the automakers while they were taking advantage of federal aid, with veto power over any transaction of $100 million or more. The companies — including the private equity firm Cerberus, which owns a majority stake in Chrysler — would have to open their books to the government overseer.

And if Chrysler defaulted on its loan, Cerberus would be responsible for reimbursing the government.

The measure also would attach an array of conditions to the bailout money, including some of the same restrictions imposed on banks as part of the $700 billion Wall Street rescue. Among them are limits on executive compensation, a prohibition on paying dividends and requirements that the government share in future profits and taxpayers be repaid before any other shareholders.

Also included in the bill is an unrelated pay raise for federal judges.

Deal reached in principle on $15B auto bailout

WASHINGTON – Weary Democratic congressional leaders and White House officials agreed in principle Tuesday on a $15 billion bailout of U.S. automakers that would give the government extraordinary power to restructure the failing industry. But the rescue faced snags as Republicans raised deep concerns.

Congressional aides and a senior administration official sa

House Speaker Nancy Pelosi, D-Calif., and House Financial Services Committee Chairman Barney Frank, D-Mass., talk about a possible bailout of American automakers during a news conference on Capitol Hill in Washington, Monday, Dec. 8, 2008.

id the proposed deal would speed the loans to Detroit's struggling car companies and place a "car czar" named by President George W. Bush in charge of overhauling the auto industry. Congress could vote on the plan as early as Wednesday and the money could be disbursed within days.

A breakthrough came when negotiators reached a compromise to require the czar to revoke the loans and deny any further federal aid to automakers that don't strike a deal with labor unions, creditors and others to ensure their survival by next spring — essentially pushing them into bankruptcy.

"A great deal of progress has been made on auto legislation that will protect the taxpayer and ensure that short-term financing is available only to companies prepared to undertake the dramatic restructuring necessary to become viable and competitive," Dana Perino, the White House press secretary, said late Tuesday.

Earlier in the day, Rep. Barney Frank, D-Mass., the Financial Services Committee chairman, said the remaining issues were minor.

"There do not appear to me to be differences in principle of a sufficient nature to blow this thing up," said Frank, whose staff is helping to draft the bill.

Still, staff aides worked into the night fine-tuning legislative details of the agreement. It could face substantial obstacles from congressional Republicans, who remained skeptical of the White House-negotiated plan. A group of conservatives led by Sen. John Ensign, R-Nev., has threatened to block the measure.

A further stumbling block was Democrats' refusal to scrap language, vehemently opposed by the White House, that would force the carmakers to drop lawsuits challenging tough emissions limits in California and other states.

That measure "kills the deal," said Dan Meyer, Bush's top lobbyist.

Senior Democratic aides acknowledged as much Tuesday and said they expected the provision to ultimately be dropped.

Environmentalists, who count House Speaker Nancy Pelosi, D-Calif., among their closest allies, already were irate that the bailout uses money set aside for a program to help the automakers finance the retooling of their factories so they could produce greener vehicles.

Another remaining hang-up was over ensuring that Cerberus, the private equity firm that owns Chrysler LLC, would reimburse the government if the auto company defaulted on its loan, said a congressional negotiator who spoke only on condition of anonymity because he was not authorized to disclose details of the emerging deal.

But the White House and congressional Democrats resolved other major conflicts. Democrats said they were willing to toughen the measure to require that the czar revoke loans from car companies that couldn't show they were viable by the end of March — rather than simply allowing the overseer to take back the money.

That would essentially let the czar force an automaker into bankruptcy if it didn't present a feasible restructuring plan.

They were also near agreement to weaken a proposal to give the czar veto power over automakers' business transactions — something the White House and automakers had said was unworkable. They were discussing giving the overseer say-so over transactions of $100 million or more, instead of putting the limit at $25 million.

Even if they seal the deal, though, conservative Republicans who want to force one or more of the Big Three into bankruptcy warned they might try to block the measure, virtually guaranteeing that it will need a 60-vote majority to pass and possibly delaying approval for days.

"I think that not only myself, but several of us will be looking at possibly blocking this package," Ensign told CNBC.

The measure would be open to Detroit's Big Three, but is expected to provide emergency loans only to General Motors Corp. and Chrysler, which have said they could collapse within weeks absent federal help. Ford Motor Co. has said it doesn't need an immediate cash transfusion, but wants a $9 billion line of credit to insulate against further deterioration in the economy.

The rescue took shape with the nation in recession, Congress and the presidency both in transition, Wall Street ricocheting daily and the Federal Reserve and Bush Treasury Department fighting to steady the reeling financial industry.

Sen. Mitch McConnell, R-Ky., said he was concerned that Democrats were proposing a package that "fails to require the kind of serious reform that will ensure long-term viability for struggling automobile companies."

With their approach, "we open the door to unlimited federal subsidies in the future," McConnell said.

Getting 60 votes for an agreement, with many senators expected to be absent for the emergency, postelection debate, could be tricky.

Said Sen. Carl Levin, D-Mich., an ally of the auto industry: "This gets us to the 20 yard line, but getting over the goal line will take a major effort, particularly in the Senate." He called for Bush and President-elect Barack Obama to lobby personally for the auto bailout.

The legislation under discussion would attach an array of conditions to the bailout money, including some of the same restrictions imposed on banks as part of the Wall Street rescue. Among them are limits on executive compensation, a prohibition on paying dividends and requirements that the government share in future profits and taxpayers be repaid before any other shareholders.

Also included in the plan is a requirement that the carmakers taking federal aid get rid of their corporate jets — which became a potent symbol when the Big Three CEOs used them for their initial trips to Washington to plead before Congress for government assistance.

Democrats also inserted a provision in the bill to bail out some of the nation's largest transit systems. The bus and rail systems could be on the hook for billions of dollars in payments because exotic deals they entered into with investors — which have since been declared unlawful — have gone sour with the collapse of American International Group Inc. and other financial institutions.

Congress sends White House auto aid plan with czar

WASHINGTON – Congressional Democrats and the White House worked to resolve their last disputes Monday over terms of a $15 billion bailout for U.S. auto makers — complete with a "car czar" to oversee the industry's reinvention of itself — that's expected to come to a vote as early as Wednesday.

House Speaker Nancy Pelosi, with House Financial Services Committee Chairman Barney Frank, D-Mass., at right, talks about a possible bailout of American automakers during a news conference on Capitol Hill in Washington, Monday, Dec. 8, 2008

Top Democrats gave the White House their proposal for rushing short-term loans to Detroit's Big Three through a plan that requires that the industry remake itself in order to survive. The Bush administration gave a cool initial response, saying the measure didn't do enough to ensure that only viable companies would get longer-term federal help. Negotiators worked into the night Monday to resolve differences.

"We've made a lot of progress in recent days to develop legislation to help automakers restructure and achieve long-term viability," Dana Perino, the White House press secretary, said in a statement. "We'll continue to work with members on both sides of the aisle to achieve legislation that protects the good faith investment by taxpayers."

President George W. Bush himself said it was "hard to tell" if a deal was imminent because definite conditions had to be met. "These are important companies, but on the other hand, we just don't want to put good money after bad," he said in an interview with ABC's "Nightline."

Despite optimism on both sides that Congress and the White House could reach a swift agreement on the measure, it was still a tough sell on Capitol Hill.

"While we take no satisfaction in loaning taxpayer money to these companies, we know it must be done," said Senate Majority Leader Harry Reid, D-Nev. "This is no blank check or blind hope."

The bill puts a government overseer named by Bush — a kind of "car czar" — in charge of setting guidelines for an industrywide overhaul, with the power to revoke the loans if the carmakers weren't taking sufficient steps to reinvent themselves.

House Speaker Nancy Pelosi, D-Calif., said the restructuring would require tough concessions from management, labor, creditors and others.

"We call this the barbershop. Everybody's getting a haircut here," Pelosi said.

Still, the White House said a preliminary look at the draft didn't appear to contain strict enough conditions to ensure that long-term financing would be available only to companies that could survive, according to officials who would comment on the continuing negotiations only on condition of anonymity.

The crux of the White House's concern is that there may not be enough clear, immediate protection for taxpayers if a company is not meeting its own promises for long-term viability after review by the president's overseer. The latest proposal suggests Congress may have to get involved again in a few months and pass a law to force a company to stick to its own plan — a potentially unwieldy political step.

Rep. Barney Frank, D-Mass., the House Financial Services Committee chairman who is leading negotiations on the measure, said he was optimistic that the differences could be resolved.

"There are a couple of specific issues to be negotiated. I think they can be worked out," Frank said Monday afternoon.

Sen. Carl Levin, D-Mich., a key ally of the auto industry, said getting the roughly 15 Republicans needed to support the plan was an uphill battle.

"This is a real hill to climb even if we can get agreement between the White House and congressional leaders," he said.

Even sympathetic Republicans weren't ready to sign on. Sen. George Voinovich, R-Ohio, has "numerous concerns" about the bill, including the strength of the taxpayer protections and the role of the so-called car czar, said spokesman Chris Paulitz.

There are lingering differences between the administration and Congress on details of the czar's role and responsibilities, essentially a proxy fight between the White House and Democrats over whether Bush or President-elect Barack Obama should have the final say on who runs the auto industry restructuring.

Democrats are pressing to allow the president to choose other people beside the czar to help oversee the bailout, while the White House wants just one person tapped by Bush to have control.

Congress Republicans and the White House also are balking at a requirement Democrats included in their proposal that the carmakers drop their opposition to efforts by California and several other states to impose stricter emissions rules than the federal standard.

Pelosi is seeking that bar at the behest of environmentalists who are angry that money to bail out the auto industry will be drawn from an existing loan program that was meant to help the Big Three build greener vehicles that burn less gasoline.

That's just one of several restrictions the bill places on the automakers while they're receiving the loans.

Among the requirements included in Democrats' draft proposal is one that the carmakers getting federal help get rid of their corporate jets — which became a potent symbol of the industry's ineptitude when the Big Three CEOs used them for their initial trips to Washington to plead before Congress for government aid.

The automakers also would be subject to some of the same restrictions imposed on banks as part of the $700 billion Wall Street bailout, including limits on executive compensation, a prohibition on paying dividends, and requirements that the government share in future profits and taxpayers be repaid before any other shareholders.

The special inspector general overseeing the Wall Street rescue also would keep tabs on the carmaker bailout. The Senate on Monday confirmed Neil M. Barofsky, a federal prosecutor in New York, for that post.

The proposed automakers' bailout also gives the car czar say-so over any major business decisions by the companies while they're taking advantage of federal aid. The companies would have to open their books to the government, including informing the overseer of any transaction of $25 million or more.

Under the plan, the carmakers' could get emergency loans right away. Then the overseer would write guidelines, due on the first of the year, for restructuring the Big Three.

In testimony before Congress last week, General Motors Corp. and Chrysler LLC, which have said they are weeks from collapse, made it clear they would need a total of $14 billion to $15 billion to survive through early 2009. Ford Motor Co. has said it has enough money to stay afloat unless one of the other Big Three goes under or the economy deteriorates more sharply.

While the measure would put an administration official selected by Bush in charge of setting terms for restructuring, the decision about whether the terms were being met would not be made until Obama had been sworn in. Some Democrats were pushing to name Kenneth Feinberg, the lawyer who oversaw the federal Sept. 11 victims' compensation fund, to the post, but top congressional officials said there had been no discussion of that.

In the latest gauge of public opinion, people were split about evenly over providing federal money to keep the car companies functioning.

Forty-five percent approved and 44 percent were opposed, according to a CBS News poll released Monday. Nearly six in 10 Democrats favored the aid, while nearly the same share of Republicans opposed it.

About seven in 10 said the government should have a say in managing the companies if taxpayers provide assistance, and nearly as many said requiring more alternative fuel vehicles should be a condition of such aid. Fifty-six percent blamed management for the companies' problems, double the number who blamed uncontrollable economic problems.

Oil bounces off 4-year lows to above $43 a barrel

SINGAPORE – Oil prices bounced off four-year lows to above $43 a barrel Monday in Asia after OPEC's president suggested the group could surprise investors with a large production cut later this month.

Light, sweet crude for January delivery was up $2.45 to $43.26 a barrel in electronic trading on the New York Mercantile Exchange by late afternoon in Singapore. The contract fell Friday nearly $3 to settle at $40.81. Prices fell as low as $40.50, levels last seen in December 2004.

Chakib Khelil, president of the Organization of Petroleum Exporting Countries, said Saturday the group could announce a "severe" reduction of output quotas at its next meeting on Dec. 17 in Algeria.

The OPEC head would not specify how deep the output cut would be, but noted that some analysts are predicting a decrease of as much as 2 million barrels per day.

An output decision that startles markets would help bolster plunging oil prices, Khelil said.

"The best way is to surprise them," he said. "I hope it will."

OPEC will likely cut production by at least 1 million barrels a day, said David Moore, commodity strategist with Commonwealth Bank of Australia in Sydney.

"The possibility of OPEC moving to tighten up the oil market is real," Moore said. "As we get closer to the meeting, people may get more wary that OPEC may make a large cut."

OPEC announced a production cut of 1.5 million barrels a day in October and investors largely ignored it, focusing instead on a global economic slowdown that has weakened crude demand.

President-elect Barack Obama warned Sunday that the U.S. economy, which saw the worst job data in 34 years on Friday, would get worse before improving.

The price of oil has fallen about 70 percent since peaking at $147.27 in July.

"Pessimism about the international outlook has remained intense," Moore said. "Concerns about weakening oil demand have not gone away. You have to look at today's movement in the oil price in light of the ferocious decline over the past week."

In other Nymex trading, gasoline futures rose 5.18 cents to 95 cents. Heating oil gained 5.80 cents to $1.48 a gallon while natural gas for January delivery slid 20.6 cents to 5.59 per 1,000 cubic feet.

In London, January Brent crude rose $1.96 to $41.70 on the ICE Futures exchange.

Bush, Democrats seek to finalize auto bailout

WASHINGTON (Reuters) – White House and congressional negotiators sought on Sunday to remove remaining differences over an emergency rescue for the struggling auto industry, a stark symbol of the deepening U.S. economic crisis.

General Motors Chairman and CEO Richard Wagoner (L-R), Chrysler CEO Robert Nardelli, and Ford Motor Company President and CEO Alan Mulally provide testimony about a proposed government bailout plan for the US auto industry at a hearing of the House Financial Services Committee on Capitol Hill in Washington

Prodded by shock unemployment figures which showed the country shed more than half a million jobs in November alone, negotiators tried to forge an agreement in principle to provide "The Big Three" American automakers with at least $15 billion in short-term loans.

The Senate is due back in session on Monday and negotiators hope to have a package ready that can be quickly approved and sent to President George W. Bush as one of the last measures he signs into law before Democrat Barack Obama succeeds him as president on January 20.

The amounts under discussion are less than half the $34 billion that the automakers asked Congress for last week. Some economists believe they may need $75 billion to $125 billion to survive in the longer term.

Nevertheless, lawmakers fear a recession will deepen if any of the three giants -- -- GM, Ford and Chrysler -- collapses soon. But some from Bush's Republican party don't want another rescue plan after a $700 billion Wall Street rescue package that triggered voter backlash in the November 4 congressional elections.

Critics also say market forces, not state intervention, ought to determine the fate of the auto industry.

Bailout backers say that since the government helped Wall Street, it must also help hundreds of thousands of blue-collar auto workers who have the support of Democrats.

Obama added his weight to the drive, saying while the car companies had made mistakes, letting them collapse was not an option -- although they must be forced to radically revamp their operations.

"I think that Congress is doing the exact right thing by asking for a conditions-based assistance package that holds the auto industry's feet to the fire," he said in Chicago, adding that new management could also be an option.

CONDITIONS AND CONCESSIONS

In addition to reorganizing and protecting taxpayer investment, possible conditions include creating a government "car czar" to oversee the bailout and additional concessions by the United Auto Workers (UAW) union.

A UAW official, speaking after a Detroit church service dedicated to prayers for the auto industry, said on Sunday the union was open to moves by Chrysler to seek an alliance with a rival automaker as long as it saves as many jobs as possible.

Congressional aides said it was as yet unclear whether companies would have to implement at least some of the conditions or merely promise them before getting any money.

Senate Banking Committee Chairman Christopher Dodd said on Sunday that GM chairman Rick Wagoner should resign to allow new leadership to restructure the faltering company.

"He has to move on," Dodd, a Connecticut Democrat who is leading efforts to craft bailout legislation, told CBS.

Faced with plummeting sales they blame largely on the credit crunch and recession, GM, Chrysler and Ford sought $34 billion from Congress last week to avoid possible collapse. A deal negotiated by the White House and Congress would provide no more than $17 billion to last into March.

Critics have said any loans would be a waste of money unless U.S. automakers were able to cut costs and better compete with more fuel-efficient, foreign-made cars.

Democratic Sen. Carl Levin of Michigan, home to the major automakers, said he was confident there would be a deal in the next 24 hours. But he was less certain if backers would garner the 60 votes needed in the 100-seat Senate to avoid a Republican procedural hurdle known as a filibuster.

"That's a much more complicated question," Levin said on "Fox News Sunday."

Senate Republican Leader Mitch McConnell earlier indicated he might support a bailout if it had adequate safeguards. But Sen. Richard Shelby, an Alabama Republican who has spoken out against the proposed "bridge loan" emergency package, indicated he was ready for battle.

"This is a bridge loan to nowhere," said Shelby, appearing with Levin on "Fox News Sunday."

UNKNOWN FUTURE

Despite the progress in Washington, America's auto industry is headed into an unknown future.

GM and Chrysler, along with Ford once bywords for U.S. industrial power, are both headed for wrenching restructuring under federal oversight that will hit their investors, creditors, dealers and workers almost as hard as if they had filed for bankruptcy protection.

Ford is in slightly better financial shape, but all three are expected to continue to mothball plants and dismiss tens of thousands of employees.

A breakthrough in the auto crisis emerged on Friday after government statistics showed that employers slashed more than 533,000 jobs in November, the highest monthly decline in 34 years. This underscored lawmakers' feared that hundreds of thousands more would be thrown out of work if any of the major automakers went down.

Indian official denies call to Pakistani president

NEW DELHI – India's foreign minister has denied making a phone call to Pakistan's president at the height of the Mumbai attacks that led to Pakistan putting its air force on alert.

U.S. Secretary of State Condoleezza Rice, left, shakes hands with Indian Foreign Minister Pranab Mukherjee, right, during a joint press conference following a meeting in New Delhi, India, Wednesday, Dec. 3, 2008. Rice said Pakistan has a 'special responsibility' to cooperate with the investigation into the attacks, which Indian and U.S. officials have blamed on militant groups based in Pakistan.

Pakistan says President Asif Ali Zardari received a "threatening" call during the crisis, apparently from Indian External affair minister Pranab Mukherjee.

Pakistan's Dawn newspaper says the call was a hoax.

Reacting for the first time to the report, Mukherjee says in a statement Sunday that "I had made no such telephone call."

Carmakers' bailout pleas hit Senate skepticism

WASHINGTON – Desperate U.S. automakers ran into fresh obstacles from skeptical lawmakers Thursday as they appealed with rising urgency — and a new dose of humility — for a $34 billion bailout. Without help, said one senator, "we're looking at a death sentence."

Auto executives, from left, General Motors Chief Executive Officer Richard Wagoner, UAW President Ron Gettelfinger, Ford Chief Executive Officer Alan Mulally, and Chrysler Chief Executive Officer Robert Nardelli testify on Capitol Hill in Washington, Thursday, Dec. 4, 2008, before a Senate Banking Committee hearing on the auto industry bailout.

With lawmakers in both parties pressing the automakers to consider a pre-negotiated bankruptcy — something they have consistently shunned — the Big Three were contemplating a government-run restructuring that could yield results similar to bankruptcy, including massive downsizing, in return for the bailout billions. But there was no assurance they could get even that.

And that wasn't all the unwelcome news. Congressional officials said one leading proposal — to tap an already approved fund set aside for making cars environmentally efficient — wouldn't give the carmakers nearly as much money as they say they need.

The auto executives pleaded with lawmakers at a contentious Capitol Hill hearing — their second round in less than a month — for emergency aid before year's end. But with time running out on the current Congress, skepticism about the bailout appeared to be as strong as ever.

"In all due respect, folks, I don't think there's faith that the next ... three months will work out, given the past history," said Sen. Charles E. Schumer, D-N.Y.

"No thinking person thinks that all three companies can survive," said Republican Sen. Bob Corker of Tennessee.

Chris Dodd, chairman of the Banking Committee, was the senator who spoke of a death sentence — though he also said, "We're not going to leave town without trying" to help.

The auto executives are to make their case at a House hearing on Friday, and Congress could take up rescue legislation next week in an emergency session.

But Democratic congressional leaders were leaning on the White House to act on its own. House Speaker Nancy Pelosi, D-Calif., and Senate Majority Leader Harry Reid, D-Nev., wrote to President George W. Bush on Thursday asking him, as they have repeatedly, to use the $700 billion Wall Street rescue fund to help the auto makers — something the administration has consistently refused to do. They argued that such a course was justified because of the potential for grave harm to the financial sector in the event of a carmaker collapse.

Auto state lawmakers went further, threatening to block the administration's access to the second half of the financial bailout fund unless it made "a firm commitment to assist working Americans and save American jobs."

The clear implication was that no more Wall Street aid would be available without help for the Big Three.

"I think they'll read between the lines," said Rep. Fred Upton, R-Mich., who teamed with Democratic Rep. John Dingell, also of Michigan, in a letter to colleagues outlining their position.

Under legislation enacted in October creating the financial industry rescue program, Congress can vote to block the Treasury Department from accessing the second $350 billion, although it would need a two-thirds supermajority to do so over a presidential veto.

Bush, too, voiced skepticism about an auto rescue package.

"No matter how important the autos are to our economy, we don't want to put good money after bad. In other words, we want to make sure that the plan they develop is one that ensures their long-term viability for the sake of the taxpayer," he said in an interview with NBC News.

President-elect Barack Obama was keeping his distance, prompting Rep. Barney Frank, D-Mass., who has been dealing with both the financial bailout and the auto rescue proposal to say Obama is "going to have to be more assertive than he's been." Frank is chairman of the House Financial Services Committee, which will conduct Friday's hearing.

Repentant after a botched first crack at bailout pleas, the executives from General Motors Corp., Ford Motor Co. and Chrysler LLC all agreed during Thursday's session that a multibillion-dollar bailout deal would include a supervisory government board that could order major overhauls of the companies if deemed necessary for survival.

United Auto Workers union President Ron Gettelfinger, aligned with the industry in pressing for the aid warned that without action by Congress: "I believe we could lose General Motors by the end of this month." He said the situation was dire and time was of the essence.

The Big Three CEOs apologized for past blunders. "We made mistakes, which we're learning from," GM chief Rick Wagoner said. Ford CEO Alan Mulally also acknowledged missteps, saying his company's approach once was "If you build it, they will come."

But as a result of the misjudgments, he said, "we are really focused."

The Bush administration wants the aid to be drawn from an existing $25 billion program to help the industry retool its plants to make their vehicles more fuel-efficient.

But congressional budget analysts said Thursday that would yield only $7.5 billion in short-term loans.

The auto executives made the trip from Detroit in new-model hybrid autos made by their respective companies, two weeks after a first appeal for $25 billion in which they were chided for flying on private jets to beg for money.

Chrysler CEO Bob Nardelli promised that his company, recipient of a previous government-subsidized rescue loan in the 1970s that it repaid, would reimburse taxpayers by 2012 this time and would devote itself to manufacturing "fuel-efficient cars and trucks that people want to buy."

Asked whether the carmakers would agree to a setup like the one established for Chrysler's 1979 bailout, with a federal restructuring trustee who had some of the same powers as a bankruptcy court, all three executives indicated they would. Ford's Mulally added, "I probably need to think about that a little bit. It sounds right, but I just don't know all of the implications."

Lawmakers still complained of sticker shock, noting that the bailout's price tag had jumped $9 billion since the trio last appeared.

Sen. Richard Shelby of Alabama, the senior Republican on the Banking Committee, pressed the automakers to explain why, and explain how the sum would not simply "prop up a failed business model for a few months ... and how are you going to pay it back?"

Democrats, too, questioned whether an auto bailout would amount to investing taxpayer money in a failing enterprise.

"Be honest and tell me ... just tell me if things stay the way they are now, are you going to be back in a year" asking for more money? asked Sen. Jon Tester, D-Mont.

Protesters who briefly interrupted the hearing were a reminder of what polls show is thin public support for a rescue. "The bailout is a sellout!" demonstrators chanted as they were escorted from the hearing room by police.

Gene L. Dodaro, the top official at Congress' watchdog agency — the Government Accountability Office — agreed with Dodd that the financial industry rescue fund set up in October "is worded broadly enough" to permit it to be tapped for the automakers.

Dodaro testified that the Federal Reserve also has the authority under existing law to make loans to the domestic auto industry if it so chooses.

Dodd said that both Treasury Secretary Henry Paulson and Fed Chairman Ben Bernanke had been invited to testify at Thursday's hearing but had declined. He later criticized the treasury chief for traveling to China at a time of economic peril in the U.S.

"Time to come home — we have a serious problem here," Dodd said. "I need the Federal Reserve to step up as well."

Though the current total request is $34 billion, Ford's proposal says it might have to come back with a second request for an additional $4 billion if the recession persists into 2010, raising the total even higher.

Democrats: Obama needs hands-on economic approach

WASHINGTON – Democrats are growing impatient with President-elect Barack Obama's refusal to inject himself in the major economic crises confronting the country. Obama has sidestepped some policy questions by saying there is only one president at a time. But the dodge is wearing thin. "He's going to have to be more assertive than he's been," House Financial Services Committee Chairman Barney Frank, D-Mass., told consumer advocates Thursday.

Frank, who has been dealing with both the bailout of the financial industry and a proposed rescue of Detroit automakers, said Obama needs to play a more significant role on economic issues.

"At a time of great crisis with mortgage foreclosures and autos, he says we only have one president at a time," Frank said. "I'm afraid that overstates the number of presidents we have. He's got to remedy that situation."

Obama has maintained one of the most public images of any president-elect. He has held half a dozen press conferences, where he has entertained question after question about the economy, the mortgage crisis, and the flailing auto industry. He called for passage of extended unemployment benefits — which has passed — and even a stimulus package if possible before Jan. 20. But he has stayed away from trying to dictate remedies for the toughest problems Congress is confronting: the auto industry's troubles and how to spend the $700 billion bailout.

Frank's remarks came as the Bush administration considers whether it needs the second half of the $700 billion of the Troubled Asset Relief Program aimed at helping the financial sector before Obama takes office on Jan. 20.

An Obama official said the Bush administration reached out to the transition team about tapping into the money. The official, speaking on the condition of anonymity because of the sensitivity of the talks, said Obama's transition team urged the administration to talk to bipartisan congressional leaders and assemble a meeting between the White House and Congress. The official said the Obama team offered to participate in a bipartisan meeting if it would be helpful.

Earlier this week, Obama was asked whether he worried that Treasury Secretary Henry Paulson might begin spending the next installment of the money before he assumes the presidency. Obama demurred.

"Until Secretary Paulson indicates publicly that he's drawing down the second tranche, the second half of the TARP money, it would be speculation on my part to suggest that that money's going to be used up," he told reporters at a Chicago news conference Wednesday.

Obama did stress that a significant component of the fund should be used to reduce the number of foreclosures. But he did not specify a particular remedy.

He also declined to take a stand in a debate over the source of money for an auto loan package. The dispute has divided Democrats and hindered progress on assistance for the industry. At issue is whether to take money from the $700 billion designated for the financial sector or to take it from a previously approved loan aimed at manufacturing more energy efficient cars.

"I think it's premature to get into that issue," Obama said at the conference.

Presidents-elect typically spend the transition period assembling their cabinets, their White House staff and preparing to take the reins of power. But this transition is occurring at an extraordinary time, with bad economic news mounting by the day and with one of the country's major industries begging for a hand to keep from collapsing.

Two Democratic senators involved in trying to salvage the auto companies have said Obama could help move the process along and should become more engaged.

"The Obama team has to step up," Sen. Christopher Dodd, chairman of the Senate Banking Committee and one of the lead negotiators, said Nov. 21 in Hartford, Conn. "In the minds of the people, this is the Obama administration. I don't think we can wait until January 20."

Two days later, Sen. Carl Levin of Michigan, a point man in helping his state's main industry, called on Obama to help resolve the dispute over money for the auto loan package.

"It would be very helpful if the president-elect would become more involved in resolving the issue over the source of the funds," he said. "I want him to offer his assistance. He is a person who can really bring people together."

Frank, shrewd and quick-witted, also poked fun at Obama's calls for a "post-partisan" governing environment in Washington. Frank predicted that regulatory legislation aimed at preventing abuses related to subprime mortgages and credit cards stood a much better chance next year, when Democrats have greater majorities in the House and Senate.

"It is a grave mistake to assume that parties are irrelevant to this process," he said. "My one difference with the president-elect, about whom I am very enthusiastic, is when he talks about being post-partisan.

"Having lived with this very right wing Republican group that runs the House most of the time, the notion of trying to deal with them as if we could be post-partisan gives me post-partisan depression," Frank said.

Palin files late disclosure for free 2007 trips

ANCHORAGE, Alaska – Gov. Sarah Palin has added to her financial disclosure forms two free trips that she took nearly two years ago but failed to report. Palin, who was Republican presidential candidate John McCain's running mate, made the disclosures last month, but after Election Day when she and McCain lost to Barack Obama and Joe Biden. The trips were first revealed in a story by The Associated Press in October.

Alaska Gov. Sarah Palin, center, waves to a crowd during a campaign stop for Sen. Saxby Chambliss, R-Ga, in Savannah, Ga. Palin has added to her financial disclosure forms two free trips that she took nearly two years ago but failed to report

The free trips were taken in April and May of 2007 and should have been reported within 30 days under state ethics law. The Nov. 17 disclosure forms note that the reports were "not filed timely due to administrative error."

Bill McAllister, the governor's spokesman, said this week that the mistakes were made by travel support staff. He said he could not explain the timing of when and how they were caught, but that it was irrelevant because the error was corrected.

Palin, who has criticized state lawmakers for gifts they take, is not facing any sanctions for the late filings, according to Linda Perez, state administrative director. Perez said she was alerted to the matter by McCain's presidential campaign before the Oct. 14 AP story.

"It wasn't necessarily the governor's oversight, nor was she trying to hide anything," Perez said. "It was a staff oversight."

In one of the trips, the James B. Hunt Jr. Institute of North Carolina — a nonprofit education policy group — paid the $2,827 cost of Palin's April 2007 flight and hotel in Scottsdale, Ariz., to attend a four-day conference, according to her report. The group has said it also paid for other governors attending the annual event in recent years.

In May 2007, Palin accepted lodging for herself and her three daughters at Mt. Chilkoot Lodge in the Southeast Alaska town of Skagway. The lodging, valued at $300, was paid for by the owners, including Palin friend and former deputy campaign treasurer Kathy Hosford.

The reports were among recent disclosures released to the AP after a public records request.

Among other gifts Palin reported last month is a June 30 flight valued at $1,187.50 that was paid by the North Slope Borough for Palin and her 7-year-old daughter, Piper, to attend various functions, including a whaling festival in the town of Barrow.

Palin and husband Todd also received travel, food and lodging valued at $4,620.12 to attend a Republican Governors Association event in Texas, in April — gifts that were not reported until August, according to disclosure forms. Palin and the other governors attending the event also received $1,000 Rocky Carroll cowboy boots.

Russia to send warship through Panama Canal

PANAMA CITY, Panama – Russia said Wednesday it is sending a warship through the Panama Canal for the first time since World War II, a short journey loaded with symbolic weight: the destroyer will dock at a former U.S. naval base, showcasing Russia's growing influence in the region.

This is a July 2004 file photo of the Admiral Chabanenko, Russian anti-submarine destroyer, seen in the Barents Sea, Russia, Russia. The Admiral Chabanenko will sail through the Panama Canal this week for the first time since World War II, the Russian navy announced Wednesday Dec. 3, 2008, pushing ahead with a symbolic projection of Moscow's power in a traditional U.S. zone of influence

Russia appears to be relishing the idea of stopping at what was long a symbol of U.S. global power; the Russian Navy announced it would visit "the Rodman naval base" — a name that the host nation, Panama has not used since taking over the base from the United States in 1999.

The destroyer Admiral Chabanenko is scheduled to enter the Panama Canal on Friday morning and arrive late in the day at what Panama calls the Balboa Naval Base.

"It is a sort of tit-for-tat for Russia's perception of U.S. meddling in Georgia, Ukraine and Eastern Europe," and has little military purpose, said Adam Isacson, an analyst for the Washington-based Center for International Policy.

Russia, like the United States, already has ports with access to both the Atlantic and Pacific oceans.

"Sending a destroyer through the Panama canal obviously has a lot of symbolic significance (and) this is primarily symbolism," said analyst Michael Shifter of the Inter-American Dialogue think tank in Washington

U.S. officials have expressed no concern over the visit — continuing a stance they took when the ship earlier participated in joint exercises with Venezuela's navy, which concluded Monday.

Venezuelan President Hugo Chavez, who campaigns against U.S. influence in the hemisphere, invited the Admiral Chabanenko and the nuclear-powered missile cruiser Peter the Great to join the exercises, adding to his growing military ties with the Kremlin.

Panamanian authorities said they would treat the Admiral Chabanenko as just another toll-paying ship, and the calm surrounding the visit is a sign of how far the country has come since it served as a Cold War bastion studded with U.S. military bases when the Canal Zone was U.S. control.

The canal was a symbol of America's growing global reach when it opened in 1914, and it was a major military outpost for generations. The 10-mile-wide, 51-mile-long strip along the canal was considered U.S. territory — a fact that allowed Canal Zone native John McCain to run for the U.S. presidency.

Panama is carrying out a multibillion dollar project to widen the waterway to accommodate bigger ships, and it sees the former U.S. bases as a tourist draw: the nearby Fort Amador is better known locally these days for its seafood restaurants than its military past.

"This isn't the moment where I think the (U.S.) conservatives will get too alarmed," said Shifter. "Perhaps if they had done it even a couple of months ago there would have been more concern, in the context of the Georgia crisis when oil prices hadn't dropped they way they have. Russia is now seen as sort of a weaker position then they were before."

Some U.S. conservatives tried to block or delay the canal hand-over in 1999, arguing that growing operations by a Hong Kong-based ports company would lead to a Chinese takeover of the waterway.

"Obviously, they've been proved to be wrong," Shifter said. "I think the Panamanians have demonstrated that they're perfectly able to run the canal very well; it's been very well managed and there's absolutely no concern" about foreign control.

Even the U.S. government is sanguine about the Russian ship.

"We have no interest in reviving Cold War images and rhetoric. We and the region have left this behind us and no longer see our relationships with other countries through the Cold War lens," said a U.S. State Department official who was not authorized to be quoted by name.

"We are looking for ways to enhance mutual cooperation in the Americas, and see a constructive role for Russia" in the process, he said.

But the presence of the Russian warship still has resonance for some in Panama, which was dominated by the United States for nearly a century, and which underwent a U.S. invasion in 1989 that ousted dictator Manuel Noriega.

President Martin Torrijos is the son of military strongman Omar Torrijos, who negotiated the return of the canal to Panama's control in the 1970s with former president Jimmy Carter. For Panamanians, the Russian "shows 'we're not under Uncle Sam's domination anymore,'" Isacson said.

Mario Rognoni, an adviser to ruling-party presidential candidate Balbina Herrera, said the Russian visit "demonstrates how times have changed, and the neutrality we have shown in operating the canal."