Proposed Honduras deal collapses as violence increases in capital

A pair of bombings Friday rocked the capital of Tegucigalpa as a week-old agreement to form a unity government to resolve Honduras' four-month political formally collapsed, apparently beyond repair. The two explosions Friday caused little damage and no injuries but put an explanation point on the failure of regional efforts to end the crisis, which began with a military coup in June, according to the Reuters international news service. Honduras has been isolated internationally since coup leaders forced the elected leftist president, Manuel Zelaya, into exile and named legislative leader Robert Micheletti to replace him. Military leaders feared that Zelaya, an ally of Venezuela's famously anti-U.S. president, Hugo Chavez, was planning to move impoverished Honduras even further to the left and was planning to stay in office beyond the end of his term of office in January. Zelaya repeatedly denied that he had designs on extending his term. Under pressure from the United States and other nations, the two sides announced an agreement last week to form a unity government and to have Honduras' Congress vote on who would lead the country, but that deal broke down over differences about who would lead the cabinet in the interim. Zelaya, who was forced to leave the country in his pajamas but had sneaked back into Honduras and took refuge in Brazil's embassy, said Thursday that the deal was dead and urged voters to boycott the Nov. 29 election. "It's absurd what they are doing, trying to mock all of us, the people who elected me and the international community that supports me," Zelaya said, according to Reuters. "We've decided not to continue this theater with Mr. Micheletti." Zelaya refused to appoint ministers to the reconciliation cabinet, as called for in the agreement, prompting Micheletti to name all of them. Micheletti took to the airwaves to announce the appointments. "We've completed the process of forming a unity government," Micheletti told the country. "It represents a wide spectrum despite the fact that Mr. Zelaya did not send a list of representatives." But the Micheletti government surrounded the Brazilian embassy with tanks and soldiers on Friday, signaling the end of reconciliation efforts and a continuation of the standoff.

For whom the final bell tolls

News from Los Angeles that a federal judge has refused to dismiss civil fraud charges against Angelo Mozilo, the former CEO of Countrywide Financial Corp., and two of his associates means that regulators are still pursuing the fabulously wealthy wheeler-dealers whose recklessness helped cause the collapse of world financial markets and sparked a global recession. Of course, the U.S. Securities and Exchange Commission filed only civil charges against Mozilo and fellow top Countrywide officers David Sambol and Eric Sieracki, so any penalties assessed against them, assuming they're found guilty, will be financial. Hopefully, criminal charges against scores of financial roughriders responsible for the massive frauds that helped sink the country's housing market are still in the offing. Mozilo built Countrywide into the country's largest mortgage lender in large part through tens of billions of dollars worth of subprime and adjustable-rate mortgages, according to the Reuters international news service. But when the poorer-quality loans began failing, the SEC alleged, Mozilo reassured investors that Countrywide's portfolio was strong while using stock options to buy millions of dollars in company stock and then selling it for more than $139 million in profits, Reuters said. The SEC said in its complaint that Mozilo admitted in an e-mail to colleagues that Countrywide was "flying blind" about the quality of its loans. Countrywide had to be sold to Bank of America in a $2.5 billion deal arranged by federal regulators in 2008. U.S. Judge John Walter in Los Angeles found it possible, as the SEC's complaint alleged, that Countrywide's management was responsible for "the virtual abandonment of prudent underwriting guidelines and the resulting proliferation of poor quality loans, during the same period Countrywide was touting the superior quality of its underwriting guidelines and its loan portfolio." Mozilo's attorney, David Siegel said he was disappointed by the judge's decision but predicted that Mozilo would be "vindicated" in a trial. "Angelo Mozilo is an innocent man who helped millions of people find a home for more than 40 years," Siegel said, according to Reuters.

Italy demonstrates to United States how to handle government wrongdoing

The democracy wasting disease that was the Bush administration until this year got its latest comeuppance on Wednesday when a court in Italy sentenced 23 U.S. residents, including at least 22 CIA agents, to prison terms of at least five years each for abducting a Muslim cleric in 2003 and secreting him to Egypt for interrogation. The case, which has been ongoing since 2007, is the first judicial reckoning of the practice of extraordinary rendition, a constitutional perversion under which U.S. agents abducted suspects in other countries and took them to a third country that permitted harsh interrogations, according to the Reuters international news service. The U.S. citizens were tried in absentia because Washington refused to allow them to be extradited to Italy to face trial. Two members of Italy's spy service, Sisma, were sentenced to three-year prison terms for participating in the renditions, suggesting that Italy was aware of the U.S. operation that took the cleric, Abu Omar, off a street in Milan and flew him to Ramstein Air Base in Germany and then to Egypt. Abu Omar claimed he was held without charge and mistreated in Egyptian custody until his release in 2007. U.S. State Department spokesman Ian Kelly said today that the Obama administration was "disappointed" in the convictions and would probably appeal, but refused to comment further. But human rights groups opposed to the practices of the Bush administration showed no such reluctance. Joan Sunderland of Human Rights Watch called the verdict "historic," Reuters said. Amnesty International admonished the United States for having gone to court at all. "The United States shouldn't need a foreign court to distinguish right from wrong," the group said in a statement. "The Obama administration must repudiate the unlawful practice of extraordinary rendition -- and hold accountable those responsible for having put the system in place -- or his administration will end up as tarnished as his predecessor's." The United States has never acknowledged any rendition flights from Italy, Reuters said.

Israeli settlements are not the problem in Middle East

Maybe if most Arab nations were democracies that acted only with the approval of their citizens, they would more-easily be able to understand what has happened to the Middle East peace process. It's fairly obvious that U.S. President Barack Obama, who perhaps unwisely raised expectations in the Arab world about changing this country's policies toward Israel, has acquired a greater appreciation of what Jerusalem has been telling him about peacemaking with the Palestinian Authority. Israel's willingness to compromise, which has varied over time, has never produced a lasting agreement because Palestinian leaders have been unwilling to prepare their people for the possibility of peace -- probably out of fear for their own safety -- after years of agitating for war. Israeli intransigence is not the chief cause of the decades-long deadlock; rather, it's the refusal of the Palestinians and of most of the countries in the region to plan for a future that includes their Jewish cousins. That's why it was kind of sad to see U.S. Secretary of State Hillary Clinton go traipsing around the Arab world this week trying to convince those countries to accept Israel's partial settlement freeze proposal and return to peace talks, as the Reuters international news service reported. The Palestinian Authority still thinks its warlike posture toward Israel, a posture supported by its Arab backers, is the best way to achieve its goal -- a Middle East without Israel. That's why previous overly generous Israeli peace offers that included the sharing of Jerusalem were rejected by Palestinian authorities. Now, with the election of a conservative government in Israel, such offers are almost certainly off the table. But a readers of this blog know, Israeli settlement-building in the West Bank is not an obstacle to true peace in the region. What it does complicate, however, is the kind of peace that is merely the absence of war. If Palestinians and Israelis are going to live side-by-side in the long term, it won't matter what country they live in assuming their rights are respected and protected. The fact that this has yet not occurred to anyone in the region strongly suggests that none of the parties is prepared to come to anything more than an interim agreement, if at all.

U.S. regulators let CIT Group go under despite $2 billion investment

Why would the government allow a 100-year-old lender that provided funds to hundreds of thousands of small and medium-sized businesses fail while bailing out large sectors of the financial system? That was the obvious question Sunday when CIT Group Inc. of New York filed for bankruptcy under the weight of nearly $65 billion in debt, according to the Reuters international news service. The bankruptcy is the fifth largest in U.S. corporate history, and sidelines, at least temporarily, a major source of financing for a sector of the economy responsible for nearly half of the nation's jobs. CIT said in a statement that it hoped to eliminate $10 billion of debt in bankruptcy and emerge quickly. The company has $71 billion in assets. “The decision to proceed with our plan of reorganization will allow CIT to continue to provide funding to our small business and middle market customers, two sectors that remain vitally important to the U.S. economy,” CIT's chairman and CEO, Jeffrey Peek, said in a prepared statement. “This market-based solution allows CIT to enter into the reorganization process well-prepared and positioned for a swift emergence. We also acknowledge our constructive working relationship with our regulators and look forward to their continued guidance as we move through this process.” Analysts said the 101-year-old company was a victim of the global credit crisis, Reuters said, as its loan porfolio suffered heavy losses and it ultimately was unable to raise enough money by selling bonds. In a letter to customers on Nov. 1, CIT said none of its subsidiary businesses, such as CIT Bank of Utah, would be affected by the bankruptcy filing. But the U.S. taxpayer is affected, since CIT received $2.33 billion from the Troubled Asset Relief Program in December. The government will only be repaid now if any money is left after banks and bond investors are paid because it is considered a preferred stockholder. Holders of CIT's common stock will not be repaid, Reuters said.

Afghanistan situation just keeps getting worse

Just when it seemed the chaotic political situation in war-torn Afghanistan was about to get some clarity comes word that presidential challenger Abdullah Abdullah had withdrawn from Sunday's runoff election. Abdullah's decision to withdraw casts further doubt on the legitimacy of the troubled Western-backed government in Kabul led by Hamid Karzai, which has been wracked by a growing insurgency, corruption charges and fraud allegations from the first round of balloting in August, according to the Reuters international news service. With tears in his eyes, Abdullah told thousands of supporters in a tent in Kabul that he was dropping out because Afghani authorities would not meet his demands to ensure a fair runoff, including sacking the country's top election official. Karzai got the most votes in the first round but a United Nations investigation found widespread fraud, triggering the runoff, Reuters said. The fraudulent election was an embarrassment to the United States and its allies, who have dedicated more than 40,000 troops to defend Afghanistan's government against resurgent Taliban forces battling for control of the country. The Taliban had threatened to disrupt the first round of voting with limited success and also is threatening to disrupt Sunday's balloting. The election crisis comes as U.S. President Barack Obama was said to be waiting for the outcome of the voting before deciding on a proposal to send 30,000 additional soldiers to bolster Afghanistan forces. But Abdullah's withdrawal could be even more embarrassing to Western countries, because it leaves an election with only one candidate -- hardly an example of vibrant democracy. The prospect and promise of democratic government was expected to help the West make its case against Taliban influence. "It is a shocking failure of efforts by the West and other international communities to build a democracy in Afghanistan," said Norine MacDonald of The International Council on Security and Development, a policy research group. Nevertheless, Karzai defiantly refused to consider a unity government with Abdullah and the Independent Election Commission said the election must proceed as scheduled on Nov. 7. "It is now a matter for the Afghan authorities to decide on a way ahead that brings this electoral process to a conclusion in line with the Afghan constitution," U.S. Secretary of State Hillary Clinton told Reuters from Morocco. "We will support the next president and the people of Afghanistan, who seek and deserve a better future." British Prime Minister Gordon Brown said Karzai must fix his government's corruption problem, improve the country's security forces and speed up efforts to improve economic conditions in the impoverished countryside.

Bank seizures belie news about improving economy

Today's news that U.S. regulators had seized nine Western banks is a sure sign that the world's largest economy is still in crisis, even while federal officials and traders on the New York Stock Exchange behave as if the nation's financial system has already recovered. The nine failed banks owned by FBOP Corp., an Illinois-based bank holding company, and their scores of branches were acquired by U.S. Bancorp of Minneapolis, which owns 770 U.S. Bank branches in Illinois, Arizona and California. The largest of the nine banks, California National Bank of Los Angeles, had 68 branches in Southern California. The nine bank seizures were the most in a single day since the financial crisis began, according to the Reuters international news service. "We're getting ready to turn everything over to U.S. Bank," said Roberta Valdez, a spokeswoman for the Federal Deposit Insurance Corp, which is helping to supervise the transfer. "[The banks] will continue to operate as normal in the interim." Today's takeovers bring to 115 the number of bank failures in 2009, the most since 1992, and more are yet to come, Reuters said, as depressed commercial real estate prices make billions of dollars in loans uncollectable. Small banks are expected to be the hardest hit because they are not as diversified as larger banks, Reuters said. Other banks expecting to report big losses this year include Zions Bancorp of Salt Lake City, Columbus, Georgia's Synovus Financial Corp of Columbus, Georgia, and Comerica Inc. of Dallas. U.S. Bancorp has been helping to pick up the slumping industry in the West by buying Downey Savings of Newport Beach and PFF Bank & Trust of Pomona last November and, in October, buying 20 branches from BB&T Corp. in Nevada.