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The 27 members of the EU should also pool intelligence on terrorism, develop joint video-surveillance and unmanned drone aircraft, start networks of anti-terrorism centres, and boost the role and powers of an intelligence-coordinating body in Brussels, said senior officials.

The 53-page report drafted by the Future Group of interior and justice ministers from six EU member states - Germany, France, Sweden, Portugal, Slovenia, and the Czech Republic -argues Europe will need to integrate much of its policing, intelligence-gathering, and policy-making if it is to tackle terrorism, organised crime, and legal and illegal immigration.

The report, seen by the Guardian, was submitted to EU governments last month following 18 months of work. The group, which also includes senior officials from the European Commission, was established by Germany last year and charged with drafting a blueprint for security and justice policy over the next five years.

Baroness Scotland, the UK attorney general, had observer status with the group to assess the implications for Britain, whose legal system, unlike continental Europe, is based on the common law.

The group’s controversial proposals are certain to trigger major disputes, not least its calls for Europe to create an expeditionary corps of armed gendarmerie for paramilitary intervention overseas.

The report said the EU would fail to beat terrorism unless it developed a full partnership with Washington, a process currently pushing ahead in fits and starts.

“The EU should make up its mind with regard to the political objective of achieving a Euro-Atlantic area of cooperation with the United States in the field of freedom, security and justice,” it said.

Such a pact, which should be finalised by 2014 at the latest, would entail the transfer of vast volumes of information on European citizens and travellers to the US authorities. Negotiations have long been under way to agree such a pact, but have been bedevilled by divergences in privacy law and data protection regimes.

The US is already demanding that EU countries sign up for a battery of security measures on transatlantic flights and the supply of personal information on passengers if they are to enjoy visa-free travel to the US. Under one such accord struck in March between Washington and Berlin, the Germans are to make DNA and biometric information on travellers available.

The European Commission and the US homeland security department are also trying to iron out discrepancies in privacy laws to allow the wholesale exchange of data. The aim is to reach a binding international agreement this year or next.

Last month the American Civil Liberties Union wrote to MEPs pressing Brussels to reject US pressure because the US is “a country that, in privacy terms, is all but lawless … US privacy laws are weak. They offer little protection to citizens and virtually none to non-citizens.”

While urging a comprehensive transatlantic electronic pact, the Future Group focuses mainly on boosting police cooperation and integration between EU states, policies which would reinforce the powers of European agencies and institutions bearing acronyms such as Europol, Eurojust, Frontex, and Sitcen and perhaps see new agencies established to deal with security and intelligence operations.

Several member states, not least Britain, will have deep qualms about the proposals, with the British likely to balk at automatic pooling of national intelligence.

Anti-terrorist campaigns can only be effective if “maximum information flow between [EU] member states is guaranteed,” the report said. “Relevant security-related information should be available to all security authorities in the member states.” It said “networks of anti-terrorist centres” was a possible solution.

While cooperation between national police forces in the EU was advancing, the report conceded that the sharing of espionage and intelligence material was a “considerable challenge” as it clashed with the “principle of confidentiality” that is the basis for successful exchanges.

“It’s very hard to predict right now when and if we’ll need more capital,” Chief Executive Officer Robert Willumstad said today in a conference call with analysts. “Future losses can change that assumption and we’re obviously dependent on the condition of the U.S. housing market.”

Willumstad faces increasing pressure to turn around AIG after the insurer posted more than $18 billion in losses over the past three quarters. The second quarter’s $5.36 billion loss, reported yesterday, was worse than analysts predicted and renewed concern that AIG may need to raise cash by selling shares. Willumstad called current capital “satisfactory.”

AIG slid as much as 18 percent in New York Stock Exchange composite trading, its biggest one-day drop in 39 years, according to Los Angeles-based Global Financial Data, which keeps records on historical share prices. The stock declined $4.75 to $24.34 at 1:56 p.m., leaving the shares down almost 60 percent this year. AIG’s quarterly loss was driven by $5.56 billion in pretax writedowns tied to credit-default swaps.

Initial jobless claims increased by 7,000 to 455,000 in the week ended Aug. 2, the most since March 2002, from 448,000 the prior week. The number of continuing claims increased to a four- year high.

Companies are reducing staff as demand slows and raw- material costs surge. Rising unemployment adds to concerns that consumer spending will falter in coming months after the effects of the government’s tax rebate checks wane.

The revision means that speculators controlled 48 percent of the open interest in NYMEX crude oil futures and options as of July 15, compared with just over 38 percent under the previous classification.

“That’s huge when you look at the numbers,” said Phil Flynn of Alaron Trading in Chicago.

“It changes the whole way you look at the recent moves in this market.”

The U.S. Commodities Futures Trading Commission announced on July 18 that it was reclassifying some trading positions that it had reported as commercial hedging positions as noncommercial speculative positions.

The data revision converted approximately 327,000 long and 330,000 short NYMEX crude oil futures and options positions into mostly spreading positions held by speculators.

The big shift is all the more surprising, oil traders and analysts said, since the CFTC apparently reclassified only one unidentified oil trader at the same time as the data revision.

“There may have been multiple ‘positions’ which were reclassified … but they all appear to have been held by just one trader, and this was a very special trader, with an enormous concentration of positions in crude oil amounting to perhaps 460 million barrels, and not much interest in anything else,” noted John Kemp of RBS Sempra Commodities.

She also said the agency would not confirm whether a single trader or multiple traders had been reclassified.

“This reclassification issue highlights the fact that improvements are still needed in the area of data collection and that the agency does not yet have the comprehensive data we need to make any declarative statements about the overall role of speculators in commodity markets,” said Democratic CFTC Commissioner Bart Chilton.

SEMGROUP LINK?

The reclassification comes amid the collapse of energy trader SemGroup LP, which filed for bankruptcy on July 22 after suffering $3.2 billion in losses on oil futures and derivatives.

SemGroup has blamed its collapse on unauthorized speculative oil trading by its co-founder and former chief executive, according to a court filing by a SemGroup lender.

The SemGroup collapse coincided with a sharp fall in oil futures from their peak above $147 a barrel in mid-July. However, a person familiar with SemGroup’s trading position said Monday the trader’s position was not concentrated in any one month and was more focused on intermonth spread positions.

“This was no Amaranth or Motherrock,” said the person familiar with SemGroup’s futures trading book, referring to two energy hedge funds whose multibillion dollar failures roiled futures markets.

SemGroup began the process of transferring its NYMEX trading book to Barclays Plc (BARC.L: Quote, Profile, Research, Stock Buzz) on July 11 after drawing down a $54 million line of credit to place a deposit with the British bank, according to bankruptcy court testimony.

SemGroup completed the transfer of its trading book to Barclays on July 16.

The transfer of SemGroup’s NYMEX trading position was instigated by the exchange itself, according to a source familiar with the NYMEX’s activities.

SemGroup’s financial difficulties were first disclosed by its publicly traded subsidiary SemGroup Energy Partners LP (SGLP.O: Quote, Profile, Research, Stock Buzz) on July 17, three days after its parent hired The Blackstone Group (BX.N: Quote, Profile, Research, Stock Buzz) to advise it on restructuring and two days after a conference call with its lenders where it told them it had run out of cash.

The new rules, issued late Wednesday with immediate effect, call for penalties of up to 30 percent of the capital involved in any unauthorized inward or outward foreign currency transfers. They give authorities stronger control over such transactions and expand reporting requirements for financial institutions.

“As China’s economy becomes more internationalized and the movement of international capital flows accelerates, there is a need to improve the system and oversight of multinational capital movements,” the State Administration of Foreign Exchange, or SAFE, said in a statement posted on its Web site.

Those are foods recommended by Price, a Cleveland dentist who traveled the world studying primitive diets. His 1939 book, “Nutrition and Physical Degeneration,” concluded that a diet high in the vitamins found in animal fats and untouched by “modern” innovations such as refined flour, sugar and chemically preserved foods was the key to preventing chronic disease and tooth decay.

Such ideas have been considered heretical by modern American public health policy that promotes a low-fat, low-sodium diet. But increasing interest in sustainable, local foods, combined with industrial health scares such as the recent salmonella outbreak, has put the spotlight on the foundation’s unorthodox ideas about healthful eating. Its membership is nearly 10,500 strong, and growing at a 10 percent clip each year. There are more than 350 U.S. chapters, plus international groups from Australia to Norway.

For years, these ideas were “as fringe as you could get, as politically incorrect as you could get,” says Fallon, 60. “All of a sudden, people are listening.”

That new audience is surprisingly broad. Some adherents are interested exclusively in nutrition. But more and more, the concept of returning to traditional foodways is pulling people in. New members include the expected “back to the land” types, for whom the foundation’s message provides yet another reason to support small organic farms, and those who oppose the government’s attempt to limit the availability of foods such as raw milk.

Tests showed that personal information could be cloned and manipulated within an hour before being inserted into new chips, the Times reported.

The paper said it had exposed “security flaws” in the passport system by asking a researcher to clone the chips on two British passports and implant digital images of Osama bin Laden and a suicide bomber. The altered chips were then passed as genuine by reader software used by the UN agency that sets the standards for such e-passports.

The tests showed that bogus biometrics could be inserted in fake or blank passports, the Times alleged, saying the flaws also undermined assertions that 3,000 blank passports stolen last week could not be forged.

The identity and passport service at the Home Office remained confident, however, that the British biometric passport was “one of the most secure passports available”, saying no one had been able to demonstrate they could modify or change information contained in a chip, and that if they did, it would be obvious to the reader.

Lawrence Lessig, a respected Law Professor from Stanford University told an audience at this years Fortune’s Brainstorm Tech conference in Half Moon Bay, California, that “There’s going to be an i-9/11 event” which will act as a catalyst for a radical reworking of the law pertaining to the internet.

Lessig also revealed that he had learned, during a dinner with former government Counter Terrorism Czar Richard Clarke, that there is already in existence a cyber equivalent of the Patriot Act, an “i-Patriot Act” if you will, and that the Justice Department is waiting for a cyber terrorism event in order to implement its provisions.

During a group panel segment titled “2018: Life on the Net”, Lessig stated:

There’s going to be an i-9/11 event. Which doesn’t necessarily mean an Al Qaeda attack, it means an event where the instability or the insecurity of the internet becomes manifest during a malicious event which then inspires the government into a response. You’ve got to remember that after 9/11 the government drew up the Patriot Act within 20 days and it was passed.

The Patriot Act is huge and I remember someone asking a Justice Department official how did they write such a large statute so quickly, and of course the answer was that it has been sitting in the drawers of the Justice Department for the last 20 years waiting for the event where they would pull it out.

Most of the clients had properties that have lost value, according to the person, who declined to be identified because the information isn’t public. The New York-based investment bank will review home-equity lines of credit, or HELOCs, monthly from now on, the person said yesterday.

Wall Street firms including Morgan Stanley are ratcheting back on risks after the collapse of the subprime mortgage market and ensuing credit contraction saddled banks and brokerages with almost $500 billion of writedowns and losses. Consumers fell behind on home-equity credit lines at the fastest pace in two decades in the first quarter, the American Bankers Association reported last month.

Physicians for Human Rights says the Shin Bet began interrogating Palestinian patients seeking permission to travel from Gaza to Israel for crucial medical help after Israel blockaded and then declared the tiny territory an enemy entity more than a year ago.

Typically, patients are taken to a small, windowless room, underground, beneath the security terminal at Erez, the only passenger crossing that remains open between Gaza and Israel, where they are questioned by Shin Bet agents for hours, the report says.

Refusal to cooperate often results in the denial of medical treatment. Based on the testimonies of more than 30 Palestinians - 11 of which are published - the report says the Shin Bet is using coercion and extortion to force patients to collaborate.

“They took me through underground passages and made me sit in another waiting room for almost 45 minutes. A man approached me and called me to another room for interrogation. He asked me to sit down and presented himself as Moshe,” Bassam al-Wahidi, a Fatah-aligned journalist, said in his affidavit to Physicians for Human Rights.

“After all my responses he said to me: ‘I want to talk to you openly when you return from Israel so that you will have an acceptable reputation on the Israeli side. Either you make contact with me and agree to my demands, or you will not get any medical treatment which will cause you to be blind and you will become a burden to your family and friends,’” Wahidi said in his affidavit.

But he said he refused and was forced to return to Gaza without receiving any treatment. Now the 28-year-old, who married a year and a half ago, is completely blind in his right eye and losing the vision in his overstrained left eye.

“I might divorce because I can’t stand in front of my wife as a disabled person,” Wahidi said.

He is one of an unknown number of patients from Gaza who have been denied medical treatment after refusing to inform on their friends, neighbours and relatives. Many patients feel they are being forced to choose between preserving their life or protecting their community. Physicians for Human Rights says such pressure amounts to coercion and extortion.

International law forbids the use of civilians in conflict to damage an enemy state and collaboration in the Palestinian community is a crime punishable by death.

In May, Credit Suisse Group and Deutsche Bank AG began offering investments in iron ore, a component of steel. About one billion tons of iron ore is mined a year but isn’t traded on a futures exchange. So it has been virtually impossible for speculators to bet on price movements.

The investment banks were inundated with interest in iron-ore deals, which function like futures contracts. In just two months, investors and hedgers took on more than $500 million of notional exposure — about 2.7 million metric tons — making this one of the biggest commodities markets to spring up almost overnight.

The new markets show how hard it will be for legislators to curb commodities speculation. Such trading is spreading to an array of other goods, from jet fuel to chicken, that have been off-limits to investors because they aren’t traded on futures markets. They also are offered for commodities already bought and sold on global exchanges, including crude oil, corn and coffee.

Through Goldman Sachs Group Inc., clients can invest in palm oil and other biofuel components. Deutsche Bank is trading ruthenium, an obscure metal used in fountain pens. Along with other firms, Deutsche is expanding into rhodium, used in catalytic converters.

Deals are being teed up in lithium and “rare earth” metals, including components of electric and hybrid cars. One Credit Suisse list reads like a science textbook: alumina, cobalt, molybdenum, ferrochrome and vanadium.

“The model is virtually limitless,” said Kamal Naqvi, a 36-year-old, London-based Credit Suisse executive who helped create the new platform after joining the bank last year. In July alone, Credit Suisse was asked to put together similar contracts by producers of wood chips, chicken and potash
fertilizer.

Some lawmakers have been alarmed by the surge in investments by big institutions such as pension funds and university endowments, which allocate money to commodities tied to indexes that track futures exchanges. Big institutions have about $260 billion invested in commodities, up from $13 billion five years ago, hedge-fund manager Michael Masters told Congress earlier this summer.

These “index speculators,” he testified, were driving up prices of oil and other natural resources. Several senators agreed, responding with bills that would limit what investors can channel into commodities they don’t intend to own.

Many economists and investors balk at the bills, attributing high commodities prices to demand from emerging economies and production squeezes. Often, they hold out iron ore as evidence: Even though it wasn’t traded on a futures exchange, its price surged in the last year. The price Chinese steelmakers pay to Australian mines, for example, has nearly doubled.

“It is not that the flow of money has no impact,” said Mr. Naqvi, the Credit Suisse executive. “But this flow . . . is a distant second to the impact of market expectations on physical supply and demand fundamentals.”

If passed, the legislation could complicate contracts linked to exchanges. The bills, investors and bankers said, are inadvertently helping nurture these nascent, over-the-counter markets. That worries some critics.

In June, Mr. Masters urged Congress to investigate the iron-ore contracts and similar deals, claiming they could help investors buy natural resources, sit on them until their price rises and then sell them. “This is Wall Street innovation run amok,” he said in an interview.

“He misunderstood our product,” said Mr. Naqvi. “There is no requirement to take physical delivery at any point, so there is no encouragement to physically hoard.”

Credit Suisse’s contracts are offered by a London unit that is an alliance with Glencore International AG, a Swiss commodities company. The alliance has about 75 people in London, New York, Hong Kong, Switzerland and Sydney.

Though clients can obtain physical assets through Glencore, Credit Suisse isn’t directly involved in any physical transactions, other than its precious-metals business in Zurich. The alliance helps Credit Suisse collect information about commodities and pass it onto clients in exchange for more trading business.

These instruments have implications for the way money flows into commodities. Historically, if someone sought to profit from iron ore, they could buy shares in a producer or a mine, but not the underlying assets.

“Iron ore is probably the largest commodity market in the world that hasn’t had financial trading around it,” said Raymond Key, the global head of metals trading for Deutsche Bank in London.

Under the contracts, known as “cash-settled swaps,” the client — a hedge fund, pension fund or steelmaker — agrees to pay a fixed price for iron ore in the future. Now, it stands at about $180 per metric ton. The bank lines up a seller that wants to lock in a price.

Credit Suisse’s minimum transaction is 5,000 metric tons. No physical delivery is taken. Instead, every month, there is a net payment in cash of the difference between the set price and a floating price pegged to an index of the spot price that steelmakers pay for iron ore that is delivered immediately.

Suskind writes in “The Way of the World,” to be published Tuesday, that the alleged forgery – adamantly denied by the White House – was designed to portray a false link between Hussein’s regime and al Qaeda as a justification for the Iraq war.

The author also claims that the Bush administration had information from a top Iraqi intelligence official “that there were no weapons of mass destruction in Iraq – intelligence they received in plenty of time to stop an invasion.”

The letter’s existence has been reported before, and it had been written about as if it were genuine. It was passed in Baghdad to a reporter for The (London) Sunday Telegraph who wrote about it on the front page of Dec. 14, 2003, under the headline, “Terrorist behind September 11 strike ‘was trained by Saddam.’”

The Telegraph story by Con Coughlin (which, coincidentally, ran the day Hussein was captured in his “spider hole”) was touted in the U.S. media by supporters of the war, and he was interviewed on NBC’s “Meet the Press.”

“Over the next few days, the Habbush letter continued to be featured prominently in the United States and across the globe,” Suskind writes. “Fox’s Bill O’Reilly trumpeted the story Sunday night on ‘The O’Reilly Factor,’ talking breathlessly about details of the story and exhorting, ‘Now, if this is true, that blows the lid off al Qaeda—Saddam.’”

According to Suskind, the administration had been in contact with the director of the Iraqi intelligence service in the last years of Hussein’s regime, Tahir Jalil Habbush al-Tikriti.

“The White House had concocted a fake letter from Habbush to Saddam, backdated to July 1, 2001,” Suskind writes. “It said that 9/11 ringleader Mohammad Atta had actually trained for his mission in Iraq – thus showing, finally, that there was an operational link between Saddam and al Qaeda, something the Vice President’s Office had been pressing CIA to prove since 9/11 as a justification to invade Iraq. There is no link.”

The White House flatly denied Suskind’s account. Tony Fratto, deputy White House press secretary, told Politico: “The allegation that the White House directed anyone to forge a document from Habbush to Saddam is just absurd.”

The White House plans to push back hard. Fratto added: “Ron Suskind makes a living from gutter journalism. He is about selling books and making wild allegations that no one can verify, including the numerous bipartisan commissions that have reported on pre-war intelligence.”

Before “The Way of the World: A Story of Truth and Hope in an Age of Extremism,” Suskind wrote two New York Times bestsellers critical of the Bush administration – “The Price of Loyalty” (2004), which featured extensive comments by former Treasury Secretary Paul O’Neill, and “The One Percent Doctrine” (2006).

Suskind writes in his new book that the order to create the letter was written on “creamy White House stationery.” The book suggests that the letter was subsequently created by the CIA and delivered to Iraq, but does not say how.

The author claims that such an operation, part of “false pretenses” for war, would apparently constitute illegal White House use of the CIA to influence a domestic audience, an arguably impeachable offense.