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Lead plaintiff Nancy Baird filled her contract with California to provide embroidered polo shirts to a youth camp run by the National Guard, but never was paid the $27,000 she was owed. She says California “paid” her with an IOU that two banks refused to accept – yet she had to pay California sales tax on the so-called “sale” of the uniforms.

The class consists mostly of small business owners, many of whom rely on income from government contracts to keep afloat. They say California has used them as “suckers” as it looks for a way to bankroll its operations while avoiding its own financial obligations.

“Instead of seeking funds through proper channels, the State has created a nightmare,” the class says. “Many of these businesses will not survive if they are required to wait until October 2009 to have these forced IOUs redeemed by the State.”

The move, which was made in the closing weeks of the administration of President George W. Bush, came after months of heated internal debate about the balance of power and the role of the military in a time of crisis, participants said. Officials said the Obama administration had left the plan essentially intact.

Under the revamped structure, the White House Military Office, which reports to the office of the White House chief of staff, has assumed a more central role in setting up a temporary “shadow government” in a crisis.

And the office, a 2,300-person outfit best known for flying Air Force One, has taken on added responsibilities as the lead agent in shepherding government leaders to a secure site at Mount Weather in rural Virginia, keeping classified lists of successors and maintaining computer systems, among other operational duties. Many of these types of tasks were previously handled by civilians at other agencies, led by the Federal Emergency Management Agency.

The deficit for the first 10 months of fiscal year 2009, which began October 1, reached 1.3 trillion dollars, close to 880 billion dollars greater than the deficit recorded through July 2008, said the US Congressional Budget Office (CBO).

And now it turns out that 47% (!) of the bonds that were taken by the primary dealers in that auction have been quietly bought by the Fed and permanently secreted to its balance sheet.

They didn’t even wait a full week! A more honest and open approach would have been for the Fed to simply buy them outright at the auction but this way, using “primary dealers” and “POMOs” and all these other extra steps the basic fact that the Fed is openly monetizing US government debt is effectively hidden from a not-too-terribly inquisitive US press and public.

The speed of the shell game is accelerating.

This immediate repurchase of newly auction bonds by the Fed tells us that demand for these bonds is not nearly as high as advertised, and that things are not quite as strong as represented.

John Salisbury-Baker will claim that he suffered “intolerable stress” through having to “defend the morally indefensible” when responding to media inquiries about the ability of army vehicles such as the “Snatch” Land Rover to protect soldiers.

Mr Salisbury-Baker, 62, says he found it impossible to support the official line on deaths and injuries after seeing the suffering of soldiers’ families. After 11 years of service at Imphal Barracks near York, he could no longer keep working and is taking legal action against the Ministry of Defence (MoD).

The U.S. Department of Energy announced the list of 48 grant recipients Wednesday in what is being called the largest ever investment in hybrid and electric car advanced battery technology. The grants, funded by the American Recovery and Reinvestment Act, target U.S.-based manufacturers, automakers, universities, and battery developers in a bid to put a million plug-in hybrid electric vehicles on the road by 2015.

The grants are divided into three areas: $1.5 billion to help U.S. manufacturers produce batteries and grow recycling capacity; $500 million toward U.S. production of electric drive components; and $400 million for education and workforce training, and the purchase and testing of electric vehicles in multiple locations.

Recipients, which agree to match the grant funds, span more than 20 states but are not surprisingly concentrated in existing auto manufacturing hubs such as Michigan and Indiana. Projects include truck stop electrification, hydrothermal lithium ion battery recycling, electric minivan and pickup truck development and deployment, and community college education for aspiring service technicians.

In the largest single grant awarded, Johnson Controls will receive $299.2 million to help fund the production of nickel-cobalt-metal battery cells and packs, which represents about half of the company’s $600 million planned investment in domestic advanced battery development. The State of Michigan also awarded the company $148.5 million in incentives in April for a lithium-ion cell and battery system manufacturing plant in Holland, southwest of Grand Rapids.

General Motors received a combined $241.4 million in grants for the production of the battery packs that will power the Chevy Volt, demonstration of the highly anticipated plug-in hybrid electric vehicle, and the construction of manufacturing capacity for its rear-wheel electric drive system.

Cornyn, who leads the Republicans’ Senate campaign effort, said Wednesday in a letter to Obama that he’s concerned that citizen engagement on the issue could be “chilled.” He also expressed alarm that the White House could end up collecting electronic information on its critics.

“I can only imagine the level of justifiable outrage had your predecessor asked Americans to forward e-mails critical of his policies to the White House,” Cornyn wrote.

Cornyn was responding to a post on the White House’s blog Wednesday in which users are asked to help stop the spread of disinformation about legislation to overhaul health insurance. The post offers an e-mail address, flag@whitehouse.gov, for users to forward anything “on the web about health insurance reform that seems fishy.”

The White House said the post was merely designed to fight “intentionally misleading” information in the health care debate.

“We want to be sure people have the facts about health insurance reform that will lower costs, protect consumers from insurance regulations that deny them coverage and assure quality and affordable health care for all Americans,” said Adam Abrams, a White House spokesman. He said no lists or sources of the information would be compiled.

In his letter, Cornyn asked that the effort cease immediately and that the administration inform Congress what it’s doing to ensure that names and electronic information about citizens weighing in on health care are not collected.

Kevin McLaughlin, a spokesman for the senator, said that the office had received no response from the administration.

Home price declines will have their biggest impact on prime “conforming” loans that meet underwriting and size guidelines of Fannie Mae and Freddie Mac, the bank said in a report. Prime conforming loans make up two-thirds of mortgages, and are typically less risky because of stringent requirements.

“We project the next phase of the housing decline will have a far greater impact on prime borrowers,” Deutsche analysts Karen Weaver and Ying Shen said in the report.

Of prime conforming loans, 41 percent will be “underwater” by the first quarter of 2011, up from 16 percent at the end of the first quarter 2009, it said. Forty-six percent of prime jumbo loans will be larger than their properties’ value, up from 29 percent, it said.

“The impact of this is significant given that these markets have the largest share of the total mortgage market outstanding,” the analysts said. Prime jumbo loans make up 13 percent of the total market.

Deutsche’s dire assessment comes amid a bolt of evidence in recent months that point to stabilization in the U.S. housing market after three years of price drops. This week, the National Association of Realtors said pending home sales rose for a fifth straight month in June. A widely watched index released in July showed home prices in May rose for the first time since 2006.

Covering 100 U.S. metropolitan areas, Deutsche Bank in June forecast home prices would fall 14 percent through the first quarter of 2011, for a total drop of 41.7 percent.

The drop in home prices is fueling a vicious cycle of foreclosures as it eliminates homeowner equity and gives borrowers an incentive to walk away from their mortgages. The more severe the negative equity, the more likely are defaults, since many borrowers believe prices will not recover enough.

Homeowners with the riskiest mortgages taken out during the housing boom have seen the greatest erosion in equity, in part because they were “affordability products” originated at the housing peak, Deutsche said. They include subprime loans, of which 69 percent will be underwater in 2011, up from 50 percent in March, Deutsche said,

Of option adjustable-rate mortgages — which cut payments by allowing principal balances to rise — 89 percent will be underwater in 2011, up from 77 percent, the report said.

Regions suffering the worst negative equity are areas in California, Florida, Arizona, Nevada, Ohio, Michigan, Illinois, Wisconsin, Massachusetts and West Virginia. Las Vegas and parts of Florida and California will see 90 percent or more of their loans underwater by 2011, it added.

There’s a strangely blurry line during such an interrogation. After viewing the five photos I’d taken of the NSA’s new Texas Cryptology Center, the NSA officer asked if I would delete them. When I asked if he was ordering me to do so, he said no; he was asking as a personal favor. I declined and was eventually released.

America’s top spy agency has taken over the former Sony microchip plant and is transforming it into a new data-mining headquarters — oddly positioned directly across the street from a 24-hour Walmart — where billions of electronic communications will be sifted in the agency’s mission to identify terrorist threats.