cryptogon.com

China is hungry – for land, food and energy. While accounting for a fifth of the world’s population, its oil consumption has risen 35-fold in the past decade and Africa is now providing a third of it; imports of steel, copper and aluminium have also shot up, with Beijing devouring 80 per cent of world supplies.
Enlarge President Robert Mugabe leaving the eleventh ordinary session of the assembly of the African Union heads of State and government in Sharm el-Sheikh, Egypt

Fuelling its own boom at home, China is also desperate for new markets to sell goods. And Africa, with non-existent health and safety rules to protect against shoddy and dangerous goods, is the perfect destination.

The result of China’s demand for raw materials and its sales of products to Africa is that turnover in trade between Africa and China has risen from £5million annually a decade ago to £6billion today.

However, there is a lethal price to pay. There is a sinister aspect to this invasion. Chinese-made war planes roar through the African sky, bombing opponents. Chinese-made assault rifles and grenades are being used to fuel countless murderous civil wars, often over the materials the Chinese are desperate to buy.

Take, for example, Zimbabwe. Recently, a giant container ship from China was due to deliver its cargo of three million rounds of AK-47 ammunition, 3,000 rocket-propelled grenades and 1,500 mortars to President Robert Mugabe’s regime.

After an international outcry, the vessel, the An Yue Jiang, was forced to return to China, despite Beijing’s insistence that the arms consignment was a ‘normal commercial deal’.

Indeed, the 77-ton arms shipment would have been small beer – a fraction of China’s help to Mugabe. He already has high-tech, Chinese-built helicopter gunships and fighter jets to use against his people.

Ever since the U.S. and Britain imposed sanctions in 2003, Mugabe has courted the Chinese, offering mining concessions for arms and currency.

While flying regularly to Beijing as a high-ranking guest, the 84-year-old dictator rants at ‘small dots’ such as Britain and America.

He can afford to. Mugabe is orchestrating his campaign of terror from a 25-bedroom, pagoda-style mansion built by the Chinese. Much of his estimated £1billion fortune is believed to have been siphoned off from Chinese ‘loans’.

The imposing grey building of ZANU-PF, his ruling party, was paid for and built by the Chinese. Mugabe received £200 million last year alone from China, enabling him to buy loyalty from the army.

In another disturbing illustration of the warm relations between China and the ageing dictator, a platoon of the China People’s Liberation Army has been out on the streets of Mutare, a city near the border with Mozambique, which voted against the president in the recent, disputed election.

The documents show the activities occurred from at least March 2005 to May 2006 and that officers used false names, which the documents referred to as “covert identities” – to open e-mail accounts to receive messages from the groups.

Also included in the 46 pages of documents, obtained by the Maryland chapter of the American Civil Liberties Union through a Freedom of Information Act lawsuit, is an account of an activist’s name being entered into a federally funded database designed to share information among state, local and federal law-enforcement agencies on terrorist and drug trafficking suspects.

ACLU attorney David Rocah said state police violated federal laws prohibiting departments that receive federal funds from maintaining databases with information about political activities and affiliations.

The activist was identified as Max Obuszewski. His “primary crime” was entered into the database as “terrorism – anti govern(ment).” His “secondary crime” was listed as “terrorism – anti-war protestors.” The database is known as the Washington-Baltimore High Intensity Drug Trafficking Area, or HIDTA.

“This is not supposed to happen in America,” said Mr. Rocah. “In a free society, which relies on the engagement of citizens in debate and protest and political activity to maintain that freedom … you should be able to attend a meeting about an issue you care about without having to worry that government spies are entering your name into a database used to track alleged terrorists and drug traffickers.”

Mr. Rocah called the surveillance “Kafka-esque insanity.”

…

Documents released by the prosecution revealed that the protesters had been under surveillance by an entity called the Baltimore Intelligence Unit.

The Maryland ACLU sued last month, claiming the state police refused to release public documents about the surveillance of peace activists.

The documents, which include intelligence reports and printouts from the database, show that several undercover officers from the state police’s Homeland Security and Intelligence Division attended meetings of three groups: Mr. Obuszewski’s group; the Coalition to End the Death Penalty; and the Committee to Save Vernon Evans, a convicted murderer who was slated for execution.

The documents show at least 288 hours of surveillance over the 14-month period. The undercover officers attended at least 20 organizing meetings at community halls and churches and a dozen rallies against the death penalty, including several at the state’s SuperMax jail in Baltimore.

WSJ: Jitters Ease as Citi, Rivals Show Signs of Bottoming Out

NYT: Hope, and Hints, That Financial Stocks Have Finally Touched Bottom

Barron’s: Buy Banks -Selectively (cover story)

Can you recall the last time 3 major media players all picked the bottom in a market or sector on the exact same day — and were all proven correct?

…

A long time ago, Banks were 3-6-3 spread players. Pay your depositors 3%, make loans at 6%, be on the golf course at 3pm. But the end of Glass Steagell, and the mergers with investment banks, have put an end to that simple but profitible business. For the past 10 years or so, we seen a model that involved taking on a lot of risk, then leveraging it up 25X, 35X, even 65X (for Fannie).

Now that model has come unglued. Banks of all types are unwinding risk, de-leveraging (selling off assets held on borrowed money) and raising capital. This means that until a new model is developed, profits will be anemic and the shareholder capital structure is about to get wildly diluted.

Bad_but_better Freddie Mac (FRE), with its $6B cap, is seeking to raise $10B. That will be enormously dilutive to both future earnings, and shareholder equity. Remember that Lehman Brothers (LEH) capital raise? $6 Billion secondary priced at $28 with 8.75% coupon and an %18 conversion premium? The stock is now $19m, the cap is $13.3B. After the last debacle, good luck with future capital raises — they are likely to be treated much more skeptically.

Is “the” bottom in?

Well, it certainly looks like “a” bottom is in.

But longer term, this is a sector that is likely to have continued write downs, weak earnings prospects, and a whole lot more regulation and government supervision than it got away with in the past. P/E compression may also be in the cards — especially if we see some dividend cuts from some of the bigger houses.

However, that fund is “a myth,” according to longtime banking consultant Bert Ely, and consumers may end up paying the price of what is expected to be a growing wave of bank failures.

NYU Economics Professor Nouriel Roubini predicts that Congress will have to intervene in order to bail out the deposit fund.

“They’re going to run out of money, with certainty,” he predicted. “Congress is going to have to recapitalize the FDIC, those $50 billion plus is not going to be enough, by no means.”

Indeed, on Friday afternoon FDIC Chairman Sheila Bair said in an interview on C-SPAN television that banks holding brokered deposits may be charged higher premiums in order to bring back the reserve to an acceptable size.

“I think that is something we need to factor into our premiums and charge higher premiums to banks that fit that profile,” she said in the interview, noting that the IndyMac failure was a big factor in the need for additional funds in the deposit insurance fund.

This means higher premiums for FDIC insured banks, analyst Ely noted, further complicating an already tenuous situation for the U.S. banking system. Banks will most likely pass the increased costs onto their customers, he said.

“Banks are going to pass it through to their customers through higher interest rates on loans, lower interest on deposit,” Ely predicted.

The FDIC has around $53 billion set aside to back up bank deposits up to $100,000 per depositor, one of the ways the organization is designed to ensure confidence in the banking industry. However, according to Ely, that $53 billion is “not really available.”

“The deposit insurance fund is as real as the social security trust fund,” Ely said, noting that only a “small fraction” of the $53 billion is actually available and “any losses beyond that will be assessed on the banks.”

New attention is being focused on the bruised mortgage companies as the Bush administration presses its rescue plan to Congress. Some lawmakers have challenged the plan’s open-ended nature and expressed fears of a potential big taxpayer bailout in an election year.

Over the past decade, both Fannie and Freddie made the list of Washington’s top 20 lobbying spenders. They spent a combined $170 million to cultivate allies during that period, a bit less than the American Medical Association and a bit more than General Electric. At the same time, their executives have consistently led the mortgage-banking sector in campaign giving to members of Congress, contributing a combined $16.2 million since 1997.

People who have lobbied on their behalf have played or are playing roles in the presidential campaigns of both Republican John McCain and Democrat Barack Obama.

Some people have run into more problems when they tried to deposit IndyMac cashier checks at other banks.

Sheryl MacPhee said she waited in line two hours Tuesday at an IndyMac branch in San Marino to liquidate a certificate of deposit. But when she took it to a Washington Mutual branch in South Pasadena to deposit, she said a manager told her their new policy was not to accept IndyMac checks. If the customer insisted, she said she was told, it could take eight weeks or more to access the full amount.

“Sure, IndyMac will give you a check,” MacPhee told the Los Angeles Times, “but what good is it if no other institution will accept it?”

WaMu spokeswoman Olivia Riley said her bank is accepting IndyMac checks, “but depending on the specifics, funds will be subject to an extended hold period.”

Production of the first capsule — consisting of two sealed rooms that can fit into the fuselage of a large military aircraft — has already begun.

Air Force officials say the government needs the new capsules to ensure that leaders can talk, work and rest comfortably in the air. But the top brass’s preoccupation with creating new luxury in wartime has alienated lower-ranking Air Force officers familiar with the effort, as well as congressional staff members and a nonprofit group that calls the program a waste of money.

Air Force documents spell out how each of the capsules is to be “aesthetically pleasing and furnished to reflect the rank of the senior leaders using the capsule,” with beds, a couch, a table, a 37-inch flat-screen monitor with stereo speakers, and a full-length mirror.

The effort has been slowed, however, by congressional resistance to using counterterrorism funds for the project and by lengthy internal deliberations about a series of demands for modifications by Air Force generals. One request was that the color of the leather for the seats and seat belts in the mobile pallets be changed from brown to Air Force blue and that seat pockets be added; another was that the color of the table’s wood be darkened.