Editor's Note: This article from a little over a month ago shows us how fast the republican party has moved away from its leaders on reform. Bush, who was against almost all reforms became a born-again reformer after republicans in the House began to bail on him as the market crumbled (crashed). As of this writing the entire republican party appears to be pro-reform. The only question left is, "did they wait too long?"

Just four months ago, bipartisan outrage over Enron's shady dealmaking and Arthur Andersen's lax auditing practices raised hopes that Washington was on the verge of a sweeping overhaul of Corporate America's financial practices. Subpoenas flew, and for a time, CEOs, corporate lawyers, accountants, and Wall Street financiers lined up to testify on Capitol Hill. But now the drive for post-Enron legislative reforms is stalled, victim of Presidential indifference, Republican hostility, fierce business lobbying, and disorganization among reform-minded Democrats.

The paralysis comes despite a steady stream of unsettling news from boardrooms that is sapping investor confidence. Almost daily, investors have been stunned by abrupt CEO departures, earnings restatements, and Securities & Exchange Commission investigations of corporate highfliers. Revelations that Wall Street analysts and traders have put their own interests above those of their clients have made things even worse. With the corporate crime wave showing no signs of abating and Washington gridlocked, investors who normally would be plunging back into the stock market by now are sitting it out.

Clearly, Washington has dropped the ball. Early on, lawmakers offered up more than 50 ways to prevent another Enron, such as banning accounting firms from performing consulting services for audit clients, requiring companies to deduct the cost of stock options from earnings, and capping the amount of company stock in employee 401(k) plans. But no bills have made it past both houses of Congress, and the outlook for legislation reaching the President is grim. "If there is no real progress on serious reform," says Felix G. Rohatyn, former managing director of Lazard LLC, "it will just perpetuate this cloud that is hanging over the securities markets."

There has been scant leadership from a White House preoccupied by the war on terrorism and by global hotspots. President Bush has said little publicly since a White House task force in March produced a 10-point plan that called for more timely disclosure of financial information, more accountability to shareholders, and stronger board oversight of auditors. And Bush's conservative economic advisers remain convinced that many reforms would do more harm than good. "We [need] better transparency, better accountability, and improved governance," says chief White House economist R. Glenn Hubbard. "Beyond that, there's not really a role for government."

That view is widely shared by Hill Republicans. But to avoid Democratic charges of complacency, the House GOP has pushed through bills that adopt the rhetoric of reform but mandate few meaningful changes. And while many Senate Democrats favor stronger steps, they lack the votes to propel them to passage. "It is becoming increasingly clear that we may not get real reform," frets Senator Jon S. Corzine (D-N.J.).

Yet there's more to Congress's weakening resolve than gridlock. Corporate and accounting industry reps, for instance, have mounted a sophisticated lobbying blitz to bottle up Democratic measures that would force a separation of auditing and consulting and establish an accounting oversight board with teeth. At the grassroots level, thousands of CPAs, organized by the American Institute of Certified Public Accountants, have flooded lawmakers with faxes, e-mails, personal visits--and money. The profession has given $4 million in campaign contributions so far in the 2002 election cycle. Top recipients include members of the Senate Banking and House Financial Services panels, which have jurisdiction over accounting. All told, 75% of lawmakers got money from the green-eyeshade brigade.

The CPAs have succeeded in watering down reform in the House and are now homing in on the Senate. Banking Committee Chairman Paul Sarbanes (D-Md.) has had trouble getting his Senate panel to approve a tough bill that would give a new oversight board the right to set audit standards and discipline errant accountants. It would also ban auditors from most consulting services and require firms to rotate the lead partner on an audit every five years. But prospects are dim.

Orchestrating the counter-reformation is Texas GOP Senator Phil Gramm, whose wife, Wendy, sits on Enron Corp.'s board. On May 16, Gramm met with 30 corporate and accounting lobbyists to plot strategy and get their members to contact lawmakers. Later that day, Sarbanes began receiving faxes from Maryland-based CPAs. Clifton Gunderson LLP, a Timonium (Md.) CPA firm, fired off a fax saying: "Congress should consider proposals that will promote economic recovery, not enact legislation that inhibits it." That language comes directly from the AICPA call to action.

So far, the business lobby has overpowered pro-investor voices. Consumer groups, the AARP, and Common Cause support reforms. But they either lack muscle or are unwilling to devote resources to fight business. The vacuum has prompted Vanguard Group founder John C. Bogle to start the Federation of Long-Term Investors, a shareholder-rights group including Warren E. Buffett and other prominent investors. A strong accounting oversight board is a top priority. "Our capitalistic system is in peril," says Bogle.

While the reform drive in Washington has largely stalled, the private sector is mustering a response to the market's demand for a cleanup. Dozens of corporations have fired consultants affiliated with their audit firm, and at least 18 companies have adopted shareholder proposals to make the split permanent. Boards, meanwhile, are strengthening their audit and compensation committees with directors who have no ties to management, acting in advance of proposed new stock exchange rules. "We are seeing the beginning of a cultural shift in corporate governance," says William B. Patterson, director of the AFL-CIO's Office of Investment.

That shift is getting a push from the SEC. Chairman Harvey L. Pitt leaned on the markets to shape up governance rules. He's calling for shareholder approval of all stock option plans. And if Congress doesn't establish an accounting oversight board, he'll propose his own version--although it won't be able to subpoena records. But Pitt's main achievement has been a crackdown on accounting abuses. In the first quarter of 2002, the SEC opened 64 financial-reporting cases, more than twice the number in the 2001 quarter.

Still, Pitt has made many missteps, undercutting investor confidence. While the SEC pressed for new rules to address stock analyst conflicts, the agency played catchup with New York Attorney General Eliot Spitzer's probe of Merrill Lynch & Co. And other states are capitalizing on Washington's inaction. Pitt, a Washington lawyer who represented the Big Five firms, has also been criticized for meeting with former clients and other companies under SEC scrutiny.

The lack of strong, visible leadership on accounting and market reforms in Washington has left investors wondering what sort of shield they'll have against the next wave of corporate abuses. The drumbeat of SEC investigations only serves to scare investors away from the market. And as long as Washington dithers, investors don't have any reassurance that the corporate numbers game will end soon. "We need a restoration of trust from every entity," including government, says Byron R. Wien, senior investment strategist at Morgan Stanley. But as George W. Bush once observed, trust is not a commodity in great supply in Washington these days.

By Amy Borrus, Mike McNamee and Paula Dwyer, in Washington, and with Marcia Vickers and David Henry in New York

WASHINGTON (AP) - The government will run a $165 billion deficit this year, the first red ink in four years, but surpluses should return by 2005, the Bush administration said Friday

The budget's sudden plunge from last year's $127 billion surplus was no surprise. Analysts have predicted it because of the flagging economy, the financial markets' swoon, and the costs of both last year's tax cuts and the government's response to the Sept. 11 terrorist attacks.

Even so, the new figure was larger than the $106 billion shortfall the White House envisioned just five months ago. Both parties immediately cited the projections in their campaigns for control of Congress.

Democrats said they believed the White House was being unrealistically optimistic about the budget's return to balance soon, and cited the tax cut President Bush pushed through Congress last year as the primary cause of the long-term fiscal decay. They said the administration was using inflated expectations about revenue growth, especially from corporate profits, and was ignoring the bipartisan desire to beef up spending for defense and domestic security.

"They have now adopted the practices of part of corporate America of hiding deficits and debt," said Senate Budget Committee Chairman Kent Conrad, D-N.D. "They have now wandered off to fantasy land."

Democrats also argued that the White House numbers show that the government will dip deeply into Social Security surpluses in the next few years to pay for other programs. That is something both parties have pledged to avoid in a bid to attract support from older voters, even though using those surpluses has no effect on Social Security's solvency or benefits.

White House budget chief Mitchell Daniels said the recession and the war were the chief culprits. In particular, he cited a sudden drop in revenue from taxes on capital gains, mutual fund distributions and stock options, a reversal of the unexpected receipts the government collected as stock markets soared in the late 1990s.

Comment: The recession ended a long time ago. Yet they blame the recession for years of deficits...notice how conservatives have this amazing ability to change the cause of their failings.

During the campaign they said tax cuts were warrented because of the projected surpluses, now that we have projected deficits are they going to undo the tax cut and be consistent? Not a chance.

"No one saw this coming," he said.

Comment: Really? Daniels has been projecting deficits through 2005 since November of last year.

Daniels also said the revival of red ink spotlights the need to clamp down on federal spending. The administration is currently involved in a bitter fight with lawmakers of both parties over the price tag of a roughly $30 billion anti-terrorism bill.

"This president doesn't intend to spend a single taxpayers' dollar unnecessary," Daniels said. "Right now, every dollar does count."

The White House sees the deficit shrinking to $109 billion in the next budget year, which starts Oct. 1, and a $53 billion surplus in 2005, Daniels said. The administration projected $827 billion in surpluses for the decade beginning 2003, down from the $1 trillion it estimated in February.

Yet Daniels conceded there was no assurance of balancing the budget without three occurrences: Better economic growth, no unexpected war-related events and holding spending increases to 3 to 4 percent annually over the next decade. Continuing the 7 percent spending growth of recent years would cost $2 trillion over the period, he said.

"It's the difference between surpluses and large, permanent deficits," he said.

Even so, Bush's own budget proposes a 10 percent spending increase for next year, mostly for defense and domestic security. Bush would hold all the growth of all other programs except automatic benefits like Medicare to 2 percent, less than inflation.

Democrats were not the only ones expecting a worsening budget picture next year. The Senate Budget Committee's Republican staff projected recently that the 2003 deficit would be $194 billion — nearly double Daniels' prediction.

The nonpartisan Congressional Budget Office plans to release its updated forecasts in August.

Daniels said the economy has been stronger than expected lately, letting the administration project 2002 economic growth at 2.6 percent instead of the 0.7 percent it forecast in February.

But with personal income tax collections lagging — especially taxes on income like capital gains and executives' bonuses — the White House now expects total 2002 revenue of $1.867 trillion. That is $124 billion, or 6 percent, less than 2001.

Yet the White House is projecting an 8.7 percent revenue increase in 2003 to $2.029 trillion, which Daniels attributed to a bounce back from the recession.

As the economy improves, the administration is also forecasting that corporate profits will grow by more than 20 percent from 2002 to 2003, and from 2004 to 2005. The tax on those profits is a major part of federal revenues.

"It's buried in the detail, and it's a critical detail that shows you why we're skeptical," said Rep. John Spratt of South Carolina, the House Budget Committee's top Democrat.

Commentary:
Daniels says the only way we can get a balanced budget again is to keep spending at no more than 3-4% over the next decade. He needs to talk to Bush since he proposed a 10% increase. If (when) he blames Congress, we need to remember that republican presidents are the kings of spending.

WASHINGTON (Reuters) - The Bush administration said on Friday it expected the federal government to post a deficit of $165 billion this fiscal year, a 56 percent increase over earlier projections reflecting a dramatic drop in tax revenues as the stock market has slumped.

Conceding it was caught off guard by the steepest decline in receipts since 1955, the administration said it may develop new budgetary models aimed at projecting the impact of stock movements on capital gains and other tax revenues.

"We have no model at this time, and it will be very difficult, I know, to produce one, but we need to try to understand this phenomenon better," White House budget director Mitch Daniels said.

While the White House revised upward its 2002 economic growth forecast to 2.6 percent from 0.7 percent and projected a return to surpluses in fiscal 2005, rising deficits in the near term could hurt President Bush and his fellow Republicans in upcoming elections, where small swings could shift control of both the House of Representatives and Senate.

Senate Majority Leader Tom Daschle, a South Dakota Democrat, called the deficit numbers "a disaster."

Rep. John Spratt, the senior Democrat on the House Budget Committee, asked: "How much worse will these figures have to get before the administration recognizes that its budget is at the source of the problem and there is no easy glide-path back to a balanced budget?"

At $165 billion, the projected deficit for fiscal 2002, which ends on Sept. 30, would be largest since fiscal 1994. The federal government posted a $127 billion surplus last year.

"The president deals with the cards that were dealt him," White House spokesman Ari Fleischer said, citing the recession and costs of the war on terrorism as reason for plunging the government into deficits for the first time in five years.

Officials said a major factor in the bigger deficits was the decline in tax receipts from capital gains -- a finding that could increase pressure on the president to play a more active role in seeking to shore up the stock market.

Capital gains taxes are generally collected from individuals when assets are sold at a profit. As stock values dropped this year, many investors racked up losses or held onto their shares. As a result, the government collected less. The White House said it expected total tax receipts in 2002 to drop by $124 billion, or 6 percent, from 2001 levels. The last time revenues fell at that rate was 1955.

Bush is already under heavy fire from Democrats for failing to respond forcefully enough to a wave of accounting scandals that have sent the stock market tumbling to lows not seen since 1997. Polls show an erosion in public confidence in the economy and the administration's economic stewardship.

Republicans countered that Bush's tax cut helped the United States recover from the twin shocks of a recession and the Sept. 11 attacks. They blamed a surge in government spending advocated by Democrats, not lower taxes, for the red ink.

The $165 billion shortfall for fiscal 2002 was revised up from the $106 billion deficit forecast by Bush in February. Senate Republicans expect a deficit of $152 billion in 2002.

The White House believes the shortfall in 2003 will run $109 billion, up from the $80 billion deficit projected in February. In contrast, Senate Republicans expect the deficit to climb to $194 billion in 2003. The deficit in 2004 would fall to $48 billion, according to the OMB's mid-year budget review.

OMB said it expected a $53 billion surplus in 2005, and a combined surplus of $827 billion between fiscal years 2003 and 2012, assuming Democrats who currently control the Senate stick to the administration's proposed spending levels.

The Bush White House is not the first to underestimate the impact of capital gains receipts on federal budgeting.

Former President Bill Clinton's projections often missed the mark. But in contrast to Bush, Clinton underestimated the capital gains windfall as the stock market set record highs.

"In the late 1990s we had surprise revenue windfalls and everyone thought it was because GDP was growing," a Bush administration official said. "But we're finding that that was not the biggest factor. The bigger factor was capital gains."

The finding gives Bush new incentive to try to boost the stock market. While polls show Bush's overall approval ratings remain high, his marks for handling the economy have slipped.

Commentary:

WASHINGTON (Reuters) - The Bush administration will release new budget projections on Friday showing a bigger-than-expected deficit of more than $160 billion this fiscal year due in large part to this year's sharp decline in the stock market, officials said.

While the White House will revise upward its 2002 economic growth forecast to 2.5 percent from 0.7 percent and project a return to surpluses in fiscal 2005, rising deficits in the near term could hurt President Bush and his fellow Republicans in upcoming elections, where small swings could shift control of both the House of Representatives and Senate.

The bigger shortfall, which the White House Office of Management and Budget will attribute for the first time to an unforeseen downturn in tax receipts from capital gains, could also increase pressure on Bush to find ways to shore up the stock market.

The president is already under heavy fire from Democrats for failing to react forcefully enough to a wave of accounting scandals that have sent the stock market tumbling to lows not seen since 1997. Polls show an erosion in public confidence in the economy and the White House's economic stewardship.

According to administration officials, the downturn in capital gains receipts dragged overall tax revenues down even though economic growth was far better than expected in the first quarter of 2002.

Capital gains taxes are generally collected from individuals when assets are sold at a profit. As stock values dropped this year, many investors racked up losses or held onto their shares. As a result, the federal government collected less revenue.

Taking new capital gains estimates into account as well as new spending on the war on terrorism, the White House budget office will project a deficit topping $160 billion in fiscal 2002, compared to February's forecast of $106 billion.

The budget deficit in 2003 will drop below the level of this fiscal year, according to administration officials. By contrast, the Republican staff of the Senate Budget Committee expects the budget deficit to climb to $194 billion in 2003.

Despite setbacks in the near term, the White House's mid-year budget review will project a return to surpluses in fiscal 2005, assuming that Democrats, who currently control the Senate, stick to the administration's proposed spending levels, officials said.

"It (the mid-year review) will show that we will be moving back toward balanced budget -- a balanced budget that presumes spending restraint," White House budget director Mitch Daniels said earlier this week.

UNDERESTIMATING CAPITAL GAINS

Administration officials say the Bush White House is not the first to underestimate the impact of capital gains receipts on federal budgeting.

Former President Bill Clinton's projections often missed the mark. But in contrast to Bush, Clinton underestimated the capital gains windfall as the stock market set record highs.

"In the late 1990s we had surprise revenue windfalls and everyone thought it was because GDP (gross domestic product) was growing," a Bush administration official said. "But we're finding that that was not the biggest factor. The bigger factor was capital gains."

The finding gives Bush new incentive to try to boost stock prices. A rebound in stocks would help the federal government return to surpluses, whereas a long-term stock slump could lead to bigger deficits for years to come.

The outlook for the stock market could have serious political implications for Bush and his fellow Republicans in November's congressional elections and beyond.

While polls show Bush's overall approval ratings remain high, his marks for handling the economy have slipped.

A recent CNN/USA Today poll showed his approval ratings for his handling of the economy falling from 72 percent last October to 58 percent now. A poll by the Pew Research Center for People and the Press found 62 percent believed Bush could do more on the economy, with only 33 percent saying he has done as much as possible.

If public confidence in the economy continues to waver into the fall, analysts said it would be a huge boost for Democrats, who have blamed the reemergence of budget deficits on Bush's $1.35 trillion tax cut.

Republicans counter that Bush's tax cut helped the United States recover from the twin shocks of a recession and the Sept. 11 attacks. They blame a surge in government spending advocated by Democrats, not lower taxes, for the red ink.

Commentary:
Wow, what a story....let's begin with the obvious first. Republicans are now just learning that revenue (from the Clinton super boom) gave us surpluses. Why didn't they know this before they passed the tax cut? Did they choose not to know it because it interfers with their ideology?

Second, if republicans and Bush got what they wanted, there would be zero capital gains taxes today and the deficits would be massive. Now they blame lower capital gains taxes for less revenue and higher deficits. Their ideology prevents from from knowing simple truths, or being consistant.

Third, Conservatives have been telling us for years that tax cuts increase revenue...oops, are they wrong again. Now they're borrowing money to pay for tax cuts which go mostly to the rich. Will Bush and conservatives now repeal their failed tax cut...not a chance. They don't want to repeat what George Sr. did. Their ideology prevents them from fixing the problem they created.

Conservatives also have a nifty way of switching what is moral and what is not. During the Clinton years deficits were immoral and a day didn't pass when they didn't cry balance the budget (all the while proposing massive new tax cuts and new spending). So here we have it--when we have a democrat president, the budget MUST BE balanced. When we have republican presidents, like Reagan, Bush Sr, and Baby Bush, we get excuses instead of a balance budget. Do conservatives really, really, deep down, believe in anything other than power?

WASHINGTON (AP) - It is a stock market whodunit that has withstood a decade of scrutiny. Who bought George W. Bush's problem-plagued oil company stock just before its value dropped?

The 1990 transaction involving shares of Harken Energy Corp. allowed the future president to pay off a bank loan for his now-famous stake in the Texas Rangers baseball team. The identity of the buyer of the stock has escaped public disclosure.

Federal regulators who examined the deal as a possible insider trade never asked. President Bush says he doesn't know and the White House declines to ask the broker who handled the transaction. Reporters have fared no better in getting to the bottom of the mystery.

Was Bush's sale of Harken stock another instance of a helping hand from family friends? Or was it a simple case of a buyer trying to make a killing in a high-risk investment?

Corporate scandals and failures that have rocked Wall Street in recent months have renewed questions about Bush's own business dealings when he was a Texas oilman. The White House was put on the defensive again Thursday, as it faced questions about the fact that Bush borrowed $180,000 from Harken to buy some of its stock. The loans are a type of transaction that Bush now wants to ban as part of a crackdown on corporate wrongdoing.

In the 1990 stock sale, Bush collected $848,560 when he sold 212,140 shares he had gotten in the merger of his struggling oil company with Harken in 1986.

By the time of the sale, Harken's finances also were in the red. Daily trading activity in the stock was as little as 1,300 shares on the New York Stock Exchange . If Bush had tried to sell such a large amount of Harken stock into the open market, it undoubtedly would have driven the price far below the $4 a share he was paid.

Bush's oil industry career is a history of being bailed out of money-losing ventures. Among the businessmen who came to his rescue before Harken were Cincinnati businessmen Mercer Reynolds III and William O. DeWitt. They eventually invested in the Rangers with Bush, raised more than $3 million for his presidential campaign and served as co-chairmen of Bush's inaugural committee. Reynolds is now U.S. ambassador to Switzerland and Liechtenstein.

Bush's sale on June 22, 1990, was handled by California stock broker Ralph D. Smith, who says he got a call on June 9 that year from an institutional client who wanted to buy a large block of Harken.

Smith said he then made a couple of "cold calls" to people who owned Harken stock, including Bush.

The broker said there wasn't any arrangement ahead of time to bail Bush out of Harken.

"If there was a rigged buyer, why would he come" to a West Coast brokerage firm? said Smith, who worked for Sutro & Co. in California until his retirement.

The broker said that "if you wanted to do a favor for Bush, you just go to him directly, say here's $800,000 and we'll get this stock transferred."

The 1990 sale triggered an insider trading probe of Bush because he was eight months late in disclosing it to the Securities and Exchange Commission . White House press secretary Ari Fleischer defended the president's sale by saying Bush had notified the SEC in a timely manner that he intended to sell his shares. However, Bush failed to notify the SEC once the stock actually was sold, as required by law.

Uncovering little evidence to support an insider trading case, the SEC chose not to interview Bush.

SEC investigators interviewed Smith in the probe, but, according to Smith, they never asked the broker who bought Bush's stock.

Over the past two years, news organizations have tried to persuade Smith to ask the buyer to waive the cloak of confidentiality that surrounds the transaction, but the retired broker has declined.

"They're not going to find out the name of the buyer; it's none of their business," Smith said, adding that he had a professional responsibility not to identify the buyer.

On Thursday, White House spokesman Dan Bartlett said that "it isn't our place" to urge that the buyer step forward.

Comment: So now we have it, privacy is good when it comes to bailing out Bush but wasn't necessary with President Clinton's sex life. It must be nice have such lose morals.

While Smith declines to name the purchaser, his difficult-to-read handwritten notes turned over to the SEC in the insider trading probe of Bush supply a clue.

The notes for June 9 appear to state that "Geo Bush will sell 212,010 shares in about 2 weeks." The June 22 entry on the day of the sale appears to state, "s/212,140 at 4 to Lee for Bush."

Smith declines to say whether the apparent word "Lee" refers to a person or an entity.

Bush's lawyers have said his investment in the Texas Rangers — not any inside information about Harken's deteriorating financial performance — was the motivating factor in selling his shares.

The stock Bush sold for $4 was selling for $3 two months later and fell to around a dollar by the end of 1990. It rebounded to nearly $9 a year after Bush sold. Today it sells for 44 cents a share.

Despite financial losses in 1990 and 1991, Harken's stock price was propped up by the company's highly publicized deal to drill for oil off the coast of Bahrain. The project, which came together while Bush's father was president, never struck any oil. Little Harken beat out major oil companies, including Amoco, for what at the time was thought might be an extremely valuable concession.

Bush's lawyers told the SEC that before the sale, his financial adviser "was bugging him to get liquid" to meet a financial obligation of $600,000 in connection with the Texas Rangers and to pay a tax bill of a couple of hundred thousand dollars. Bush paid off a bank loan he'd taken out for a share of the baseball team.

Bush's $600,000 stake in the Rangers in 1998 brought him $14.9 million when the team was sold.

Commentary:
Bush made $14.9 million from a $600,000 investment. Not bad if you can get sweetheart deals like this. No wonder a C average worked for him.

Clinton was investigated to death over a land deal called Whitewater, that he lost money on. Where are the calls for an investigation of Bush. The silence from republicans once again shows their morals change depending on which party controls the presidency.

— NEW YORK (Reuters) - Stocks gave up early gains and fell on Friday as weak consumer sentiment data spooked Wall Street after solid earnings news or outlooks from bellwethers such as Dell Computer Corp.

The Dow Jones industrial average rose 23.46 points early on but later sank 156.18 points, or 1.77 percent, to 8,645.35 and the S&P 500 lost 12.39 points, or 1.34 percent, to 914.98. The tech-packed Nasdaq Composite shed a gain of about 17 points, to fall 5.56 points, or 0.40 percent, at 1,368.87.

On Wednesday, Nasdaq ended at its lowest level since May 1997, the Dow suffered its largest one-day percentage loss since September 2001 and the S&P hit its lowest level since October 1997.

U.S. consumer sentiment tumbled in early July as a stock market drubbing that took major indexes to multiyear lows soured Americans' expectations for the future. The University of Michigan's preliminary consumer sentiment index fell to its lowest level since November 2001 in July, down to 86.5 from 92.4 in June. That bucked forecasts for a rise to 92.8.

"The University of Michigan numbers came in weak and that caused the drop," said Barry Hyman, chief investment strategist at Ehrenkrantz King Nussbaum. He said the data cast doubt on the sustainability of spending by consumers, which accounts for two thirds of U.S. economic activity. He also pointed to downgrades such as Home Depot, the home improvements giant whose investment rating was cut by Merrill Lynch. Home Depot, a Dow stock, fell $1.90 at $29.50, or 6 percent

Commentary:
Hmmm, "It's the economy stupid."

UNITED NATIONS (AP) - Facing worldwide opposition, the United States has retreated from its demand that American peacekeepers be permanently immune from the new war crimes tribunal. U.S. diplomats are instead proposing a year long ban on any investigation

The compromise proposal made Wednesday marked a significant change in the Bush administration's campaign to shield Americans from frivolous or politically motivated prosecutions by the new International Criminal Court.

Members of the U.N. Security Council have been grappling with a U.S. threat to end U.N. peacekeeping operations, beginning with Bosnia's on July 15, if it didn't get blanket immunity. They said the latest U.S. proposal was still unsatisfactory.

Nonetheless, there was widespread relief at Washington's new willingness to negotiate.

"We have all very much welcomed the constructive approach of the U.S. at least to work with the other members," said Mauritius' U.N. Ambassador Jagdish Koonjul.

Britain's U.N. Ambassador Jeremy Greenstock, the current council president, called the U.S. proposal "a fair basis for discussion" and said consultations would continue behind closed doors on Thursday.

U.S. Ambassador John Negroponte introduced the new draft at the end of a daylong open council meeting, at which the United States faced intense criticism from nearly 40 countries for seeking permanent immunity for American peacekeepers. Only India, which also opposes the court, was somewhat sympathetic to the U.S. position.

Canada's U.N. Ambassador Paul Heinbecker, who requested the open meeting, warned that the United States was jeopardizing the credibility of the Security Council, the legality of international treaties, and the principle that all people are equal and accountable before the law.

The court's supporters accused Washington of threatening peace and stability from the Balkans and East Timor to the Mideast and Africa — places where U.N. peacekeepers operate.

The court is the product of a long campaign to create a permanent tribunal to prosecute the most heinous deeds: war crimes, genocide, and crimes against humanity.

It came into existence on July 1 with ratifications from 76 countries and signatures from 139.

The United States objects to the idea that Americans could be subject to the court's jurisdiction — even if the United States is not a party. Washington says other countries could use this to try American soldiers for war crimes, in effect threatening U.S. sovereignty.

The new U.S. proposal would ban for 12 months "any investigations or prosecutions" of participants in U.N.-sanctioned peacekeeping operations from countries like the United States that have not ratified the Rome treaty formalizing the court. It also "expresses the intention to renew the request ... for further 12-month periods for as long as may be necessary."

Under the proposal, any peacekeeper who was exempt from investigation or prosecution for a year could be prosecuted if the exemption was not renewed — though no U.N. peacekeeper has ever been charged with a war crime.

"We have for one year a total freedom," said Richard Grenell, spokesman for the U.S. Mission, who said this was sufficient time to bring any American suspect home, thus out of reach of the court.

"What we have been focused on is ensuring that American men and women are not within the reach of the International Criminal Court," he said. "What we have been able to offer today ... (is) that for a period of 12 months they would have that immunity."

But the U.S. draft still raises serious questions for some council members.

The Rome treaty already allows the Security Council to request a 12-month deferral of investigation or prosecution by the court on a case-by-case basis.

Some council members — including France, which has veto power — argued that the U.S. draft would change the statute's intent by giving blanket deferral to peacekeepers. Colombia's U.N. Ambassador Alfonso Valdivieso, also a council member, called the U.S. draft "an improvement" because it was not "in perpetuity."

At the open meeting, nations from the European Union , Latin America, Africa and Asia argued that the Rome treaty has sufficient safeguards to prevent political prosecutions. First and foremost, the court will step in only when states are unwilling or unable to dispense justice.

Commentary:
We can classify this one under, "Bush getting his butt handed to him." After weeks and months of saying the US would not give in, Bush was forced to give in. His conservative buddies will be pleased he fought this battle, liberals are pleased he lost. There was little doubt Bush was going to lose this one, but to conservatives, it appears success isn't required. They're so easy to roll.

WASHINGTON (AP) - President Bush 's bioethics advisers rejected a permanent ban on cloning for biomedical research, taking a middle ground in the divisive debate over the promise of science versus the perils of research using human embryos.

The President's Council on Bioethics was itself divided on what course Congress should take, but neither of two recommendations put forward supports the permanent ban favored by Bush and approved by the House last year.

A slim majority — 10 of 18 members — favored a four-year moratorium to allow for further public debate. Seven members argue that scientists should be allowed to move ahead under strict government regulations. One member failed to attend most meetings and took no position.

"The council, reflecting the differences of opinion in American society, is divided regarding the ethics of research involving cloned embryos," the report said. "Yet we agree that all parties to the debate have concerns vital to defend."

The report said members agreed it was better to air their differences than try to paper over them "in search of a spurious consensus."

The divided report was expected. In February, the council's chairman, Leon Kass, said opinions were so wide-ranging that he was abandoning hope of finding consensus. He said the council would instead produce two reports, outlining the pros and cons of each position.

Members agreed that cloning for reproductive purposes should be banned outright, for both practical and ethical reasons. In this procedure, a cell from one person would be used to create a second person with the same genetic code — like an identical twin born much later.

Scientists say the procedure would be extraordinarily dangerous because any baby produced would likely have severe deformities. Nonetheless, at least two scientists, including one in Kentucky, say they are trying to produce a cloned baby.

It was unclear what influence the report might have in the Senate, where members are also split over whether to allow cloning for research.

"It is my sincere hope that what we've done here will be of some help" in thinking through the issues, said Kass, a bioethicist at the University of Chicago.

Like senators, council members are divided on the central issue: the moral value of a human embryo compared with the promise of science to develop treatments for disease.

The idea, researchers say, is to create embryonic stem cells that could develop into compatible organs and replace a patient's ailing heart, liver or kidney.

Seven of the 18 members favored a total ban that Bush supports: "We believe it is morally wrong to exploit and destroy developing human life, even for good reasons."

They joined with three others who wanted a moratorium, which would give time to develop a system of regulation, to form the majority position.

The seven members in the minority argued that a days-old human embryo does not deserve the same protections afforded a human being and the moral objections to the research are outweighed by the good that could come from it.

"This research could provide relief to millions of Americans," they wrote.

Stacked with academics, the council's meetings have sounded more like graduate seminars than government deliberations. Members parried over the inherent dignity of human beings and debated, at length, the proper terminology to use in the discussion, with each phrase loaded in one direction or another.

While Kass repeatedly said the council's deliberations had little to do with the issue of abortion, the question of when life begins underscored the entire ethical debate.

Over several meetings, the council considered whether a human embryo deserves the same rights and protections that society affords people; whether it is a collection of cells with no rights at all; or whether it is something in between.

The House passed a total cloning ban last year, including reproduction and research. But the Senate has yet to act. Last month, a leading proponent of a total ban, Sen. Sam Brownback, R-Kan., said he would support a two-year moratorium on cloning for research, conceding he didn't have the votes for a permanent ban.

Commentary:
What a farse. Bush made his decision months ago and he said no human cloning. So what is the purpose of the "The President's Council on Bioethics." This council, like any council or panal this president creates won't be listened too anyway. They one guy who didn't attend most of the meetings--I'm with him. Why waste time advising a president who's already made up his mind (based on ideology not facts).

WASHINGTON (AP) - President Bush received low-interest loans totaling $180,375 in the 1980s from a Texas oil company where he was a director, a practice he asked companies to end as part of his proposal to discourage corporate wrongdoing.

The loans, which Bush used to buy stock in Harken Energy Corp., carried a 5 percent annual interest rate, according to company records filed with the Securities and Exchange Commission . Harken didn't require Bush to repay the principal for eight years.

On Tuesday, Bush told a Wall Street audience he wanted to halt such deals. "I challenge compensation committees to put an end to all company loans to corporate officers," he said.

Bush didn't profit from the loans, White House spokesman Dan Bartlett said. Bush eventually retired the debt by trading 105,000 Harken shares being held as collateral, and in return, received options for 42,503 shares that he never exercised, Bartlett said.

Bartlett said the loans were totally appropriate, that such deals were a common practice to encourage investment but "recently have been abused by companies providing billions of dollars to their CEOs without much accountability at all."

The loans were for $96,000 in 1986 for 80,000 of the company's shares, and $84,375 in 1989 for 25,000 shares, according to Harken records filed with the SEC.

Bush's business dealings as a Harken director have dogged him for years and generated fresh interest as corporate scandals mount. Bush has talked about creating a new climate of ethical behavior as worried investors sell and stock prices plunge.

Bush was a member of Harken's board when it reported a profit on the company-financed sale of a subsidiary to a group of Harken insiders. The SEC forced the company to amend its books to reflect millions of dollars in losses that had been hidden by the accounting practice.

Bush was the subject of a separate insider stock trade investigation. The SEC took no action against Bush in that inquiry.

The SEC has released some records on its insider trading probe of Bush, but has withheld others. The White House is declining to authorize the SEC to release all documents from the investigation of Bush.

Commentary:
We're to believe Bush borrowed money from Harken to buy 105,000 shares of Harken stock and then he gave them 105,000 shares back as payment for the loan. What did Bush or Harken get out of the deal? There's something very fishy going on here. The WH would have us believe the number of shares is important..it's not. How much was the stock worth? So here's the deal, Bush borrows money to buy stock, pays it back using the same stock but where did the profits from the increased value of the stock go? Obviously to Bush, why else would he did it? So Bush borrows money and makes a profit from it. Nice if you can get it.

Topping it off, Bush says such loans are not ethical and should be outlawed. Unethical for you or me, but not for him, lawful for him, but not for the rest of us. At best he's a hypocrite, at worst, he's a criminal.

NEW YORK (Reuters) - A stock rout this year has erased $2.4 trillion in market value, representing almost one-quarter of the U.S. gross domestic product, as waves of accounting problems, executive skullduggery and profit warnings have pounded Wall Street's confidence

The Wilshire Total Market Index <.TMW>, the broadest index for the U.S. equity market, closed at its lowest point in almost 4 years on Wednesday and has tumbled more than 18 percent so far this year.

The decline is worth more than Germany's gross national product, a measure of the dollar value of all goods and services produced in that country plus income from abroad. U.S GDP , which measures the value of goods and services produced within the United States, is about $10 billion.

But for all the doom and gloom, some see recent sharp declines as good news.

"It's going back to a more normal level. During the speculative bubble, it (the Wilshire index) was (valued at) almost 2 times GDP," said Edgar Peters, chief investment officer for Panagora Asset Management, which manages $13 billion. "But it's pretty much run its course, despite all the pessimism. When that dissipates in the next few months, it will be a good buying opportunity for those who have the fortitude."

The Wilshire index measures the stock performance of all U.S.-based companies. It had traded down 9.45 points, or 0.11 percent, at 8,706.93 at mid-morning on Thursday.

On Wednesday, the index closed at 8,716.38, giving it a value of $10.4 trillion. That was the lowest close for the market measure since Oct. 8, 1998, when the Wilshire 5000 ended the day at 8,620.80. It also is a new low since the market peaked on March 24, 2000.

Since the Wilshire's all-time high, the market gauge has tumbled about 41 percent, reflecting a loss of nearly $7 trillion in market value.

Commentary:
Bush is using fear to govern and fear kills confidence. Just yesterday, Bush put out a warning about jewelry stores being involved in terrorism. How many investors are dumping their stocks in jewelry stores etc. Every Bush warning on terrorism (and they're all wrong) hurts another industry and destroys confidence.