Deregulation is a Good Thing

The US almost always benefits from Deregulation. Restrictive laws too often create more harm than good. With respect to the current mortgage crisis, the most damaging is the Community Reinvestment Act, a regulatory act that forced banks to give credit and make loans to borrowers unlikely to repay their debts.

Is there any reason for shock when borrowers with lousy credit scores and weak job prospects default on their mortgages? No.

Deregulation Not to Blame for Financial Woes:

Sept. 30 (Bloomberg) -- In the debate on Sept. 26, Democratic presidential nominee Barack Obama argued that the current crisis in the financial markets is the result of Republican deregulation.

The advertising from his campaign has been saying the same thing, and this claim is becoming a fixed element in the talking points of Democratic candidates this year.

The credibility of the charge depends on ignoring several important facts:

-- There has been a great deal of deregulation in our economy over the last 30 years, but none of it has been in the financial sector or has had anything to do with the current crisis. Almost all financial legislation, such as the Federal Deposit Insurance Corp. Improvement Act of 1991, adopted after the savings and loan collapse in the late 1980s, significantly tightened the regulation of banks.

-- The repeal of portions of the Glass-Steagall Act in 1999 -- often cited by people who know nothing about that law -- has no relevance whatsoever to the financial crisis, with one major exception: it permitted banks to be affiliated with firms that underwrite securities, and thus allowed Bank of America Corp. to acquire Merrill Lynch & Co. and JPMorgan Chase & Co. to buy Bear Stearns Cos. Both transactions saved the government the costs of a rescue and spared the market substantial additional turmoil.

None of the investment banks that got into financial trouble, specifically Bear Stearns, Merrill Lynch, Lehman Brothers Holdings Inc., Morgan Stanley and Goldman Sachs Group Inc., were affiliated with commercial banks, and none were affected in any way by the repeal of Glass-Steagall.

It is correct to say that there has been significant deregulation in the U.S. over the last 30 years, most of it under Republican auspices. But this deregulation -- in long-distance telephone rates, air fares, securities-brokerage commissions, and trucking, to name just a few sectors of the economy where it occurred -- has produced substantial competition and innovation, driving down consumer costs and producing vast improvements and efficiencies in our economy.

The Internet, for example, wouldn't have been economically possible without the deregulation of data-transfer rates. Amazon.com Inc., one of the most popular Internet vendors, wouldn't have been viable without trucking deregulation.

-- Republicans have favored financial regulation where it was necessary, as in the case of Fannie Mae and Freddie Mac, while the Democrats have opposed it. In 2005, the Senate Banking Committee, then under Republican control, adopted a tough regulatory bill for Fannie and Freddie over the unanimous opposition of committee Democrats. The opposition of the Democrats when the bill reached the full Senate made its enactment impossible.

Barack Obama did nothing; John McCain endorsed the bill in a speech on the Senate floor.

-- The subprime and other junk mortgages that Fannie and Freddie bought -- and the market in these mortgages that their buying spawned -- are the underlying cause of the financial crisis. These are the mortgages that the Treasury Department is asking for congressional authority to buy. If the Democrats had allowed the Fannie and Freddie reform legislation to become law in 2005, the entire financial crisis might have been avoided.

Policies that center on deregulation are probably hard for the voting public to grasp, and that has allowed Democratic candidates to spread the idea that there is a connection between deregulation and the current crisis. But an Obama victory, based in part on the claim that deregulation has caused the financial crisis, will create a mandate for new regulation where it isn't necessary and will do harm to our economy.

Biden -- Energy Gasbag

Biden is one of those politicians who honors the old notion of looking like he might be an idiot, and then he speaks and removes all doubt. Democrats are determined to punish America over energy. They seem consumed by the lunacy that energy is like alcohol -- a good-time elixir consumed at parties that leads to headaches in the morning.

It's not. The prosperity of the US has sprung from a few well known sources: Democracy and Capitalism, and Energy. Cheap abundant Energy. Biden, however, is befuddled when it comes to the role of energy in the economy. Worse, he thinks it's better for America if energy costs more.

Based on his support for punitive strategies like cap-and-trade, it's clear Biden wants to enact as many de facto taxes as possible on Americans who utilize the energy that makes the economy move.

Biden's Coal Slaw

The classic definition of a gaffe is when a politician accidentally tells the truth, and specialists like Joe Biden can work wonders with the form. On Tuesday Barack Obama's running mate blew an easy question about coal, revealing volumes about liberal energy politics.

Working the rope line in Maumee, Ohio, the Senator was asked by an environmentalist why he and Mr. Obama support "clean coal." "We're not supporting clean coal," Mr. Biden responded. Then, riffing on China's breakneck construction of new coal plants, he continued, "No coal plants here in America. Build them, if they're going to build them, over there."

Coal happens to be the indispensable workhorse of the U.S. power system, providing about 50% of the country's electricity. Many Democrats nonetheless despise coal -- because of pollution before the era of scrubbers, but especially now because of carbon emissions. Al Gore favors an outright moratorium on coal-fired power in the name of climate change. Meanwhile, any scheme to tax and regulate carbon -- like the cap-and-trade program backed by Mr. Obama and John McCain -- would hit coal first and hardest, effectively banishing it from the U.S. energy mix.

Mr. Biden, then, only stated an obvious if politically unutterable truth. The real costs of green ambitions won't be paid by well-heeled coastal liberals, but will fall disproportionately on the Southern and Midwestern states that depend on coal for jobs and power. The blue-collar voters of Pennsylvania, Indiana, Ohio, West Virginia and so forth will get hurt most -- notwithstanding Mr. Biden's campaign reinvention as the scrapper from Scranton.

As for "clean coal," the Obama campaign actually supports it. But this too is a political bait-and-switch, perhaps explaining Mr. Biden's confusion. In theory, clean coal would require capturing greenhouse gas emissions, compressing them into liquid and then pumping it underneath the earth. Even if the technology were ready for commercial deployment tomorrow, to sequester just 25% of yearly U.S. CO2 emissions would mean moving volumes more than twice as large as the world's current oil pipeline system can handle. That will require an enormous amount of money, and generations to build.

That an eminence like Mr. Biden is clueless about coal suggests how little official Washington has thought through the consequences of its anticarbon agenda. His blunder is also notable because it exposed the realities that politicians prefer not to voice amid an election campaign. Coal-state voters should be watching what their politicians really have planned for them come January.

Obama's Bailout

It's an interesting question. How did Obama pay for college and law school? Or, Who paid for Obama to attend law school? It seems as though he wants to keep that information to himself. Very lawyerly of him.


How exactly did Barack Obama pay for his Harvard Law School education?

The way the Obama campaign has answered the question was simply hard work and student loans.


But new questions have been raised about Obama’s student loans and Obama’s ties to a radical Muslim activist who reportedly was raising money for Obama’s Harvard studies during the years 1988 to 1991.


The allegations first surfaced in late March, when former Manhattan Borough president Percy Sutton told a New York cable channel that a former business partner who was “raising money” for Obama had approached him in 1988 to help Obama get into Harvard Law School.


In the interview, Sutton says he first heard of Obama about twenty years ago from Khalid Al-Mansour, a Black Muslim and Black Nationalist who was a “mentor” to the founders of the Black Panther party at the time the party was founded in the early 1960s.


Sutton described al-Mansour as advisor to “one of the world’s richest men,” Saudi prince Alwaleed bin Talal.


Prince Alwaleed catapulted to fame in the United States after the September 11 attacks, when New York mayor Rudy Guiliani refused his $10 million check to help rebuild Manhattan, because the Saudi prince hinted publicly that America’s pro-Israel policies were to blame for the attacks.


Sutton knew Al-Mansour well, since the two men had been business partners and served on several corporate boards together.


As Sutton remembered, Al-Mansour was raising money for Obama’s education and seeking recommendations for him to attend Harvard Law School.


“I was introduced to (Obama) by a friend who was raising money for him,” Sutton told NY1 city hall reporter Dominic Carter. “The friend’s name is Dr. Khalid al-Mansour, from Texas.”


Obama spokesman Ben LaBolt told Newsmax that Sutton’s account was “bogus” and a “fabrication that has been retracted” by a spokesman for the Sutton family.


He referred Newsmax to a pro-Obama blog published on Politico.com by reporter Ben Smith.


In a September 3 blog entry, Smith wrote that “a spokesman for Sutton’s family, Kevin Wardally” said that Sutton had been mistaken when he made those comments about Obama and Khalid Al-Mansour.


Smith suggested the retraction “put the [Obama/Al-Mansour] story to rest for good.”


Wardally told Smith that the “information Mr. Percy Sutton imported [sic] on March 25 in a NY1 News interview regarding his connection to Barack Obama is inaccurate. As best as our family and the Chairman’s closest friends can tell, Mr. Sutton, now 86 years of age, misspoke in describing certain details and events in that television interview.”


Asked which parts of Percy Sutton’s statements were a “fabrication,” LaBolt said “all of it. Al Mansour doesn’t know Obama. And Sutton’s spokesman retracted the story. The letter [to Harvard, which Percy Sutton says he wrote on behalf of Obama], the ‘payments for loans’ — all of it, not true,” he added.


Newsmax contacted the Sutton family and they categorically denied Wardally’s claims to Smith and the Politico.com. So there was no retraction of Sutton’s original interview, during which he revealed that Khalid Al-Mansour was “raising money” for Obama and had asked Sutton to write a letter of recommendation for Obama to help him get accepted at Harvard Law School.


Sutton’s personal assistant told Newsmax that neither Mr. Sutton or his family had ever heard of Kevin Wardally.


”Who is this person?” asked Sutton’s assistant, Karen Malone.


When told that he portrayed himself as a “spokesman” for the family, Malone told Newsmax, “Well, he’s not.”


According to a 2006 New York magazine profile, Wardally is part of a “New New Guard” in Harlem politics that has been challenging the “lions” of the old guard, Charles Rangel and Percy Sutton. That makes him an unlikely candidate to speak on behalf of Sutton.


Sutton maintains an office at the Manhattan headquarters of the firm he founded, Inner City Broadcasting Corporation. ICBC owns New York radio stations WBLS and WLIB.


Sutton’s son Pierre (“Pepe”) runs ICBC along with his daughter, Keisha Sutton-James. Malone told Newsmax that she had consulted with Sutton’s family members at the station and confirmed that no one knew Kevin Wardally or had authorized him to speak on behalf of the family.


For someone claiming to be a “spokesman” for the Sutton family, who was authorized to call Percy Sutton a liar, Wardally even got Percy Sutton’s age wrong.


Sutton is not 86, as Wardally said, but close to 88. He was born on Nov. 24, 1920.


Wardally responded to a several Newsmax phone messages and emails with a terse one-line comment, maintaining his statement that Percy Sutton “misspoke” in the television interview.


“I believe the statement speaks for itself and the Sutton Family and I have nothing further to say on the topic,” he wrote in an email.


Asked to explain why it was that no one at Inner City Broadcasting Corp. knew of him or accepted him as a family spokesman, Wardally responded later that he had been retained by a nephew of the elder Sutton, who “is in our office almost every week.”


Wardally works for Bill Lynch Associations, a Harlem political consulting firm. The nephew, Chuck Sutton, no longer works with the elder Sutton at Inner City Broadcasting, but for a high-tech start-up called Synematics.


“Percy Sutton doesn’t go out idly on television saying things he doesn’t mean,” a well-connected black entrepreneur who knows Sutton told Newsmax.


Ben LaBolt’s claim that “Al Mansour doesn’t know Obama” was contradicted by Al Mansour himself in an extended interview with Newsmax.


Comparing the revelation of his ties to Obama to the controversy surrounding Rev. Jeremiah Wright, Al Mansour said that he was determined to keep a low profile to avoid embarrassing Obama.


“In respect to Mr. Obama, I have told him, because so many people are running after him… I was determined that I was never going to be in that situation,” he told Newsmax.


Al Mansour said he was deliberately avoiding any contact with the candidate. “I’m not involved in any way in celebrity sweepstakes,” he said. “I wish him well, anything I can do if he lets me know, I’ll let him know what I think I can do or can’t. But I don’t collect autographs. I wish him the best, and hope he can win the election.”


He repeatedly declined to comment on the Percy Sutton allegations, either to confirm or to deny them.


“Any statement that I make would only further the activity which is not in the interest of Barack, not in the interest of Percy, not in the interest of anyone,” Al Mansour said.


Unanswered Questions


Sen. Obama has refused to instruct Harvard Law School to release any information about his time there as a student, or about his student loans.


Newsmax contacted the Dean of Students, the Director of Student Financial Services, the Registrar, and the Bursar of Harvard Law School. None would provide any specific information on Barack Obama’s time at Harvard, except for his dates of attendance (1988-1991) or his year of graduation, 1991.


A spokesman for the law school, Michael Armini, said it was Harvard policy not to divulge information on alumni without their approval.


“There are lots of reporters nosing around the library,” he acknowledged. So far, none had turned up any new information.


Law professors Lawrence Tribe and Charles Ogletree have both said publicly that they were “impressed” by Obama when he was a student.


Sources close to the Sutton family told Newsmax that Percy Sutton wrote a letter of recommendation for Obama to Ogletree at Khalid Al-Mansour’s request, but Ogletree declined to answer Newsmax questions about this.


Harvard Law School spokesman Michael Armini said that Harvard was “very generous” with financial aid, but only on the basis on need.


The Obama campaign told Newsmax that Obama self-financed his three years at Harvard Law School with loans, and did not receive any scholarship from Harvard Law school.


LaBolt denied that Obama received any financial assistance from Harvard or from outside parties. “No - he paid his way through by taking out loans,” he said in an email to Newsmax.


At the time, Harvard cost around $25,000 a year, or $75,000 for the three years that Obama attended. And as president of the Harvard Law Review, he received no stipend from the school, Harvard spokesman Mike Armini said.


“That is considered a volunteer position,” Armini said. “There is no salary or grant associated with it.”


So if the figures cited by the Obama campaign for the Senator’s student loans are accurate, that means that Obama came up with more than $32,000 over three years from sources other than loans to pay for tuition, room and board.


Where did he find the money? Did it come from friends of Khalid Al Mansour? And why would a radical Muslim activist with ties to the Saudi royal family be raising money for Barack Obama?


That’s the question the Obama campaign still won’t answer.


Michelle Obama Speaks Out


Speaking at a campaign event in Haverford, Pa, in April of this year, Michelle Obama claimed that her husband had “just paid off his loan debt” for his Harvard Law School education.


In an appearance in Zanesville, Ohio, in February she bemoaned the fact that many American families were strapped with student loan payments for years after graduation.


“The only reason we’re not in that position is that Barack wrote two best-selling books,” she said. The first of those best-sellers netted the couple $1.2 million in royalties in 2005.


In response to Newsmax questions about the Obama’s college loans, a campaign spokesman cited a report in The Chicago Sun claiming that Obama borrowed $42,753 to pay for Harvard Law School, and “tens of thousands” more to pay for undergraduate studies at Columbia.


The same report said that Michelle Obama borrowed $40,762 to pay for her years at Harvard Law School.


But a Newsmax review of Senator Obama’s financial disclosures found no trace of any outstanding college loans, going back to 2000.


As a United States Senate candidate, Barack Obama was required to file a financial disclosure form in 2004 detailing his assets, income, consulting contracts, and liabilities.


Obama listed “zero” under liabilities in 2004 and in all subsequent U.S. Senate financial disclosure forms.


Under the Senate ethics rules, he is required to disclose any loan, including credit card debt, of $10,000 or more. The only exception to the reporting requirement is mortgage debt on a principal residence.


The Senate reports also directly contradict Michelle Obama’s claim that the couple had “only just” paid off their student loans after receiving book royalties paid out in 2005 and 2006 – well after her husband had been ensconced in the Senate.


Apparently, Michelle Obama misspoke, according to the version provided by the Obama campaign.


Campaign spokesman Ben LaBolt now tells Newsmax that the loans Sen. Obama took out to pay for Harvard Law School “were repaid in full while he was a candidate for the U.S. Senate [in 2004], and under the rules, the modest outstanding balance he repaid was not reportable as a liability on his personal financial disclosure reports.”


The Senator repaid the loans on “the expectation of a significant increase in family income” as a result of the paperback edition of his 1995 book, Dreams of My Father, LaBolt said.


Obama acknowledges that sales of the hard cover edition of the book were “underwhelming.” But in the spring of 2004,when Obama won the Democrat U.S. Senate primary in Illinois, Rachel Klayman, an editor at Crown Publishers in New York, read an article about Obama and became interested in his memoir, only to discover that Crown now owned the rights.


She asked Obama to write a new forward, and Crown then decided to re-issue Dreams as a paperback in July 2004, just as Obama made his historic speech to the Democrat National Convention.


The paperback eventually sold over one million copies, which under the standard industry royalty for trade paperbacks of 7.5%, earned him $1.2 million. However, Obama didn’t report income from the book until 2005, so it’s unclear how he was able to repay his student loans in 2004.


Responding to attacks from the Hillary Clinton campaign during the primaries, Obama released seven years of tax returns on March 25 of this year.


The returns, dating back to 2000, indicate that the couple paid no interest on their student loans. The interest from such loans would have been deductible on their joint income tax returns.


For 2000 through 2004, taxpayers declared student loan interest as a deduction on line 24 of federal form 1040. After 2004, the deduction can be taken on Line 33.


But the Obamas never declared a dime of interest in student loans on their return, most likely because they simply earned too much money to be able to take the deduction under the IRS rules.


Obama spokesman Ben LaBolt had no answer as to why the Obamas’ failed to declare the loans, stating the obvious that “because interest on the loans was not deducted, it would not appear on the Obamas’ personal return.”

South Africa heading South

The new leader of South Africa will lead the country in the direction taken by Fidel Castro and others who believe government can manage businesses about which they know nothing. Their results are all that's needed to know what is ahead for South Africa. Scarce resources will become even scarcer and the country will need to rely on the kindness of foreigners more than ever.


South African President Mbeki Agrees to Step Down

Sept. 20 (Bloomberg) -- South African President Thabo Mbeki agreed to step down, bowing to an order by the ruling African National Congress and clearing the way for party leader Jacob Zuma to steer the continent's biggest economy.

Mbeki, who succeeded Nelson Mandela in 1999 to become the nation's second black president and oversaw its longest period of economic growth on record, ``will step down after all constitutional requirements have been met,'' his spokesman Mukoni Ratshitanga said by telephone from Pretoria.

The order by the ANC's 86-member National Executive Committee came eight days after a High Court judge suggested Mbeki pressured prosecutors to pursue corruption charges against Zuma, the likely winner in 2009 elections. He can't be named immediately because he is not a member of parliament. The legislature will choose an interim successor from its ranks.

Zuma, 66, has the backing of labor unions and the Communist Party, who opposed Mbeki's sale of state companies and efforts to balance the budget deficit. Zuma, who wrested control of the ANC from Mbeki in a Dec. 18 party vote, has pledged to increase spending on health and education and do more to fight crime.

``We are determined to heal the rifts that may exist'' in the party, ANC Secretary-General Gwede Mantashe told reporters today in Johannesburg.

Manuel Will Remain

Finance Minister Trevor Manuel, who has held the post since 1996, doesn't plan to resign, his spokeswoman Thoraya Pandy said by phone from Johannesburg today.

``The important thing is what happens to the rest of the cabinet, and investors will be keenly watching what decision Finance Minister Trevor Manuel will take on his future,'' Mike Davies, an analyst at Eurasia Group in London, said in a telephone interview.

The ANC still wants Mbeki to continue his mediation of the political crisis in neighboring Zimbabwe, Mantashe said.

Zuma has ruled out wholesale changes to Mbeki's economic policies even as unionists and communists have demanded changes to economic policies including the abolition of an inflation target and payments of income grants to the poor.

Since taking over the leadership of the ANC, Zuma has shifted his position on a range of policies, tailoring his comment to appease different audiences.

Policy Shifts

He said the government may make it easier for employers to fire staff and then pledged not to erode worker rights; he advocated public debate on reintroducing the death penalty and then said he opposed capital punishment; and he promised to protect the justice system's integrity as the ANC set about disbanding the agency investigating him, known as the Scorpions.

Zuma has also courted poor white Afrikaners, alienated by Mbeki's criticism of South Africa's white community and by affirmative-action policies.

``We are going to go through a phase of quite a lot of policy uncertainty,'' said Kevin Lings, an economist at Stanlib Asset Management in Johannesburg, said in a telephone interview. ``Zuma is by his nature, and the way he's approached things, more consultative than Mbeki. It will delay decisions on key policy initiatives.''

The ANC will approach all members of government and ask them to remain in their posts, Mantashe added. The party wanted to bring an end to instability and uncertainty in the financial markets, he said.

Deputy President Phumzile Mlambo-Ngcuka would quit if Mbeki did, her spokesman Denzil Taylor said before the ANC's announcement today. The ANC hasn't been informed of her decision, Mantashe said.

Zuma Investigations

Zuma has been under investigation for taking bribes from arms dealers since 2001, and charges against him were reinstated on Dec. 28.

Judge Chris Nicholson invalidated the charges on Sept. 12, saying prosecutors didn't follow proper procedures and that the case may have been politically motivated, a ruling the National Prosecuting Authority plans to appeal.

The ANC dominates South African politics, having won almost 70 percent of the vote in the last elections in 2004. New elections have to be held before the end of next July, after which Mbeki had to step down, having served a maximum two terms.

A Loan is NOT a Bailout -- AIG

The financial uproar that led to the bankruptcy filing of Lehman Brothers, the sale of Bear Stearns, the sale of Merrill Lynch and major threats to the existence of AIG has led the US government to offer emergency LOANs to end the turmoil.

Bear Stearns received a 10-year loan collateralized by a pool of assets once considered valuable enough to push Bear's stock price to $170. Meanwhile, JP Morgan struck a deal to buy Bear for $2 a share. But JPM soon realized that buying Bear for $2 a share was an act of getting so much for so little that it bumped its final price to $10 a share. The Bear building alone was worth the extra $8 a share.

Merrill wasted no time looking for loans from Washington. Merrill, led by John Thain, quickly concluded a deal with Bank of America for $50 Billion.

At the start of 2008, Bear employed about 14,000. When JP Morgan acquired the company, it kept about half the workers. Lehman employed about 25,000 at the start of the year. As a result of the bankruptcy, all of them were out of work. However, Barkley's Bank bought a portion of Lehman after the Chapter 11 announcement. It appears that purchase may have saved about 9,000 jobs.

How many jobs will Merrill lose? Undoubtedly thousands. But Merrill will live on.

Then there is AIG, which is a diverse financial services business unlike the investment banks. The US government extended a Two-Year Loan to AIG. With this capital, AIG will have the breathing room to conduct a sale of its many parts. It appears that the government has taken the role of Corporate Raider that was popular on Wall Street in the 1980s.

Those were days of Greenmail. When Corporate Raiders would acquire Large Companies in Leveraged Buyouts and sell them, one division at a time, for more than the price of the Acquisition. R.J. Reynolds was one of the best known. That episode inspired the book "Barbarians at the Gate."

This time the US government is financing the orderly sale of AIG based on a rock-bottom sale price. Should AIG have trouble repaying an $85 billion loan by selling businesses that had been valued at several times that figure not long ago? No.

What might lie ahead? The investment banking business has always been risky. About 25 years ago Sears wanted to diversify. Retail, like all businesses, had its ups and downs. To offset the cycles in retail, it bought an investment bank -- Dean Witter, a national firm with a conservative Wall Street reputation. The union was always difficult. During the years Sears owned Dean Witter, Sears introduced the Discover credit card, which was a huge success. Eventually Sears, like many companies, decided to return to the business it knew best and sold Dean Witter and the Discover Card business as a package. It also sold off its Allstate Insurance division. Both units were spun-off from Sears and thereafter the stocks of Dean Witter Discover and Allstate traded on the NY Stock Exchange.

Morgan Stanley eventually acquired Dean Witter Discover. Now Morgan Stanley is negotiating its own fate. That might include a sale of 50% of the company to China or a total sale to Wachovia Bank.

Again, what might lie ahead? The reappearance of Merrill Lynch, for one. Bear Stearns for another. When times improve for investment banks, Bank of America might spin off Merrill the same way Sears spun off Dean Witter. The other investment banking names may reappear under the same scenario. After nursing them back to health, the corporate parents may decide to capture an easy profit by selling their stakes.

A.I.G. Is Still Profitable, With a Wide Array of Enterprises

American International Group and its assortment of businesses run the gamut from aircraft leasing to life insurance for Indians to retirement plans for elementary schoolteachers. Parts of the company have been battered by the credit crisis.

But many of its operations may put up for sale — as the Federal Reserve signaled they would be when it announced its rescue of the company Tuesday night — and they could prove attractive to prospective investors and competitors. The main insurance unit has remained profitable, as has the aircraft leasing arm.

The great assortment of assets reflects the determination of the man who built A.I.G., Maurice R. Greenberg, to create an global empire operating in complementary businesses. Not even the company’s annual reports to shareholders or its regulatory filings offer a chart of its complex corporate structure.

Though its name is American, the company is rooted in Asia. According to company lore, its founder, Cornelius Vander Starr, a World War I veteran, traveled to Asia with only 300 Japanese yen (less than $3 by today’s exchange rates) in his pocket and started the firm in Shanghai in 1919.

With a partner, he sold marine and fire insurance and expanded rapidly throughout the Philippines, Indonesia and China by hiring locals as agents and managers, a business strategy A.I.G. uses today. Nearly half of A.I.G.’s 116,000 direct employees — about 62,000 people — are in Asia.

In 1960, Mr. Greenberg joined the company, following his mentor, an executive at Continental Casualty Company in Chicago. Mr. Greenberg focused on making giant commercial deals, increasing its share of the life insurance business and writing what were, decades ago, unusual types of coverage, like insurance against kidnapping and protection from suits against a company’s officers and directors.

A.I.G.’s general insurance business, which accounted for nearly half its $110 billion in revenue last year, has held up well. A.I.G. claims that its companies are the largest underwriters of commercial and industrial insurance in the United States. Its policies cover everything from environmental liability for companies to auto insurance.

A.I.G.’s asset management group — it includes a private banking subsidiary for the wealthy, a broker dealer and another unit that manages mutual funds — has had losses, but it is not a unit that pushed the company to the brink. That group reported its first loss in years in the last quarter of 2007; in the second quarter of this year, it reported an operating loss of $314 million, which is modest these days.

Then there is the aircraft leasing business, which owns more than 900 planes and is part of the company’s financial services group. The company stated in its annual filing with regulators that the leasing unit would buy 73 new aircraft this year. That unit is profitable, according to the most recent report for the quarter ended June 30.

A.I.G.’s problems rest in the company’s London-based financial products unit, part of its financial services group, which is exposed to securities tied to the value of home loans — the same kind of securities that forced Lehman Brothers into Chapter 11 bankruptcy proceedings on Monday. The financial products group sold credit-default swaps, complex financial contracts allowing buyers to insure securities backed by mortgages. Many of the buyers were European banks. As home values have fallen, the value of the underlying mortgages has declined, and A.I.G. has had to reduce the value of the securities on its books.

The company has other forms of real estate exposure. One subsidiary, American General Finance, makes home loans and has suffered along with the housing market. Another subsidiary, the United Guaranty Corporation, provides mortgage guarantee insurance. Still other units buy mortgage-backed securities directly.

“We’ve always been opportunistic,” Mr. Greenberg said, responding to a question about whether the company would buy other insurers struggling in the wake of the Sept. 11 terrorist attacks. “When we see opportunities, we will never change. At A.I.G., it’s part of our culture.”

Geographically, A.I.G. is sprawling. One of its life insurance companies operates in 50 countries and other units offers other products, like health insurance and retirement services, in countries like Japan and the United States. It claims to be the largest life insurance company in the Philippines. Its private bank is based in Zurich.

A.I.G. ’s Asian asset management business has $115 billion in assets, and the company peddles mutual funds in the Philippines, Hong Kong and Singapore and investment trusts in Taiwan.

The company is a sizable investor in Asian development projects, from toll roads in the Philippines to Seoul’s international finance center. It is also a major investor in the Taiwan government. As of February, A.I.G. held $14.2 billion in Taiwan government bonds, 13.1 percent of Taiwan’s total issued government bonds.

Though he left the company a few years ago after an accounting scandal, Mr. Greenberg’s fortune remains locked up with A.I.G., in which he has a stake of about 11 percent through various holdings, according to Bloomberg News.

Early in 2005, questions arose about financial transactions that had the effect of making the company’s earnings look better. Mr. Greenberg resigned as chief executive after regulators sent a wave of subpoenas to the company; eventually A.I.G. restated earnings covering a five-year period.

His successor tried to restore confidence in the company but his efforts did not meet with investor approval and he was replaced this summer, after the company announced that it lost $7.8 billion in the first quarter of the year, the biggest loss in its history. In August it announced that it had lost another $5.3 billion in the second quarter.

al-Qaeda Bombs -- On film and In Battle

These days, the only time al Qaeda appears in the US is on video. After seven years, the US military has killed most of the death-craving leaders. Only a couple, including Osama bin Laden, have escaped, which is a hint that their death-wish is mostly talk. It's okay with Osama and his closest pals if others die in support of his mad pursuits, but he's doing everything possible to stay out of the gunsights of the US military.

Osama will have to increase his vigilance. US Special Forces teams are in Pakistan these days. Navy SEALs and others are in the wild tribal regions of Pakistan killing muslim bad guys and looking for Osama. Maybe they'll nail him today -- September 11 -- and force Obama, Osama's favorite in the pending presidential election, to find a new campaign issue.

Eventually US agents will find him. Maybe a clue will emerge from the videos he sends every year. The Unabomer was caught after his Manifesto was published by the New York Times and the Washington Post. He's believed to suffer from a kidney problem, and it's possible he depends on dialysis. It's probably tough to hide in remote mountains with bad kidneys. If that is his situation, he'll probably acquire an infection and die. But if a little luck comes our way, our Special Forces will find him first.

Meanwhile, times have been bad for the basic al Qaeda recruits. Or good, if death is their true goal. They've been dying wherever and whenever they battle US forces, and they have been destroyed in Iraq. These foolish muslims have embraced the new form of military outcome known as the Pyrrhic Loss.


Al-Qaeda Is Planning to Release 9/11 Video, U.S. Monitor Says

Sept. 11 (Bloomberg) -- Al-Qaeda is planning to release a video message within 24 hours to mark the seventh anniversary of the Sept. 11 attacks on the World Trade Center and Pentagon, a U.S.-based intelligence group said.

The terrorist network's media production unit as-Sahab published banners on the Internet earlier this week flagging the release, with a graphic saying ``Wait 11 September,'' IntelCenter, based in Alexandria, Virginia, said in an e-mailed statement today.

The banner showed a silhouette of a face with a question mark over it, according to IntelCenter, which provides counterterrorism intelligence support to the U.S., British, Australian and Canadian armed forces. The ``mystery speaker'' on the video may be al-Qaeda leader Osama bin Laden or a recording of the last will and testament of Mohammed Atta, one of the 9/11 hijackers, IntelCenter said.

Al-Qaeda regularly releases messages on the Internet and in May broadcast an audio message from bin Laden timed to coincide with Israel's 60th anniversary and President George W. Bush's visit to the region. In it, bin Laden condemned countries that are supportive of the Jewish state.

``This is the greatest amount of build-up al-Qaeda has generated for any anniversary video release designed to mark 9/11,'' IntelCenter said in a statement.

There have been no confirmed sightings of bin Laden since he escaped U.S.-led forces in the Tora Bora region of Afghanistan in December 2001.

Palin has them Wailin'

When the campaign narrowed to McCain and Obama, it started to look as though the race would put a nice-looking, clean and articulate black man (to borrow some terms from Joe Biden) against a 72-year-old former Navy man with bad shoulders. Obama's messianic appeal to emotional voters who believe the government is the source of all sweetness and light became clear and was becoming tedious. McCain's appeal to people who realize the world is a hostile place no matter how a nation conducts itself was well accepted, but not news.

Then, along came Palin. She's human. She's imperfect. She's decent and as capable as any vice presidential candidate who has ascended to the presidency.

Truman was all that, too. His appearance on the national stage was similar to Palin's. He was tapped by FDR a couple of weeks before the 1944 Democratic Convention to run with him that year. Truman was an obscure senator from Missouri.

But there were critical differences. FDR was the president who was near death and expected to die during a 4th term in office. Meanwhile, World War II was raging. And the day after FDR died, Truman was told about the atomic bomb. Till then he knew nothing about it. Palin will manage.

Howard Fineman writing in Newsweek on the Republican vice-presidential candidate:

Democrats dare not issue [Sarah] Palin a pass—she's too dangerous a foe. Normally vice presidential candidates fade into the background.

Nobody is expecting that with Palin; indeed, her newfound celebrity has made even Obama look dull.

The usual rule is that voters don't trust attacks from people they don't know, but Palin is turning the adage on its head.

Democrats are determined to attack her credibility, even if it gives her more visibility. "We've got to go after her, and fast," a top Democratic strategist, who asked for anonymity when discussing strategy, told me.

Obama -- Community Dis-Organizer

What have "community organizers" accomplished? Based on my observations, community groups have done well with "green spaces" and "community gardens." But that's about it. All other neighborhood improvements were accomplished by forces far beyond the hapless community organizations, which seem to absorb allocations from taxpayers while doing next to nothing.

Did community organizers contribute to the drop in crime over the last 15 years? No.

Have they improved public schools in any way? No

Have they increased employment in any measurable way? No.

This is the where Obama has come from. His background is with organizations incapable of reaching worthwhile goals. He brings no record of achievement to the campaign.

Meanwhile, he's picked a vice presidential running mate who has had two brain aneurysms. Hence, Joe Biden is a lot closer to death than John McCain. The truly scary part occurs when you consider how totally unprepared Obama is for the presidency and then think about Biden's living-death status. One good shock might finish him off.

Obama is a man who's led angry tenants against landlords and led angry citizens as they demand more and more from taxpayers while offering nothing in return.

Obama has probably written his inauguration speech and undoubtedly he urges Americans to "Ask not what you can do for your country. Ask for as much as you can from taxpayers."

South Side Veterans for Truth

September 8, 2008

Last week we wrote that " 'community organizer' is to Barack Obama what 'war hero' was to John Kerry." We didn't know the half of it.

Kerry staked his claim to the presidency on the pretense that he was a war hero, notwithstanding his showy repudiation decades earlier of the war and his fellow veterans. According to a new exposé in the liberal New Republic, Obama, before embarking on a career in politics, similarly, albeit quietly, repudiated "community organizing," only to re-embrace it decades later, apparently out of political expediency.

TNR's John Judis tracked down Jerry Kellman, who in 1985 "hired Obama to organize residents of Chicago's South Side." Kellman describes a conversation the two "community organizers" had at a conference on "social justice" in October 1987:

"[Obama] wanted to marry and have children, and to have a stable income," Kellman recalls.

But Obama was also worried about something else. He told Kellman that he feared community organizing would never allow him "to make major changes in poverty or discrimination." To do that, he said, "you either had to be an elected official or be influential with elected officials." In other words, Obama believed that his chosen profession was getting him nowhere, or at least not far enough. . . .

And so, Obama told Kellman, he had decided to leave community organizing and go to law school.

Another way of putting this might be that Obama left community organizing because he wanted a job in which he had actual responsibilities (and, of course, earned more money).

But Obama did not decide only that "community organizing" was not for him. Judis reports the future senator took part in a September 1989 symposium in which he "rejected the guiding principles of community organizing: the elevation of self-interest over moral vision; the disdain for charismatic leaders and their movements; and the suspicion of politics itself."

Later, Obama "would begin to construct a political identity for himself that was not simply different from his identity as a community organizer--but was, in fact, its very opposite."

Judis offers the closest thing we've heard to a job description for "community organizers." What they do, he writes, is "unite people of different backgrounds around common goals and use their collective strength to wring concessions from the powers that be." To help illuminate this rather vague description, Judis also enumerates some of the tasks Obama and his colleagues undertook.

Before Obama's arrival in Chicago, Kellman and his "partner," Mike Kruglik, set out "to revive the region's manufacturing base--and preserve what remained of its steel industry--by working with unions and church groups to pressure companies and the city; but those hopes were quickly dashed." Apparently the presence of "community organizers" is not a strong selling point for companies making location decisions. Go figure.

Obama set his sights lower, but still missed the mark. He "got community members to demand a job center that would provide job referrals, but there were few jobs to distribute." Then "he tried to create what he called a 'second-level consumer economy' . . . consisting of shops, restaurants, and theaters. This, too, went nowhere."

These efforts at economic development having failed, Obama "began to focus on providing social services for Altgeld Gardens," a government-owned and -operated apartment complex:

"We didn't yet have the power to change state welfare policy, or create local jobs, or bring substantially more money into the schools," [Obama] wrote. "But what we could do was begin to improve basic services at Altgeld--get the toilets fixed, the heaters working, the windows repaired." Obama helped the residents wage a successful campaign to get the Chicago Housing Authority to promise to remove asbestos from the units; but, after an initial burst of activity, the city failed to keep its promise. (As of last year, some residences still had not been cleared of asbestos.)

It is both funny and scary that one of America's major political parties would offer this record of sheer futility as its nominee's chief qualification to be president of the United States. Even more striking, though, is how alien the world in which Obama operated was by comparison with the world in which normal Americans live.

Reader, when your toilet breaks, do you wait around for some Ivy League hotshot to show up and organize a meeting so that you can use your collective strength to wring concessions from the powers that be?

Or do you call a plumber?

As a "community organizer," Obama toiled within a subculture of such abject dependency that even home repairs were "social services," provided by government (or, in Obama's Chicago, not provided). It was an utterly bizarre intersection between the cultural elite and the underclass. By Judis's account, Obama's Columbia degree was useless. He would have been more helpful if he'd gone to vocational school instead.

Judis quotes an Altgeld resident as telling Obama, "Ain't nothing gonna change. . . . We just gonna concentrate on saving our money so we can move outta here as fast as we can." Certainly no one can fault Obama for doing the same thing. But what did Obama move outta there to do? To become a politician--specifically, an "idealistic" politician who wants "to make major changes in poverty." Guys like that created this mess in the first place.

In his political career, has Obama done or even said anything to suggest that he has a different approach to "poverty," one that would reduce dependency rather than promote it? His recent rediscovery of the glories of "community organizing" certainly isn't an encouraging sign.

My Name is Barack Hussein, I am not Muslim

B. Hussein Obama was born to a muslim father and lived in a Muslim country for several formative years of his youth. While living in Indonesia he was immersed in Islamic culture in a society that discriminates against Christians and is openly anti-Semitic.

He converted to Christianity. However, as anyone who has bridged cultural gaps will admit -- anyone whose name is not Barack Hussein Obama -- one is never totally free of the influences of the culture that dominated one's youth. That is reality. Moreover, those early Muslim influences were absorbed by Obama without an understanding of the wider world. Thus, the effects are harder to shake.

He's got a problem. He was born a Muslim, he's got a Muslim name and he lived in a Muslim nation.

Would an Irish Catholic who converted to Obama's Christian sect work as hard to deny his roots?

By the way, those who know about Obama's church and Reverend Wright know that the church and Wright are closely tied to the Nation of Islam -- Black Muslims. Thus, even though Obama claims to be a Christian, his Christianity, his church praises the Nation of Islam and Louis Farrakhan.

Obama can claim he is not a Muslim, but his connections run deep and they cut through his entire life. Not just his early years. He is too close to Islam for comfort.

Obama's verbal slip fuels his critics
Sunday, September 7, 2008

ST. LOUIS, Mo. - Sen. Barack Obama's foes seized Sunday upon a brief slip of the tongue, when the Democratic presidential nominee was outlining his Christianity but accidentally said, "my Muslim faith."

The three words -- immediately corrected -- were during an exchange with ABC's George Stephanopoulos on "This Week," when he was trying to criticize the quiet smear campaign suggesting he is a Muslim.

But illustrating the difficulty of preventing false rumors about his faith from spreading, anti-Obama groups within one hour of the interview had sliced it out of context and were sending it around via email. They also were blogging about it.

Mr. Obama, who is a Christian and often proudly speaks about how his faith has influenced his public service, said he finds it "deeply offensive" that there are efforts "coming out of the Republican camp to suggest that perhaps I'm not who I say I am when it comes to my faith."

The exchange came after Mr. Obama said that Republicans are attempting to scare voters by suggesting he is not Christian, which McCain campaign manager Rick Davis said was "cynical."

Asked about it on ABC, Mr. Obama said, "These guys love to throw a rock and hide their hand."

"The McCain campaign has never suggested you have Muslim connections," said Mr. Stephanopoulos, who repeatedly interrupted Mr. Obama during the interview.

"I don't think that when you look at what is being promulgated on Fox News, let's say, and Republican commentators who are closely allied to these folks," Mr Obama responded, and Mr. Stephanopoulos interrupted: "But John McCain said that's wrong."

Mr. Obama noted that when Republican vice presidential nominee Gov. Sarah Palin "was forced" to talk about her pregnant 17-year-old daughter, he issued a forceful statement to reporters that the line of inquiry was "off limits." But he said the McCain campaign tried to tie him to "liberal blogs that support Obama" and are "attacking Governor Palin."

"Let's not play games," he said. "What I was suggesting -- you're absolutely right that John McCain has not talked about my Muslim faith. And you're absolutely right that that has not come."

Mr. Stephanopoulos interrupted with, "Christian faith."

"My Christian faith," Mr. Obama said quickly. "Well, what I'm saying is that he hasn't suggested that I'm a Muslim. And I think that his campaign's upper echelons have not, either. What I think is fair to say is that, coming out of the Republican camp, there have been efforts to suggest that perhaps I'm not who I say I am when it comes to my faith -- something which I find deeply offensive, and that has been going on for a pretty long time."

Biden Bombs

Joe Biden has given encouragement to Iran and its hopes of attacking Israel. Obama has already acquiesced in this department. Hence, the threat level in the middle east has now officially risen, thanks to Biden. His latest statement has the feel of Senator Chuck Schumer's recent statement that IndyMac Bank was in bad shape. It was. But when the news came from Schumer, the depositors started a run on the bank which destroyed its base of regulatory capital and brought on immediate failure.

Biden has encouraged Iran. What a moron. On the other hand, he's got a long history of sticking his foot in his mouth and two more months to keep shoving it in. What's next from the mouth of the Blabbering Biden?

Biden Slams Pro-Israel AIPAC

Thursday, September 4, 2008

Barack Obama's running mate, Sen. Joe Biden, told Jewish press Wednesday that the pro-Israel lobby group AIPAC doesn't represent the Jewish state.

During a teleconference with reporters, Biden said AIPAC "doesn't speak for the entire Jewish community."

He added that it "doesn't speak for the state of Israel, no matter what it insists on any occasion."

On the nettlesome issue of Iran's nuclear weapons, Biden suggested an attack on Iran would not be wise considering the U.S. is "bogged down" in Iraq.

He chastised McCain for exaggerating the Iranian threat.

"We all know Iran is weak and weak economically," Biden said. "We should stop making Iran into this 12 foot giant. They are not. The more we do that, the more we undercut our own self-interest."

Last week, Israeli Army Radio reported that Biden had previously told Israeli officials that they should not strike Iran's nuclear weapons facilities. Biden told ABC News that the report was a "lie."

Winning a War

During the Vietnam War, the US attemped a plan of Vietnamization -- turning the fighting over to the Army of the Republic of Vietnam. But American military personnel knew the Vietnamese army would collapse if left on its own to fight the North Vietnamese and the Vietcong. Nevertheless, this wishful expectation was maintained all the way to the end of the war and up to the final moments of the US departure. It was no surprise to anyone that South Vietnam fell as the US withdrew, leaving Americans with the disturbing image of the Last Helicopter out of Saigon as the ending.

We lost that war, and the reasons were abundant. But lessons were learned. That knowledge was put to work in Iraq. Fortunately, no one wanted opinions from John Murtha, who is one of those hidebound gasbags who believes the US military is incapable of advancing. He's one of the fossilized crew who sees only through the clouded lenses of his own past.

What happened? We won! But the US has yet to wake up to the good news. The US is about to return control of Iraq to a democratically elected representative government that is in charge of an economy that is funded by a rapidly improving oil industry.

Sure, things are still shaky. There's plenty of problems and lots of troubles ahead. But it looks like the Iraqis are adjusting to their own brand of democracy. We may see its deficiencies. But the new government is miles ahead of the preceding dictatorship. The Iraqis have beaten the muslim insurgents -- al Qaeda -- which means al Qaeda needs to relocate.

We will never obtain an unconditional surrender from our muslim enemies as we received from Germany and Japan at the end of the fighting in World War II. That unconditional surrender gave the US what it needed to invest the next SEVEN YEARS in rebuilding those two nations. The shooting may have stopped in 1945, but the US spent seven more years restructuring those two countries before we handed them back to their newly elected leaders. It was 1952 when the Germans and the Japanese regained control of their countries. But they were democracies. No longer dictatorships.

Iraq, in it's own way, is on the same path. With the exception of Israel, Iraq's regional neighbors are hostile to democracy which means Iraq may need more support than it thinks now. The US will remain ready, however, to assist Iraq. But a democratic Iraq is the most serious non-violent threat the other muslim theocracies will ever face. A democratic Iraq tells muslims they have the power to live freely and prosper, that life in a religious dictatorship is not all there is. Scary stuff for the fundamentalists of Iran, who seem determined to bring destruction upon their regime.

Things are still shaky in Iraq, and will undoubtedly remain shaky for a while. But by election day, Americans might feel confident enough about the progress in Iraq to begin to believe that we have won and that the new Iraqi democracy might survive. Thoughts like those will upset Obama's plan to declare defeat in Iraq and offer an unconditional surrender to the muslim terrorists in Iraq while he commences his plan to invade Pakistan hoping to kill bin Laden.

U.S. hands back security of Anbar Province

Monday, September 1, 2008

RAMADI, Iraq: Two years ago, Anbar Province was the most lethal place for American forces in Iraq. A U.S. marine or soldier died in the province nearly every day, and the provincial capital, Ramadi, was a moonscape of rubble and ruins. Islamic extremists controlled large pieces of territory, with some so ferocious in their views that they did not even allow the baking of bread.

On Monday, U.S. commanders formally returned responsibility for keeping order in Anbar Province, once the heartland of the Sunni insurgency, to the Iraqi Army and police. The ceremony, including a parade on a freshly paved street, capped one of the most significant turnabouts in the country since the war began five and a half years ago.

Over the past two years, the number of insurgent attacks against Iraqis and Americans has dropped by more than 90 percent. Al Qaeda in Mesopotamia has been severely degraded, if not crushed altogether, in large part because many local Sunnis, including former insurgents, have taken up arms against it.

Since February, as the security situation improved, U.S. commanders have cut the number of marines and soldiers operating in the province by 40 percent.

The transfer of authority codified a situation that Iraqi and American officers say has been in effect since April: The Iraqi Army and police operate independently and retain primary responsibility for battling the insurgency and crime in Anbar. The United States, which had long done the bulk of the fighting, has stepped into a backup role, going into the streets only when accompanied by Iraqi forces.

But the dynamic that has brought such calm to Anbar, welcome as it is, seems fragile. Many former insurgents now man the local police forces, or remain on the U.S. payroll as loosely supervised gunmen working for the so-called Sunni Awakening Councils.

But with most of the Sunni population having abstained from voting in 2005, many are now claiming that the present arrangement leaves them unrepresented. Local Sunni leaders have warned that provincial elections must go forward if violence is to be averted.

Still, as the parade marched along Ramadi's Main Street on Monday, the signs were mostly good. The ceremony was a primarily Iraqi affair, with the U.S. marines wearing neither helmets nor body armor, nor carrying guns. The festive scene became an occasion for celebration by Iraqis and Americans, who at several moments wondered aloud in the sweltering heat how things had gone from so grim to so much better, so fast.

"Not in our wildest dreams could we have imagined this," said Mowaffak al-Rubaie, the Iraqi national security adviser, who flew in from Baghdad. "Two or three years ago, had we suggested that the Iraqis could take responsibility, we would have been ridiculed, we would have been laughed at. This was the cradle of the Sunni insurgency."

Indeed it was. Anbar Province became the most intractable region after the toppling of Saddam Hussein in April 2003. More than 1,000 American marines and soldiers have died in the province, a quarter of the total U.S. toll.

Anbar's second city, Falluja, was the scene of the biggest battle of the war, in which nearly 100 Americans died and more than 500 were wounded.

Bordering on three countries, Anbar was also considered the primary transit point for foreigners entering Iraq.

The fighting devastated much of Anbar. Falluja, a city of 250,000, was razed, and large parts of Ramadi, a city of 500,000, were reduced to ruins.

By the summer of 2006, insurgents had tried to kill Anbar's governor, Mamoon Sami al-Rashid, 29 times. They failed with Rashid, but that was an exception. Rashid's immediate predecessor, Raja Nawaf, was kidnapped and murdered. His deputy, Talib al-Dulaimi, was shot and killed. The chairman of the Anbar provincial council was also murdered. Rashid's personal secretary was beheaded and most of his ministers went into hiding.

What finally broke the stalemate, according to former insurgents and local leaders, was a local revolt against Al Qaeda in Mesopotamia, the radical insurgent group believed to be led primarily by foreigners. As the group began to expand its goals beyond killing Americans to include sectarian assassinations and imposing a fundamentalist Islam, local tribal leaders struck back and reached out for help to U.S. forces. The "Sunni Awakening" was born, and it soon spread across the Sunni areas of Iraq.

Saadi al-Faraji used to be a gunman for a local group called the Islamic Movement of Holy Warriors, which focused mainly on attacking Americans. Then, in 2006, Al Qaeda in Mesopotamia tried to take over his group and force them to kill Iraqis who worked for the government, including police officers.

"Qaeda declared that we were apostates, and they demanded our heads, because we would not kill Iraqi soldiers or Iraqi police," Faraji said.

The Islamic Movement of Holy Warriors began attacking Qaeda fighters at about the same time that a local Sunni sheik named Abdul Sattar abu Risha struck a deal with the Americans and formed the first Awakening Council. The Islamic Movement formed its own Awakening Council, and today, Faraji is a colonel in the Iraqi police.

As for his view on Americans, Faraji said they had evolved.

"They made mistakes, and so did we," he said. "The past is past."