Bury Ourselves in Debt - Cemetery Ride Smoother!

Rangel's in the ringer? Maybe so but the old fox probably can pull it off because he could blow the whistle on so many others should he choose to do so and they know it. The FBI's Hoover had the same leverage. Pelosi will finess. After all she promised a most ethical Congress she may use Rangel's activities to set the bar, right?

Best Congress Money can buy! (See 1 below.)

Congress was influenced by The Greens so they told Detroit what cars to make. Detroit makes them but can't sell them at a profit so Congress bails out the auto indutry. Then Congress calls auto executives to testify before the dolts who helped create the problem but auto executives can't tell these kings they have no clothes because they need the kings' money and thus, can't bite the hand that is about to feed them.

Now that is a competitive classic model that could make a case study for MBA seekers.

Congress knows best - government has the solution. Keep throwing money at the problem, buy our way out of the mess speculation and spending got us into. Another MBA case study when students finish the first. (See 2 below.)

Is GW about to complete his last "roll over" and I do not mean an IRA one? Seems so but then he has done this with respect to N Korea, Iran and in many other instances so should this be a surprise? Maybe GW gets confused over the right way to spell principle. (See 3 below.)

Stimulus or pork? Whichever, tax payers will be bar-be-qued! At least the roads to the cemetery will be less bumpy as we bury ourselves in senseless debt that Congress intends to keep shoveling our way. (See 4 below.)

Is the current economic plight we find ourselves in above ebveryone's pay grade? (See 5 below.)

Mexico is one of the most sickly children in this continent. (See 6 below.)

Somali pirates are becomiong Wall Street types. (See 7 below.)



Dick

1) Rangel's Problems Dog Democrats Article

WASHINGTON -- Rep. Charles Rangel, the charismatic, powerful chairman of the House Ways and Means Committee, spoke grandly at a news conference this week about the need to fund urban projects and keep the nation competitive. Then the New York Democrat was chased down the hall by reporters demanding to know whether he was going to temporarily give up his chairmanship over ethics allegations.
"I don't see what purpose that would serve," Rep. Rangel said. "I don't think reporters should be in the position to remove chairmen, not even temporarily, especially when the reporting is false."

The exchange highlighted the danger for congressional Democrats that Rep. Rangel's problems could be a distraction as they return to Washington this week and prepare for a bigger majority. Rep. Rangel's plight creates a discordant note as the party seeks to enact sweeping overhauls. House Speaker Nancy Pelosi further roiled the waters recently by suggesting the Ethics Committee would quickly wrap up its investigation of Rep. Rangel, prompting Republicans to charge that she was trying to manipulate the process.

Rep. Charles Rangel is under investigation by the House ethics panel over renting apartments at below-market rates, among other things.
Rep. Rangel has been accused of, among other things, not paying taxes on rent from a Dominican Republic beach house, renting several New York apartments at below-market rates, and, most recently, doing favors for a donor to a school named after him.
He has denied any willful wrongdoing, and has asked the Ethics Committee to investigate the first two allegations. The committee announced Tuesday that it was expanding the inquiry to examine the third allegation.
The party has closed ranks around the veteran, and no Democrats have called on Rep. Rangel to step down.

During the recent congressional campaign, Mark Begich, the Democratic Senate candidate in Alaska, returned contributions he had received from Rep. Rangel. The tight Alaska race, against Sen. Ted Stevens, hinged on allegations of corruption and abuse of power after Sen. Stevens, the top Republican on the Senate Appropriations Committee, was convicted of lying about gifts he had received. Two Democratic House candidates also returned Rep. Rangel's money.

As the new Democrat-led Congress gets set to convene, the allegations are an unwelcome intrusion for the party, which is hoping to show the country it is governing under a banner of change. "I think it's a big problem for them," said Melanie Sloan, executive director of Citizens for Responsibility and Ethics in Washington, a nonpartisan watchdog group. "Rangel's ethics problems get worse on a nearly daily basis."

Rep. Pelosi's recent comment that she had "been assured" the Ethics Committee would finish its report by Jan. 3 prompted questions from Republicans about how she knew the committee's schedule when its work is intended to be confidential. Critics have said that she either improperly received information about the committee's inquiry or was trying to pressure its members to wrap up their investigation hastily. "How is it that she knows it will only take one more month?" said Rep. Darrell Issa (R., Calif.), one of Rep. Rangel's most outspoken critics.
Rep. Pelosi's office has said she wasn't manipulating the process but was simply relying on the committee's history in assuming it would finish work by the end of the current Congress.

Rep. Rangel, 78 years old, was first elected from his Harlem district in 1970 and has become a Capitol Hill institution. A large man with slicked-back hair and a gravelly voice, he is well-liked by colleagues and given to colorful comments.
When the Democrats captured the House in 2006, Rep. Rangel became one of its most powerful lawmakers. Because it oversees tax policy, his committee is among the most sought-after in Congress.
The New York Times and New York Post have reported in recent months that Rep. Rangel occupies several rent-controlled apartments in New York; that he failed to report rental income from a vacation home; that he took a tax break for primary residences on a Washington, D.C., home while he also had a rent-stabilized apartment in New York that required a similar residency claim; and that he worked to preserve a tax loophole that benefited a company at the same time its chief executive was pledging $1 million for the Charles B. Rangel School of Public Service.
House Republicans, joined by several newspapers and watchdog groups, have asked Rep. Rangel to step down from his chairmanship while the Ethics Committee is investigating.

Rep. Rangel doesn't appear in jeopardy of losing his gavel. Even if the Ethics Committee concludes he violated House rules, the panel is known for light punishments. A Pelosi spokesman said nothing she has seen suggests he should give up his gavel, though she is awaiting

2)The Bailout That Won't: Would you buy a car from Congress?
By HOLMAN W. JENKINS, JR


Leave it to Bob Lutz, GM's voluble vice chairman, to puncture the unreality of the auto bailout he himself has been championing. In an email to Ward's Auto World, he notes an obvious flaw in Congress's rescue plan now taking shape: The fuel-efficient "green" cars GM, Ford and Chrysler profess to be thrilled to be developing at Congress's behest will be unsellable unless gas prices are much higher than today's.

"Very few people will want to change what has been their 'nationality-given' right to drive big and bigger if the price of gas is $1.50 or $2.00 or even $2.50," Mr. Lutz explained. "Those prices will put the CAFE-mandated manufacturers at war with their customers -- and no one will win in that battle."

Translation: To become "viable," as Congress chooses crazily to understand the term, the Big Three are setting out to squander billions on products that will have to be dumped on consumers at a loss.

None of this was mentioned at four days of congressional bailout hearings, because Detroit knows better than to suggest Congress has a role in the industry's problem. Yet its own recently updated Corporate Average Fuel Economy regime, or CAFE, makes a mockery of the idea that government money will render the companies profitable, even as the same bailout bill demands that the Big Three drop their legal challenge to a California mileage mandate even more unsustainable than the federal government's.
Forget Chrysler, which has needed a bailout from Washington or Stuttgart in three of the last four recessions. The tragedy of GM and Ford is that, inside each, are perfectly viable businesses, albeit that have been slowly murdered over 30 years by CAFE. Both have decent global operations. At home, both have successful, profitable businesses selling pickups, SUVs and other larger vehicles to willing consumers, despite having to pay high UAW wages.

All this is dragged down by federal fuel-economy mandates that require them to lose tens of billions making small cars Americans don't want in high-cost UAW factories. Understand something: Ford and GM in Europe successfully sell cars that are small but not cheap. Europeans are willing to pay top dollar for a refined small car that gets excellent mileage, because they face gasoline prices as high as $9. Americans are not Europeans. In the U.S., except during bouts of high gas prices or in the grip of a Prius fad, the small cars that American consumers buy aren't bought for high mileage, but for low sticker prices. And the Big Three, with their high labor costs, cannot deliver as much value in a cheap car as the transplants can.

Under a law of politics, such truths were unmentionable in last week's televised circus because legislators are unwilling to do anything about them. They won't repeal CAFE because they fear the greens. They won't repeal CAFE's "two fleets" rule (which effectively requires the Big Three to make small cars in domestic factories) because they fear the UAW. They won't hike gas prices because they fear voters.

And make no mistake: An even more massive auto wreck lies ahead when a soon-to-be taxpayer-financed and taxpayer-owned auto industry confronts a California rulemaking that, in a silly gesture against global warming, would render most of its auto designs, profit centers and tooling unsalvageable.
We hate to admit it, but the only good idea from the bailout debate is the proposal for a new "auto czar." Along with disposing of Chrysler and downsizing Ford and GM, his job should be to confront Congress with its own policy cowardice and failure. If saving gasoline and Detroit are both worthy goals, let's ditch CAFE and institute a gasoline tax to make consumers value the cars government is forcing auto makers to build. If Congress doesn't have the tummy for that, at least ditch the "two fleets" rule so Detroit can import small cars to meet the mandate.

Alas, Barack Obama's vaunted "change" apparently doesn't include spending the political capital to make Congress acknowledge the failure of CAFE. If he can't do better than throw taxpayer money at a dismal policy disaster like our fuel-economy regulations (and so far he seems to be joining Congress in pretending it's all Detroit's fault), we might as well give up on his presidency along with any hope of progress on the nation's other unresolved dilemmas.

His campaign never really answered the question of whether he was Chance the Gardener or Abraham Lincoln. We might as well find out now.

3) Bush and Detroit: A bailout that won't enhance the Republican's legacy.

It's easy to see why Congressional Democrats and an Obama Administration would be eager to bail out Detroit auto makers in exchange for an equity stake and a chance to dictate business decisions. Democrats want Detroit to stop making big cars that run on gasoline, and they hope to protect their friends at the United Auto Workers. The mystery is why President Bush would go along for this ride.

This is all the more puzzling given that the President was once a principled opponent of precisely the kind of taxpayer bailout he now seems prepared to accept. Asked by the Journal about a possible Detroit bailout in an Oval Office interview in January 2006, Mr. Bush said General Motors and Ford might instead try to produce "a product that's relevant." For good measure, he added that "I think it's very important for the market to function."

Nobody can argue that this was a case in which the market didn't function. Ford, GM and Chrysler were in obvious trouble long before the current credit panic. The companies were bleeding cash and piling up liabilities when the rest of the U.S. economy was posting solid quarterly gains. They were losing market share as their foreign competitors -- building cars in the U.S., with American workers -- were gaining. Yes, they were hampered by fuel-efficiency standards that forced them to build cars, at U.S. plants with UAW contracts, that they couldn't sell. But those fuel standards also applied to Honda, and in any case won't be eased under the terms of this bailout.

Nor can it be argued that a rescue for Detroit is of a piece with the financial services bailout. Without credit, no market can function, as millions of Americans looking for loans are now discovering. The provision of public capital to the banking system through the Troubled Asset Relief Program was unfortunate but necessary as a way to prevent a larger, global financial collapse.

Last we checked, consumers had options other than a Buick, Mercury or Chrysler Sebring if they needed a new car. Bankruptcy for any of the Big Three would exacerbate the recession and mean pain for laid-off workers and their families, but it poses no systemic risk to the U.S. economy. It also offers the companies the legal protection to modify labor and other contracts, or to sell their businesses in some economically rational way, rather than postpone the day of reckoning for another few years, at huge taxpayer expense.

No wonder, then, that polls show Americans opposing a Detroit bailout by 61% to 36%, according to a CNN survey last week. That margin is probably higher among the voters who twice put Mr. Bush in office and might expect him to govern according to some discernible conservative principle. When Harry Truman seized steel mills in 1952, at least he had the excuse of having the Korean War to prosecute. In the current bailout debate, the Administration hasn't even been able to bargain for passage of a Colombian or Korean free-trade agreement.

Mr. Bush is holding out for terms, and some kind of "master" or "czar," that could prod the companies to restructure. The White House also wants to remove the demand in the draft Democratic bill that the companies not challenge "state" (read: California) fuel-efficiency rules that would doom the companies to pursue the same loss-making strategies that got them to their current pass. That's certainly helpful as far as it goes. But the problem with this bailout is its premise as well as its details.

Bailing out companies because they claim to be uniquely American sets a precedent for every other poorly managed and politically connected U.S. industry. As for a car-industry "czar," note how quickly House Speaker Nancy Pelosi rejected the idea of former General Electric CEO Jack Welch for the job. She wants a "public sector" type who will impose the decisions that Congress wants. A bankruptcy judge would have a much more independent hand.

It's also becoming increasingly clear that the real goal of Democrats isn't to save jobs per se, but to tell Detroit what cars to make and how to make them. The goal is to turn GM and the rest into Big Green Machines that will stop making SUVs and trucks and start making small cars that run on something other than carbon fuel. If consumers don't want to drive them, well, the next step will be to impose subsidies or penalties and taxes to coerce them to do so. Giving the federal government an equity stake could also lead to protectionism, as the politicians attempt to shield Detroit's mismanaged assets from competition by citing the interests of the UAW, the environment, or some other "social" good that has nothing to do with making cars Americans will want to drive.

None of these measures will save Detroit in any real commercial sense. For precedents, consult the history of France's Renault, S.A., or perhaps of Jawaharlal Nehru's industrial policies in postwar socialist India. But a bailout will harm consumers, harm the auto industry as a whole, put taxpayers on the hook indefinitely, and bring the U.S. commitment to market principles further into doubt.
If this is how Barack Obama wants to begin his Presidency, so be it. But Mr. Bush will not enhance his legacy by helping Congress and the Sierra Club nationalize Detroit.

4)Stimulus Shouldn't Be an Excuse for Pork :The nation's mayors have presented a revealing wish list to Washington.
By ROBERT POOLE

Dictionary.com defines infrastructure as "the fundamental facilities and systems serving a country, city, or area." The nation's mayors define it a bit differently.

On Monday, the U.S. Conference of Mayors went to Capitol Hill to ask for a handout, or as they put it: "We are reporting that in 427 cities of all sizes in all regions of the country, a total of 11,391 infrastructure projects are 'ready to go.' These projects represent an infrastructure investment of $73,163,299,303 that would be capable of producing an estimated 847,641 jobs in 2009 and 2010."

A wish list that is 11,391 projects strong! What vital infrastructure projects would cash-strapped taxpayers get for their $73 billion? Here's a sampling:
- Hercules, Calif., wants $2.5 million in hard-earned taxpayer money for a "Waterfront Duck Pond Park," and another $200,000 for a dog park.
- Euless, Texas, wants $15 million for the Midway Park Family Life Center, which, you'll be glad to note, includes both a senior center and aquatic facility.
- Natchez, Miss., "needs" a new $9.5 million sports complex "which would allow our city to host major regional and national sports tournaments."
- Henderson, Nev., is asking for $20 million to help "develop a 60 acre multi-use sports field complex."
- Brigham City, Utah, wants $15 million for a sports park.
- Arlington, Texas, needs $4 million to expand its tennis center.
- Miami, Fla., needs $15 million for a "Moore Park Community Center, Tennis Center and Day Care" facility. The city is also desperate for $3.6 million to build a covered basketball court and a new tennis court at Robert King High Park. Then there's the $94 million Orange Bowl parking garage you are being asked to pay for.
- La Porte, Texas, wants $7.6 million for a "Life Style Center." And Oakland, Calif., needs $1 million for Fruitvale Latino Cultural and Performing Arts Center.

And you thought infrastructure investment meant roads, bridges and schools. It is clear that any infrastructure stimulus money given to the country's mayors will lead to thousands of tennis centers to nowhere. News alert for mayors: We are officially in a recession. American families have to get by with less, and so do American cities.

The country does indeed need to invest in critical infrastructure. We have a backlog of deferred maintenance on both highways and bridges. According to Reason Foundation's Annual Highway Report, 24% of U.S. bridges were reported structurally deficient or functionally obsolete in 2006. At the current rate of repair it will take 62 years for those bridges to be brought up to date. But it won't take six decades to fix them because the government doesn't have the money; it will take that long because our political leaders don't prioritize. Too often they choose ribbon-cutting ceremonies at sports complexes over repairing bridges.

The current centralized process of parceling out infrastructure and gas-tax money does not invest resources wisely, and "stimulus" handouts would be even more wasteful. Consider how the Los Angeles area is spending its transportation money. A 2006 study by University of North Carolina at Charlotte Prof. David Hartgen found that in Los Angeles less than 5% of the area's workers use public transit to commute, yet over 50% (nearly $67 billion) of the area's long-range plan (to the year 2030) money will be spent on transit projects. Planners admit the cash going towards those transit projects won't significantly increase transit's share of commuters, which means over half the spending won't do anything to reduce the region's infamous traffic jams, which drain the economy and hurt businesses.

Hartgen's study showed we could eliminate severe congestion in all of the nation's urban areas for $21 billion a year -- less than we are spending on transportation today, and $52 billion less than the mayors just asked for. And by investing in the right projects we'd save 7.7 billion hours each year.

Reducing traffic congestion, which costs Americans well over $63 billion a year in wasted time and fuel, should be a primary criterion for any transportation project that is funded. Our economy depends on it.

Today, over 80% of all goods (by value) in this country are shipped by truck. Time is money. A national network of truck-only toll lanes would enable truckers to carry more goods, faster. In our 21st century economy, spurred by companies like Amazon.com, Apple and FedEx, truck lanes would do more for the economy than any cultural or aquatic center. And, perhaps most notably, taxpayers wouldn't have to foot the bill alone. The private sector would pay to build the truck lanes in many major urban areas, recouping their money by charging tolls.

There is good evidence that well-targeted additions of capacity to congested urban freeway systems and truck-heavy interstate corridors would not merely have benefits greater than costs but could achieve commercial rates of return.

Right now the stock market is experiencing a flight to quality, as investors look for the best-run, most stable companies. Involving the private sector in infrastructure funding would induce a similar shift in our transportation investments.

Secretary of Transportation Mary Peters says there is over $400 billion in private capital available for high-priority U.S. infrastructure projects. That sum, if properly spent on the most-needed transportation projects, would transform our roads, transit systems and airports into a 21st century transportation network that would unleash the economy.

We can be sure the private sector won't pay for everything on the mayors' Christmas lists though. Since neither a massive subway system nor high-speed train system even exist in Northern California, investors will probably pass on the $200 million high-speed train station that San Francisco hails as "the Grand Central Station of the West Coast" in its ready-to-go list.

It was very nice of the country's mayors to hand taxpayers a wish list worth $73 billion. But before taxpayers give them a dime, let's see the mayors rank those 11,391 goodies -- I mean "infrastructure" projects -- based on effectiveness and potential return on investment for taxpayers.

5) Foreclosure Follies: A rebuttal to the FDIC modification plan.Article

On Monday we published a letter from the FDIC complaining about our recent editorial on the agency's mortgage modification plan. Hours later, the Comptroller of the Currency released new data suggesting that the FDIC proposal may be as bad as we feared.

FDIC wants to pay loan servicers to restructure delinquent loans and then have taxpayers share the losses if the loans fail again after six months. The FDIC did not appreciate that we reported private data showing that more than 50% of modified loans go delinquent again. The agency suggested that 15% might be a better estimate.

That estimate just got a lot harder to defend. Comptroller John Dugan released the default numbers on loans modified in the first two quarters of 2008, based on data from institutions servicing more than 60% of all first mortgages. "What makes these quarterly reports unique is that they are not merely surveys, but instead consist of validated, loan level data," said Mr. Dugan. "We believe the reports include the most accurate and reliable data on mortgage performance that is available today."
According to Mr. Dugan, "The results, I confess, were somewhat surprising, and not in a good way." Of mortgages modified in the early part of this year, more than 35% had gone at least 60 days delinquent again after just six months, and a full 53% were 30 days delinquent or more. By eight months, this default rate had climbed to 58%. Second quarter modifications are on track to be nearly as ugly, with more than 50% of borrowers at least 30 days delinquent at the six-month mark. Come to think of it, these stinkers are going south so quickly that perhaps the FDIC's plan actually will protect taxpayers -- there won't be much left to insure after these toxic loans blow up in the first six months after modification.

Of course, that would mean that fewer foreclosures would be avoided, which is supposed to be the point of this exercise. For her part, FDIC Chairman Sheila Bair says that "The OCC's data on redefaults raises more questions than answers because it fails to define, in any meaningful way, the modifications that have redefaulted."
In politics, when you don't like the data, merely wish it away.

She believes that her formula, which reduces interest rates initially but often creates larger obligations down the road, will yield fewer re-defaults than the industry average. Washington's housing bubble resulted in many loans going to borrowers who cannot or will not make their mortgage payments. Let's stop contriving ways for taxpayers to subsidize them.

6) Mexico and the War Against the Drug Cartels in 2008
By Fred Burton and Stephen Meiners


Related Mexico’s war against drug cartels continued in 2008. The mission President Felipe Calderon launched shortly after his inauguration two years ago to target the cartels has since escalated in nearly every way imaginable. Significant changes in Mexico’s security situation and the nature of the drug trade in the Western Hemisphere also have occurred over the last 12 months.

In this year’s report on Mexico’s drug cartels, we assess the most significant developments of the past year and provide an updated description of the country’s powerful drug-trafficking organizations. This annual report is a product of the coverage we maintain on a weekly basis through our Mexico Security Memo and various other reports.

Mexico’s Drug-Trafficking Organizations
Gulf cartel: As recently as a year ago, the Gulf cartel was considered the most powerful drug-trafficking organization in Mexico. After nearly two years of bearing the brunt of Mexican law enforcement and military efforts, however, it is an open question at this point whether the cartel is still intact. The group’s paramilitary enforcement arm, Los Zetas, was the primary reason for Gulf’s power, but reports of Zeta activity from this past year suggest that the much-feared group now operates independently. Without the Zetas, the Gulf leadership has struggled to remain relevant.

Los Zetas: During the past 12 months, Los Zetas have remained a power to be reckoned with throughout Mexico. The group operates under the command of Heriberto “El Lazca” Lazcano. The organization’s leadership suffered significant losses during 2008, including the April arrest in Guatemala of Daniel “El Cachetes” Perez Rojas, who commanded Zeta operations in Central America. Even more significant, however, was the November arrest of Jaime “El Hummer” Gonzalez Duran, who was captured during a raid in the northwestern city of Reynosa, Tamaulipas state. Gonzalez was believed to rank third in the Zeta chain of command.

Beltran Leyva organization: The Beltran Leyva family has a long history in the narcotics business. Until this past year, the organization formed part of the Sinaloa federation, for which it controlled access to the U.S. border in Sonora state, among other responsibilities. By the time of Alfredo Beltran Leyva’s January arrest, however, the Beltran Leyva organization’s alliance with Sinaloa was over, as it is rumored that his arrest resulted from a Sinaloa betrayal. Since then, the organization has quickly become one of the most powerful drug-trafficking organizations in Mexico, capable not only of smuggling narcotics and battling rivals but also demonstrating a willingness to order the assassination of high-ranking government officials. The most notable of these was the May targeted killing of acting federal police director Edgar Millan Gomez.

Sinaloa cartel: Joaquin “El Chapo” Guzman is the most wanted drug lord in Mexico. Despite the turbulence that his Sinaloa cartel has experienced this past year, it is perhaps the most capable drug-trafficking organization in Mexico. This turbulence involved the loss of key allies, including the Carrillo Fuentes organization in Ciudad Juarez, as well as the split with the Beltran Leyva organization. But the loss of these partners does not appear to have affected the cartel’s ability to manage the trafficking of drugs from South America to the United States. On the contrary, the Sinaloa cartel appears to be the most active smuggler of cocaine and has demonstrated the ability to establish operations in new environments like Central America and South America.

Carrillo Fuentes organization: Also known as the Juarez cartel, the Carrillo Fuentes organization is based out of the northern city of Ciudad Juarez, Chihuahua state. The cartel is led by Vicente Carrillo Fuentes, who took over after the 1997 death of his brother Amado, the cartel’s former leader. Throughout this year, the Juarez cartel has maintained its long-standing alliance with the Beltran Leyva organization, which has been locked in a vicious battle with the Sinaloa cartel for control of Juarez.

Arellano Felix organization: Also known as the Tijuana cartel, the Arellano Felix crime family has been weakened almost beyond recognition over the past year due to the efforts of both U.S. and Mexican law enforcement to capture several of its high-ranking leaders. Of these, perhaps the most symbolic was the October arrest of Eduardo “El Doctor” Arellano Felix. Fighting among the various elements of the cartel itself has resulted in the splitting of the organization into two factions that continue to do battle on a daily basis.

Calderon’s Success Story
Since taking office in December 2006, President Calderon has undertaken extraordinary measures in pursuit of the country’s drug cartels. The policies enacted by Calderon’s administration saw some progress during his first year in office, although it has only been during the past year that the continued implementation of these policies has produced unprecedented results in the fight against the cartels.

One such result has come in the form of record seizures of illegal narcotics, weapons and drug-manufacturing laboratories, including the July raid of the largest methamphetamine production facility ever discovered in Mexico, where authorities seized some 8,000 barrels of precursor chemicals. The Mexican government also has succeeded in pursuing the cartels’ leadership. Important members of nearly all the country’s drug-trafficking organizations have been arrested over the last 12 months, although the highest-ranking kingpins continue to evade capture. One indication that the government’s crackdown has made it increasingly difficult to smuggle drugs in and out of Mexico is the revelation that many drug traffickers have turned to other illegal activities, such as extortion, kidnapping and human trafficking, to supplement their incomes.

Despite the endemic challenges presented by bureaucratic infighting and rampant corruption, there is simply no denying that the Mexican government has disrupted the cartels’ operations in meaningful ways.

2008: A Year of Flux
One consequence of these achievements has been greater volatility in the balance of power among the various drug-trafficking organizations in the country. Mexican security forces’ relentless focus on the Gulf cartel has severely damaged the organization’s capabilities.

This development presented opportunities to the other criminal groups over the past 12 months, and it has led to even greater turf battles and power struggles. It is premature to predict which cartels will remain on top once the dust has settled.

Historically, the Mexican drug trade has been controlled by two large and competing drug cartels, each of which has had a base of operations in a Mexican city along the U.S. border. A similar outcome after the current flux is certainly possible, but changes in the country’s security environment and shifting areas of cartel operations might add new dimensions to the country’s criminal landscape.

Changing Geography
The year 2008 has seen a shift in the geography of the drug trade in the Western Hemisphere, nearly all of which can be attributed to the situation in Mexico. The United States remains among the primary destinations for drugs produced in South American countries such as Peru and Colombia, and Mexico continues to serve as the primary transshipment route. The path between South America and Mexico is shifting, however.

One of these shifts involves the increasing importance of Central America. After the Mexican government implemented greater monitoring and control of aircraft entering the country’s airspace, airborne shipments of cocaine from Colombia decreased more than 90 percent, according to an October report. Similarly, maritime trafficking reportedly has decreased more than 60 percent over a two-year period. As a result, Mexican smugglers have expanded their presence in Central American countries as they have begun to rely increasingly on land-based shipping routes to deliver drugs from South American producers. In addition — and likely as a result of the more difficult operating environment — Mexican drug-trafficking groups also have increased their operations in South America to begin providing drugs to markets there and in Europe.

The presence of Mexican cartels in Central and South America illustrates two important points. First, there is no question that Mexican groups are now the central figures in the drug trade in the Western Hemisphere. Nothing demonstrates this better than the fact that it is the Mexican traffickers — not the Colombian or Peruvian producers — who are conquering new turf and even expanding to other markets. The second point is that the drug trade does not necessarily have to revolve around U.S. consumers. While the United States remains a top consumer of cocaine, expanding markets in Latin America and Europe, as well as a continued crackdown in Mexico, could produce a more profound shift in drug-trafficking routes.

Deteriorating Security
One apparent paradox for the Calderon administration has been that, even while the government has clearly succeeded in damaging the cartels, the country’s security situation has continued to deteriorate at what appears to be an unstoppable rate. Just last week, the total number of drug-related homicides in Mexico in 2008 surged past 5,000. This puts Mexico on track to more than double the previous annual record of 2,700 killings, set in 2007.

In addition to the drastic rise in the number of killings, the violence has escalated in other important ways that are more difficult to quantify. For one, Mexican cartel violence has remained a brutal enterprise, with this past year registering perhaps the most significant beheading incident. Second, attacks on security forces have increased. Law enforcement and military personnel have represented some 10 percent of cartel casualties, compared to approximately 7 percent during 2007.

In addition, a series of assassinations of high-ranking government officials in Mexico City made it clear that almost anyone can be considered a cartel target. An expansion of the cartels’ arsenals also contributed to the escalation in violence, including the July discovery of explosive-actuated improvised incendiary devices in vehicles near a cartel safe house, and the February failed assassination attempt with an improvised explosive device (IED) in Mexico City.

Finally, 2008 witnessed the first clear case of the indiscriminate killing of civilians, when alleged members of the La Familia crime organization threw two fragmentation grenades into a crowd during Mexico’s Independence Day celebration in Morelia, Michoacan state.

Of particular concern to the United States is how this rampant violence continues to cross the border. No single incident better demonstrates this than the Phoenix home invasion in June. In that incident, cartel hit men armed with assault rifles and wearing Phoenix Police Department raid shirts killed a drug dealer. The assault had all the makings of a Mexican cartel hit, especially in the attackers’ willingness to engage police officers if necessary.

Looking Ahead
The deteriorating security situation certainly has become the top priority for the Calderon administration, with Mexico’s crime problem now officially considered a matter of national security. The government is considering the implications of increasing casualties, not only among security forces but also among civilians.

Moreover, the initial strategy of relying on the military only over the short term appears increasingly unfeasible, as police reforms have proven far more difficult to achieve than the administration anticipated. Despite the costs, Calderon has shown no signs of letting up. Assistance from the United States will begin expanding under the Merida Initiative, but foreign assistance is only one part of the solution. Perhaps recognizing that at present it is the cartels — not the government — that ultimately control the level of violence in the country, the Calderon administration is exploring plans to escalate the military’s commitment to the fight.

Of course, a sudden drop in violence could make such an escalation unnecessary. There is currently no indication that the violence will soon taper off, but it might also be premature to assume that the violence will continue to escalate in the way it has so far. Attacks involving IEDs or the indiscriminate killing of civilians, for example, have yet to be repeated.

Despite this caveat, the obvious danger is that the cartels have shown themselves to be remarkably innovative, vicious and resilient when backed into a corner. Given their powerful arsenals and deep penetration of the country’s institutions, a further increase in attacks against security forces and government officials seems all but inevitable.

7) Somali pirates set up "agencies" on three continents

From Tuesday, Dec. 9, at least four British, French and Greek warships, two reconnaissance planes and 150 marines will escort merchant ships sailing through the Gulf of Aden and Horn of Africa waters. This force will expand to 6 naval vessels, 3 aircraft and 1,000 marines.

Meanwhile military and counter-terrors sources report, the pirates have set up a land-based intelligence-financial-logistic logistic network in the Persian Gulf, East Africa and… northern Europe.

Royal Navy Rear Adm. Phillip Jones will oversee the EU mission from the RAF Northwood base in the UK, while Greek Commodore Antonios Papaioannou will be on-the-spot commander.

The EU force will coordinate its operations with US, Russian, Indian and Malaysian naval units in the region, although their rules of engagement are not uniform.

DEBKA-Net-Weekly 373, revealed on Nov. 21, information turned up by the US Bahrain-based Fifth Fleet intelligence that the Somali pirates had organized their traffic on business lines by establishing a sort of "back office" in Abu Dhabi.

It is run by money changers earning a rake-off on ransom payments as the pirates' agents. They have since established similar "agencies" in Mombasa, Kenya; Piraeus, Greece; Naples, Italy; and Rotterdam, Netherlands, which work through spies at shipping and marine insurance firms.

Here is how the system works: The pirates' undercover agents gather information from their shipping contacts in Gulf, East African and European ports on the merchant vessels heading for the Gulf of Aden, the Red Sea and the Indian Ocean and the cargoes. They brief the pirates on the presence of security guards and weapons available for the crew aboard the vessel.

The pirates are always on the lookout for “special cargoes”, meaning smuggled goods or merchandise exported illegally or contrary to international law, such as clandestine weapons shipments.

Such consignments, like that of the Ukrainian MV Faina, which carried a large unregistered cargo of 33 T-72 tanks and other armaments - and is still held - increase the ransom value of the vessel and pay more than routine freights.

The pirates also use their proxies to negotiate ransoms and terms for releasing the hijacked vessels, rather than exposing themselves and their locations. These front men also go shopping for the latest word in speed boats, navigation equipment, GPS, communications gear, food, fuel and other supplies.

Counter-terror sources report that the pirates' logistics and intelligence are far superior to that of the European counter-terror operation. This gap seriously detracts from the international patrol fleet's prospects of getting to grips with the pirates, who have attacked more than 90 vessels this year and successfully seized more than 36 on the world's busiest shipping lanes.