Reuters - The United States lost its top-tier AAA credit rating from Standard & Poor's on Friday in an unprecedented blow to the world's largest economy in the wake of a political battle that took the country to the brink of default.
S&P cut the long-term U.S. credit rating by one notch to AA-plus on concerns about the government's budget deficit and rising debt burden. The action is likely to eventually raise borrowing costs for the American government, companies and consumers.
"The downgrade reflects our opinion that the fiscal consolidation plan that Congress and the Administration recently agreed to falls short of what, in our view, would be necessary to stabilize the government's medium-term debt dynamics," S&P said in a statement.
The outlook on the new U.S. credit rating is "negative," S&P said in a statement, indicating another downgrade was possible in the next 12 to 18 months.
The move reflects the deterioration in the global economic standing of the United States, which has had a AAA credit rating from S&P since 1941, and it could have implications for the U.S. dollar's reserve currency status.
"The global system must now adjust to the many implications and uncertainties of the once-unthinkable loss of America's AAA," said Mohamed El-Erian, co-chief investment officer at Pacific Investment Management Co which oversees $1.2 trillion in assets.
The outlook on the new U.S. credit rating is "negative," S&P said in a statement, indicating another downgrade was possible in the next 12 to 18 months.
The decision follows a fierce political battle in Congress over cutting spending and raising taxes to reduce the government's debt burden and allow its statutory borrowing limit to be raised.
On August 2, President Barack Obama signed legislation designed to reduce the fiscal deficit by $2.1 trillion over 10 years. But that was well short of the $4 trillion in savings S&P had called for as a good "down payment" on fixing America's finances.
The political gridlock in Washington over addressing the long-term fiscal problems facing the United States came against the backdrop of slowing U.S. economic growth and led to the worst week in the U.S. stock market in two years.
The S&P 500 stock index fell 10.8 percent in the past 10 trading days on concerns that the U.S. economy may be heading into another recession and because the European debt crisis has worsened.
Treasury bonds, once indisputably seen as the safest security in the world, are now rated lower than bonds issued by countries such as Britain, Germany, France or Canada.
U.S. TREASURY QUESTIONS CALCULATION
Obama was briefed earlier in the day regarding S&P's intentions, but discussions only took place with Treasury officials and did not include the White House, a source familiar with the discussions told Reuters.
Late on Friday, the Treasury said the rating agency's debt calculations were wrong by some $2 trillion.
S&P confirmed it changed its economic assumptions after discussion with the Treasury Department but said it did not affect its decision to downgrade.
"We take our responsibilities very seriously, and if at the end of our analysis the committee concludes that a rating isn't where we believe it should be, it's our duty to make that call," David Beers, head of sovereign ratings at S&P, told Reuters.
The theme running throughout S&P's analysis is the breakdown in the ability of the Democratic and Republican parties to govern effectively.
The agency said that policymaking and political institutions had weakened in the past few months "to a degree more than we envisioned." This has major implications for the nation's budget and debt problems.
For example, S&P now assumes that tax cuts brought in under President George W. Bush in 2001 and 2003 would not, as planned, expire by 2012 because of staunch Republican opposition to any measure that would raise revenues.
The compromise reached by Republicans and Democrats this week calls for creation of a bipartisan congressional committee to find $1.5 trillion of deficit cuts by late November, beyond the $917 billion already identified.
Saturday, August 6, 2011
Friday, August 5, 2011
How Washington took the U.S. to the brink
Reuters) - The world's largest economy was headed toward an unprecedented default, and all Washington wanted to talk about was the manner in which the president had left a room.
A White House meeting in mid-July between President Barack Obama and congressional leaders had ended with sharp words as Obama clashed with the brash Republican House majority leader, Eric Cantor.
Now Cantor was back on Capitol Hill, dishing details to a scrum of reporters -- a shift from the terse, vague statements that usually followed such meetings.
"He said to me, 'Eric, don't call my bluff. I'm going to the American people with this,'" Cantor said in his Southern drawl. "I was somewhat taken aback."
Republican aides filled in the gaps. Obama had "stormed out of the room," one said. At the White House, aides pushed back. One official demonstrated to reporters exactly how Obama had ended the meeting -- lightly pushing his chair back from the table, standing up deliberately, walking away calmly. "He didn't storm out. He just got up and walked into his office," one said.
That evening -- July 13, 2011 -- was one of the lowest points in the struggle to avert fiscal disaster and put the nation's budget on a sustainable path.
Congress needed to extend the country's $14.3 trillion debt ceiling before Tuesday, August 2, the date the Treasury Department would begin running out of cash to cover the country's bills. But Republicans and Democrats were deadlocked.
INSIDERS UNITE
As the deadline drew closer, the two sides abandoned a series of efforts to reach agreement, searching for the right combination of policies and personalities to get a deal done. In the end, it fell to two consummate Washington insiders to prevent the talks from collapsing.
A Reuters examination of the months-long showdown over the debt ceiling found that:
* Vice President Joe Biden and Senate Republican Leader Mitch McConnell emerged as critical players in the final stretch of the talks, as theirs was the only cross-party relationship built on decades of trust.
* Despite a belief among many rank-and-file Republicans that the government could muddle through a default, party leaders never doubted the Treasury Department's warnings that economic catastrophe was a real possibility if they didn't reach a deal by August 2.
* Although House of Representatives Speaker John Boehner, the top U.S. Republican, was eager to strike a bold deal with Obama, it was ultimately necessary for Boehner to distance himself from the White House to convince his House Republicans to back the final deal.
* The business community played an important behind-the-scenes role, with two White House foes -- Wall Street and the Chamber of Commerce -- rallying support for a compromise backed by Obama.
This account of America's journey to the brink of default is based on interviews conducted over the past six weeks with dozens of elected officials, business lobbyists and aides in the House, the Senate and the White House.
A ZEAL FOR CUTS
The U.S. congressional elections in November 2010 set the stage for confrontation over the congressionally mandated cap on the outstanding total of federal government borrowings. Republicans had harnessed voters' anxiety over the economy and soaring deficits to capture the House of Representatives.
Accusing Obama of overreaching with his stimulus package in 2009 and his drive for healthcare reform, Republicans vowed to slash spending and rein in the federal government's size.
A campaign document -- the "Pledge to America" -- promised to cut spending by $100 billion in the first year alone, back to the levels in place in Republican President George W. Bush's last year in office.
The newly elected Republicans, 87 in all, were not interested in compromise. Many felt a greater obligation to the grassroots Tea Party activists who had sent them to Washington than to the party elders who ran the place.
In a budget fight with the Democratic-controlled Senate that took the government to the brink of a shutdown in April, Republicans managed to cut spending by $38 billion, the largest domestic cut in U.S. history.
Still, 59 House Republicans voted against the bill because it did not go far enough.
BOEHNER'S BATTLELINES
That was a mere skirmish. The big battle lay ahead as the government was fast running up against its $14.3 trillion credit limit and would need Congress to raise it further. In early May, Boehner laid out his conditions for a debt-ceiling increase: spending cuts would need to exceed the amount of new borrowing authority.
Instead of billions of dollars, the debate would be measured in the trillions.
It would be a chance for Boehner to show his new troops that he could use the levers of Washington to get results.
An avid golfer and a chain-smoker, the 61-year-old Boehner is from an older generation than many of the Tea Party conservatives whose election to Congress made it possible for him to become House Speaker.
The seasoned legislator and former businessman grew up in Ohio from a family of modest means and worked as a janitor to help put himself through college.
Obama, 49, had a comfort level with fellow Midwesterner Boehner despite their philosophical differences. The speaker reminded the president, a former state senator from Illinois, of Republican legislators he used to play poker with in Illinois and with whom he forged bipartisan deals.
Both men are even-tempered and view themselves as Washington outsiders. Each has ambitions of transforming Washington and making a big mark on policy.
Those aspirations drove their on-again, off-again talks aimed at a far-reaching, bipartisan "grand bargain" that would put the United States on sounder fiscal footing for years to come.
On a golf outing in mid-June, the two agreed to work together on a broad deficit-reduction deal. "Let's give it a try," Obama told the speaker.
The following week, at a secret White House meeting, they agreed to have their staff draw up options. The aim was to craft a plan that would cut deficits by roughly $4 trillion over 10 years.
A 'GRAND BARGAIN?'
The challenges were steep. Democrats would have to agree to rein in cherished social programs like the Medicare health plan for retirees and the disabled. Republicans would have to accept a tax-code overhaul that would increase revenues through the elimination of tax breaks and deductions.
Boehner's enthusiasm for the "grand bargain" was not shared by his colleague, Senate Republican leader Mitch McConnell.
McConnell had confided to Vice President Joe Biden that he thought it was unrealistic to try to accomplish such a sweeping deal in the weeks before August 2 deadline.
The Senate Republican leader worried it would lead to a dead end when pressure was building to resolve the debt-limit standoff. Rating agencies were warning they might downgrade the country's top-notch credit score and, while there was no sign of panic yet in financial markets, investors were growing nervous.
McConnell, 69, had served in the Senate since 1985 and witnessed firsthand the divided-government battles of the 1990s, when Republican House Speaker Newt Gingrich and an earlier generation of firebrand conservatives went toe-to-toe with Democratic President Bill Clinton.
MEMORIES OF 1996
That confrontation led to a shutdown of the federal government and provoked a public backlash against Gingrich and his party. With the Republican brand tarnished, Clinton sailed to re-election in 1996.
McConnell, whose party is a minority in the closely divided Senate, viewed the 2012 elections as a chance to gain dominance in the chamber.
He feared the debt-limit fight would put that in jeopardy while also bolstering Obama's re-election prospects.
If Treasury Secretary Timothy Geithner's warnings were right -- and both McConnell and Boehner believed they were despite skepticism among their rank-and-file -- the fallout from a debt default would be calamitous, causing stocks and the dollar to sink and interest rates to surge.
Mortgage rates and business borrowing costs would spike, potentially sending the economy into another recession. That would mean Republicans -- whom Democrats had accused of intransigence over the debt limit -- would share in the blame for the economy's woes and suffer voter wrath as a result.
Many in the White House viewed McConnell as more of a tactician than a visionary and someone more focused on party politics than on setting policy. In the quest for a grand bargain, Boehner would make a better partner, they thought.
But in the end, after Boehner twice broke off talks with the White House, administration officials relied heavily on McConnell as an emissary to the speaker, and came to view him as a crucial player.
A BOND BETWEEN RIVALS
The administration's chief link to McConnell was Biden, 68, a 36-year veteran of the Senate with rock-solid Democratic credentials who nonetheless had a strong rapport with the Republican leader.
The two seemed to speak the same language from their years in the Senate together. Their bond grew closer when they worked together on a tax-cutting deal just before Christmas late last year, according to people who know both men.
"C'mon Mitch, you know what I'm dealing with here," Biden would sometimes tell McConnell -- Senate-speak to describe the pushback he would face from Democratic Party activists if he gave too much ground.
According to a former Biden aide, McConnell seemed to appreciate that Biden understood the GOP leader faced similar constraints within the Republican Party.
In April, Obama tapped Biden to lead a panel of lawmakers that would lay the groundwork for a deal. In an ornate corner room just off the Senate floor, the group pored through stacks of government and private-sector reports to identify more than $1 trillion in mutually acceptable spending cuts.
As the talks stretched into June, Biden gradually built up a rapport with Cantor, the House majority leader, who was leading the Republican side.
REPUBLICAN RIFT
In less than 10 years in Washington, Cantor had quickly climbed to the top rungs of Republican leadership. But his sharp elbows had earned him enemies -- some from within his own party.
He and Boehner had a cool relationship, say people who know both lawmakers. The rift extended into the lobbying community, where Republicans identified themselves as "Boehner people" or "Cantor people."
At the end of June, Cantor abruptly walked out of the Biden talks, saying the two sides could not agree on taxes. The "principals" -- Obama and Boehner -- would have to take it from there.
Even before the Biden talks began, members of Boehner's office dismissed them as political theater.
"This thing will ultimately get decided by Boehner and Obama," a Boehner aide said.
After weeks of back-channel negotiations with Obama, Boehner decided on July 22 that he could not work with the White House and would have to forge a deal with Democrats on Capitol Hill.
The two sides had come tantalizingly close to a deal, but stumbled again over the tax question.
Boehner felt the White House had shifted the goalposts at the last minute.
White House officials believed Boehner's departure stemmed from an unwillingness -- or an inability -- to take on the conservative rebels in his party. If Boehner had been willing to shake hands publicly with Obama on a "grand bargain," they said, there would have been a way to woo enough mainstream Republicans and Democrats to pass the bill.
They also disagreed with any suggestions that they had shifted the goalposts.
'A BOWL OF JELL-O'
"Dealing with the White House is like dealing with a bowl of Jell-O," Boehner said angrily at a press conference that night.
Obama called him back to the White House the following day and told him he should not be left out of the process.
"Mr. President, as I read the Constitution, the Congress writes the laws. You get to decide if you want to sign them," Boehner responded, according to his aides.
The action moved back to Congress. Like the deal that Boehner and the White House had abandoned, the latest plan would separate the relatively easy decisions -- curbs on annual discretionary spending -- from the difficult reforms to benefits and the tax code.
It wasn't the "grand bargain" Obama and Boehner had sought, but it would deliver trillions in savings and cover the nation's borrowing needs past the November 2012 elections.
There was one catch. The plan would require another debt-ceiling vote in a few months to ensure Congress would sign off on the second set of savings, and Obama had already ruled that out.
Around 10 p.m., on Saturday, July 23, Obama called Boehner to tell him he would veto the bill if it reached his desk. But he suggested that they could find another way to ensure Congress would actually follow through with the tax and benefit changes envisioned by the plan.
GOING SEPARATE WAYS
Congressional staff continued work on the plan the next day. Boehner told Fox News he would press ahead with his own legislation if the two sides could not agree. With no progress made on the enforcement mechanism, known as a "trigger" in Washington-speak, that appeared to be the case.
Boehner told Republicans he would unveil his version of the plan on Monday, July 25, while the Democratic leader of the Senate, Harry Reid, decided to advance a rival plan. Another effort had failed.
The final week would put Boehner's leadership to the test.
Boehner unveiled his plan to Republicans that Monday in a meeting room in the bowels of the Capitol. It wouldn't tie a debt-limit increase to the balanced-budget constitutional amendment, as many of them wanted, but it would deliver more than $2 trillion in savings. A vote was set for Wednesday, July 27.
Boehner launched a two-front lobbying blitz, alternating between in-person meetings with wavering lawmakers and phone calls to conservative media figures like talk radio host Rush Limbaugh and columnist Charles Krauthammer.
On Monday night, he touted the plan directly to a national audience, as television networks granted him air time to respond to a prime-time speech by Obama.
'READY TO DRIVE THE CAR'
Boehner's rally continued on Tuesday morning at the Capitol Hill Club, a social club for Republicans. Boehner's lieutenants took the lead. Cantor bluntly acknowledged that "the debt limit sucks." Kevin McCarthy, the House Republican whip, or lead vote counter, showed a clip from "The Town," a 2010 movie about bank robbers.
"I need your help," said a character played by Ben Affleck. "You can never ask me about it later and we're gonna hurt some people."
"Whose car are we going to take?" asks another character.
The message: it was time to get the job done, no matter how messy. The film clip appeared to win over at least one convert.
Representative Allen West, an outspoken Tea Party-aligned freshman, stood up and shouted: "I'm ready to drive the car!"
OBAMA'S UNLIKELY ALLIES
But momentum shifted as the day wore on. Outside conservative groups like the Club for Growth and the Heritage Foundation urged a vote against the bill.
At the White House, aides were batting away suggestions that Obama had been sidelined.
"He's working tirelessly, meeting with his economic team, doing a lot of outreach, exploring all opportunities for compromise," said senior White House adviser Valerie Jarrett.
Obama worked the phones, talking strategy with Democratic leaders and developing options for the final endgame.
Jarrett, one of the administration's envoys to the business community, said her phone was ringing off the hook with calls from retailers and other business owners worried about the prospect of another debt-limit fight in December if Obama was forced to accept Boehner's two-step plan.
The White House was also actively reaching out to the business community to spell out the dire consequences of a default.
The administration found an ally in the Chamber of Commerce, a group traditionally aligned with Republicans, who now urged the party to back the bill.
The financial services industry was also on the same page as the administration on this issue, despite its many skirmishes with the White House during the debate over Wall Street reform in 2010.
JAMMED CIRCUITS
In his public address on Monday night, Obama had implored Americans to intervene directly by calling, emailing or posting messages on Twitter to their lawmakers.
Telephone circuits on Capitol Hill seized up, email messages bounced back and Web sites crashed under the load.
The anxiety at the White House was building.
"It's fair to say that nobody here had any doubt that this was going to go right up to the line, even as we urged Congress not to take it right up to the line," one administration official said. "That's just the way Congress works."
Still, the path toward a deal was far from clear.
Over at Treasury, Geithner was trying to figure out what to do if Congress failed to reach a deal in time.
Should the government make debt service a top priority to prevent a meltdown on Wall Street? That could delay paychecks to soldiers, benefit checks to retirees, and payments to government contracts, sending ripples through the economy.
Back at the Capitol, Boehner's troubles mounted.
Representative Jim Jordan, a leader of the Republican Party's right wing, predicted Boehner wouldn't get the votes he needed from his own party. Democrats united against his bill.
The Congressional Budget Office, the official scorekeeper, said it would only deliver $850 billion in savings, rather than the $1.2 trillion it claimed. Late that evening, Boehner decided to rewrite the bill to make sure it complied with the party's vow to extract spending cuts greater than the size of the debt limit increase. That put off a vote until at least Thursday.
'FIRE HIM!'
The acrimony spilled into the open Wednesday morning, July 27, in the party's basement meeting room.
Representative Greg Walden, a Boehner ally, read aloud an email from a Jordan staffer that urged outside conservative groups to convince undecided members to vote against the bill. Many lawmakers in the room viewed the message as a betrayal of the Speaker. As the Jordan staffer stood uncomfortably against a wall, lawmakers chanted, "Fire him! Fire him!"
The usually jovial Boehner turned the screws. "Get your ass in line," he said. There was laughter, but the message was unmistakable.
As the meeting adjourned, lawmakers predicted the bill would pass. But a large number remained on the fence. Boehner spent the day listening to their concerns -- the cuts weren't big enough, the special committee might raise taxes, the balanced-budget amendment has been watered down.
Thursday morning, July 28: another meeting, another chance to rally the troops over fruit and doughnuts and signs that read "Play like a champion." Representative Mike Kelly, an alumnus of Notre Dame University, drew upon his school's storied legacy as he urged members to "put on your helmet, buckle your chin straps, run out onto the field and beat the shit out of your opponent!"
Doubters like Jordan stayed silent. As the meeting adjourned, they told reporters that their opposition had not changed.
With the rewritten bill ready to go, Republican leaders scheduled a vote for late Thursday afternoon. As debate started on the House floor, Boehner, Majority Leader Cantor and Whip McCarthy continued to meet with doubters, making the case that the party needed to stick together if it wanted an acceptable final product.
At 5:25 p.m., the Republican troika abruptly yanked the bill from the House floor with only one minute left of debate. They didn't have the votes.
'BLOODY AND BEATEN'
As floor action turned to naming post offices, Boehner summoned the holdouts to his office just off the Capitol rotunda. Whatever he was doing wasn't changing any minds.
"I'm a bloodied and beaten 'no,'" said Representative Louie Gohmert of Texas, one of several conservatives who had downplayed the consequences of a technical default, as he left the office.
At the beginning of the year, Republicans had enacted a ban on earmarks, the pet spending projects that had come to symbolize waste and corruption in the public imagination. That meant that Boehner had fewer carrots to offer reluctant members -- no highway overpasses.
"It is the most refreshing thing in the world to see what is going on here. These kinds of negotiations a couple of years ago would have cost $20 billion," said Representative Jeff Flake of Arizona, whose anti-spending stance had made him an outcast in the party in the past decade.
The five Republicans who represent South Carolina headed from Boehner's opulent suite to the Capitol's small, private chapel to pray.
As they knelt beneath a stained glass window depicting George Washington, they weren't praying for guidance, just strength to maintain their stand.
"I think divine inspiration has already happened. I was a 'lean-no,' now I'm a 'no,'" said Representative Tim Scott.
19 BOXES OF PIZZA
The action moved downstairs to McCarthy's office. The jovial 46-year-old Republican whip, from California's dusty interior, was a novice vote counter. He had presided over a few embarrassing setbacks earlier in the year. Now he was facing a true disaster.
As the night wore on, 19 boxes of pizza from Al's Pizzeria disappeared into McCarthy's office.
The holdouts weren't looking for pork-barrel spending or other favors -- though they didn't refuse the pizza. Instead, they wanted to strengthen the balanced-budget clause. That would certainly doom the bill in the Senate, but at that point Boehner just wanted to get it out of the House.
Even with that change, Boehner still appeared to be short of the 217 votes he needed. At 10:30 on Thursday night, the House adjourned without a vote.
House Republicans met in their basement clubhouse again on Friday morning, July 29. The holdouts came under more pressure -- this time from other rank-and-file members who said they were undermining the party's negotiating position. But a final count showed that the votes appeared to be there.
"I love you guys," Boehner said in a moment of levity.
The bill passed Friday evening on a vote of 218 to 210 -- just one vote more than needed. The Senate defeated it two hours later, and the House retaliated on Saturday by defeating a proposal put forth by Harry Reid, leader of the Democratic majority in the Senate.
Another week had elapsed, and Congress was no closer to consensus.
While the legislative chess game played out, Biden called McConnell on Wednesday and Friday.
MCCONNELL'S BOTTOM LINE
Out of loyalty to Boehner, the Senate Republican leader had refrained from talks with the White House for most of the week.
On Friday morning, McConnell told Biden there was "no daylight" between the two Republicans, but told the vice president to try later in the day.
"Call me back after these votes and I will tell you what it will take to get my support," McConnell said, according to a Republican aide.
Biden and McConnell spoke again Friday evening and in the early afternoon on Saturday. Negotiations began in earnest around 3 p.m., after the House defeated Reid's bill.
Tuesday, August 2, was three days away.
White House chief of staff Bill Daley's office became Grand Central Station for a rolling series of meetings among White House staff. The meetings moved on Sunday to the vice president's office and later to the Oval Office.
On Saturday, Obama asked Biden's chief of staff, Bruce Reed, whether his wife was angry that he was spending his wedding anniversary at the office.
"Previously, I was on negative watch but I've now been officially downgraded," Reed deadpanned.
CLIMACTIC PHONE CALLS
After months of high-profile meetings, nearly all of the negotiations on the final weekend took place by phone.
In the big gatherings, participants tended to emphasize "talking points" because of the expectation that the conversations would spill out into the public. Smaller meetings allowed participants to cut to the chase, according to an administration official, and details could remain private.
On Saturday night, a media report surfaced that there was a tentative framework for a deal.
White House reporters seeking an update chased a top communications aide toward the Oval Office, only to be told later that the two sides had not arrived at a deal yet.
Indeed, the negotiations ended up going down to the wire.
At 5 p.m. on Sunday night, White House officials discussed whether Treasury Secretary Geithner should make a statement to the financial markets that evening or perhaps the following morning.
GEITHNER'S GAME
Geithner, in his former role as head of the Federal Reserve Bank of New York, was one of the chief financial firefighters during the global markets meltdown triggered by the collapse of Lehman Brothers in September 2008.
Asian markets were about to open. The crisis had already roiled U.S. debt markets and taken a toll on the dollar and Wall Street stocks.
Administration officials feared worse bloodletting if investors returned to their desks at the start of the week without clarity on whether there would be a deal.
Geithner and a small team of aides had been quietly working on contingency plans in case Congress missed the August 2 deadline to raise the debt ceiling. Treasury had planned to brief markets on those plans no later than Monday.
Private-sector analysts believed that in a worst-case scenario, Geithner would be prepared to tell markets he would put a priority on paying the government's debt in order to avoid default -- even if that meant taking the politically explosive step of delaying payments to Social Security recipients and others.
PULLING THE TRIGGER
But the Treasury secretary never had to show his hand.
The final sticking point in the talks centered on the terms of the deficit-cutting "trigger." Democrats wanted automatic cuts in military spending if Congress balked at the second round of deficit reduction.
Biden and McConnell spoke four times on Saturday, five times on Sunday, circling around the two stumbling blocks that remained -- the nature of the "trigger" and the size of the defense cuts that Democrats wanted. McConnell kept in contact with Boehner.
On Sunday, July 31, there were less than two full days before Default Day. As Obama's budget director, Jack Lew, crunched numbers on the Republican defense cut proposals, the White House feared it might not get a deal. Biden spoke with Boehner around 4 p.m. and said, "We just can't get there."
McConnell floated a compromise to widen the trigger to all security-related programs -- the State Department, veterans' care, nuclear security -- and not just the Pentagon.
At 8:15 p.m. Sunday, Obama made a final call to Boehner as White House aides listened nearby.
"Do we have a deal?" Obama asked.
There was a moment of suspense, then: "Congratulations to you, too, John."
A White House meeting in mid-July between President Barack Obama and congressional leaders had ended with sharp words as Obama clashed with the brash Republican House majority leader, Eric Cantor.Now Cantor was back on Capitol Hill, dishing details to a scrum of reporters -- a shift from the terse, vague statements that usually followed such meetings.
"He said to me, 'Eric, don't call my bluff. I'm going to the American people with this,'" Cantor said in his Southern drawl. "I was somewhat taken aback."
Republican aides filled in the gaps. Obama had "stormed out of the room," one said. At the White House, aides pushed back. One official demonstrated to reporters exactly how Obama had ended the meeting -- lightly pushing his chair back from the table, standing up deliberately, walking away calmly. "He didn't storm out. He just got up and walked into his office," one said.
That evening -- July 13, 2011 -- was one of the lowest points in the struggle to avert fiscal disaster and put the nation's budget on a sustainable path.
Congress needed to extend the country's $14.3 trillion debt ceiling before Tuesday, August 2, the date the Treasury Department would begin running out of cash to cover the country's bills. But Republicans and Democrats were deadlocked.
INSIDERS UNITE
As the deadline drew closer, the two sides abandoned a series of efforts to reach agreement, searching for the right combination of policies and personalities to get a deal done. In the end, it fell to two consummate Washington insiders to prevent the talks from collapsing.
A Reuters examination of the months-long showdown over the debt ceiling found that:
* Vice President Joe Biden and Senate Republican Leader Mitch McConnell emerged as critical players in the final stretch of the talks, as theirs was the only cross-party relationship built on decades of trust.
* Despite a belief among many rank-and-file Republicans that the government could muddle through a default, party leaders never doubted the Treasury Department's warnings that economic catastrophe was a real possibility if they didn't reach a deal by August 2.
* Although House of Representatives Speaker John Boehner, the top U.S. Republican, was eager to strike a bold deal with Obama, it was ultimately necessary for Boehner to distance himself from the White House to convince his House Republicans to back the final deal.
* The business community played an important behind-the-scenes role, with two White House foes -- Wall Street and the Chamber of Commerce -- rallying support for a compromise backed by Obama.
This account of America's journey to the brink of default is based on interviews conducted over the past six weeks with dozens of elected officials, business lobbyists and aides in the House, the Senate and the White House.
A ZEAL FOR CUTS
The U.S. congressional elections in November 2010 set the stage for confrontation over the congressionally mandated cap on the outstanding total of federal government borrowings. Republicans had harnessed voters' anxiety over the economy and soaring deficits to capture the House of Representatives.
Accusing Obama of overreaching with his stimulus package in 2009 and his drive for healthcare reform, Republicans vowed to slash spending and rein in the federal government's size.
A campaign document -- the "Pledge to America" -- promised to cut spending by $100 billion in the first year alone, back to the levels in place in Republican President George W. Bush's last year in office.
The newly elected Republicans, 87 in all, were not interested in compromise. Many felt a greater obligation to the grassroots Tea Party activists who had sent them to Washington than to the party elders who ran the place.
In a budget fight with the Democratic-controlled Senate that took the government to the brink of a shutdown in April, Republicans managed to cut spending by $38 billion, the largest domestic cut in U.S. history.
Still, 59 House Republicans voted against the bill because it did not go far enough.
BOEHNER'S BATTLELINES
That was a mere skirmish. The big battle lay ahead as the government was fast running up against its $14.3 trillion credit limit and would need Congress to raise it further. In early May, Boehner laid out his conditions for a debt-ceiling increase: spending cuts would need to exceed the amount of new borrowing authority.
Instead of billions of dollars, the debate would be measured in the trillions.
It would be a chance for Boehner to show his new troops that he could use the levers of Washington to get results.
An avid golfer and a chain-smoker, the 61-year-old Boehner is from an older generation than many of the Tea Party conservatives whose election to Congress made it possible for him to become House Speaker.
The seasoned legislator and former businessman grew up in Ohio from a family of modest means and worked as a janitor to help put himself through college.
Obama, 49, had a comfort level with fellow Midwesterner Boehner despite their philosophical differences. The speaker reminded the president, a former state senator from Illinois, of Republican legislators he used to play poker with in Illinois and with whom he forged bipartisan deals.
Both men are even-tempered and view themselves as Washington outsiders. Each has ambitions of transforming Washington and making a big mark on policy.
Those aspirations drove their on-again, off-again talks aimed at a far-reaching, bipartisan "grand bargain" that would put the United States on sounder fiscal footing for years to come.
On a golf outing in mid-June, the two agreed to work together on a broad deficit-reduction deal. "Let's give it a try," Obama told the speaker.
The following week, at a secret White House meeting, they agreed to have their staff draw up options. The aim was to craft a plan that would cut deficits by roughly $4 trillion over 10 years.
A 'GRAND BARGAIN?'
The challenges were steep. Democrats would have to agree to rein in cherished social programs like the Medicare health plan for retirees and the disabled. Republicans would have to accept a tax-code overhaul that would increase revenues through the elimination of tax breaks and deductions.
Boehner's enthusiasm for the "grand bargain" was not shared by his colleague, Senate Republican leader Mitch McConnell.
McConnell had confided to Vice President Joe Biden that he thought it was unrealistic to try to accomplish such a sweeping deal in the weeks before August 2 deadline.
The Senate Republican leader worried it would lead to a dead end when pressure was building to resolve the debt-limit standoff. Rating agencies were warning they might downgrade the country's top-notch credit score and, while there was no sign of panic yet in financial markets, investors were growing nervous.
McConnell, 69, had served in the Senate since 1985 and witnessed firsthand the divided-government battles of the 1990s, when Republican House Speaker Newt Gingrich and an earlier generation of firebrand conservatives went toe-to-toe with Democratic President Bill Clinton.
MEMORIES OF 1996
That confrontation led to a shutdown of the federal government and provoked a public backlash against Gingrich and his party. With the Republican brand tarnished, Clinton sailed to re-election in 1996.
McConnell, whose party is a minority in the closely divided Senate, viewed the 2012 elections as a chance to gain dominance in the chamber.
He feared the debt-limit fight would put that in jeopardy while also bolstering Obama's re-election prospects.
If Treasury Secretary Timothy Geithner's warnings were right -- and both McConnell and Boehner believed they were despite skepticism among their rank-and-file -- the fallout from a debt default would be calamitous, causing stocks and the dollar to sink and interest rates to surge.
Mortgage rates and business borrowing costs would spike, potentially sending the economy into another recession. That would mean Republicans -- whom Democrats had accused of intransigence over the debt limit -- would share in the blame for the economy's woes and suffer voter wrath as a result.
Many in the White House viewed McConnell as more of a tactician than a visionary and someone more focused on party politics than on setting policy. In the quest for a grand bargain, Boehner would make a better partner, they thought.
But in the end, after Boehner twice broke off talks with the White House, administration officials relied heavily on McConnell as an emissary to the speaker, and came to view him as a crucial player.
A BOND BETWEEN RIVALS
The administration's chief link to McConnell was Biden, 68, a 36-year veteran of the Senate with rock-solid Democratic credentials who nonetheless had a strong rapport with the Republican leader.
The two seemed to speak the same language from their years in the Senate together. Their bond grew closer when they worked together on a tax-cutting deal just before Christmas late last year, according to people who know both men.
"C'mon Mitch, you know what I'm dealing with here," Biden would sometimes tell McConnell -- Senate-speak to describe the pushback he would face from Democratic Party activists if he gave too much ground.
According to a former Biden aide, McConnell seemed to appreciate that Biden understood the GOP leader faced similar constraints within the Republican Party.
In April, Obama tapped Biden to lead a panel of lawmakers that would lay the groundwork for a deal. In an ornate corner room just off the Senate floor, the group pored through stacks of government and private-sector reports to identify more than $1 trillion in mutually acceptable spending cuts.
As the talks stretched into June, Biden gradually built up a rapport with Cantor, the House majority leader, who was leading the Republican side.
REPUBLICAN RIFT
In less than 10 years in Washington, Cantor had quickly climbed to the top rungs of Republican leadership. But his sharp elbows had earned him enemies -- some from within his own party.
He and Boehner had a cool relationship, say people who know both lawmakers. The rift extended into the lobbying community, where Republicans identified themselves as "Boehner people" or "Cantor people."
At the end of June, Cantor abruptly walked out of the Biden talks, saying the two sides could not agree on taxes. The "principals" -- Obama and Boehner -- would have to take it from there.
Even before the Biden talks began, members of Boehner's office dismissed them as political theater.
"This thing will ultimately get decided by Boehner and Obama," a Boehner aide said.
After weeks of back-channel negotiations with Obama, Boehner decided on July 22 that he could not work with the White House and would have to forge a deal with Democrats on Capitol Hill.
The two sides had come tantalizingly close to a deal, but stumbled again over the tax question.
Boehner felt the White House had shifted the goalposts at the last minute.
White House officials believed Boehner's departure stemmed from an unwillingness -- or an inability -- to take on the conservative rebels in his party. If Boehner had been willing to shake hands publicly with Obama on a "grand bargain," they said, there would have been a way to woo enough mainstream Republicans and Democrats to pass the bill.
They also disagreed with any suggestions that they had shifted the goalposts.
'A BOWL OF JELL-O'
"Dealing with the White House is like dealing with a bowl of Jell-O," Boehner said angrily at a press conference that night.
Obama called him back to the White House the following day and told him he should not be left out of the process.
"Mr. President, as I read the Constitution, the Congress writes the laws. You get to decide if you want to sign them," Boehner responded, according to his aides.
The action moved back to Congress. Like the deal that Boehner and the White House had abandoned, the latest plan would separate the relatively easy decisions -- curbs on annual discretionary spending -- from the difficult reforms to benefits and the tax code.
It wasn't the "grand bargain" Obama and Boehner had sought, but it would deliver trillions in savings and cover the nation's borrowing needs past the November 2012 elections.
There was one catch. The plan would require another debt-ceiling vote in a few months to ensure Congress would sign off on the second set of savings, and Obama had already ruled that out.
Around 10 p.m., on Saturday, July 23, Obama called Boehner to tell him he would veto the bill if it reached his desk. But he suggested that they could find another way to ensure Congress would actually follow through with the tax and benefit changes envisioned by the plan.
GOING SEPARATE WAYS
Congressional staff continued work on the plan the next day. Boehner told Fox News he would press ahead with his own legislation if the two sides could not agree. With no progress made on the enforcement mechanism, known as a "trigger" in Washington-speak, that appeared to be the case.
Boehner told Republicans he would unveil his version of the plan on Monday, July 25, while the Democratic leader of the Senate, Harry Reid, decided to advance a rival plan. Another effort had failed.
The final week would put Boehner's leadership to the test.
Boehner unveiled his plan to Republicans that Monday in a meeting room in the bowels of the Capitol. It wouldn't tie a debt-limit increase to the balanced-budget constitutional amendment, as many of them wanted, but it would deliver more than $2 trillion in savings. A vote was set for Wednesday, July 27.
Boehner launched a two-front lobbying blitz, alternating between in-person meetings with wavering lawmakers and phone calls to conservative media figures like talk radio host Rush Limbaugh and columnist Charles Krauthammer.
On Monday night, he touted the plan directly to a national audience, as television networks granted him air time to respond to a prime-time speech by Obama.
'READY TO DRIVE THE CAR'
Boehner's rally continued on Tuesday morning at the Capitol Hill Club, a social club for Republicans. Boehner's lieutenants took the lead. Cantor bluntly acknowledged that "the debt limit sucks." Kevin McCarthy, the House Republican whip, or lead vote counter, showed a clip from "The Town," a 2010 movie about bank robbers.
"I need your help," said a character played by Ben Affleck. "You can never ask me about it later and we're gonna hurt some people."
"Whose car are we going to take?" asks another character.
The message: it was time to get the job done, no matter how messy. The film clip appeared to win over at least one convert.
Representative Allen West, an outspoken Tea Party-aligned freshman, stood up and shouted: "I'm ready to drive the car!"
OBAMA'S UNLIKELY ALLIES
But momentum shifted as the day wore on. Outside conservative groups like the Club for Growth and the Heritage Foundation urged a vote against the bill.
At the White House, aides were batting away suggestions that Obama had been sidelined.
"He's working tirelessly, meeting with his economic team, doing a lot of outreach, exploring all opportunities for compromise," said senior White House adviser Valerie Jarrett.
Obama worked the phones, talking strategy with Democratic leaders and developing options for the final endgame.
Jarrett, one of the administration's envoys to the business community, said her phone was ringing off the hook with calls from retailers and other business owners worried about the prospect of another debt-limit fight in December if Obama was forced to accept Boehner's two-step plan.
The White House was also actively reaching out to the business community to spell out the dire consequences of a default.
The administration found an ally in the Chamber of Commerce, a group traditionally aligned with Republicans, who now urged the party to back the bill.
The financial services industry was also on the same page as the administration on this issue, despite its many skirmishes with the White House during the debate over Wall Street reform in 2010.
JAMMED CIRCUITS
In his public address on Monday night, Obama had implored Americans to intervene directly by calling, emailing or posting messages on Twitter to their lawmakers.
Telephone circuits on Capitol Hill seized up, email messages bounced back and Web sites crashed under the load.
The anxiety at the White House was building.
"It's fair to say that nobody here had any doubt that this was going to go right up to the line, even as we urged Congress not to take it right up to the line," one administration official said. "That's just the way Congress works."
Still, the path toward a deal was far from clear.
Over at Treasury, Geithner was trying to figure out what to do if Congress failed to reach a deal in time.
Should the government make debt service a top priority to prevent a meltdown on Wall Street? That could delay paychecks to soldiers, benefit checks to retirees, and payments to government contracts, sending ripples through the economy.
Back at the Capitol, Boehner's troubles mounted.
Representative Jim Jordan, a leader of the Republican Party's right wing, predicted Boehner wouldn't get the votes he needed from his own party. Democrats united against his bill.
The Congressional Budget Office, the official scorekeeper, said it would only deliver $850 billion in savings, rather than the $1.2 trillion it claimed. Late that evening, Boehner decided to rewrite the bill to make sure it complied with the party's vow to extract spending cuts greater than the size of the debt limit increase. That put off a vote until at least Thursday.
'FIRE HIM!'
The acrimony spilled into the open Wednesday morning, July 27, in the party's basement meeting room.
Representative Greg Walden, a Boehner ally, read aloud an email from a Jordan staffer that urged outside conservative groups to convince undecided members to vote against the bill. Many lawmakers in the room viewed the message as a betrayal of the Speaker. As the Jordan staffer stood uncomfortably against a wall, lawmakers chanted, "Fire him! Fire him!"
The usually jovial Boehner turned the screws. "Get your ass in line," he said. There was laughter, but the message was unmistakable.
As the meeting adjourned, lawmakers predicted the bill would pass. But a large number remained on the fence. Boehner spent the day listening to their concerns -- the cuts weren't big enough, the special committee might raise taxes, the balanced-budget amendment has been watered down.
Thursday morning, July 28: another meeting, another chance to rally the troops over fruit and doughnuts and signs that read "Play like a champion." Representative Mike Kelly, an alumnus of Notre Dame University, drew upon his school's storied legacy as he urged members to "put on your helmet, buckle your chin straps, run out onto the field and beat the shit out of your opponent!"
Doubters like Jordan stayed silent. As the meeting adjourned, they told reporters that their opposition had not changed.
With the rewritten bill ready to go, Republican leaders scheduled a vote for late Thursday afternoon. As debate started on the House floor, Boehner, Majority Leader Cantor and Whip McCarthy continued to meet with doubters, making the case that the party needed to stick together if it wanted an acceptable final product.
At 5:25 p.m., the Republican troika abruptly yanked the bill from the House floor with only one minute left of debate. They didn't have the votes.
'BLOODY AND BEATEN'
As floor action turned to naming post offices, Boehner summoned the holdouts to his office just off the Capitol rotunda. Whatever he was doing wasn't changing any minds.
"I'm a bloodied and beaten 'no,'" said Representative Louie Gohmert of Texas, one of several conservatives who had downplayed the consequences of a technical default, as he left the office.
At the beginning of the year, Republicans had enacted a ban on earmarks, the pet spending projects that had come to symbolize waste and corruption in the public imagination. That meant that Boehner had fewer carrots to offer reluctant members -- no highway overpasses.
"It is the most refreshing thing in the world to see what is going on here. These kinds of negotiations a couple of years ago would have cost $20 billion," said Representative Jeff Flake of Arizona, whose anti-spending stance had made him an outcast in the party in the past decade.
The five Republicans who represent South Carolina headed from Boehner's opulent suite to the Capitol's small, private chapel to pray.
As they knelt beneath a stained glass window depicting George Washington, they weren't praying for guidance, just strength to maintain their stand.
"I think divine inspiration has already happened. I was a 'lean-no,' now I'm a 'no,'" said Representative Tim Scott.
19 BOXES OF PIZZA
The action moved downstairs to McCarthy's office. The jovial 46-year-old Republican whip, from California's dusty interior, was a novice vote counter. He had presided over a few embarrassing setbacks earlier in the year. Now he was facing a true disaster.
As the night wore on, 19 boxes of pizza from Al's Pizzeria disappeared into McCarthy's office.
The holdouts weren't looking for pork-barrel spending or other favors -- though they didn't refuse the pizza. Instead, they wanted to strengthen the balanced-budget clause. That would certainly doom the bill in the Senate, but at that point Boehner just wanted to get it out of the House.
Even with that change, Boehner still appeared to be short of the 217 votes he needed. At 10:30 on Thursday night, the House adjourned without a vote.
House Republicans met in their basement clubhouse again on Friday morning, July 29. The holdouts came under more pressure -- this time from other rank-and-file members who said they were undermining the party's negotiating position. But a final count showed that the votes appeared to be there.
"I love you guys," Boehner said in a moment of levity.
The bill passed Friday evening on a vote of 218 to 210 -- just one vote more than needed. The Senate defeated it two hours later, and the House retaliated on Saturday by defeating a proposal put forth by Harry Reid, leader of the Democratic majority in the Senate.
Another week had elapsed, and Congress was no closer to consensus.
While the legislative chess game played out, Biden called McConnell on Wednesday and Friday.
MCCONNELL'S BOTTOM LINE
Out of loyalty to Boehner, the Senate Republican leader had refrained from talks with the White House for most of the week.
On Friday morning, McConnell told Biden there was "no daylight" between the two Republicans, but told the vice president to try later in the day.
"Call me back after these votes and I will tell you what it will take to get my support," McConnell said, according to a Republican aide.
Biden and McConnell spoke again Friday evening and in the early afternoon on Saturday. Negotiations began in earnest around 3 p.m., after the House defeated Reid's bill.
Tuesday, August 2, was three days away.
White House chief of staff Bill Daley's office became Grand Central Station for a rolling series of meetings among White House staff. The meetings moved on Sunday to the vice president's office and later to the Oval Office.
On Saturday, Obama asked Biden's chief of staff, Bruce Reed, whether his wife was angry that he was spending his wedding anniversary at the office.
"Previously, I was on negative watch but I've now been officially downgraded," Reed deadpanned.
CLIMACTIC PHONE CALLS
After months of high-profile meetings, nearly all of the negotiations on the final weekend took place by phone.
In the big gatherings, participants tended to emphasize "talking points" because of the expectation that the conversations would spill out into the public. Smaller meetings allowed participants to cut to the chase, according to an administration official, and details could remain private.
On Saturday night, a media report surfaced that there was a tentative framework for a deal.
White House reporters seeking an update chased a top communications aide toward the Oval Office, only to be told later that the two sides had not arrived at a deal yet.
Indeed, the negotiations ended up going down to the wire.
At 5 p.m. on Sunday night, White House officials discussed whether Treasury Secretary Geithner should make a statement to the financial markets that evening or perhaps the following morning.
GEITHNER'S GAME
Geithner, in his former role as head of the Federal Reserve Bank of New York, was one of the chief financial firefighters during the global markets meltdown triggered by the collapse of Lehman Brothers in September 2008.
Asian markets were about to open. The crisis had already roiled U.S. debt markets and taken a toll on the dollar and Wall Street stocks.
Administration officials feared worse bloodletting if investors returned to their desks at the start of the week without clarity on whether there would be a deal.
Geithner and a small team of aides had been quietly working on contingency plans in case Congress missed the August 2 deadline to raise the debt ceiling. Treasury had planned to brief markets on those plans no later than Monday.
Private-sector analysts believed that in a worst-case scenario, Geithner would be prepared to tell markets he would put a priority on paying the government's debt in order to avoid default -- even if that meant taking the politically explosive step of delaying payments to Social Security recipients and others.
PULLING THE TRIGGER
But the Treasury secretary never had to show his hand.
The final sticking point in the talks centered on the terms of the deficit-cutting "trigger." Democrats wanted automatic cuts in military spending if Congress balked at the second round of deficit reduction.
Biden and McConnell spoke four times on Saturday, five times on Sunday, circling around the two stumbling blocks that remained -- the nature of the "trigger" and the size of the defense cuts that Democrats wanted. McConnell kept in contact with Boehner.
On Sunday, July 31, there were less than two full days before Default Day. As Obama's budget director, Jack Lew, crunched numbers on the Republican defense cut proposals, the White House feared it might not get a deal. Biden spoke with Boehner around 4 p.m. and said, "We just can't get there."
McConnell floated a compromise to widen the trigger to all security-related programs -- the State Department, veterans' care, nuclear security -- and not just the Pentagon.
At 8:15 p.m. Sunday, Obama made a final call to Boehner as White House aides listened nearby.
"Do we have a deal?" Obama asked.
There was a moment of suspense, then: "Congratulations to you, too, John."
Saturday, July 23, 2011
Norway attacks planned since 2009: diary
A rambling 1,500-page diary apparently written by the Norwegian man who admitted killing at least 92 people in twin attacks says he has been preparing the operation since at least autumn 2009.
The internet document is part diary, part bomb-making manual and part political rant in which Anders Behring Breivik details his Islamophobia, attacks on Marxism and his initiation as a Knight Templar.
One entry titled "Autumn 2009 - Phase Shift" explains how he set up front mining and farming businesses to prepare the attacks for which he was arrested on Friday.
"The reasoning for this decision is to create a credible cover in case I am arrested in regards to the purchase and smuggling of explosives or components to explosives - fertiliser," the tract says.
At least 85 people died in the massacre of youngsters attending a Labour Party summer camp on Utoeya and seven more were killed in an earlier car bomb explosion which ripped through government buildings in Oslo.
"I will be labelled as the biggest (Nazi-) monster ever witnessed since WW 2," the text's author writes, while discussing the preparation of his "martyrdom operation".
While the text is signed under the pseudonym "Andrew Berwick", the author explains the origins of his real name - Anders Behring Breivik.
"My name, Breivik, can be dated back to even before the Viking era. Behring is a pre-Christian Germanic name which is derived from Behr, the Germanic word for Bear... Anders (Andreas) is the Scandinavian equivalent of... Andrew."
The text refers to the author's friends, their habits, girlfriends and sexual habits, as well as many of the mundane details of day-to-day life, including drinking expensive wine ahead of the attacks.
"I have written approximately half of the compendium myself. The rest is a compilation of works from several courageous individuals throughout the world. The content of the compendium truly belongs to everyone."
He writes about increased aggression because of taking body-building products, and includes question and answer sessions with himself.
"Q: Name one living person you would like to meet?
A: The Pope or Vladimir Putin. Putin seems like a fair and resolute leader worthy of respect. Im unsure at this point whether he has the potential to be our best friend or our worst enemy though."
"I'm an extremely patient and a very positively minded individual," the author writes in the text that includes a glossary and tips on farming.
But by July of this year, patience had run out and preparations were proceeding apace.
"Sunday July 17: Continued removing traces of the decor on the rental car. Washed twice with acetone then another round of degreasing. There are still significant traces but at this point I do not have time to take additional measures.
"I believe this will be my last entry. It is now FRI July 22nd, 12.51 Sincere regards, Andrew Berwick, Justiciary Knight Commander, Knights Templar Europe, Knights Templar Norway."
Behring Breivik's lawyer told Norwegian television on Saturday that he had admitted responsibility for the attacks.
"He explained that it was cruel but that he had to go through with these acts," lawyer Geir Flippest said, adding that the attacks were "apparently planned over a long period of time".
The internet document is part diary, part bomb-making manual and part political rant in which Anders Behring Breivik details his Islamophobia, attacks on Marxism and his initiation as a Knight Templar.
One entry titled "Autumn 2009 - Phase Shift" explains how he set up front mining and farming businesses to prepare the attacks for which he was arrested on Friday.
"The reasoning for this decision is to create a credible cover in case I am arrested in regards to the purchase and smuggling of explosives or components to explosives - fertiliser," the tract says.
At least 85 people died in the massacre of youngsters attending a Labour Party summer camp on Utoeya and seven more were killed in an earlier car bomb explosion which ripped through government buildings in Oslo.
"I will be labelled as the biggest (Nazi-) monster ever witnessed since WW 2," the text's author writes, while discussing the preparation of his "martyrdom operation".
While the text is signed under the pseudonym "Andrew Berwick", the author explains the origins of his real name - Anders Behring Breivik.
"My name, Breivik, can be dated back to even before the Viking era. Behring is a pre-Christian Germanic name which is derived from Behr, the Germanic word for Bear... Anders (Andreas) is the Scandinavian equivalent of... Andrew."
The text refers to the author's friends, their habits, girlfriends and sexual habits, as well as many of the mundane details of day-to-day life, including drinking expensive wine ahead of the attacks.
"I have written approximately half of the compendium myself. The rest is a compilation of works from several courageous individuals throughout the world. The content of the compendium truly belongs to everyone."
He writes about increased aggression because of taking body-building products, and includes question and answer sessions with himself.
"Q: Name one living person you would like to meet?
A: The Pope or Vladimir Putin. Putin seems like a fair and resolute leader worthy of respect. Im unsure at this point whether he has the potential to be our best friend or our worst enemy though."
"I'm an extremely patient and a very positively minded individual," the author writes in the text that includes a glossary and tips on farming.
But by July of this year, patience had run out and preparations were proceeding apace.
"Sunday July 17: Continued removing traces of the decor on the rental car. Washed twice with acetone then another round of degreasing. There are still significant traces but at this point I do not have time to take additional measures.
"I believe this will be my last entry. It is now FRI July 22nd, 12.51 Sincere regards, Andrew Berwick, Justiciary Knight Commander, Knights Templar Europe, Knights Templar Norway."
Behring Breivik's lawyer told Norwegian television on Saturday that he had admitted responsibility for the attacks.
"He explained that it was cruel but that he had to go through with these acts," lawyer Geir Flippest said, adding that the attacks were "apparently planned over a long period of time".
Friday, July 22, 2011
Europe Debt Plan Relieves Pressure
BRUSSELS—With a new €109 billion ($157 billion) bailout for Greece, European leaders broke from their recent string of slow-paced half-measures to launch a frontal attack on a debt crisis that threatens to engulf the troubled country.
But the greatest test is still to come: Does Europe yet have the tools to block the crisis from spreading deep into the Continent's core?
Economists and analysts broadly hailed the Greece package, which provides the country with much needed long-term cash and places some of the bailout's burden on the shoulders of Greece's private creditors.
Still, details of the plan made plain that it would do little to immediately reduce Greece's huge stock of government debt—leading to fears that Greece could again flare up as the country struggles to meet its heavy burden.
And economists are skeptical that Europe is prepared to head off trouble in other countries. Ireland and Portugal, the other bailout recipients, were given more time to repay rescue loans at a lower interest rate, but saw no other relief. The wider euro-zone bailout fund, given more authority to intervene pre-emptively before a country reaches the verge of bankruptcy, didn't get any more money to do so.
"It is a courageous package for Greece, but the market is moving beyond the solvency crisis in specific countries to looking at the potential threat to the euro area as a whole," said Silvio Peruzzo, European economist at the Royal Bank of Scotland in London. "The elements needed to fight a systemic crisis were not delivered."
European stocks rallied Friday on the news of the debt deal, with banks enjoying some of the biggest gains. The Stoxx Europe 600 index rose 0.6%, for its third consecutive gain.
In the deal, Europe's leaders went further than they were accustomed to. German Chancellor Angela Merkel, who once insisted that aid be provided to troubled countries only on punitive terms as a last resort, opened up to pre-emptive lending at charitable rates. And the ensemble of euro-zone countries reluctantly accepted that Greece faced a solvency problem: It simply could not pay back all of its debts.
But the greatest test is still to come: Does Europe yet have the tools to block the crisis from spreading deep into the Continent's core?
Economists and analysts broadly hailed the Greece package, which provides the country with much needed long-term cash and places some of the bailout's burden on the shoulders of Greece's private creditors.
Still, details of the plan made plain that it would do little to immediately reduce Greece's huge stock of government debt—leading to fears that Greece could again flare up as the country struggles to meet its heavy burden.
And economists are skeptical that Europe is prepared to head off trouble in other countries. Ireland and Portugal, the other bailout recipients, were given more time to repay rescue loans at a lower interest rate, but saw no other relief. The wider euro-zone bailout fund, given more authority to intervene pre-emptively before a country reaches the verge of bankruptcy, didn't get any more money to do so.
"It is a courageous package for Greece, but the market is moving beyond the solvency crisis in specific countries to looking at the potential threat to the euro area as a whole," said Silvio Peruzzo, European economist at the Royal Bank of Scotland in London. "The elements needed to fight a systemic crisis were not delivered."
European stocks rallied Friday on the news of the debt deal, with banks enjoying some of the biggest gains. The Stoxx Europe 600 index rose 0.6%, for its third consecutive gain.
In the deal, Europe's leaders went further than they were accustomed to. German Chancellor Angela Merkel, who once insisted that aid be provided to troubled countries only on punitive terms as a last resort, opened up to pre-emptive lending at charitable rates. And the ensemble of euro-zone countries reluctantly accepted that Greece faced a solvency problem: It simply could not pay back all of its debts.
Phone hacking: US to issue subpoenas into News Corp investigations
Sending out subpoenas to News Corp executives would represent a dramatic intensification of Mr Murdoch's legal woes. According to the Wall Street Journal, senior Justice Department officials had yet to sign off on the move.
News Corp has been trying to limit its legal difficulties to News International in Britain while at the same time preparing for aggressive probes in the US following calls from Democratic politicians for investigations.
The Securities and Exchange Commission and the Justice Department are believed to be beginning investigations while the FBI has said it is looking into a report in the "Daily Mirror" that News Corp journalists sought to hack into the voicemails of victims of the September 11th terrorist attacks of 2001.
A person close to News Corp was quoted by the Wall Street Journal, which is owned by News Corp, as describing the preparation of subpoenas is "a fishing expedition with no evidence to support it".
Jack Horner, a News Corp spokesman, declined to comment to the Daily Telegraph. A spokeswoman had earlier told the "Wall Street Journal": "We have not seen any evidence to suggest there was any hacking of 9/11 victim's phones, nor has anybody corroborated what are clearly very serious allegations.
"The story arose when an unidentified person speculated to the Daily Mirror about whether it happened. That paper printed the anonymous speculation, which has since mushroomed in the broader media with no substantiation."
News Corp has instructed a formidable American legal team in anticipation of an investigation by the Justice Department into whether the alleged bribes paid to British police violated the Foreign Corrupt Practices Act (FCPA).
News Corp has been trying to limit its legal difficulties to News International in Britain while at the same time preparing for aggressive probes in the US following calls from Democratic politicians for investigations.
The Securities and Exchange Commission and the Justice Department are believed to be beginning investigations while the FBI has said it is looking into a report in the "Daily Mirror" that News Corp journalists sought to hack into the voicemails of victims of the September 11th terrorist attacks of 2001.
A person close to News Corp was quoted by the Wall Street Journal, which is owned by News Corp, as describing the preparation of subpoenas is "a fishing expedition with no evidence to support it".
Jack Horner, a News Corp spokesman, declined to comment to the Daily Telegraph. A spokeswoman had earlier told the "Wall Street Journal": "We have not seen any evidence to suggest there was any hacking of 9/11 victim's phones, nor has anybody corroborated what are clearly very serious allegations.
"The story arose when an unidentified person speculated to the Daily Mirror about whether it happened. That paper printed the anonymous speculation, which has since mushroomed in the broader media with no substantiation."
News Corp has instructed a formidable American legal team in anticipation of an investigation by the Justice Department into whether the alleged bribes paid to British police violated the Foreign Corrupt Practices Act (FCPA).
Fitch calls default, Greece pledges no let-up on debt
Reuters) - Fitch ratings agency declared Greece would be in temporary default as the result of a second bailout, which Athens said had bought it breathing space.
But the agency pledged to give Greece a higher, "low speculative grade" after its bonds had been exchanged and said Athens now had some hope of tackling its debt mountain, which most economists still expect to force a deeper restructuring in the future.
An emergency summit of leaders of the 17-nation currency area agreed a second rescue package on Thursday with an extra 109 billion euros ($157 billion) of government money, plus a contribution by private sector bondholders estimated to total as much as 50 billion euros by mid-2014.
Under the bailout of Greece, which supplements a 110 billion euro rescue plan by the European Union and the International Monetary Fund in May last year, banks and insurers will voluntarily swap their Greek bonds for longer maturities at lower rates.
"Fitch considers the nature of private sector involvement... to constitute a restricted default event," said David Riley, Head of Sovereign Ratings at Fitch.
"However, the reduction in interest rates and extension of maturities potentially offers Greece a window of opportunity to regain solvency, despite the formidable challenges that it faces," he said.
The summit agreed the region's rescue fund, the European Financial Stability Facility, will be allowed to buy bonds in the secondary market if the European Central Bank deems that necessary to fight the crisis.
It can also for the first time give states precautionary credit lines before they are shut out of credit markets, and lend governments money to recapitalize banks, both moves which Germany blocked earlier this year.
German central bank chief Jens Weidmann was openly critical of the package, saying it shifted risks onto taxpayers in countries with stronger finances and weakened incentives for governments to keep their finances under control.
"This weakens the foundation for a currency union based on fiscal self-responsibility," said Weidmann, a European Central Bank policymaker, although he conceded the deal could help ease financial market tensions.
As part of the package, the euro zone leaders also made detailed provisions for limiting the damage of a temporary default -- the first in western Europe for more than 40 years.
"There is a great breath of relief for the Greek economy and this will gradually pass on to the real economy," Greek Finance Minister Evangelos Venizelos told reporters. "But by no means does this mean we can relax our efforts."
Riley told Reuters Greece may languish in default for only a few days and would likely get re-rated at single B or CCC.
Among other steps, the leaders agreed to ease terms on bailout loans to Greece, Ireland and Portugal; maturities will be extended to 15 years from 7.5 and interest cut to around 3.5 percent from 4.5-5.8 percent now.
Doubts remain about whether the plan went far enough to assure not only Greece's debt sustainability but that of Ireland, Portugal and other heavily indebted nations.
The package yielded "more than expected but not enough to make us sleep comfortably," Barclays economists said. They were disappointed that European leaders did not agree to expand a euro zone rescue fund.
The wider EFSF role is designed to prevent bigger euro zone states such as Spain and Italy from being shut out of markets because of fears of a weaker country defaulting.
Funds are sufficient so far but the burden could rise substantially. A precautionary credit line for a large country like Italy might total more than 500 billion euros over several years, overwhelming the EFSF's current 440 billion euros.
German Chancellor Angela Merkel said all euro zone debtors had to act decisively to repair their finances.
"Italy's austerity program was absolutely good. But it will be a process and demands further steps in the future," she told a news conference.
But the agency pledged to give Greece a higher, "low speculative grade" after its bonds had been exchanged and said Athens now had some hope of tackling its debt mountain, which most economists still expect to force a deeper restructuring in the future.An emergency summit of leaders of the 17-nation currency area agreed a second rescue package on Thursday with an extra 109 billion euros ($157 billion) of government money, plus a contribution by private sector bondholders estimated to total as much as 50 billion euros by mid-2014.
Under the bailout of Greece, which supplements a 110 billion euro rescue plan by the European Union and the International Monetary Fund in May last year, banks and insurers will voluntarily swap their Greek bonds for longer maturities at lower rates.
"Fitch considers the nature of private sector involvement... to constitute a restricted default event," said David Riley, Head of Sovereign Ratings at Fitch.
"However, the reduction in interest rates and extension of maturities potentially offers Greece a window of opportunity to regain solvency, despite the formidable challenges that it faces," he said.
The summit agreed the region's rescue fund, the European Financial Stability Facility, will be allowed to buy bonds in the secondary market if the European Central Bank deems that necessary to fight the crisis.
It can also for the first time give states precautionary credit lines before they are shut out of credit markets, and lend governments money to recapitalize banks, both moves which Germany blocked earlier this year.
German central bank chief Jens Weidmann was openly critical of the package, saying it shifted risks onto taxpayers in countries with stronger finances and weakened incentives for governments to keep their finances under control.
"This weakens the foundation for a currency union based on fiscal self-responsibility," said Weidmann, a European Central Bank policymaker, although he conceded the deal could help ease financial market tensions.
As part of the package, the euro zone leaders also made detailed provisions for limiting the damage of a temporary default -- the first in western Europe for more than 40 years.
"There is a great breath of relief for the Greek economy and this will gradually pass on to the real economy," Greek Finance Minister Evangelos Venizelos told reporters. "But by no means does this mean we can relax our efforts."
Riley told Reuters Greece may languish in default for only a few days and would likely get re-rated at single B or CCC.
Among other steps, the leaders agreed to ease terms on bailout loans to Greece, Ireland and Portugal; maturities will be extended to 15 years from 7.5 and interest cut to around 3.5 percent from 4.5-5.8 percent now.
Doubts remain about whether the plan went far enough to assure not only Greece's debt sustainability but that of Ireland, Portugal and other heavily indebted nations.
The package yielded "more than expected but not enough to make us sleep comfortably," Barclays economists said. They were disappointed that European leaders did not agree to expand a euro zone rescue fund.
The wider EFSF role is designed to prevent bigger euro zone states such as Spain and Italy from being shut out of markets because of fears of a weaker country defaulting.
Funds are sufficient so far but the burden could rise substantially. A precautionary credit line for a large country like Italy might total more than 500 billion euros over several years, overwhelming the EFSF's current 440 billion euros.
German Chancellor Angela Merkel said all euro zone debtors had to act decisively to repair their finances.
"Italy's austerity program was absolutely good. But it will be a process and demands further steps in the future," she told a news conference.
Somali militants block foreign aid from famine-hit south
Islamist guerrillas who control swaths of Somalia are banning food aid from foreigners – a posture that observers predict might cost millions of lives.
“This is yet another heinous crime – starving people to death in the name of religion,” Omar Jamal, a New York-based official with Somalia’s vestigial government, said in an interview.
Somalia’s al-Shabab militants, already globally notorious for suicide bombings and sharia courts that kill and maim alleged heretics, may well now be set to facilitate famine on an epic scale.
Al-Shabab has gained ground by targeting Somalia’s Transitional Federal Government, the largely powerless local authority whose ministers face widespread intimidation and possible death if they remain in the country.
This week, al-Shabab militants kidnapped a newly appointed female cabinet minister who they let go only after extracting promises she no longer work for the TFG. Last month, the country’s interior minister was killed in a suicide bombing by a female who was reportedly his niece.
In a country beset by two decades of anarchy and warlordism, these al-Qaeda-linked fighters continue to make gains as a relatively cohesive fighting force.
A spokesman for al-Shabab, which controls the bulk of Somalia’s south, recently told reporters its territories remained off-limits to groups such as the United Nations. This statement reversed a pledge to open the lands up for famine relief, a promise that had made the international aid organizations cautiously optimistic that widespread famine might be averted.
“We are not guaranteeing safety for any agency that was previously banned from working in areas under our control,” Sheikh Ali Mohamud Rage of al-Shabab told the Daily Telegraph. “We shall also expel any agency that causes problems for Muslim society.”
He said al-Shabab leaders were “mistranslated” when they were quoted saying that they would let in foreign agencies.
Somali has 3.7 million people who are starving because of the drought, according to the UN. Because most live in the south, the UN says its food aid is reaching only about a third of those who need it. The UN World Food Program hasn’t been present in south Somalia since January, 2010.
“We have conflicting messages. We thought we were being asked to come in and resume our operations,” Julie Marshall, spokeswoman for the World Food Program, said in an interview. “We are appealing to the people that hold the areas to allow us to come in.”
The famine occurs as Somalia’s TFG, which controls hardly any territory in Somalia, is besieged by al-Shabab fighters.
Mr. Jamal, the TFG’s first secretary to the United Nations, suggested the international community should consider air dropping food onto the ground and snatching up al-Shabab leaders on war-crimes charges. He further suggested that because of the famine the TFG, a largely discredited authority lately criticized for using child soldiers, should be better armed to fight al-Shabab militants.
Very few aid agencies can work throughout Somalia, meaning the bulk of the international aid is being routed to the north and to areas of the capital, Mogadishu. Some aid organizations are able to get to the south through local intermediaries. Others hope to exploit fissures that can exist within al-Shabab leadership to get food into the south.
Yet this is not nearly enough to meet the huge and growing need. Hundreds of thousands of starving Somalis have been trying to flee to adjacent countries on long marches. Some perish during these long journeys, others survive only to discover that borderland refugee camps are overflowing.
Somalis in the West fear the situation is growing more bleak daily.
“This is yet another heinous crime – starving people to death in the name of religion,” Omar Jamal, a New York-based official with Somalia’s vestigial government, said in an interview.Somalia’s al-Shabab militants, already globally notorious for suicide bombings and sharia courts that kill and maim alleged heretics, may well now be set to facilitate famine on an epic scale.
Al-Shabab has gained ground by targeting Somalia’s Transitional Federal Government, the largely powerless local authority whose ministers face widespread intimidation and possible death if they remain in the country.
This week, al-Shabab militants kidnapped a newly appointed female cabinet minister who they let go only after extracting promises she no longer work for the TFG. Last month, the country’s interior minister was killed in a suicide bombing by a female who was reportedly his niece.
In a country beset by two decades of anarchy and warlordism, these al-Qaeda-linked fighters continue to make gains as a relatively cohesive fighting force.
A spokesman for al-Shabab, which controls the bulk of Somalia’s south, recently told reporters its territories remained off-limits to groups such as the United Nations. This statement reversed a pledge to open the lands up for famine relief, a promise that had made the international aid organizations cautiously optimistic that widespread famine might be averted.
“We are not guaranteeing safety for any agency that was previously banned from working in areas under our control,” Sheikh Ali Mohamud Rage of al-Shabab told the Daily Telegraph. “We shall also expel any agency that causes problems for Muslim society.”
He said al-Shabab leaders were “mistranslated” when they were quoted saying that they would let in foreign agencies.
Somali has 3.7 million people who are starving because of the drought, according to the UN. Because most live in the south, the UN says its food aid is reaching only about a third of those who need it. The UN World Food Program hasn’t been present in south Somalia since January, 2010.
“We have conflicting messages. We thought we were being asked to come in and resume our operations,” Julie Marshall, spokeswoman for the World Food Program, said in an interview. “We are appealing to the people that hold the areas to allow us to come in.”
The famine occurs as Somalia’s TFG, which controls hardly any territory in Somalia, is besieged by al-Shabab fighters.
Mr. Jamal, the TFG’s first secretary to the United Nations, suggested the international community should consider air dropping food onto the ground and snatching up al-Shabab leaders on war-crimes charges. He further suggested that because of the famine the TFG, a largely discredited authority lately criticized for using child soldiers, should be better armed to fight al-Shabab militants.
Very few aid agencies can work throughout Somalia, meaning the bulk of the international aid is being routed to the north and to areas of the capital, Mogadishu. Some aid organizations are able to get to the south through local intermediaries. Others hope to exploit fissures that can exist within al-Shabab leadership to get food into the south.
Yet this is not nearly enough to meet the huge and growing need. Hundreds of thousands of starving Somalis have been trying to flee to adjacent countries on long marches. Some perish during these long journeys, others survive only to discover that borderland refugee camps are overflowing.
Somalis in the West fear the situation is growing more bleak daily.
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