‘I don’t know what I saw,’ videographer says of fireball

Video captured in Austin, Texas, shows a meteor-like object in the sky Sunday morning.
Just like some U.S. officials looking into the mystery, the man who captured video of an apparent fireball plunging from the sky over Texas on Sunday is perplexed about what it was.

“I don’t know what I saw in the sky. It was something burning and falling really fast,” Eddie Garcia, a videographer for News 8 Austin, told CNN Monday. “I’m looking in the viewfinder and I see, just, something flying through the sky. And it kind of looks like it could be dust, it could be something, and then I look up and, no, it was something burning in the sky,” he said. “And you know, this is something that you see at night clearly during a meteor shower or something like that, but you don’t see something like that during the day.” Authorities in Texas said there were reports of sonic booms in the area Sunday as well. Watch video of meteor-like fireball » Early speculation was that it might have been debris from two satellites — one American, one Russian — that rammed into each other in space a week ago. But the U.S. Strategic Command, which tracks satellite debris, said it was not. “There is no correlation between those reports and any of that debris from the collision,” command spokeswoman Maj. Regina Winchester told CNN Monday. So what was it “I don’t know,” she responded. “It’s possible it was some kind of natural phenomenon, maybe a meteor.” Meteor fireballs bright enough to be seen in the daytime are rare but not unheard of. Two of the most recent fell in October in the Alice Springs region of Australia and last June just west of Salt Lake City, Utah.

Don’t Miss
Texans report fireball in sky, sonic booms

Russian, U.S. satellites collide in space

The one over Australia was unique because the asteroid that caused it was discovered and tracked before it reached Earth’s atmosphere, according to the Sydney Observatory’s Web site. It says the asteroid was about 6.5 feet wide. A sonic boom also was heard in connection with that event, the Australian observatory says. On Friday, the National Weather Service reported that its office in Jackson, Kentucky, had received calls about “possible explosions” or “earthquakes” in that area. “The Federal Aviation Administration has reported to local law enforcement that these events are being caused by falling satellite debris,” the service said Friday. “These pieces of debris have been causing sonic booms, resulting in the vibrations being felt by some residents, as well as flashes of light across the sky. The cloud of debris is likely the result of the recent in-orbit collision of two satellites on Tuesday February 10, when Kosmos 2251 crashed into Iridium 33.” CNN’s call Monday to NASA to get its take on the fireball over Texas was not immediately returned. Garcia said he had been told NASA may have called him. The FAA had asked pilots Saturday to keep an eye out for “falling space debris,” warning that “a potential hazard may occur due to re-entry of satellite debris into the Earth’s atmosphere.” FAA spokesman Roland Herwig said Sunday there had been no reports of ground strikes or interference with aircraft in flight. He said the FAA had received no reports from pilots in the air of any sightings, but had gotten “numerous” calls from people on the ground in Texas, from Dallas south to Austin. As of Monday morning, Herwig said his agency had no information about what the fireball was. iReport.com: Did you see the fireball Send photos, video He also said the FAA had rescinded its warning to pilots to look out for space debris. Garcia, the videographer, was out covering a marathon race Sunday morning when he caught a glimpse of the blaze. In the video, it appear as a meteor-like white fireball blazing across the clear sky.

“I remember shooting it and wondering what I shot, and then looking around and seeing if anyone saw it with me, and everyone was just focused on that marathon that we were shooting at the time,” he told CNN Newsroom. Whatever it was, Garcia said he’s “just grateful I got a shot of it. And, hopefully, that’ll help” people figure out what it was.

Hamas says it may consider Israeli soldier’s release

Gilad Shalit, who was seized by Palestinians, is shown in a family photo.
The Palestinian militant group Hamas said Monday that it is willing to consider the release of an Israeli soldier who was seized in a cross-border raid more than two years ago.

But the Hamas leadership of Gaza will not release Gilad Shalit as part of a broader cease-fire agreement with Israel, according to a statement released Monday from Hamas political official Raafat Naseef. Hamas is a fundamentalist Palestinian Islamic group whose military wing has attacked Israel. The United States and Israel consider it a terrorist organization, but it also operates a social services network. Hamas is in control of Gaza after winning parliamentary elections in 2006, and in 2007, a campaign of violence forced the Fatah movement led by Palestinian Authority President Mahmoud Abbas out of Gaza. The matter of Shalit was one of three issues that Hamas sought to “clarify” its commitment to in the statement. It said the clarifications were “in light of recent developments which are concurrent with the Cairo dialogues” — a reference to Egypt’s attempts to broker a larger, more detailed cease-fire between Israel and the Hamas leadership of Gaza.

Don’t Miss
Israel denies reports of Hamas negotiations

Olmert blasts ‘damaging’ reports on kidnapped soldier

Shalit was 19 when he was captured June 25, 2006, by Palestinian militants from Gaza, including those from Hamas. The militants tunneled into Israel and attacked an Israeli army outpost near the Gaza-Israel-Egypt border, killing two other soldiers in the assault. Israel immediately launched a military incursion into Gaza to rescue Shalit, but failed. Outgoing Israeli Prime Minister Ehud Olmert has been under pressure to secure Shalit’s release as part of a broader cease-fire deal with Hamas. Israel temporarily halted its recent three-week military operation in Gaza and declared a unilateral cease-fire that did not include Shalit’s release as a condition. Hamas later declared its own unilateral cease-fire. Earlier this month, Olmert said recent media reports about the negotiations to secure the Shalit’s release were “exaggerated and damaging.” Last week, Israel held elections for a new government which the centrist Kadima with just one seat more than the right-wing Likud both parties are now seeking to form a ruling coalition. The strong showing of other right-wing parties — including Yisrael Beytenu and the Orthodox Shas movement — means Likud has more natural allies. Liked leader Benjamin Netanyahu said Monday: “We have a government in our hands, but we want a broader one.” He added that he will negotiate with other parties, including Kadima, “to form a broad national unity government.” “With God’s help, I shall head the coming government,” he said. “I am sure that I can manage to put together a good, broad-based and stable government that will be able to deal with the security crisis and the economic crisis.” Netanyahu — who served as prime minister from 1996 to 1999 — has supported the expansion of Israeli settlements on the West Bank and has opposed making further territorial concessions in hope of ending the decades-old Israeli-Palestinian conflict.

N. Korea preps for satellite launch amid ‘space development’ claim

Secretary of State Hillary Clinton speaks Monday at Haneda Airport after arriving in Tokyo, Japan.
Denying recent intelligence suggesting it is preparing to test a long-range missile, North Korea signaled Monday it is gearing up to launch a satellite, according to South Korea’s Yonhap news agency.

A senior U.S. official told CNN last week that an American spy satellite had snapped an image of preparations at a North Korean site previously used to launch Taepodong-2 missiles. The photograph shows North Korea assembling telemetry equipment involving sophisticated electronics used to monitor missile launches, the official said, adding there was no direct evidence that a missile was being moved to the launch pad. North Korea’s official Korean Central News Agency (KCNA) said Monday it will go ahead with its “space development” program, Yonhap said, adding that the report is a possible message to Washington ahead of Secretary of State Hillary Clinton’s visit to Seoul, South Korea, this week. Watch Hillary Clinton board her flight to Asia » “One will come to know later what will be launched in the DPRK [Democratic People’s Republic of Korea],” KCNA said, according to Yonhap, but it denied a missile test is planned. “Space development is the independent right of the DPRK and the requirement of the developing reality,” KCNA said, calling outside reports a “vicious trick” aimed at stopping the nation’s sovereign activity, Yonhap reported. The reclusive North Korean regime made a similar claim after launching a rocket in 1998, saying it succeeded in putting a satellite into orbit, Yonhap said.

Don’t Miss
Clinton visits Asia to send key message

Clinton heads to Asia on first state trip

Hillary Clinton warns, woos North Korea

U.S. intelligence officials initially said after the August 1998 test that North Korea launched a two-stage Taepodong-1 missile, but later said it was a three-stage missile, and the third stage broke up in an unsuccessful attempt to put a small satellite into orbit. South Korea rejected the North Korean claim that it has a right to space development, with Foreign Minister Yu Myung-hwan saying at a parliamentary session, “Whether it is a missile or a satellite, [a launch] would constitute a violation of the U.N. Security Council’s Resolution 1718,” Yonhap reported Monday. That resolution, adopted in October 2006, imposed sanctions against North Korea — and demanded it stop nuclear activity and missile testing — after it launched a Taepodong-2 long-range ballistic missile. The missile failed 40 seconds after launch, but the Taepodong-2 is believed to have an intended range of about 2,500 miles (about 4,025 kilometers), making it capable of striking Alaska. Asked about the matter last week, U.S. Defense Secretary Robert Gates would only say, “Well, since the first time that they launched the missile it flew for a few minutes before crashing, the range of the Taepodong-2 remains to be seen. So far, it’s very short. I’m not going to get into intelligence reports, but it would be nice if North Korea would focus on getting positive messages across … to its negotiating partners about verification and moving forward with the denuclearization.” North Korea has been involved on and off in what is known as the six-party talks with the United States, China, Russia, South Korea and Japan. Clinton left for Asia on Sunday on her first overseas trip as secretary of state, and is scheduled to travel to Japan, China, South Korea and Indonesia to discuss a range of issues, including mutual economic recovery, trade, the prevention of nuclear weapons proliferation and reversing global warning. Her trip represents a departure from a diplomatic tradition under which the first overseas trip by the secretary of state of a new administration is to Europe.

Speaking at the New York-based Asia Society before her departure, Clinton called North Korea’s nuclear program “the most acute challenge to stability in northeast Asia.” She said the Obama administration is prepared to seek a permanent, stable peace with Pyongyang so long as its regime pursues disarmament and does not engage in aggression against South Korea.

‘Everybody loved being around her’

Madeline Loftus, 24, was killed aboard Flight 3407. She was returning to Buffalo for a reunion hockey game.
The women hockey players gathered at the center of the rink and prayed. Tears wet their cheeks and most held hands. Then they lit 10 candles, the number on the jersey of the missing teammate, the one with the huge smile and even bigger heart, who died in last week’s plane crash.

Madeline Loftus, known as Maddy, was one of 49 people to die aboard Continental Connection Flight 3407 last Thursday. She was returning to Buffalo State College to play in a reunion hockey game on Saturday, to meet up with her old classmates to play the game she loved so dearly. “She popped into my head every time I got back to the bench,” said former teammate Emma Wadsworth. Breaking down in tears, she said the game was filled with sadness because “Maddy wasn’t here.” She described Loftus as an “awesome teammate, a beautiful person always smiling, and always upbeat, and ready to cheer you up if you were having a bad day.” Watch a promising life cut short » “She was just amazing,” Wadsworth said. Her teammates said they decided to play the game out, because Loftus would’ve wanted them to play on. Loftus’ No. 10 jersey hung from the bench near her friends and former players. “It’s a really hard time for her teammates, for her friends, for her family,” said teammate Janelle Junior. Loftus, 24, of Parsippany, New Jersey, played two seasons at Buffalo State from 2002 to 2004 before transferring to St. Mary’s University in Minnesota after her sophomore year. At St. Mary’s, she was a marketing major who starred on the hockey team from 2004 to 2006. While there, Loftus helped form the Cardinal Athletic Council, a student-athlete outreach program to help with community service projects. “Madeline was an important part of the university and athletic communities. Our thoughts and prayers now turn to Madeline’s family, friends and teammates as they cope with this sudden loss,” St. Mary’s athletic director Nikki Fennern said in a statement. “Maddy was the first senior to graduate from my program. She will always hold a special place in my heart,” said Terry Mannor, St. Mary’s women’s hockey coach. “Everyone who knew her will remember someone full of life and compassion. She was loved by everyone and will be greatly missed.”

Don’t Miss
Crash victims include rights campaigner, beloved cantor

Witnesses saw, heard plane go down

Would-be passengers feel relief, sadness

List of passengers, crew aboard flight

Officials in Buffalo have said that it may take several days before all the bodies are recovered from the crash site, as investigators work through freezing temperatures and piles of wreckage. See photos of the crash site » About 1,000 people gathered at a church in western New York Monday to remember the crash victims. The community memorialized the 50 victims, with religious leaders from Christian, Jewish, Muslim and Hindu communities offering words of sympathy to the community. “We’ve gathered today because western New York has entered a season of grieving,” said Pastor Karl Eastlack of the Eastern Hills Wesleyan Church. Each speaker emphasized that everyone in the community is connected by the tragedy. One leader said we “gather in our common desire to console one another.” All 49 passengers and crew members aboard the 74-seat turboprop were killed when the plane crashed into a home in Clarence Center, New York, on Thursday night. A 61-year-old man in the house was also killed. While investigators try to piece together the cause of the crash, portraits of those who died aboard the flight have emerged: • Alison Des Forges spent four years in Rwanda documenting the 1994 genocide and had testified about that atrocity and the current situation in central Africa before U.N. and congressional panels. • Beverly Eckert was the widow of Sean Rooney, who died in the World Trade Center in the terrorist attacks of September 11, 2001. After Sean’s death, Eckert co-founded Voices of September 11, an advocacy group for survivors of the attacks and families of those killed. • Gerry Niewood was traveling with jazz guitarist Coleman Mellett for a show with musician Chuck Mangione and the Buffalo Philharmonic at Kleinhans Music Hall. • Co-pilot Rebecca Shaw’s father said she loved to fly and “couldn’t believe she’d get paid” when she took the job. Learn more about the victims On the ice rink in Buffalo Saturday, Loftus’ friends played with a heavy heart. This would have been her first time on the ice with her former Buffalo State teammates since her playing days. Jessica Aykroyd said she had spoken with Loftus right before she left for the airport. “The last thing I have is: Can’t wait to see you,” Aykroyd said. Lindsay Welch said simply, “Her friends and hockey is what she was all about.”

So passionate about hockey, Loftus was the first female to play on the boys’ team in high school. In college, when she wasn’t playing, she worked as a student assistant for the ice rink. “She was a great student, she was a great hockey player and just a great person. Everybody loved being around her,” said rink manager Jim Fowler. Those who knew her in Minnesota agreed. “Her classmates were always eager to work with her on projects,” said Thomas Marpe, dean of St. Mary’s School of Business. “Maddy was enthusiastic about life and especially about women’s hockey.”

Longer lashes courtesy of the FDA?

Mary Johnson, 56, who lost most of her lashes during chemotherapy, was excited to give Latisse a try.
Soft music filled the room as waiters served white wine and hors d’oeuvres. Two dozen well-dressed women chatted in small groups.

But, this was no ordinary cocktail party. The setting was the lobby of the OH2 Medical Spa in Alpharetta, Georgia. The women were on hand to take part in a new beauty treatment hitting the United States: the promise of better looking eyelashes through a prescription drug called Latisse. “It’s the latest, the greatest,” exclaimed the party hostess, Christine Glavine, wife of Major League Baseball pitcher Tom Glavine. She invited a group of friends to meet with local plastic surgeon Dr. Randy Rudderman to get a dose of the new FDA-approved medication. Glavine didn’t have to do much convincing. Tammie Wilson, 43, of Roswell, Georgia, said she was motivated to try the product because “I want to be able to look like I have on makeup when I don’t.” Watch more on the marketing of Latisse » “I have blond hair and blond lashes. I have to put on three coats of mascara,” complained her friend Jennifer Altmeyer, also 43 and from Roswell.

Don’t Miss
Health Minute Archive

Altmeyer, who is hoping to be able to skip mascara altogether, was the first to line up at Rudderman’s exam room. The drug is available only through a doctor; it is approved to treat hair loss on the lash line. The product maker, Allergan, says Latisse will thicken, darken and lengthen inadequate or skimpy eyelashes in as little as eight weeks. But, here’s the catch: Doctors report it takes up to 16 weeks to see maximum eyelash growth. If you discontinue Latisse, your lashes will go back to their original state in a few months. Visit CNNhealth.com, your connection for better living Oh, and by the way, the drug isn’t cheap. It costs about $120 for a 30-day supply. Latisse was discovered almost by accident, Rudderman said. The product contains a compound that is also found in medication that decreases eye pressure in glaucoma patients. “A significant number of those patients started having a side effect of increased growth of eyelashes,” said Rudderman. Women like Altmeyer are clamoring to give Latisse a try. Rudderman’s assistant first removed Altmeyer’s eye makeup and then applied a drop of Latisse to a small applicator. The wand was then swiped across her top lashes. Rudderman advised Altmeyer to apply the drug once a day before she goes to bed and not to apply Latisse to lower lashes because they come in contact with the medicine on the top lashes during blinks. Rudderman said Latisse comes with several warnings: It is approved only for those over 18 and is not recommended for pregnant women, people with pre-existing eye conditions or those with allergies to the ingredients. Rudderman said some of the most common side effects are itchy and red eyes and hyper-pigmentation, or darkening along the eyelash base. Dr. Pradeep Sinha, a plastic surgeon in Atlanta, Georgia, started working with the glaucoma version of the medication two years ago on an off-label — or trial — basis, before it was approved specifically for eyelash thickening. While he said his patients were happy with the results, Sinha noted another unpleasant side effect if the user is not careful while wielding the applicator. “One patient was messy and grew small, fuzzy hair on her eyelid,” Sinha said. He instructed the woman to stop using the product, and the unwanted hair eventually fell out.

Health Library
MayoCLinic.com: Hairloss

Some women, like Mary Johnson, a 56-year-old breast cancer survivor, are willing to take their chances. After undergoing chemotherapy last year she lost a lot of eyelashes. “That was really devastating for me,” she said. She said she could put a wig on her head, but for the rest of her face she had to “fake it” by drawing in a lash line and eyebrows with cosmetics. Johnson tried some over-the-counter lash products, but she said none of them worked.

She was smiling as she received her first dose of Latisse from Rudderman. “Until you have lost your eyelashes, you don’t really realize how hard it is to put eye makeup on,” she said. “When you lose your eyelashes you just don’t look the same.”

Armstrong’s bike stolen after race

Lance Armstrong's bike was stolen after he competed in the first day of the Amgen Tour of California.
A one-of-a-kind bicycle belonging to U.S. cycling legend Lance Armstrong was stolen from a team truck in California just hours after he rode it Saturday on the first day of a nine-day race.

Cancer survivor and seven-time Tour de France champion Armstrong is racing in the Amgen Tour of California this week as he attempts another comeback after retiring from the sport in 2005. Armstrong’s first comeback came in 1998, two years after he was diagnosed with advanced testicular cancer that had spread to his lungs and brain. Doctors gave him a less than 50 percent chance of survival. Armstrong announced the bike theft on his Twitter account Sunday morning and posted a photograph. “There is only one like it in the world therefore hard to pawn it off. Reward being offered,” he wrote. The bicycle that was stolen is not the one Armstrong rides every day during the race. The stolen bike is used only for time trials, a race in which cyclists ride individually at staggered intervals over a set distance and try to get the best time. The thieves took four bicycles from a truck Armstrong’s Astana team had parked behind a hotel in Sacramento. The other three bicycles belonged to team members Janez Brajkovic, Steve Morabito and Yaroslav Popovych, Astana said. Armstrong, 37, won the Tour de France, considered the premier bicycle race in the world, a record seven times from 1999-2005. The 750-mile Amgen Tour of California ends Sunday. It is the second major race in which Armstrong has participated since announcing his comeback in September. He raced last month in the Tour Down Under in Australia, finishing 29th. Armstrong said he is aiming for another Tour de France victory this summer and was not expected to contend in the Australian race, which he used to gauge his fitness level after more than three years out of the saddle.

Peanuts on Northwest Airlines prompt protests

Just weeks after Northwest began handing out peanuts as flight snacks, customers have raised allergy concerns.
The return of peanuts to the snack menu at Northwest Airlines this month has prompted a spasm of protests from travelers with allergies.

The change comes four months after Northwest merged with Atlanta-based Delta Air Lines and in the midst of a national salmonella outbreak involving Peanut Corporation of America. Georgia, where the company has a plant, is the top peanut-producing state in the country. Northwest began handing out the goobers as snacks on February 1, as Delta has been doing for years. In Minneapolis, where Northwest is based, news of the change has resulted in a flood of responses on the Web site of the Star Tribune, a local newspaper. “This is a very disappointing development,” wrote one man who responded to the story. “My wife’s allergy is so severe that if someone is sitting next to her and eating peanuts, the odor is enough to trigger an allergic reaction.” “Northwest is really out of touch with its customers and the reality of allergies to peanuts,” wrote another reader. “What’s wrong with pretzels”

Don’t Miss
Eat smart with peanut butter alternatives

Peanut butter makers say their products are safe

The Centers for Disease Control and Prevention says more than 3 million Americans are allergic to peanuts or tree nuts, while nearly 7 million are allergic to seafood. Combined, food allergies cause 30,000 cases of anaphylaxis, 2,000 hospitalizations and 150 deaths annually.

Delta says it will make accommodations for those with peanut allergies, if a request is made. “We’ll create a buffer zone of three rows in front of and three rows behind your seat,” the airline’s Web site says. “We’ll also advise cabin service to board additional nonpeanut snacks, which will allow our flight attendants to serve these snack items to everyone within this area.”

And the Emmy Goes To …

And the Emmy Goes To ...

The members of the Motion Picture Academy are still filling out their ballots, but right now the Anglo-Indian melodrama Slumdog Millionaire is the strong favorite to win the Oscars for Best Picture, Directing and Adapted Screenplay. It has already snagged top prizes from the producers’, directors’, writers’ and actors’ guilds. It’s also earned nearly $80 million at the domestic box office–far more than the combined take of three of its Best Picture rivals, The Reader, Frost/Nixon and Milk. Though set in Mumbai, Slumdog has become a new American idol. The other films may as well sign up for Biggest Losers Ever.

All five finalists are fine films. But The Reader, Frost/Nixon and Milk aren’t so much movies as TV movies: sensitive explorations of major political themes, little pictures on big subjects. It’s the stuff more likely to show up on HBO than at the AMC multiplex. Why does the Academy keep citing these little movies over the big ones, whose scope and excitement can’t be duplicated on the small screen One reason is that Academy members are a tad older than the target audience for action-adventures, however elegantly crafted. It’s not that Hollywood folk don’t get these films; after all, they made ’em. It’s that they don’t think the grand-scale technical skill lavished on a Dark Knight or an Iron Man is as honorable as the spectacle of two guys talking–as long as one of them is Richard Nixon. Really, any old-timer will do. Except for Slumdog, all the Best Picture finalists are set wholly in the past. Aaah, Harvey Milk. Oooo, Nazis! Members feel simpatico to films that remind them of when they were actively engaged in politics–and in moviegoing. Moviegoing is exactly what separates the audience from the Academy. You, dear ordinary cinephile, go to a theater and sit in a big room with a big screen on which, you hope, big things will happen. Those things are called movies. But the Academy balloters, by and large, aren’t true moviegoers; the movies come to them, on DVD screeners. When the members, many of whom are on the set for 12 or 14 hours a day, do their Oscar homework, they want a retreat from the pyrotechnics they’ve been creating. They want dramas that are important yet intimate, stressing method and message. Those things are called TV shows. That’s why, in the films and performances that are honored, the Oscars have become more like the Emmys. And why the Academy Awards, which used to be the highest-rated entertainment program of the year, could hit a new low with its Feb. 22 broadcast. Now, if Slumdog were battling The Dark Knight for Best Picture–sort of Dharma vs. Goliath–that would be a can’t-miss fight. And yet in the 2009 Academy slog, as in the best old romances, there is a redemption angle. If Slumdog wins, the Hollywood establishment will have rewarded a foreign film, partly in Hindi, with no familiar faces, just a snazzy mixture of art and heart–and a movie that the audience, not the Academy, made into a hit. Isn’t that worth tuning in for One other bonus. In India, the TV ratings should be huge. CRITIC’S PICKS: Here’s your TIME reviewer’s annotated Oscar ballot. But these predictions come with a caveat: Don’t bet your bailout bundle on “expert” opinions. You’d do just as well with a Ouija board 2009 Oscar Ballot PDF See the top 10 movie performances of 2008.

France ‘responsible’ for Holocaust deaths

Jews and foreigners are rounded up in Paris in May 1941.
France bears responsibility for deporting Jews to their deaths in concentration camps during World War II, the country’s highest court ruled Monday.

But, the Council of State said, “measures taken since the end of the Second World War have compensated for the damage.” Northern France was directly occupied by Nazi Germany during World War II while the south of the country was ruled by the Vichy government that collaborated with Adolf Hitler. France’s role in the deportation of its Jews was a taboo subject for decades after the war. The trial of Maurice Papon, a civil servant in the collaborationist Vichy government, for deporting Jews, forced the country to confront its role in the Holocaust. Papon was convicted in 1998 by a French court for complicity in crimes against humanity for his role in the deportation of 1,590 Jews from the city of Bordeaux. Most of the deportees later perished at the concentration camp at Auschwitz in modern day Poland. Papon died in February 2007, aged 96, after serving part of his term and then being freed on health grounds. There were approximately 350,000 Jews in France at the time of the country’s defeat by Germany in 1940. At least half of those were refugees who had already fled Germany or countries already under Nazi occupation, according to the Web site of the United States Holocaust Memorial Museum. At least 77,000 Jews were deported to their deaths from French transit camps between 1942 and the end of German occupation in December 1944. Of these, around a third were French citizens and more than 8,000 were children under 13.

The Case for Nationalizing the Entire Economy

The Case for Nationalizing the Entire Economy

The advocates for nationalizing U.S. banks have been out in force recently. Senator Lindsay Graham, who almost certainly does not have a PhD in economics or finance told ABC News that banks were in such deep trouble that government ownership of the institutions may be the only way to save the financial system. Economist Nouriel Roubini, who probably has several advanced degrees, wrote in The Washington Post that the Swedes set a precedent for bank nationalization nearly 20 years ago. The first counter to his argument is that it is dark over 20 hours a day in Sweden during the winter which causes a level of depression among the population that may undermine their judgment and views of how dire any economic situation is. If this theory is true, banks in Panama will never face being taken over by the government.

Disagreeing with Roubini has not been rewarding. He predicted the current economic collapse with precision long before most economists. His forecasts for the next year or so seem reasonable and are widely viewed as a good road map for what is likely to be ahead for GDP and employment. However, he may not be right with his estimate that total banks write-offs due to toxic financial instruments sold by U.S. will be about $3.3 trillion worldwide. That is well above projections by most economists and the IMF.
Nationalization of U.S. banks would cause hundreds of billions of dollars of losses to the common and preferred stockholders in the firms. This, in turn, could cause the failure of some investment funds that hold those shares.

Nationalization would obviously make taxpayers responsible for the losses these banks may experience in the future. But, the taxpayer is already likely to face that fate. The federal government is in the process of guaranteeing bad paper at the banks and may end up buying many of these toxic assets to keep losses at the firms at a level where they do not have to raise even more capital.

Nationalization seems tempting because it seems simple. The U.S. owns the banks. They continue to do business as usual, but their balance sheets become, in essence, the balance sheet of the Treasury. In theory, as time passes and the banks become profitable, those profits go back to the government and pass though to citizens in the form of lower taxes. The banks may also end up being sold back into the private enterprise system bringing the government an even better return.

Bank ownership becomes more complex when a firm owned by the government does something materially different from what its competitors in the private sector do. If bank owned by the government offers business loans at 3% interest, what does a foreign-based public bank like DeutscheBank do to match that A government-owned bank can be driven, at least short-term, by policy and not profits. That puts financial firms in the private sector in peril whenever they try to compete. The relationship between a national U.S. bank and private banks both inside and outside the U.S. causes a series of inequities within the system.

Banks lend money to one another and charge interest in the process. The risk of borrowing from a firm owned by the government should be extremely low. Borrowing from a U.S. regional bank is, on paper, more risky. All inter-bank borrowing would almost certainly move toward taking money from the firms backed by the government balance sheet. Interbank lending among private banks could disappear.

A national bank is almost certain to follow practices which are unsound, which would not make it terribly different from the large firms that helped get the economy into trouble. Bank managements bought toxic assets two or three years ago. A government-controlled bank might offer mortgages at extremely low rates, rates so low that they clearly do not take into account the level of home loan defaults. From a policy standpoint, it may make “sense” to do that to help buttress the housing market. But, to some extent that moves the government’s control of the credit system from nationalizing banking to nationalizing the home lending system. The government could decide to apply the same principles to consumer credit loans and business lending.

It may just be a better idea to nationalize the entire economy and be done with it.

— Douglas A. McIntyre

See pictures of the Top 10 scared traders.
For constant business updates, go to 24/7wallst.com.