Bernanke say economy could shrink
WASHINGTON, April 2 (UPI) -- U.S. Federal Reserve Chairman Ben Bernanke said Wednesday he expected the gross domestic product to stall and possibly shrink this year.
"It now appears likely that real gross domestic product will not grow much, if at all, over the first half of 2008 and could even contract slightly," Bernanke said in testimony before the Senate Banking Committee.
The statement hovers close to an admittance that a recession is possible.
"Concerns about employment and income prospects, together with declining home values and tighter credit conditions, have caused consumer spending to decelerate considerably," Bernanke said.
The chairman said inflation would "moderate" in the next quarters. He also told financial leaders the Fed's recent actions in restoring liquidity to financial markets "appear to have helped stabilize the situation somewhat."
Bernanke made no mention of future reductions in key bank lending rates, which the Fed reduced to 2 1/4 percent in March.
He said the rescue of the "near-failure" of investment bank Bear Stearns was necessary to avoid a "chaotic unwinding," of financial markets.
The demise of the large investment bank "raised difficult questions of public policy," Bernanke said "However, the issues raised here extended well beyond the fate of one company."
Dems point to economy, McCain advisers
WASHINGTON, April 2 (UPI) -- Democrats, pointing to the slumping U.S. economy, are focusing on two economic advisers attached to John McCain's GOP presidential bid, sources said.
Former Sen. Phil Gramm, R-Texas, who guided financial deregulation through Congress, and Carly Fiorina, the former Hewlett-Packard chief executive who oversaw HP's Compaq takeover before being fired, both are known as aggressive capitalists who may be falling from favor as the U.S. economy is mired in a malaise, The Washington Post reported Wednesday.
Economists of all philosophies say such characterizations may be oversimplifying the economic issue, the Post said. However, some McCain advisers wonder whether Gramm and Fiorina should be in such prominent roles and so closely linked to the Arizona senator and presumptive GOP nominee.
"I, for one, have thought about it a lot," one McCain adviser told the Post.
Robert Reich, labor secretary during President Bill Clinton's administration, described the pair's economic philosophy as "dog eat dog capitalism," which works well when the economy is flourishing, but not so well during bleaker times."
"McCain is counting on people having very short memories and not connecting some pretty obvious dots here," said Jared Bernstein, an economist at the Economic Policy Institute.
Watchdogs say data centers lack oversight
WASHINGTON, April 2 (UPI) -- Intelligence centers across the United States, with access to personal information about millions of people, lack public accountability, observers said.
One state-run data center, also known as a fusion center, has access to top-secret systems at the CIA, The Washington Post reported. These intelligence centers were created after the Sept. 11, 2001, terrorist attacks to identify potential threats and improve information-sharing.
A document obtained by the Post lists resources used by the fusion centers. The information resource listings were part of a 2007 survey, officials familiar with the effort told the Post. The survey indicated the fusion centers, similar to most police agencies, subscribe to private information-broker services.
Government watchdog organizations, some police and intelligence officials said they're concerned about the fusion centers not having enough oversight and not being available enough to the public largely because they operate under state rules.
"Fusion centers have grown, really, off the radar screen of public accountability," said Jim Dempsey, vice president for public policy at the Center for Democracy and Technology. "Congress and the state legislatures need to get a handle over what is going on at all these fusion centers."
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U.A.E.-U.S. trade row over dual-use items
WASHINGTON, April 2 (UPI) -- American-made circuit boards sold to the United Arab Emirates ended up in roadside bombs in Iraq, prompting a trade row between the two allies, officials said.
Officials in the Bush administration sparked a standoff with U.A.E. officials over the alleged sale of dual-use technology to Iran, Syria or Pakistan, The New York Times reported Wednesday.
The United Arab Emirates boasts one of the best economies in the world but an export control fight erupted in 2006 when Dubai Ports World lobbied to manage shipyards in the United States, a move lawmakers eventually said threatened national security.
The Bush administration threatened to impose tough export measures as a result but backed down when U.A.E. officials promised to monitor the trade of items U.S. officials claim are dual-use items that could find their way into military technology.
Trade experts and U.A.E. officials say U.S. officials exaggerate the dual-use classification and unduly complicate matters, the Times said, but the discovery of the U.S.-made computer components prompted the U.S. Commerce Department to push for tougher control measures, to which U.A.E. officials reportedly obliged.
"The (United Arab Emirates) has made progress," Mario Mancuso, an export official at the Commerce Department, told the Times. "But more needs to be done."
Israel warns Hezbollah: Don't test us!
JERUSALEM, April 2 (UPI) -- Israel is concerned Syria has transferred chemical weapons to Hezbollah, while Syria has braced for an invasion, analysts said.
Israeli officials decided Wednesday to redistribute biochemical masks on intelligence suggesting Syrian officials might transfer biological or chemical weapons to the military wing of Hezbollah in Lebanon, the Jerusalem intelligence reporting bureau, DEBKAfile said.
The Arabic-language al-Quds al-Arabi newspaper based in London quoted officials in Damascus as claiming the Israeli military is preparing for a large-scale attack on Syria, prompting the call-up of Syrian reservists and various other military preparations, Ynetnews reported Wednesday.
Israeli officials called for nationwide security exercises during April 6-10 and the Israeli defense minister, Ehud Barak, said Tuesday that Hezbollah should not "test us" following reports of a "great deal of activity" along Israel's northern border with Lebanon.
The DEBKAfile report says Damascus fortified the highway from Beirut to Damascus for fear of an Israeli invasion, though the al-Quds piece says Hezbollah decided against escalations over the alleged killing of Imad Mughniyeh, a top Hezbollah security official, for fear of provoking Israel.
John Paul II had 'supernatural qualities'
VATICAN CITY, April 2 (UPI) -- Speculation regarding the sainthood of the Pope John Paul II escalated Wednesday as Pope Benedict XVI attributed the late pontiff with "supernatural qualities."
Eulogizing at a mass commemorating the third anniversary of John Paul's death, Benedict said ''among his many human and supernatural qualities, (John Paul) also had an exceptional spiritual and humanistic sensibility,'' the Italian news agency, ANSA, said.
The head of the Roman Catholic diocese in Rome, Cardinal Camillo Ruini, closed the first steps of the beatification process at a similar mass last year.
Beatification is a phase on the way to full sainthood. Full sainthood requires evidence of a variety of theological qualifications, including evidence of miracles.
A French nun says she recovered from Parkinson's disease when she prayed for John Paul's intercession and claims of miracles attributed to the late pope arrive in Rome every week, Vatican officials said.
Vatican watchers expect a quick sainthood for John Paul II and some speculate the beatification date will be Oct. 16, the 30th anniversary of his election as pope, ANSA said. After that, if a second miracle it attributed to the beatified, that person would be canonized as a saint.
