U.S. government guarantees on securities totaling $419 billion for bank bailouts provide an early test of President Barack Obama’s pledge to be open with taxpayers about what they have at risk in the credit crisis.

Bloomberg News asked the Treasury Department Jan. 26 to disclose what securities it backed over the past two months in a second round of actions to prop up Bank of America Corp. and Citigroup Inc. Department spokeswoman Stephanie Cutter said Jan. 27 she would seek an answer. None had been provided by the close of business yesterday.

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Officials of Barack Obama’s administration have drafted a letter to Iran from the president aimed at unfreezing US-Iranian relations and opening the way for face-to-face talks, the Guardian has learned.

The US state department has been working on drafts of the letter since Obama was elected on 4 November last year. It is in reply to a lengthy letter of congratulations sent by the Iranian president, Mahmoud Ahmadinejad, on 6 November.

Diplomats said Obama’s letter would be a symbolic gesture to mark a change in tone from the hostile one adopted by the Bush administration, which portrayed Iran as part of an “axis of evil”.

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Russia held out an olive branch to President Barack Obama today by suspending plans to deploy missiles in Europe, according to a report in Moscow.

An official from Russia’s General Staff in Moscow told Interfax news that the move had been made because the new United States leadership was reconsidering plans to establish a missile defence shield in eastern Europe.

Deployment of Iskander short-range missiles, which can carry nuclear warheads, was being suspended in Russia’s Baltic exclave of Kaliningrad in response, the unidentified official said.

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President Obama is not going to solve the Israeli-Palestinian conflict, crush the Taliban, end Iran’s nuclear intransigence, get Syria to stop interfering in Lebanon or end the fighting in Iraq overnight — or next week, or possibly ever. Yet his interview Tuesday with the Al Arabiya satellite channel laid a foundation for better U.S. relations with the Arab world than we’ve had in many years.

Obama’s savvy diplomacy started before he even opened his mouth, with his selection of Al Arabiya to air the first official television interview he has granted since taking office. Not only did this signal a new level of involvement in Middle Eastern affairs, but it gave a boost to a Saudi-owned news channel founded in 2003 to present a more balanced view of regional conflicts than was being produced by the more Islamist-leaning Al Jazeera network. The latter has since become more objective in its coverage, possibly because it was losing viewers to Al Arabiya. Now it has even more incentive to play fair: the chance of landing the next Obama exclusive.

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Loath to criticize a president who enjoys stratospheric approval ratings and the good tidings of most Americans, Republicans on the Hill are instead framing their overwhelming opposition to the stimulus bill as a vote against a congressional Democratic leadership that is far less popular than Obama.

“It’s not so much his effort, it’s what the House has done with this bill, what Pelosi has done with this bill,” explained Rep. Kay Granger (R-Texas), a veteran member of the Appropriations Committee.

Rep. Patrick McHenry (R-N.C.), a young conservative firebrand, was more blunt when asked what happened to Obama’s honeymoon: “Ask Pelosi.”

Sen. Kit Bond (R-Mo.), a senior appropriator, said that “several people” registered complaints to Obama that the GOP had not been consulted in the development of the bills now being marked up in the Finance and Appropriations committees.

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In one of his first interviews since taking office, President Barack Obama struck a conciliatory tone toward the Islamic world, saying he wanted to persuade Muslims that “the Americans are not your enemy” and adding that “the moment is ripe for both sides” to negotiate in the Middle East.

His remarks, recorded in Washington on Monday night, signaled a shift ”” in style and manner at least ”” from the Bush administration, offering a dialogue with Iran and what he depicted as a new readiness to listen rather than dictate.

Mr. Obama spoke as his special Middle East envoy, George J. Mitchell, arrived in Egypt to begin an eight-day tour that will include Israel, Jordan, Saudi Arabia, France and Britain. Mr. Mitchell planned to meet President Hosni Mubarak.

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Timothy F. Geithner was confirmed Monday night by the Senate as the secretary of the Treasury after a sizable bipartisan majority concluded that his experience in government and finance outweighed concerns about recent disclosures that he had been delinquent in paying about $34,000 in taxes.

The vote was 60 to 34. The tax controversy delayed Mr. Geithner’s confirmation and kept him from taking office just after President Obama was inaugurated last Tuesday, as initially hoped. In a desultory two-hour debate, opponents in both parties cited the tax issue as their reason to vote against him, though a couple of populist senators objected to Mr. Geithner’s leading role in the government bailouts of financial institutions over the last few months.

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President Obama has asked the Environmental Protection Agency to look into allowing California to increase fuel efficiency standards for cars.

Is this request part of a patchwork of measures that will create a cleaner environment and green jobs?

Or – as its critics contend – will it help to create a patchwork of fuel standards that will end up costing even more jobs in America’s struggling car industry?

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Some of Mr. Obama’s advisers have asked who the government would get to run the banks. Many of the most experienced executives are tainted by the decisions they made during the age of excess. And how would the government attract the best talent if it demanded that they take minimal pay ”” a political reality in the current environment?

Another option is for the government to buy the banks’ most toxic assets either through a giant fund, or, more likely, a federally supported bad bank designed to buy up troubled investments. But in that case, taxpayers might well be the losers: They would have all of the banks’ worst assets and none of their performing loans. And unless a deal is worked out to take a larger share of the banks whose bad loans are shuffled off to the government, the taxpayers would not have the chance to benefit by selling the shares back to private investors.

Moreover, cleaning up the banks’ bad assets, without extracting a heavy price for the bank managers, shareholders and their lenders, is exactly what Mr. Summers and Mr. Geithner warned against during the Asian financial crisis.

“We told the Asians that they had to be willing to let banks and companies fail,” said Jeffrey Garten, a professor at the Yale School of Management and a top official in the Clinton administration. “We warned that there was great moral hazard if governments just bailed them out.”

“And now,” he said, “we are doing the polar opposite of our advice.”

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Obviously, important things are to be done in a host of other areas by Obama, but it is a dangerous precedent to have another president who treats constitutional principles as something of a distraction. Just as Bush dismissed abstract principles in his war on terror, Obama seems poised to do the same in his economic war. Again, it will simply be an inconvenient time for principle.

I joined millions around the world relishing the moment Obama took the oath and gave such eloquence and hope to a besieged nation. But there is a danger of a cult of personality developing around Obama, that supporters could, in all this adoration, confuse the man with his mandate. So, when Obama put his hand on the Lincoln Inaugural Bible, I silently prayed not for a president but for principle, and that Obama will be able to tell the difference.

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Obama’s appeals to unity should not be taken for granted, however. Much was made recently of Russian thinker Igor Panarin’s prediction that the US will disintegrate in 2010. While well short of the mark, Panarin put his finger on a painful truth: America has become more divided and frail than many believe. The last two presidents, both baby-boomers who fought the culture wars, were very polarising figures. In Obama many of us see hope for a real oneness that is much needed.

All that said, I have deep concerns, on nothing so much as the issue of the commodification of life so prevalent in America. Obama famously said at Saddleback Church that the exact moment when life begins was a question “above” his “pay grade”. But if there even is a question whether it is life or not surely the error to make is on the side of life, otherwise we are like the hunter who shoots first in the forest and asks questions later.

My other great worry: America is in crisis over what exactly marriage is. Is it a social contract for the fulfilment of personal and sexual needs, or is it a lifelong covenant for the raising of children and of citizens who promote the common good? We seem to be veering ever more strongly in favour of the former, at the expense of the latter.

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President Barack Obama and his top advisers sought over the weekend to broaden the appeal of his proposed $825 billion economic-stimulus package and to defend the way they are pushing it through Congress, even as officials said the administration would move quickly to tighten the U.S. financial regulatory system.

But some senior Republicans said Sunday that they would oppose the stimulus plan as it now stands.

With action moving on several fronts, officials said the administration would make wide-ranging regulatory changes, including stricter federal rules for hedge funds, credit rating agencies and mortgage brokers, and greater oversight of the complex financial instruments that contributed to the economic crisis.

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Monsignor Rino Fisichella, who heads the Vatican’s Pontifical Academy for Life, urged Obama to listen to all voices in America without “the arrogance of those who, being in power, believe they can decide of life and death.”

Fisichella said in an interview published Saturday in Corriere della Sera that “if this is one of President Obama’s first acts, I have to say, in all due respect, that we’re heading quickly toward disappointment.”

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The Obama administration plans to move quickly to tighten the nation’s financial regulatory system.

Officials say they will make wide-ranging changes, including stricter federal rules for hedge funds, credit rating agencies and mortgage brokers, and greater oversight of the complex financial instruments that contributed to the economic crisis.

Broad new outlines of the administration’s agenda have begun to emerge in recent interviews with officials, in confirmation proceedings of senior appointees and in a recent report by an international committee led by Paul A. Volcker, a senior member of President Obama’s economic team.

A theme of that report, that many major companies and financial instruments now mostly unsupervised must be swept back under a larger regulatory umbrella, has been embraced as a guiding principle by the administration, officials said.

Some of these actions will require legislation, while others should be achievable through regulations adopted by several federal agencies.

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America’s newly inaugurated president was told this week that the Catholic Church will fight his plans to make abortion more readily available, and will oppose any easing of current regulations restricting embryonic stem cell research.

The warning was contained in two letters from US bishops delivered to Barack Obama, the first dated 13 January and released on 15 January, and the second, more strongly worded, dated 16 January and released on 19 January, the eve of Mr Obama’s swearing-in. The bishops said they wanted to work constructively with the new administration, but issued a tough challenge on life issues.

“We will work to protect the lives of the most vulnerable and voiceless members of the human family, especially unborn children and those who are disabled or terminally ill,” the bishops said in the first letter signed by the president of the bishops’ conference, Cardinal Francis George, the Archbishop of Chicago.

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[KIM] LAWTON: Not everyone was happy about all the religion that was tied to the inauguration. A group of atheists launched an ultimately unsuccessful court battle to try and stop the official inaugural prayers. But as a recent poll for RELIGION & ETHICS NEWSWEEKLY found, the majority of all Americans say they believe God has uniquely blessed this nation, and many expect that God should be acknowledged at big national events.

Religious groups sponsored a host of unofficial events this week as well. Prominent black leaders celebrated at the African-American Church Inaugural Ball. Many saw Obama’s election as a direct result of the black church organizing first started by Reverend Martin Luther King Jr.

Dr. VINCENT HARDING (Veterans of Hope Project): There would be no point in trying to really speak to the beauty and the strength and the meaning of Barack’s inauguration without finding some way to speak to the strength and the beauty and the meaning of black religion as it inspired the people who opened the way for Obama.

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But let us look for a minute at the extent of the loss in perceived wealth that is the main shock to our economic system. If in real terms we assume write-downs of 50% in U.S. equities, 35% in U.S. housing, and 35% to 40%
in commercial real estate, we will have had a total loss of about $20 trillion of perceived wealth from a peak total of about $50 trillion. This relates to a GDP of about $13 trillion, the annual value of all U.S. produced goods and services. These write-downs not only mean that we perceive ourselves as shockingly poorer, they also dramatically increase our real debt ratios. Prudent debt issuance is based on two factors: income and collateral. Like a good old-fashioned mortgage issuer, we want the debt we issue to be no more than 80% of the conservative asset value, and lower would be better. We also want the income of the borrower to be sufficient to pay the interest with a safety margin and, ideally, to be enough to amortize the principal slowly. On this basis, the National Private Asset Base (to coin a phrase) of $50 trillion supported about $25 trillion of private debt, corporate and individual. Given that almost half of us have small or no mortgages, this 50% ratio seems dangerously high. But now the asset values have fallen back to $30 trillion, whereas the debt remains at $25 trillion, give or take the miserly $1 trillion we have written down so far. If we would like the same asset coverage of 50% that we had a year ago, we could support only $15 trillion or so of total debt. The remaining $10 trillion of debt would have been stranded as the tide went out! What is worse is that credit standards have of course tightened, so newly conservative lenders now assume the obvious: that 50% was too high, and that 40% loan to collateral value or even less would be more appropriate. As always, now that it’s raining, bankers want back the umbrellas they lent us.

[And as for our future expectations]….Under the shock of massive deleveraging caused by the equally massive write-down of perceived global wealth, we expect the growth rate of GDP for the whole developed world to continue the slowing trend of the last 12 years as we outlined in April 2008. Since this recent shock overlaps with slowing population growth, it will soon be widely recognized that 2% real growth would be a realistic target for the G7, even after we recover from the current negative growth period. Emerging countries are, of course, a different story. They will probably recover more quickly, and will continue to grow at double (or better) the growth rate of developed countries.

Read the whole sobering analysis.

The White House released new details of an $825 billion economic recovery package on Saturday as President Obama sought to broaden the plan’s appeal a day after stepping squarely into the fractious Congressional debate over the proposal.

In his weekly video address, Mr. Obama argued that the package of spending programs and tax breaks was critical not only to turn around the economy but to rebuild the nation for a new era.

In the address, posted for the first time on the White House Web site, Mr. Obama made the case that the package would help students go to college, protect workers from losing health care, lower energy bills and modernize schools, roads and utilities.

“This is not just a short-term program to boost employment,” Mr. Obama said. “It’s one that will invest in our most important priorities like energy and education, health care and a new infrastructure that are necessary to keep us strong and competitive in the 21st century.”

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The Bush presidency had its failures too, of course. Perhaps the saddest – and most ironic – is reflected in the hyper-partisan shrillness of America’s national politics.

It is hard to remember now, but Bush originally ran for president on an agenda of restoring courtesy and goodwill to the political sphere. He promised to end the “arms race of anger” in Washington, and pointed to his record of bipartisanship in Texas. “I have no stake in the bitter arguments of the last few years,” Bush told the 2000 Republican convention. “I want to change the tone of Washington to one of civility and respect.”

Needless to say, things didn’t work out that way….

But it’s also true that many of Bush’s bitterest foes, including some in the media, never gave him a chance. It became commonplace to describe the 2000 election as “stolen” and the Bush presidency as illegitimate. Democratic candidates vied to outdo each other in anti-Bush invective. For many, “Bush hater” became a label to wear with pride.

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As Barack Obama begins his tenure as the first U.S. president with Muslim ancestry, a group of 300 young Muslim activists from 76 countries has asked him to promote policies that can help peacefully curtail religious extremism.

The Muslim Leaders of Tomorrow, a grassroots movement aiming to foster a new generation of civic engagement, issued the open letter after convening the group’s first international conference last weekend (Jan. 16-19) in Doha, Qatar.

Participants, all between the ages of 20 and 45, included artists, academics, religious leaders and business owners. About 40 came from the U.S., including comedian Azhar Usman, journalist Souheila Al-Jadda and faith-based activist Saleemah Abdul-Ghafur, who recently wrote the book “Living Islam Out Loud: American Muslim Women Speak.”

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There have been four articles so far this week, check them each out and see what you think.

In other words, Obama is doing exactly what he said he would do. He is confronting liberal and conservative, gay and straight, evangelical and mainline with the common good, the ideal lost in the culture wars and polarized politics of the last 20 years, but essential to the functioning of the American — or for that matter, any — democracy that hopes to survive its current crises and prosper long into an indefinite future.

Obama seems to think (and I agree) that serving the common good is not an option. It is a necessity.

Replacing the rhetoric of constant confrontation with a sustained search for areas of agreement and reasonable compromise is not an option. It is a necessity.

Unless we all have a stake in the future of the republic, the republic has no future.

Can we do it? Yes, we can.

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The president’s elderly stepgrandmother brought him an oxtail fly whisk, a mark of power at home in Kenya. Cousins journeyed from the South Carolina town where the first lady’s great-great-grandfather was born into slavery, while the rabbi in the family came from the synagogue where he had been commemorating Martin Luther King’s Birthday. The president and first lady’s siblings were there, too, of course: his Indonesian-American half-sister, who brought her Chinese-Canadian husband, and her brother, a black man with a white wife.

When President Barack Obama was sworn in on Tuesday, he was surrounded by an extended clan that would have shocked past generations of Americans and instantly redrew the image of a first family for future ones.

As they convened to take their family’s final step in its journey from Africa and into the White House, the group seemed as if it had stepped out of the pages of Mr. Obama’s memoir ”” no longer the disparate kin of a young man wondering how he fit in, but the embodiment of a new president’s promise of change.

For well over two centuries, the United States has been vastly more diverse than its ruling families. Now the Obama family has flipped that around, with a Technicolor cast that looks almost nothing like their overwhelmingly white, overwhelmingly Protestant predecessors in the role. The family that produced Barack and Michelle Obama is black and white and Asian, Christian, Muslim and Jewish. They speak English; Indonesian; French; Cantonese; German; Hebrew; African languages including Swahili, Luo and Igbo; and even a few phrases of Gullah, the Creole dialect of the South Carolina Lowcountry. Very few are wealthy, and some ”” like Sarah Obama, the stepgrandmother who only recently got electricity and running water in her metal-roofed shack ”” are quite poor.

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The Roman Catholic archbishop of Washington, Donald W. Wuerl; the presiding bishop of the Episcopal Church, Katharine Jefferts Schori; and the primate of the Greek Orthodox Church in America, Archbishop Demetrios, also offered prayers at other moments in the service.

“It was a conscientious effort to have a broad tapestry representing the faces of American religion,” said Rabbi David N. Saperstein, director and counsel of the Religious Action Center of Reform Judaism, in Washington.

The participants, prayers and even the hymns were chosen by a committee of Mr. Obama’s advisers on religious issues. Altogether, there were three rabbis because the committee wanted to have representatives from the Reform, the Conservative and the Orthodox branches of Judaism (the Orthodox branch usually prohibits participation in a prayer service in a Christian sanctuary).

The Rev. Jim Wallis, a liberal evangelical who is president of Sojourners, a magazine and grass-roots organization based in Washington, said that he and other religious leaders were preparing for a dual role: to challenge the president on policies, and “to clear the way” so people will be prepared to accept the changes he institutes.

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When it comes to getting advice, President Barack Obama is following the same path as the two men who came before him.

He’s leaning on Bishop T. D. Jakes of the Potter’s House in Dallas. The bishop returned from Washington Wednesday afternoon.

“It was an amazing experience,” Jakes said. He summed up the entire day in one word, “Unity.”

“Republicans and Democrats, young and old were coming together in a sense that was mind boggling.”

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Since the days of the founding of this Republic, Episcopalians have prayed each inauguration day that “Rulers may have grace, wisdom and understanding to execute justice and to maintain truth.”

In keeping with a tradition of more than 230 years, some 40 people attended a prayer service at St. Alban’s Episcopal Church of Waco this morning to request heaven’s aid to guide incoming President Barack Obama.

Although Psalm 146 advises “Put not your trust in rulers, nor in any child of earth, for there is no help in them. When they breathe their last, they return to earth and in that day their thoughts perish,” the faithful nonetheless asked God to bless the President of the United States and all those in authority to make them ever mindful of their calling to serve the people.

“Grant them wisdom and strength to know and to do your will,” said the Rev. Jeff Fisher, rector of St. Alban’s.

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Mr. President and Mrs. Obama, Mr. Vice President and Dr. Biden, and your families, what an inaugural celebration you have hosted! Train ride, opening concert, service to neighbor, dancing till dawn . . .

And yesterday . . . With your inauguration, Mr. President, the flame of America’s promise burns just a little brighter for every child of this land!

There is still a lot of work to do, and today the nation turns its full attention to that work. As we do, it is good that we pause to take a deep spiritual breath. It is good that we center for a moment. What you are entering now, Mr. President and Mr. Vice President, will tend to draw you away from your ethical center. But we, the nation that you serve, need you to hold the ground of your deepest values, of our deepest values.

Beyond this moment of high hopes, we need you to stay focused on our shared hopes, so that we can continue to hope, too.

We will follow your lead.

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President Barack Obama moved swiftly on Wednesday to impose new rules on government transparency and ethics, using his first full day in office to freeze the salaries of his senior aides, mandate new limits on lobbyists and demand that the government disclose more information.

Obama called the moves, which overturned two policies of his predecessor, “a clean break from business as usual.” Coupled with Tuesday’s Inaugural Address, which repudiated the Bush administration’s decisions on everything from science policy to fighting terrorism, the actions were another sign of the new president’s effort to emphasize an across-the-board shift in priorities, values and tone.

“For a long time now there’s been too much secrecy in this city,” Obama said at a swearing-in ceremony for senior officials at the Eisenhower Executive Office Building, adjacent to the White House. He added, “Transparency and rule of law will be the touchstones of this presidency.”

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Twenty clergy members participated in the service, including representatives from the Islamic Society of North America, the Hindu Temple Society of North America, and the United Synagogue of Conservative Judaism. Prayers were based on the Episcopal Book of Common Prayer but had been retouched to draw on George Washington’s 1789 prayer service and Abraham Lincoln’s 1865 inaugural address.

In her sermon, Watkins drew on words from an array of thinkers, including Gandhi, Martin Luther King Jr., the Cherokee Indians, and even the president himself. She particularly emphasized the need to draw on American values, like loving one’s neighbor, in the face of crises.

“Our individual well-being depends on a world in which liberty and justice prevail,” Watkins said. “This is the biblical way. It is also the American way.”

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The Obama administration will take action on a “dramatic scale” to revive credit markets and strengthen banks so they are able to lend, Treasury secretary- designate Tim Geithner said on Wednesday.

Testifying to the Senate committee considering his nomination, Mr Geithner said the Obama team was working on a “comprehensive plan” to deal with the banks and hoped to unveil it soon.

“We’re going to have to do more to make sure that the institutions at the core of our system are strong enough that they can lend.”

He refused to offer any insight into how this might work, in spite of pressure from the markets, saying: “We have seen the costs in terms of uncertainty created by tentative signals not followed up with clear actions.”

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