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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

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Banned Israeli tennis player: ‘It’s not fair’

Sharar Peer told CNN she learnt of her visa ban on Saturday, just before her scheduled flight to Dubai.
The Israeli tennis player refused an entry visa to Dubai has told CNN she is "very, very disappointed" to have been denied the opportunity to play.

Shahar Peer was due to fly into the United Arab Emirates for the start of the Dubai Tennis Championships on Sunday, but was informed on Saturday night by telephone that she wouldn’t be granted a visa. She had just finished playing in the Pattaya Open in Thailand, where she reached the semi-final. “They really stopped my momentum because now I’m not going to play for two weeks and because they waited for the last minute I couldn’t go to another tournament either,” Peer told CNN from Tel Aviv. “So it’s very disappointing and I think it’s not fair.” Her sentiments were echoed by the chairman and chief executive of the Women’s Tennis Association, Larry Scott, who said the decision could lead to the termination of professional tennis in the UAE. “This runs counter to everything we were promised and I think it is a real setback, not only for international tennis, but the whole international sporting community will take note of this,” Scott said. He told CNN Peer’s visa refusal has precedence: last year an Israeli men’s doubles team was denied entry to Dubai. He said the Emirate cited security reasons following recent unrest in the region.

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“At that time I was in Dubai, I made it clear to the authorities, the representatives of the government, that next year when our top players wanted to play this very prestigious tournament all of them had to be allowed to play,” Scott said. “They had a year to work on it and solve it. We’ve spent time through the year discussing it. We were given assurances that it had gone to the highest levels of government,” Scott said. “I was optimistic they would solve it. And we’ve made crystal clear to the government to the tournament organizers that there could be grave repercussions not just for tennis in the UAE but sports beyond that.” Watch CNN’s interview with Larry Scott » The Dubai government issued a short statement through the state-owned news agency, saying that Peer was informed while in Thailand that she would not receive a visa. The agency quoted an official source in the organizing committee saying, “The tournament is sponsored by several national organizations and they all care to be part of a successful tournament, considering the developments that the region had been through.” Earlier an official source who did not want to be named, told CNN: “We should check what happened in New Zealand, when Peer was playing there with all the demonstrations against Israel during the attacks on Gaza. We have to consider securing the players and the tournament.” In January, a small group of about 20 protestors waved placards and shouted anti-Israel slogans outside the main entrance to the ASB Classic tournament in Auckland. They were moved on before Peer played her match. The Israeli player told CNN she’s received phone calls of support from her fellow players. “‘All the players support Shahar,” world number six Venus Williams told The New York Times, adding, “We are all athletes, and we stand for tennis.”

Peer is uncertain of her next move. She told CNN the last-minute decision had left her at a loose end. She said she was concerned about her points and ranking and may go to the U.S. this week to try to take part in another tournament. “I don’t think it should happen,” she told CNN. “I think sport and politics needs to stay on the side and not be involved. I really hope it’s not going to happen again, not only to me but to any other athlete.”

Clinton visits Asia to send key message

U.S. Secretary of State Hillary Clinton arrived in Japan Monday to begin a week-long trip through four Asian nations, looking to begin building new international relationships to help tackle some of the world’s toughest challenges.

Speaking to reporters en route to Tokyo, Clinton said “going to Asia is, for me, a very big part of how we’re going to demonstrate the Obama administration’s approach to dealing with the multitude of problems that we see, but also the opportunities as well.” Her visits to Japan, Indonesia, South Korea, and China will include discussions on a host of sensitive topics, from climate change to nuclear proliferation. And Clinton vowed that she will not be “shying away from talking about human rights issues.” But there will likely be few fireworks or confrontations. “I think it’s fair to say that this first trip will be one intended to really find a path forward, to have as robust an engagement as possible on a range of issues,” she said. Clinton added: “I chose to go to Asia deliberately in order to send that message that we are reaching out. We do see Asia as part of America’s future.”

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Her meetings will not be limited to government officials, Clinton said, “because I think it’s important that we get out of the ministerial buildings and listen to the people in the countries where I’ll be visiting. So to that end, I’ll be doing town halls and visits in areas of concern that we can discuss with NGO leaders and local officials.” Clinton has had official travels through Asia previously, dating back to when her husband was U.S. president. She described the trip as “an opportunity to renew relationships with some people that I’ve known before” and to speak face-to-face with “those with whom I’ll be meeting for the first time.” Watch David Lampton of John Hopkins University discuss Clinton’s trip »

The backdrop for the visit is the global economic crisis, she said. All four nations are members of the G-20, which is composed of financial leaders of 19 nations and the European Union. The group was formed in the late 1990s to bring together key figures to help improve the world economy. The next G-20 meeting is in London in April. “I will be discussing with them the approaches that each are taking, explaining what we have just done with the passage of our stimulus bill, and seeking greater cooperation about how together we’re going to work our way through these very difficult economic times,” Clinton said.

Abramovich spending $342 a minute on Chelsea

Big spender: Russian billionaire has spent about $1.03 billion on Chelsea since taking over in 2003.
Russian billionaire Roman Abramovich is spending more than £240 ($340) per minute on his London football club, Chelsea FC, fresh figures have revealed.

Abramovich, who took over the Stamford Bridge club in 2003, has since poured £710 million ($1.03 billion) into rejuvenating the team — an amount that equates to the incredible $342 per minute. Despite the Russian’s investments, the club has not been profitable since he took over, and last week reported a loss of $95 million for the year ended June 30, 2008. The club last year said it aimed to break even before 2009/2010. Do you think the money of rich investors has been good or bad for the English Premier League After the figures were released, Chelsea chairman Bruce Buck said: “Following the conversion of half of the interest-free loans into equity there should now be no doubt as to the owner’s commitment to the club and the stability of the company’s funding structure. “We have always believed that this ‘debt’, now reduced by 50 percent, has been misrepresented. Chelsea has no external debt and makes no punitive interest payments to external funders,” Buck said. Much of Abramovich’s spending had been buying new players such as Didier Drogba and Ricardo Carvalho. More than $30 million has been spent paying compensation to sacked coaches, including Jose Mourinho and Avram Grant. It has been reported Luiz Felipe Scolari, who was sacked from Chelsea last week, may leave with as much as £7.5 million ($10.7m) as compensation. At $342 per minute, Abramovich has spent almost $500,000 every day at Stamford Bridge.

Robert Gates: Taming the System

If you are a firm believer in the war in Afghanistan, Defense Secretary Robert Gates’ grim assessment last month of what lies in store for the U.S. might have made you shudder. “If we set ourselves the objective of creating some sort of Central Asian Valhalla over there, we will lose, because nobody in the world has that kind of time, patience and money, to be honest,” he said.

But if you are a defense contractor who has enjoyed a decade of bottomless Pentagon funding, it was Gates’ comments about a struggle much closer to home that are keeping you up at night. “The spigot of defense spending that opened on 9/11 is closing,” he said. “With two major campaigns ongoing, the economic crisis and resulting budget pressures will force hard choices on this department.” Gates, the U.S.’s 22nd Defense Secretary, has declared a low-key war against the military services and the way they develop and buy the weapons they use to defend the nation. Up until now, he has done that mostly by jawboning: The U.S. can’t “eliminate national-security risks through higher defense budgets, to do everything and buy everything,” Gates says in the latest issue of Foreign Affairs. That futile quest has led to weapons that “have grown ever more baroque, have become ever more costly, are taking longer to build and are being fielded in ever dwindling quantities.” But his war of words is about to become very real. As he prepares a budget for next year, Gates must decide the fate of a number of fantastically expensive weapons programs the military services say they need. He can’t fund them all–and might be wise to take a knife to them all. In this, Gates has little choice: the military’s annual budget has finished growing, and the billions it once imagined it might spend on future weapons have evaporated. So cuts–and big ones–are coming, and Gates will be the man who makes them. Though Gates was hired by George W. Bush to clean up the mismanaged wars in Iraq and Afghanistan, Gates’ greatest legacy may come in what he calls a “strategic reshaping” that better outfits the U.S. military to wage coming wars. Future weapons buys must “be driven more by the actual capabilities of potential adversaries,” Gates told Congress a few weeks ago, “and less by what is technologically feasible given unlimited time and resources.” Pentagon procurement, he said, is plagued by a “risk-averse culture, a litigious process, parochial interests, excessive and changing requirements, budget churn and instability and sometimes adversarial relationships within the Department of Defense.”

California’s Big Race to Succeed Schwarzenegger

Californias Big Race to Succeed Schwarzenegger

Ever since gold miners first scraped their fortunes out of the hills of northern California, America’s most populous state has been a land of titanic dreams. These days, though, it’s a place with even bigger problems. Its $42 billion budget deficit would make an out-of-control Hollywood director blush — and bankrupt a small nation. Its schools are failing, air quality is worsening, and unemployment neared 10% as of December. The only thing larger than its litany of woes, however, is the roster of big-name political celebrities who are testing the waters for a run for governor in 2010, when term limits show Arnold Schwarzenegger to the door.

“This is an era of limits,” Jerry Brown recently told TIME, reprising a theme he sounded more than 30 years ago when the state first put him in the governor’s mansion in the aftermath of Watergate and the last throes of Vietnam War. “There is not a lot of room for political maneuvering. The age of dividing up the easy surpluses is over. We’ve been on a borrowing binge, both in the private and public sector, and we’re going to have to enter a time of belt-tightening.”

Brown, 70 and himself a son of an iconic governor , is probably best known outside of California as a three-time Democratic presidential candidate and former long-time boyfriend of Linda Ronstadt. Currently, the state’s attorney general, he has already added more than $3 million to his war chest, money easily enough transferred to a gubernatorial campaign when the time is right.

Not everyone is waiting. When Brown does enter the race he’ll be facing another long-time Golden State political pro, Lieutenant Governor John Garamendi, a two-time former insurance commissioner and deputy U.S. interior secretary under President Clinton. “I am in. Period,” Garamendi told TIME. California, Garamendi says, needs a leader who will put progressive back into the Golden State’s political lexicon. Despite Schwarzenegger’s swing to the middle recently, Garamendi said the governor has lost his ability to lead the state out of its troubles. His two terms, he said, “have been a failure of leadership.”

Meanwhile, San Francisco Mayor Gavin Newsom, 41, another Democrat who has yet to officially enter the race, has been barnstorming across California holding town-hall style meetings. “We’ve done six and we have more scheduled,” he said recently, taking a late-night break on the side of the road to talk politics with TIME for 45 minutes. “And I just can’t believe how engaged, and how passionate, the voters are at each and every place we go. They are hungry for change.”

Like Brown, he says California is in bad shape. But he adds that he’ll offer a more hopeful message than one anchored by austerity. “There are two ways to respond to our current crisis,” he said. “One, we can cut our way out. But then we enter a downward spiral of disinvestment. The other is we can grow our way out of our problems. That’s where I am. This state has such amazing capacity for change, for economic development. We need a strategy to grow.”

The state that once drew people from all over the world to create Silicon Valley, the Free Speech Movement at Berkeley and Hollywood, now sees too many of its best people leave. To stop that, Newsom hopes to borrow a page from last year’s Obama campaign. On the floor of the Democratic National Convention last summer, Newsom told TIME that he wanted to run in 2010, but first wanted to see if voters embraced Obama’s campaign of youth and generational chance. “I think we’ve had an answer to that, back in November,” Newsom said in his recent interview. “Youthfulness and hope — it’s also who I am naturally. I was 35 when I ran for mayor of San Francisco [in 2003]. Youthfulness is not a chronological date, it’s about a state of mind, it’s the quality of your imagination.”

Another big-city mayor, Antonio Villaraigosa of Los Angeles, could shake up the already crowded Democratic field as soon as this spring. Villaraigosa, 56, is expected to easily win a second term March 3. After that, an aide tells TIME, he can turn his attention to whether he will run for governor. “He has said on the record that he doesn’t know yet, but when he decides, he’ll do what’s best for the people of California.”

U.S. Sen. Dianne Feinstein, the state’s most popular politician, has been coy about her own intentions regarding the race. She’d make a powerful candidate, but others doubt she’ll give up her power in the Senate.

Whichever of the Democrats wins the primary, he or she will likely face tough competition from Schwarzenegger’s party, where two billionaires and a former Silicon Valley congressman are already sizing each other up. Former U.S. Rep. Tom Campbell and state insurance commissioner — and tech billionaire — Steve Poizner have formed exploratory committees and are expected to make the race.

Last Monday, former eBay CEO Meg Whitman shook up the potential GOP primary line-up by forming her own gubernatorial exploratory committee. Already equipped with a powerful roster of statewide co-chairs and political endorsements — and her own history of big-time fundraising — the Whitman development looked anything but exploratory. Whitman, 52, was a national co-chair and money magnet for the McCain/Palin ticket in 2008. In a statement, she said, “California faces challenges unlike any other time in its history — a weak and faltering economy, massive job losses, and an exploding state budget deficit. California is better than this, and I refuse to stand by and watch it fail. Now is the time for people across the state to join a cause for change, excellence and a new California.”

Brown, who expects the billionaires on the other side to make it a race, says he’s betting that voters aren’t looking for a new California. Ideas, even if borrowed from an earlier time, will be fine, just so long as they work. “They want a campaign based on hope, but grounded in common sense,” he says. “They don’t need a grab bag of alluring ideas. They want realism.”

Whatever it is Californians want, the only thing they can be sure they’ll get is a long campaign to sell them a candidate who can try to deliver the goods.
See pictures of Arnold Schwarzenegger’s wife, Maria Schriver.
Read a TIME cover story on Schwarzenegger.

Pakistani government does deal with Taliban on sharia law

Delegation members of pro-Taliban leader Soofi Mohammad at a meeting in Peshawar Monday.
Pakistani government officials announced Monday that they have reached an agreement with the Taliban to allow strict Islamic law, or sharia, to be implemented in parts of North West Frontier Province.

It marks a major concession by the Pakistani government in its attempt to hold off Taliban militants who have made significant advances inside the country. The government will recognize sharia for the entire Malakand Division, which includes the Swat district, the chief minister of North West Frontier Province Amir Haider Hoti announced Monday in a news conference. Islamic law is already being practiced in the area, where the Taliban have control. The agreement comes amid negotiations between provincial officials and Taliban representatives, led by Sufi Mohammed.

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The Taliban on Sunday declared a 10-day cease-fire in Swat Valley, which Taliban spokesman Muslim Khan said was a gesture of good will towards the government. The Taliban’s control of Swat is believed to be the deepest advance by militants into Pakistan’s settled areas — meaning areas outside its federally administered tribal region along the border with Afghanistan.

The negotiations in North West Frontier Province are the latest attempt by Pakistan’s civilian government — which took power last year — to achieve peace through diplomacy in areas where Taliban and al Qaeda leaders are believed to have free rein. But analysts, as well as critics within the establishment, have warned that Pakistan’s previous dealings with the Taliban have only given the fundamentalist Islamic militia time to regroup and gain more ground.

A Historian’s Take on Obama

A Historians Take on Obama

Last year’s gripping campaign and the wave of popularity behind Barack Obama have focused tremendous attention on the White House and the presidency. As the country marks Presidents Day, TIME spoke with author and historian Richard Norton Smith about America’s “schizoid” relationship with its President, the lofty expectations for Obama and the way history’s verdicts can shift over time.

What interests you as a historian about our new President

There is a theory, and I think it holds some credence, that every 30 years or so America is in a regenerative mood. It shows a willingness to take a hard look at some of its accepted truths, whether it’s the role of big business at the beginning of the 20th century or isolationism after World War I. You saw it with FDR in the 30s, and with Kennedy and with Reagan. I’m intrigued by the possibility that we may be embarking on another such era. It will be fascinating to see how this President puts his stamp not only on the next four or eight years, but potentially on the next generation or more.

Even before he took office, Obama was being compared to Abraham Lincoln and other historic leaders. Are those kinds of expectations fair

You cannot overstate the degree to which media exaggeration has become part of the modern presidency — the saturation coverage and saturation punditry. The irony is, no one in March 1933 knew FDR was going to be FDR. And Lincoln — hell, his election prompted seven southern states to secede. So they both had the advantage, if you want to call it that, of being underestimated.

I think there is a fundamental disconnect between much of the media — with its breathless and impatient coverage — and most people out there. Most people are more patient and sophisticated, and appreciate that our problems have developed over a long period of time. They’re realistic enough to understand that they are not going to disappear overnight.

Thanks to blanket media coverage and the long campaign, we know an awful lot about the personal lives of President Obama and his family. Could that weaken the power of an office that relies, to some degree, on mystique

We’re schizoid about this. In the aftermath of Vietnam and Watergate, we loved it when candidate Jimmy Carter carried his own laundry, and we admired him for walking down Pennsylvania Avenue on Inauguration Day. Yet just a few weeks later we excoriated him for wearing a cardigan sweater and addressing us from the Oval Office on the energy crisis. There is this classic pendulum that swings back and forth. On the one hand, we want our presidents, if not necessarily to be of us, than certainly to be accessible to us. On the other hand, at various times in our history we also want to put them on a pedestal.

In a curious way, thus far I think Obama combines both qualities. I think the President was elected in no small measure because people sensed an authenticity about him and his upbringing. But at the same time, I think there is a sort of Kennedy-esque, semi-regal quality that we want to project onto the President and his entire family.

Obama is the first President to use a BlackBerry. Are you hopeful that will offer future historians a fuller written record of his presidency

Oh no, on the contrary. Email and BlackBerrys have their own particular character of communication, which I think is very different from the interior dialogue that one conducts in the pages of a diary, or the written conversation to which one contributes when writing a letter. The culture being what it is, people don’t write letters today, people don’t keep diaries today. As late as Ronald Reagan, some presidents maintained a virtual diary of their presidency, which is an invaluable document to get inside their head. Those don’t exist for the years since.

People close to George W. Bush say history will eventually vindicate his presidency. Could that happen

Harry Truman is a classic example of someone who was widely scorned at the time. It took 30 years for Truman to be appreciated, as a contrast to the artifice, theatricality, and in some cases mendacity associated with the presidency during Vietnam and Watergate. All the sudden he came to be seen as the real deal.

The difficulty of assessing a president who’s just left office is, in effect, he’s running against himself. It’s particularly true with a polarizing president — it takes time for those emotions to cool. It takes time to get access to papers, it takes time for a president and his policies to be assessed against his successors, and to see how they deal with the same issues.

The old line that “history is argument without end” applies to nothing more than the assessment of presidential performance.

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See pictures of U.S. Presidents and their children.

See TIME’s pictures of the week.

Will Beijing Respond to Clinton’s Wish List?

Will Beijing Respond to Clintons Wish List?

North Korea has a long history of communicating with the United States through provocation and brinksmanship, and it has played to type ahead of Secretary of State Hillary Clinton’s four-nation trip to Asia that began Sunday. In recent weeks, Pyongyang has annulled its maritime border with South Korea, renounced the nonaggression agreement between the two countries, and moved missiles and equipment around in ways that could signal preparations for a launch, according to U.S. officials.

For her part, Secretary Clinton has responded with understated coolness,
continuing the State Department practice of publicly and privately encouraging
the North not to do anything stupid. On Friday, she told reporters, “We
hope that North Korea will refrain from provocative actions and words at
this point.” And before her departure, U.S. diplomatic sources say, the State Department weighed in with the Chinese in hopes that they can dissuade any bad behavior by Kim Jong Il.

Washington’s latest contact with the Chinese is, in many ways, more interesting than the predictable pre-trip posturing by Pyongyang. Change is afoot in Washington, and China, which controls much of the food and fuel that keeps North Korea afloat, has more reasons than usual to try to help. Where Clinton’s goals on the Japan, Indonesia and South Korea legs of the trip are fairly straightforward, U.S. policy towards China is in flux, and there are opportunities for Beijing to shape and take advantage of a new relationship with Washington.

The Obama team is trying hard to avoid the experience of the last three administrations, which began their relations with China on a confrontational note, struggling to improve relations thereafter. “This Administration is determined to get off on the right foot with China,” says a senior U.S. official. But it will take more than just a hospitable tone for Washington to get the help it wants from Beijing. North Korea is just the start. Prospects for success on Administration priorities from climate change, Afghanistan and Pakistan to Iran could all be greatly improved with Chinese assistance. The same holds true on a variety of other issues, such as energy security, Burma, Zimbabwe and nonproliferation. “Global issues and third country issues are going to be the real focus and the test of the relationship,” says the senior Administration official.

Climate change is one opportunity for the Obama Administration to establish a positive working relationship with Beijing. The two countries are the world’s top two producers of greenhouse gases, and China, though determined to continue its economic expansion, has recognized that climate change is an urgent problem. China hopes to cut its greenhouse-gas emissions through technology, an objective for which it needs U.S. help. Some in Washington see the climate-change issue as sufficiently important to be the core focus of the new Administration’s relationship with Beijing.

The U.S. will pursue climate-change talks with Beijing aggressively, but Michael Green, a Bush Administration Asia expert who met with Clinton this month, says she is unlikely to build the whole relationship around it because there are so many other important issues between the two countries. Iran is high on the list. China is Iran’s largest trading partner, and is a key arms supplier. The U.S. is desperate to get China to play a tougher role on sanctions against Iran, but even discreet assistance would be welcome. Until now, China has dismissed the most thorough U.S. arguments for why it is in Beijing’s interest to help crackdown on Iran.

Another area where the two have mutual and inextricably linked interests is the global financial crisis. China holds an enormous amount of American debt and the U.S., throughout its economic boom, fueled China’s growth through its consumption. It’s an indication of how serious Washington is about progress on the China relationship that there has been an intense competition between the State Department and the Treasury Department over who will control which parts of the U.S.-China relationship. Treasury Secretary Timothy Geithner offended Beijing by accusing the Chinese of manipulating their currency to the detriment of the U.S. Since then, State has tried to expand its remit on economic issues, but is expected to cede much of that ground to Treasury in the end, because Treasury and Geithner have the expertise.

While the U.S. has a long list of issues on which it wants China’s support, Beijing has a list of its own: China wants diminished U.S. arms sales to Taiwan; a greater say in the decision-making of the International Monetary Fund, and tougher regulations on the financial system in wealthy countries to prevent future shocks. It also wants an end to U.S. hectoring over human rights, particularly in respect to Tibet and Sudan.

Just what Washington is willing to give on all of these issues is not clear. In theory there is room for small deals to begin the new relationship well, but the larger issues may prove as intractable as ever. In any case, the opportunities are clear to both sides, and they intend to pursue them. Which is bad news for North Korea because the last thing China wants now is to see the potential for a mutually beneficial relationship with Washington damaged by Pyongyang.
See TIME’s Pictures of the Week.

Watch a video about China’s effort to preserve its grasslands.

Man charged over Australian bush fires named

A dirt track runs through the burnt out forest in the Kinglake region of Victoria state.
A court has lifted a ban on identifying a man charged with one of a number of deadly wildfires that scorched southwestern Australia this month.

The man, 39-year-old Brendan Sokaluk, did not appear in Monday’s hearing in Melbourne Magistrates’ Court, the Australian Associated Press reported. An order banning the publishing of Sokaluk’s street address or his image remains in place. Public passions are running high in the aftermath of the fires that have killed scores of people. One T-shirt says, “The bastards who lit Victoria’s fires should: Burn in hell.” Sokaluk is suspected of lighting a fire on February 7. He was charged with arson causing death, intentionally or recklessly lighting a bush fire, and possessing child pornography, Victoria state police said last week. The fire Sokaluk is accused of setting killed at least 21 people in Gippsland. See map of fire-hit areas »

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The death toll in a string of fires across Victoria climbed to 189 on Monday, police reported. The number of fires burning had dropped to six, from about a peak of about three dozen, the Country Fire Authority said. Watch a survivor tell his story » Meanwhile, more than 150 detectives were working on the arson investigation, authorities said. The fires have destroyed more than 1,800 homes and displaced about 7,000 people.