WASHINGTON – The government's economic stimulus spending has already had its biggest impact and probably won't contribute to significant growth next year, a top White House adviser said Thursday.
Christina Romer, the chair of President Barack Obama's Council of Economic Advisers, said the initial jolt of the $787 billion stimulus expanded the economy in the second and third quarters of this year. But she said the remaining spending will simply keep the economy from slipping.
"By mid-2010," she said, "fiscal stimulus will likely be contributing little to further growth."
That assessment underscored the fragility of an economic recovery marked by stubbornly high unemployment.
Romer said the government has already spent $194 billion of the total stimulus package, most of it in tax cuts, aid to states and unemployment and food stamps. In addition, she said, $146 billion of spending had been already obligated.
Romer, testifying before Congress' Joint Economic Committee, said that as of August the stimulus had created or saved 600,000 to 1.5 million jobs. She said a premature end to the stimulus would be "misguided."
"This is not a normal recovery," she said. "Coming out of this, we've got lots of things working against us," she said.
Unemployment will remain high, at or above 9.6 percent, through the end of 2010, Romer predicted.
"While job losses will likely end early next year, robust job gains may still be several quarters away," she said.
The pace of the recovery and the unyielding jobless numbers pose significant political and policy problems for the president and for congressional Democrats who face midterm elections next year.
The administration and Congress are confronting competing demands to spend more money to create additional jobs and a desire to confront rising deficits and a burgeoning national debt.
Republicans were skeptical of Romer's claims of stimulus success.
"The impacts of the stimulus are wildly exaggerated," said Rep. Kevin Brady, R-Texas.
Sen. Sam Brownback, R-Kan., said the administration's push for health care and climate change legislation have also created uncertainty among employers who worry about tax increases and are thus unwilling to take risks that could create jobs.
Romer said the Federal Reserve and the Treasury Department are keeping a wary eye on commercial real estate lending, an area that economists and financial experts predict could be the next crisis to befall banks, particularly smaller community institutions.
Romer said that unlike the housing market crash that brought Wall Street to the edge of collapse last year, the troubles facing commercial real estate are "a slower evolving problem; one that we will have the time and ability to deal with."
In testimony to separate panels, Romer and Assistant Treasury Secretary Herbert Allison also credited the government's $700 billion banking rescue fund for pulling the financial sector back from a free fall. The program, known as the Troubled Asset Relief Program, injected billions of dollars into large financial institutions and into the auto industry and has become increasingly unpopular with Congress and with the public.
At the same time, the president has been under pressure from Democrats to use the rescue money to help homeowners facing foreclosure and to assist small businesses. Republicans have called on the administration to simply end the program upon its scheduled expiration Dec. 31.

Without saying that the program will be extended, Allison told the Congressional Oversight Panel that acts a a watchdog over TARP: "It is time to set a new direction for the TARP, to account for the recent improvements in capital markets and to address lingering weaknesses in housing markets and small business lending."

WASHINGTON – In the largest single strike at Mexican drug operations in the U.S., federal officials on Thursday announced the arrests of more than 300 people in raids across the country aimed at the newest and most violent cartel.
La Familia has earned a reputation for dominating the methamphetamine trade and displaying graphic violence, including beheadings. U.S. officials said the cartel, based in the state of Michoacan, in southwestern Mexico, has a vast network pumping drugs throughout the United States, specializing in methamphetamine.
The arrests took place in 38 cities, from Boston to Seattle and Tampa, Fla., to St. Paul, Minn., in 19 states.
Attorney General Eric Holder pledged to keep hitting La Familia and the cartels responsible for a wave of bloodshed in Mexico. He said the U.S. would attack them at all levels, from the leadership to their supply chains reaching far into the United States.
"To the extent that they do grow back, we have to work with our Mexican counterparts to cut off the heads of these snakes, to get at the heads of the cartels, indict them, try them, if they're in Mexico, extradite them to the United States," Holder said at a news conference.
Michele Leonhart, who heads the Drug Enforcement Administration, said La Familia's power has grown quickly, in part due to its quasi-religious background. DEA officials say the cartel professes a "Robin Hood mentality" of aiding the poor by stealing from the rich. Some drug proceeds are used to give bibles and money to the poor, according to investigators.
The Obama administration has directed more agents, resources and money to fight the cartel's presence along the Mexico-U.S. border. But the arrests over the past two days occurred far beyond that region.
"The problem is not just along the southwest border, it is all over our country now," said Kenneth Melson, head of the Bureau of Alcohol, Tobacco, Firearms, and Explosives.
In Dallas alone, 77 people were charged by a number of different federal and local law enforcement agencies.
On Wednesday and Thursday, more than 3,000 federal agents and police officers carried out arrests in more than a dozen states, as part of a long-running effort that has netted nearly 1,200 arrests over almost four years.
The suspects face a combination of federal and state charges.
In the latest legal assault on La Familia, a New York grand jury has indicted an alleged cartel leader, Servando Gomez-Martinez. He is linked to one of the more brazen acts of cartel violence.
In July, after a dozen Mexican police officers were found murdered, officials say Gomez-Martinez publicly proclaimed his membership in La Familia and said the cartel was locked in a battle with Mexican police.
Many of the new charges are centered on the cartel's methamphetamine distribution, but other charges involve cocaine and marijuana, the officials said.
The officials said states where arrests were made or charges filed include Arizona, California, Colorado, Florida, Georgia, Kansas, Illinois, Massachusetts, Minnesota, Mississippi, Missouri, Oklahoma, Nevada, New York, North Carolina, South Carolina, Tennessee, Texas, and Washington state.
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On the Net:
Justice Department: http://www.justice.gov/

Drug Enforcement Administration: http://www.dea.gov

Bureau of Alcohol, Tobacco, Firearms and Explosives: http://www.atf.gov/

PESHAWAR, Pakistan (Reuters) –
Pakistani forces attacked a Taliban stronghold with aircraft and artillery on Friday, as a suspected suicide bomber killed 10 people in the city of Peshawar in the latest in a wave of militant attacks.

The government says a ground offensive against the Pakistani Taliban in their South Waziristan lair is imminent and the army has been stepping up its air and artillery attacks in recent days to soften up the militants' defenses.

The militants have launched a string of brazen attacks in the past 11 days, striking at the United Nations, the army headquarters, police and the general public, killing about 150 people, apparently trying to stave off the army assault.

Friday's blast was outside an office of the police's Central Investigation Agency in the capital of North West Frontier Province, a staging post for U.S. supplies into neighboring Afghanistan.

"I was on the spot within minutes and helped remove bodies. They were really in bad shape," said resident Mohammad Rizwan.

Police suspected the blast was caused by a suicide bomber.

A top city official said 10 people had been killed, among them a woman and a child. A nearby mosque was damaged and about a dozen people were wounded.

Television showed anxious policemen wheeling bloodied colleagues into hospital.

The government says the militant attacks have only reinforced its determination to defeat its enemies.

Nuclear-armed Pakistan is under U.S. pressure to crack down on Islamist militancy as President Barack Obama considers a boost in troop numbers fighting in neighboring Afghanistan.

Aircraft and artillery struck militant positions in their strongholds of Ladha, Makeen and in the mountainous Shahoor region of South Waziristan overnight, hours after killing 27 militants in the region in various strikes.

"We could see thick smoke and flames leaping into the sky from caves in the mountains after the bombing by jet fighters," said a resident near Shahoor who declined to be identified.

Security officials said they had no information about casualties in the latest attacks.

"SOME FLEEING"

An army official in the region said some Taliban were trying to leave the area in disguise ahead of the offensive.

"They are now trying to run but we have tightened controls around their areas and are checking every person leaving," said the military official in Wana, the main town in South Waziristan, where the army has a base.

About 28,000 troops are in place to take on an estimated 10,000 hard-core Taliban, army officials have said.

Pakistan's stock market slipped as the violence escalated at the beginning of the week, but the main index was 1.1 percent higher at 0800 GMT.

Investors would be reassured by an offensive on South Waziristan as a sign the government was getting to grips with the militants, dealers say.

Pakistani Taliban fighters made advances toward Islamabad early this year, raising fears about the stability of the U.S. ally.

But significant military gains in the Swat valley, from where militants have largely been driven out in recent months, have reassured the U.S. and Western allies about Pakistan's commitment to the fight.

In a sign of U.S. continuing support, President Barack Obama signed Wednesday a $7.5 billion aid bill for Pakistan over the next five years.

But Pakistan's military has complained about the bill because the legislation ties some funds to fighting militants and is seen by critics as violating sovereignty.

(Additional reporting by Augustine Anthony and Hafiz Wazir; Editing by Alex Richardson)

HELSINKI (Reuters) –
In one of the quirkiest book cults America has never heard of, a round-snouted troll is hauling consumers' wallets from their pockets despite the worst recession in decades.

The license-holders for Moomin, who say license sales increased 35 percent this year, are contemplating expansion.

"We want to grow and be as profitable as we have been so far," said Sophia Jansson. "But in a way that increases the awareness of Moomin, starting from countries where books already are sold."

The artistic head and chairman of Moomin Characters, she is the niece of Finnish author and illustrator Tove Jansson, whose creation, the Moomintrolls, soon turn 65.

Moomins -- whose naive hero Moomintroll was the "nastiest creature" teenage Tove could imagine after a quarrel with her brother -- are a lucrative publishing and licensing niche mostly in Nordic countries, Japan and Britain.

Since the 1945 publication of "The Moomins and the Great Flood," adventures with Moomin and parents Moominmamma and Moominpappa have featured in 13 novels and picturebooks translated into 40 languages, and thousands of cartoon strips.

The characters have also been used to brand a wide range of products including kitchenware, diapers, DVDs and tinned candy.

"They made me feel peaceful," said Tokyo-based Hideyuki Masumoto, 40, describing the characters he called his childhood friends while eyeing gifts in the tiny Moomin shop in Helsinki.

"They remind us of how we used to live in Japan; in a small community where everyone knows each other."

In Japan, children in the 1960s grew up with an animated television series of the trolls and loved Moomin, Masumoto said: his personal hero was Moomin's friend the wayfarer Snufkin, the "wise guy, who plays music and doesn't belong anywhere."

Inhabiting a land called Moominvalley, Moomins play into a similar vein of comfort to Disney's "Winnie-the-Pooh," revived by publishers Egmont in an October 5 sequel. But the deeply Finnish characters tap much darker mysteries than Pooh.

Bjorn Lindergaard, 30, a Dane in Helsinki on U.N. training, said he liked that the tales were inventive and realistic, and none of the characters were perfect: for example Little My, a tin-sized, fierce girl, with a positively aggressive temper.

"The Moominvalley looked very friendly, but there was also a darker side to it. life was not just plain idyllic," he said.

Peaceful and realistic is how people see Moomins, but they are not human, says Jansson, whose firm manages the Moomintroll legacy and copyrights including up to 300 licensees.

"The Moomins are not people. You can't send them up the Eiffel Tower, they don't speak on cellphones, drive cars, or carry guns," she said.

ONE EYE ON AMERICA

Moomin Characters' chief executive Roleff Krakstrom said he is eyeing the U.S. market. Moomin books were sold there half a century ago but the firm has no licensees and animations have aired only on Hawaii. But he is cautious.

"It is possible, but not obligatory," Krakstrom said. "We are reluctant to start a big project that could fail and label Moomin for a long time."

Last year Moomin Characters, which was founded by Tove and her brother and co-illustrator Lars Jansson, collected $6.69 million in license income and sales from its three brand shops in Helsinki, with operating profit at $2.18 million.

"Some think Moomin is only for the smallest family members, but for instance in Japan our main target group is 20-35-year old women," said Jansson: products for adults make half the firm's sales.

Technologies such as digital media are helping characters cross borders, said Marty Brochstein, senior vice president of the international Licensing Industry Merchandisers' Association (LIMA), but warned cultural characteristics are important.

In Japan, Moomin plays into a long-running craze for cute things, said Roger Berman, managing director of the Japanese branch of LIMA: it was a similar story to many characters seen in the west as targeting children, such as Peter Rabbit by Beatrix Potter or The Very Hungry Caterpillar by Eric Carle.

"If it looks cute, Japanese adults will buy as much as a child will. They will happily display character hangstraps from their mobile phones without self-consciousness," he said.

But Martin Olausson, digital media director at Strategy Analytics, pointed out that with Disney recently agreeing to buy Marvel's superheroes, the consolidating industry is tending to focus on established characters to minimize risk rather than introduce new ones.

"Profitability depends on how strong the brand is," he said. "There is a very wide spectrum, but firms like Marvel, with a library of globally big characters, can charge a lot."

In North America, character royalties slid 3.9 percent to $2.6 billion last year. Giants like Disney and Marvel have suffered as consumers reined in purchases.

EDGY

The Moomintrolls -- curious, bohemian, generous -- may be a bit more edgy and eccentric than the American mainstream.

Moomintroll is friendly, wide-eyed; he picks flowers and likes to fish. Besides Little My, who plays pranks, his friends are oddball. Snufkin smokes a pipe.

Where Pooh's Hundred Acre Wood has Eeyore the grumpy donkey, Moominvalley has a melancholy scientist, the Hemulen. A hill-shaped, lethal spook called the Groke invokes all winter's pain. Even the comedy Hattifatteners -- finger-shaped electric creatures which move in a flock -- are unsettling.

Tove Jansson, who died in 2001, said her own experiences were the basis for her work, and the experience of war may be one distinguishing factor making Europeans and Japanese susceptible to her sense of shyness and feelings of disaster.

Some experts, like Chris Anderson, author of "The Long Tail," have said technology now allows firms to cater to increasingly fragmented audiences, boosting niche products.

But Strategy Analytics' Olausson, while not ruling out that Moomins could catch on, said there was little evidence to show a niche product can thrive in the profit-driven U.S. market without the backup of a big player.

Lana Castleman, managing editor of Canadian trade magazine KidScreen, was also cautious about the chances of success for Moomins in a market that has traditionally favored princesses and spidermen above new characters.

"It's a completely different mindset," she said. "They (Moomins) are very different from current and historical American characters, such as Mickey and Winnie, both in the way they look and content of the stories."

(Editing by Sara Ledwith)