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09/13/2008

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Gene Sharp, whose writings haveirked Iran and other governments.

The Federal Reserve Bank ofNew York held an emergencymeeting Friday night with topWall Street executives to discussthe future of venerable firm Leh-man Brothers Holdings Inc. andthe perilous state of U.S. finan-cial markets.

In attendance were TreasurySecretary Henry Paulson, Securi-ties and Exchange CommissionChairman Christopher Cox, Mor-gan Stanley Chief Executive John

Mack and Merrill Lynch & Co.Chief Executive John Thain,among others.

Talks about a sale of Lehmanor many of its parts were takingplace in other forums and werelikely to continue through the

weekend. The meeting began at6 p.m., but precise details aboutwhat was discussed couldn’t belearned. The meeting appearedsimilar to one a decade ago whenthe New York Fed pulled to-

gether top Wall Street execu-tives to prevent the collapse ofhedge fund Long-Term CapitalManagement. One big issue:Most of the firms at the meetinghave themselves been hit withbig losses and may not have theexcess capital to step in.

“Senior representatives ofmajor financial institutions metat the Federal Reserve Bank ofNew York Friday evening to dis-cuss recent market conditions,”a spokesman for the New YorkFed said.

The future of Lehman couldopen a new chapter in the govern-ment’s handling of the financialcrisis, which is sweeping up an in-creasing number of firms, includ-

ing American InternationalGroup Inc. and Washington Mu-tual Inc. If the meeting helps en-gineer a rescue for the firm thatdoesn’t involve governmentfunding, it would represent anew approach for the Bush ad-ministration and Mr. Paulson,who has in the past six monthshelped intervene to break upBear Stearns Cos. and organize agovernment takeover of mort-gage giants Fannie Mae and Fred-die Mac.

As of late Friday, Mr. Paulsonappeared unwilling to support agovernment-led bailout of Leh-man, people familiar with the sit-uation say. Mr. Paulson and Fed-

Please turn to page A10

ELORZA, Venezuela—TheU.S. government, ratcheting up adiplomatic crisis with one of itsleading suppliers of crude oil,placed sanctions on several high-ranking Venezuelan officials Fri-day, accusing them of aiding thedrug trafficking of Colombia’smain guerrilla army.

The Treasury Departmentsaid it would freeze financial as-

sets and bar any business deal-ings with three key aides to Vene-zuelan President Hugo Chávez, in-cluding two intelligence officialsand the former interior and jus-tice minister.

“Today’s designation exposestwo senior Venezuelan govern-ment officials and one former of-ficial who armed, abetted andfunded the FARC [RevolutionaryArmed Forces of Colombia], evenas it terrorized and kidnapped in-nocents,” said Adam J. Szubin, di-rector of the Treasury’s Office ofForeign Assets Control.

The U.S. move escalates a fast-growing diplomatic confronta-tion between Washington and asmall bloc of anti-U.S. govern-ments in the region that are ledby Mr. Chávez’s Venezuela and in-clude Bolivia, Ecuador, Nicara-gua and Honduras.

Thursday, Mr. Chávez ac-cused the U.S. of planning hisoverthrow and, amid a hail of vul-gar insults, ordered U.S. ambassa-dor Patrick Duddy to leave thecountry within 72 hours. That fol-lowed a similar move Wednesdayby Bolivian President Evo Mo-rales, who kicked out U.S. ambas-sador Philip Goldberg after accus-ing him of fomenting a separatist

Please turn to page A8

Get

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By Yaroslav Trofimov

HANOI—As a U.S. Navy pilot,John McCain flew 23 bombingsorties over Vietnam before hewas shot down and incarceratedin the infamous “HanoiHilton” prison camp.The courage he dis-played behind barsgave him the aura of awar hero, and it is stillpowering his electoralappeal.

Yet now, even thejailers who once tor-tured Sen. McCain arelining up to offer effu-sive—if somewhat em-barrassing—endorse-ments for his presiden-tial candidacy.

“If I had a vote in the U.S., Iwould choose McCain,” beams re-tired Col. Tran Trong Duyet, thecamp’s former commander. “Iwant him in the White House.”

This unlikely sentiment iswidely shared in this fast-grow-ing country of 85 million. “Themajority of the people in Vietnamknow Sen. McCain and feel com-fortable about him,” says Duong

Trung Quoc, a memberof Vietnam’s NationalAssembly and secretary-general of the Associa-tion of Vietnamese His-torians. “Nobody hereknows about Obama.”

The fascinationwith Sen. McCain’s pres-idential bid shows whathas and hasn’t changedin Vietnam in the morethan three decadessince Hanoi’s Commu-nist regime won its

“American War.” Converts sincethen to a gospel of free-marketeconomics, Vietnam’s rulers to-day see America not as a foe butas an increasingly valuable part-

Please turn to the back page

7 7

By Philip Shishkin

BOSTON—In February,the Iranian governmentshowed a fictionalized videoon the dangers of foreignplots against the state. One ofits stars: a mysterious Ameri-can named Gene Sharp.

In June 2007, VenezuelanPresident Hugo Chavez pub-licly accused Mr. Sharp of stir-ring unrest in Venezuela.Last year in Vietnam, authori-ties arrested several opposi-tion activists who were dis-tributing a book written byMr. Sharp. In 2005, fires de-

stroyed two Moscow bookstoresselling Russian translations ofthe same book.

The target of all this intrigueand animosity is 80 years old

and slightly stooped. Hewalks with a cane.

Working from a modesthouse in East Boston, Mr.Sharp is nearly unknown tothe U.S. public. But he is de-spised by many authoritarianregimes and respected by op-position activists around theglobe. Mr. Sharp has hadbroad influence on interna-tional events over the pasttwo decades, helping to ad-vance a global democratic

Please turn to page A10

By Jose de Cordoba inGuasdalito, Venezuela,and David Luhnow in

Mexico City

Shan

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Whi

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JOURNAL REPORT: ENCORE

Best bets in

educational travel | R1(

How to avoid bad news

(and stay solvent) | B1

Lehman Fate Spurs Emergency SessionWall Street TitansSeekWaysto StemWideningCrisis

John McCain Has Some Odd Fans:His Jailers at the ‘Hanoi Hilton’

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They Play Down Torture and Wish Him Well;

Museum Visitors Want to See His Cell

American RevolutionaryQuiet Boston Scholar Inspires Rebels Around the World

L ehman’s future was thesubject of an emergency

meeting at the Federal Re-serve Bank of New York Fri-day night that included Trea-sury Secretary Paulson, theSEC’s Cox and Wall Street ex-ecutives. Talks about a sale ofLehman or many of its partswere taking place in other fo-rums and were likely to con-tinue through the weekend. A1n Investors stepped up theirbets against Lehman as itsshares tumbled, less than amonth after SEC rules restrict-ing short-selling expired. B1n Heightened concerns overLehman, AIG and WaMucaused the investment-gradecredit market to swoon. B6

n AIG faces a possible down-grade and could unveil newmeasures Monday, includingpossible asset sales. Pressurealso is rising on Merrill. B1

n Alstom spent at least tens ofmillions of dollars more thanpreviously suspected on illicitpayments to win contractsabroad, prosecutors say. A7

n The Dow industrials fell11.72 points to 11421.99 asstocks and oil prices seesawed.Energy stocks offset slump-ing financial shares. B1, B6n Soybean prices had theirbiggest one-day gain amidfears of a shortage before theharvest begins this fall. B6

n Retail sales in August wereweak across the board, falling0.3% from July, a sign that con-sumer spending is weak. A4

n GM’s Wagoner told lawmak-ers that the seizing up of creditmarkets has left Detroit’s automakers in need of loans. A4

n WaMu CEO Fishman hireda close aide from his days ata Brooklyn, N.Y., bank as spe-cial assistant to the CEO. B16

n A government-backed res-cue plan for Alitalia was in jeop-ardy as talks between unionsand investors collapsed. B5

n Deutsche Bank reached adeal to buy a nearly 30%stake in Deutsche Post’s bank-ing unit for $3.89 billion. B3

n China agreed to use itsforeign-exchange reserves tobuy $300 million in bondsfrom Costa Rica, in a politi-cally driven investment. B3

>

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What’s News–

n Hurricane Ike began tobatter the Texas coast.But even as waves startedcrashing over Galveston Is-land’s 17-foot seawall, asmany as 20,000 residentsshunned orders to evacuate.Authorities in Houston, fear-ing traffic gridlock, told resi-dents to remain and “hunkerdown.” Forecasters warnedIke could grow into a Cate-gory 3 hurricane, with peakwinds of up to 120 mph. A3

Insurers are girding for lossesthat may far exceed Rita’s $2billion toll in 2005 and mightapproach Katrina’s $41 billion.

n The Justice Departmentproposed guidelines designedto loosen restrictions on howFBI agents conduct national-security investigations. A3

n The U.S. placed sanctionson several Venezuelan officials,saying they aided Colombianguerrillas in drug trafficking. A1

n Alaska lawmakers voted tosubpoena Palin’s husband in aprobe of her alleged effort to im-properly fire a state trooper. A6

n Obama sharpened his at-tack on McCain with a TV adthat portrays his Republicanrival as as out-of-touch. A6n Biden released 10 years oftax returns, in what was inpart an attempt to pressurePalin to do the same. A6

n Pakistan’s military warnedit could strike back at U.S. sol-diers if they conduct cross-bor-der raids from Afghanistan. A7n Taliban militants attackeda convoy in Afghanistan, spark-ing a clash that killed 10 insur-gents and five Afghan guards.

n A car bomb ripped through acommercial district in a mainlyShiite town north of Bagdhad,killing at least 32 people. A8

n A South African judge threwout charges against Zuma, clear-ing the way for the ANC leaderto become president. A8

n Talks on deploying moni-tors in Georgia broke down.Saakashvili’s critics are question-ing his handling of the war. A7

n Thailand’s Samak failed inhis bid to return as prime minis-ter after members of his partyand coalition deserted him. A7

n A district court judge in NewOrleans was suspended for twoyears by a federal judicial panelfor alleged misconduct. A4

n Freight trains began rollinglate Friday through the Chan-nel Tunnel after firefighters ex-tinguished an intense blaze. A8

n A Chinese dairy companywhose baby formula has beenimplicated in a wave of ill-nesses began a major recall. A8n Chinese officials detainedexecutives of an illegal iron-ore mine where a mudslidekilled at least 178 people. A8

C O N T E N T SBooks W13,14The Buzz B3,4Campaign ’08 A6Corporate News B5,6Food & Drink W3,9Leisure & Arts W14,18

Letters to Editor A12Markets Lineup B4Opinion A11-13Remembrances A9Sports W12U.S. News A2-4World News A7,8

s Copyright 2008 Dow Jones & Company All Rights Reserved

Tran TrongDuyet

Fire burned houses in Galveston Island, Texas, as Hurricane Ike approached Friday. Article on page A3, andcontinuing storm coverage on WSJ.com.

—Inside—

7 7

–Markets–Stocks (Friday):DJIA 11421.99, t 11.72;Nasdaq 2261.27, s3.05; S&P500 index 1251.70, s2.65.Bonds: 10-year Treas.t29/32, yield 3.730%;30-year Treas.t 1 30/32,yield 4.325%.Dollar: 107.87 yen, +0.72;euro $1.4217, +2.70 cent vs.the dollar.Commod: Oil $101.18 abarrel, s$0.31; Gold (Comex)$760.30 per troy ounce ,s19.00; DJ-AIGindex 175.763, s2.725.

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U.S. AccusesVenezuelanOfficialsIn Drug Case

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