Article & Journal Resources

By THOMAS FLEMING

There is a Christmas story at the birth of this country that very few Americans know. It involves a single act by George Washington -- his refusal to take absolute power -- that affirms our own deepest beliefs about self-government, and still has profound meaning in today's world. To appreciate its significance, however, we must revisit a dark period at the end of America's eight-year struggle for independence.

The story begins with Gen. Washington's arrival in Annapolis, Md., on Dec. 19, 1783. The country was finally at peace -- just a few weeks earlier the last British army on American soil had sailed out of New York harbor. But the previous eight months had been a time of terrible turmoil and anguish for Gen. Washington, outwardly always so composed. His army had been discharged and sent home, unpaid, by a bankrupt Congress -- without a victory parade or even a statement of thanks for their years of sacrifices and sufferings.

Instead, not a few congressmen and their allies in the press had waged a vitriolic smear campaign against the soldiers -- especially the officers, because they supposedly demanded too much money for back pay and pensions. Washington had done his utmost to persuade Congress to pay them, yet failed, in this failure losing the admiration of many of the younger officers. Some sneeringly called him "The Great Illustrissimo" -- a mocking reference to his world-wide fame. When he said farewell to his officers at Fraunces Tavern in New York early in December, he had wept at the sight of anger and resentment on many faces.

Congressman Alexander Hamilton, once Washington's most gifted aide, had told him in a morose letter that there was a "principle of hostility to an army" loose in the country and too many congressmen shared it. Bitterly, Hamilton added that he had "an indifferent opinion of the honesty" of the United States of America.

Soon Hamilton was spreading an even lower opinion of Congress. Its members had fled Philadelphia when a few hundred unpaid soldiers in the city's garrison surrounded the Pennsylvania State House (now Independence Hall), demanding back pay. Congressman Hamilton called the affair "weak and disgusting to the last degree" and soon resigned his seat.

The rest of the country agreed. There were hoots of derision and contempt for Congress in newspapers from Boston to Savannah. The politicians took refuge in the village of Princeton, N.J., where they rejected Washington's advice to fund a small postwar regular army, then wandered to Annapolis.

In Amsterdam, where brokers were trying to sell shares in an American loan negotiated by John Adams, sales plummeted. Even America's best friend in Europe, the Marquis de Lafayette, wondered aloud if the United States was about to collapse. A deeply discouraged Washington admitted he saw "one head turning into thirteen."

Was there anyone who could rescue the situation? Many people thought only George Washington could work this miracle.

Earlier in the year he had been urged to summarily dismiss Congress and rule as an uncrowned king, under the title of president. He emphatically refused to consider the idea. Now many people wondered if he might have changed his mind. At the very least he might appear before Congress and issue a scathing denunciation of their cowardly flight from Philadelphia and their ingratitude to his soldiers. That act would destroy whatever shreds of legitimacy the politicians had left.

At noon on Dec. 23, Washington and two aides walked from their hotel to the Annapolis State House, where Congress was sitting. Barely 20 delegates had bothered to show up.

The general and his aides took designated seats in the assembly chamber. The president of Congress, Thomas Mifflin of Pennsylvania, began the proceedings: "Sir, the United States in Congress assembled are prepared to receive your communications."

Mifflin had been one of the generals who attempted to humiliate Washington into resigning during the grim winter at Valley Forge. He had smeared Washington as a puffed-up egotist, denigrated his military ability, and used his wealth to persuade not a few congressmen to agree with him. A few months later, Mifflin was forced to quit the army after being accused of stealing millions as quartermaster general.

Addressing this scandal-tarred enemy, Washington drew a speech from his coat pocket and unfolded it with trembling hands. "Mr. President," he began in a low, strained voice. "The great events on which my resignation depended having at length taken place; I now have the honor of offering my sincere congratulations to Congress and of presenting myself before them to surrender into their hands the trust committed to me, and to claim the indulgence of retiring from the service of my country."

Washington went on to express his gratitude for the support of "my countrymen" and the "army in general." This reference to his soldiers ignited feelings so intense, he had to grip the speech with both hands to keep it steady. He continued: "I consider it an indispensable duty to close this last solemn act of my official life by commending the interests of our dearest country to the protection of Almighty God and those who have the superintendence of them [Congress] to his holy keeping."

For a long moment, Washington could not say another word. Tears streamed down his cheeks. The words touched a vein of religious faith in his inmost soul, born of battlefield experiences that had convinced him of the existence of a caring God who had protected him and his country again and again during the war. Without this faith he might never have been able to endure the frustrations and rage he had experienced in the previous eight months.

Washington then drew from his coat a parchment copy of his appointment as commander in chief. "Having now finished the work assigned me, I retire from the great theater of action and bidding farewell to this august body under whom I have long acted, I here offer my commission and take leave of all the employments of public life." Stepping forward, he handed the document to Mifflin.

This was -- is -- the most important moment in American history.

The man who could have dispersed this feckless Congress and obtained for himself and his soldiers rewards worthy of their courage was renouncing absolute power. By this visible, incontrovertible act, Washington did more to affirm America's government of the people than a thousand declarations by legislatures and treatises by philosophers.

Thomas Jefferson, author of the greatest of these declarations, witnessed this drama as a delegate from Virginia. Intuitively, he understood its historic dimension. "The moderation. . . . of a single character," he later wrote, "probably prevented this revolution from being closed, as most others have been, by a subversion of that liberty it was intended to establish."

In Europe, Washington's resignation restored America's battered prestige. It was reported with awe and amazement in newspapers from London to Vienna. The Connecticut painter John Trumbull, studying in England, wrote that it had earned the "astonishment and admiration of this part of the world."

Washington shook hands with each member of Congress and not a few of the spectators. Meanwhile, his aides were bringing their horses and baggage wagons from their hotel. They had left orders for everything to be packed and ready for an immediate departure.

The next day, after an overnight stop at a tavern, they rode at a steady pace toward Mount Vernon. Finally, as twilight shrouded the winter sky, the house came into view beside the Potomac River. Past bare trees and wintry fields the three horsemen trotted toward the white-pillared porch and the green shuttered windows, aglow with candlelight. Waiting for them at the door was Martha Washington and two grandchildren. It was Christmas eve. Ex-Gen. Washington -- and the United States of America -- had survived the perils of both war and peace.

Mr. Fleming is the author, most recently, of "The Perils of Peace: America's Struggle for Survival After Yorktown" (Collins, 2007).

When Saul of Tarsus set out on his journey to Damascus the whole of the known world lay in bondage. There was one state, and it was Rome. There was one master for it all, and he was Tiberius Caesar.

Everywhere there was civil order, for the arm of the Roman law was long. Everywhere there was stability, in government and in society, for the centurions saw that it was so.

But everywhere there was something else, too. There was oppression -- for those who were not the friends of Tiberius Caesar. There was the tax gatherer to take the grain from the fields and the flax from the spindle to feed the legions or to fill the hungry treasury from which divine Caesar gave largess to the people. There was the impressor to find recruits for the circuses. There were executioners to quiet those whom the Emperor proscribed. What was a man for but to serve Caesar?

There was the persecution of men who dared think differently, who heard strange voices or read strange manuscripts. There was enslavement of men whose tribes came not from Rome, disdain for those who did not have the familiar visage. And most of all, there was everywhere a contempt for human life. What, to the strong, was one man more or less in a crowded world?

Then, of a sudden, there was a light in the world, and a man from Galilee saying, Render unto Caesar the things which are Caesar's and unto God the things that are God's.

And the voice from Galilee, which would defy Caesar, offered a new Kingdom in which each man could walk upright and bow to none but his God. Inasmuch as ye have done it unto one of the least of these my brethren, ye have done it unto me. And he sent this gospel of the Kingdom of Man into the uttermost ends of the earth.

So the light came into the world and the men who lived in darkness were afraid, and they tried to lower a curtain so that man would still believe salvation lay with the leaders.

But it came to pass for a while in divers places that the truth did set man free, although the men of darkness were offended and they tried to put out the light. The voice said, Haste ye. Walk while you have the light, lest darkness come upon you, for he that walketh in darkness knoweth not whither he goeth.

Along the road to Damascus the light shone brightly. But afterward Paul of Tarsus, too, was sore afraid. He feared that other Caesars, other prophets, might one day persuade men that man was nothing save a servant unto them, that men might yield up their birthright from God for pottage and walk no more in freedom.

Then might it come to pass that darkness would settle again over the lands and there would be a burning of books and men would think only of what they should eat and what they should wear, and would give heed only to new Caesars and to false prophets. Then might it come to pass that men would not look upward to see even a winter's star in the East, and once more, there would be no light at all in the darkness.

And so Paul, the apostle of the Son of Man, spoke to his brethren, the Galatians, the words he would have us remember afterward in each of the years of his Lord:

Stand fast therefore in the liberty wherewith Christ has made us free and be not entangled again with the yoke of bondage.

This editorial was written in 1949 by the late Vermont Royster and has been published annually since.

Lieberman gives the nod, as Republicans take a second look. Plus can America survive the writers strike?

Paul Gigot: This week on "The Journal Editorial Report," he's crossing party lines to endorse John McCain for president. Sen. Joe Lieberman's here to tell us why. And with Rudy Giuliani slipping in the national polls, our panel takes a look at the wide-open Republican race. Plus, the Hollywood writers strike is looming large over the Oscars and Golden Globes. Will celebs cross the picket line to get their awards, and who stands to lose the most in the seven-week-old showdown? Our panel weighs in after the headlines.

Gigot: Welcome to "The Journal Editorial Report." I'm Paul Gigot.

The campaign of Republican presidential candidate John McCain is enjoying a resurgence of late, with two new polls putting him in second place in the all-important state of New Hampshire. With that primary less than three weeks away, he's gotten lots of positive buzz and a handful of new endorsements, including one from my guest this week. Independent Democratic Senator Joe Lieberman joins me now from Connecticut.

Senator, thanks for being here. Good to have you.

Lieberman: Good to be with you, Paul. Thank you.

Gigot: All right, so, you've endorsed John McCain. What response have you received from your fellow Democrats this week?

Lieberman: Oh, some puzzlement, some anger, I mean, a lot of phone calls. People were angry. But you know, to me, I know it's unusual for a Democrat, even an independent Democrat, to endorse a Republican, but there's too much as stake in this presidential election to let the choice be governed solely by what party you're in. And to me, John McCain is simply the best qualified to lead our country forward, so I wasn't going to stop from endorsing him because he happens to have an "R" after his name and I happen to have a "D"--or an "ID," as it were.

Gigot: One of the reasons you've cited is the fact that you think a President McCain could reach across the aisle and restore some bipartisanship to foreign policy. Why would he be able to do that better than, say, somebody like Sen. Obama, one of whose main themes is kind of get beyond this partisan divide and bring the country together?

Lieberman: Right. Look, there are two reasons, two main reasons, that I supported and am proud to support John McCain. One is his very strong record on national security. I think he understands the threat of Islamist extremism. He understands how to put together a principled, strong American foreign and defense policy. So I'm with him on all that.

The second reason is that he's had a record of working across party lines over a long period of time. John McCain is a proud Republican, but he has a restless desire to get things done, and he knows that, to do it, you've got to work across party lines. So more than any of the other candidates, I think he's got the proven record.

And look, with all respect to Sen. Obama, who is a friend of mine, I simply disagree with him on a lot of the positions he's taken on national security, with regard to Iraq, Iran, for instance. Whereas, I totally agree with John McCain, worked side-by-side with him, so I think he's got the ability from the--day one, to be a strong commander in chief who will bring us back, Paul, to where we used to be on foreign policy, which was that you had debates here at home, but then, as former senator Arthur Vandenberg famously said, politics ends at the water's edge because we've got common enemies.

Gigot: When Sen. McCain came in to see us at the Wall Street Journal last week, we asked him how he would explain the opposition from Nancy Pelosi and Harry Reid to the surge in Iraq and support for more funding. He attributed it to, quote, "a lack of patriotism," unquote. That's pretty tough. Do you agree with that?

Lieberman: Yeah, well, it is tough, and John's a straight talker. I'd say I agree with him in the sense that I'm afraid too many Democrats put both ideology and partisan interests ahead of the national interest, and so even after--it was one thing to say last year--earlier this year, let's say--that people were skeptical about whether we could win the war in Iraq. And then when Gen. Petraeus and the president came forward with the surge strategy, whether it would work. But now it is working, quite miraculously. And so for people to continue to say the war is lost and to fight to cut funding for our troops or set deadlines for withdrawal--to me, that's not having partisan politics end at the water's edge.

Gigot: Let me ask you a question about Iraq. Do you think that no matter who's president next year, Democrat or Republican, that there are going to be American troops, maybe tens of thousands of American troops, in Iraq for many years to come?

Lieberman: I believe so, and I suppose I'd say I think it's important to our security that that is so. Look, here's the good news. Because the surge in Iraq is working, we are now beginning to draw down over 20,000 troops from now until July. Gen. Petraeus is going to come back and speak to the Congress and the president in April. He'll tell us whether he thinks we can withdraw more in the rest of the year. That all has got to depend not on some arbitrary formula dictated by Congress but on conditions on the ground.

But no one thinks--unless you just want to give up on Iraq and let al Qaeda and Iran take it over--that all of our troops are going to be out of Iraq in 2009, and it was interesting in one of the Democratic debates, Sen. Clinton, Obama and Edwards, much to my surprise, all said if they were president, we would still have troops in Iraq in 2009.

Gigot: Let me ask you about another bit of news in the Middle East this week. Iran, where the Russians are supplying fuel, announced that they're going to supply nuclear fuel for what they say is a civilian nuclear plant at Bushehr. President Bush said he had no problem with that. Are you as sanguine as the president?

Lieberman: I'm not, and frankly, I think with all respect to the president, that he was putting a good face on this, because I think in the best of all worlds, particularly with all the evidence--the National Intelligence Estimate notwithstanding--that we have and that the international community has, that Iran is enriching nuclear fuel to get ready to build a bomb, that we don't want to encourage them in any way. And I think the Russian sale of this fuel does encourage them.

Look, it's great--not great--but it is better that apparently this fuel will be under the control of the International Atomic Energy Agency. But this is not a time when I'd give this fanatical anti-American extremist regime anything that takes them closer to having a nuclear weapon. So I regret what the Russians did.

Gigot: But it sounds like there's not much we can do about it. They're going to deliver it, and what else can the president do?

Lieberman: There's not much we can do about that right now. We can of course go forward and try to pass another sanctions program in the United Nations, which we I hope will do after the first of the year.

I'll tell you what else. I'm really glad that the secretary of state has designated the Iranian Guard Corps and the Quds Force there as terrorist organizations, now with the capacity to impose economic sanctions on them. I hope after the U.N. resolution, that the United States will use the legal powers we have to impose some economic sanctions, both on the Iranians and on some foreign companies that are doing business with them in a way that we think makes it easier for them to get nuclear weapons, which everyone here in American politics pretty much says we will not allow to happen.

So Iran is a menace under this regime. The Iranian people are not. Iran is in this fanatical regime, and we've got to do everything we can to both contain them, to support the reformers in Iran, and to stop them from getting nuclear weapons.

Gigot: All right, Sen. Joseph Lieberman. Thanks so much for being here.

Lieberman: Paul, great to be with you. Take care.

Gigot: Still ahead, Rudy Giuliani slips in the national polls and the Hucka-boom continues. With less than two weeks to Iowa, our panel handicaps the Republican race.

Gigot: With the nation's first primary contest less than two weeks away, the GOP race is wide open. Two new national polls show former New York City mayor Rudy Giuliani losing significant ground with the so-called Hucka-boom taking a toll on the onetime front-runner.

Joining the panel this week, Wall Street Journal columnist and deputy editor Dan Henninger, editorial board members Dorothy Rabinowitz and Jason Riley and, in Washington, Steve Moore.

Dan, I have to say this Republican race is as wide open as any in my adult lifetime. Why hasn't any candidate been able to break from the pack?

Henninger: As you just noted, Paul, there's a feeling out there Rudy Giuliani's candidacy is in decline and others are rising. You know, I think we all in this business kind of flatter ourselves on the idea that this campaign's been running since January, and the conceit is the whole country is waiting with bated breath day-to-day to see. That's not the way it works. The Iowa caucus is Jan. 3. New Hampshire is just over that. Obviously what's going on is people are beginning to pay attention and focus. And they're starting to think about which candidate makes the most sense to them, and, as always, the pack is beginning to tighten.

Gigot: But what's the problem with the nature of this pack--these candidates, Jason, that nobody--there's no Ronald Reagan this time, there's no George W. Bush from 2000, somebody who is really the clear front-runner?

Riley: True. But at the same time I think you have to question Giuliani's strategy to some extent, which is basically to ignore Iowa and concentrate on states that were going to hold primaries in February. And it's backfired to some extent.

Henninger: Well, just to get back for a second to Paul's question. I think one of the problems, Paul, is that there's no really authentic Southern conservative or authentic conservative from California or the West. You know, George Allen of Virginia thought he was going to be that guy. We know what happened to him. Fred Thompson really hasn't caught fire. So as a result, you've got conservatives like Giuliani, who are economic and national security conservatives, but social-issue moderates. And so this has created a lot of confusion for the Republican base.

Gigot: Go ahead, Steve.

Moore: I was just going to say, to me the big story of how this has evolved is you've got two kind of frontrunners in Rudy Giuliani and Romney--the ones with the most money and name recognition. And if you look at the polls today, the two of them combined are only getting about a third of the Republican primary vote, and what that suggests to me is that there are a lot of doubts among Republican primary voters about what I call the big two. That's the reason you've got this Huckabee boom that you're talking about.

Gigot: Steve, why haven't they been able to make the sale?

Moore: Clearly, Rudy Giuliani is culturally too far to the left for Republican voters. He's from New York. Don't forget, all of you up in New York, a lot of the people around the rest of the country have a negative attitude towards New York.

Gigot: We never forget about that, Steve, OK?

Moore: And Romney, I just do think, has an authenticity issue.

The one other point I'd like to make, Paul, is that Democrats that I talk to--and Kim Strassel talked about this in her column--Democrats are salivating for Mike Huckabee, because they know he is the weakest candidate in the general election for the Republicans.

Gigot: Now, the Huckabee boom is explainable, in part, I think as a result of the social conservatives, particularly in Iowa. But there's something else that's happening here, Dorothy, and that is of late something of a resurgence--a mini-resurgence, at least--for John McCain, who a lot of people had written off. Is this real, and how do you explain it?

Rabinowitz: Yes, I think it's real, because underneath the surface all the time, not just now, people were daunted by the--uh, he's gone. There was a tremendously bad news over the summer about his campaign falling apart. But underneath it all, if you asked people, what do you think? Well, it was always McCain. In the end, when they thought about it, it was always he ranks better. He's the most likely to defeat the Democratic candidate; he's the one can you depend on for security reasons. And it has all come together now, magically but not surprisingly.

Gigot: Particularly, as Rudy Giuliani descends and he picks up some of the support from the former Giuliani supporters.

Riley: Right. He does, he does. And he will definitely benefit from Huckabee's surge in Iowa, that is McCain in New Hampshire. It'll take some wind out of Romney's sails.

But the other thing to remember about McCain is he matches up very well against the Democratic front-runners, not only Clinton, whom he matches up against much better than Romney or Giuliani, but also against Obama. He matches up much better against them in the general election than Romney and Giuliani.

Gigot: Steve, let me ask you a question about Fred Thompson, who was supposed to be the Southern conservative that Dan talked about. He has not gone anywhere so far. But is there's a chance here at the end, particularly if Huckabee deflates, that he could be the de facto landing place for some of these conservatives?

Moore: No, I think he has flatlined. And the other big story here has been that where Huckabee is right now, Paul, is where Fred Thompson should be. This is where a lot of us who are political prognosticators thought that Thompson would come in as the conservative and rush into first place. The difference between Huckabee and Fred Thompson is Huckabee has energy and charisma, and unfortunately, Thompson really falls flat with voters.

Gigot: All right, Steve, thank you.

Still ahead, would Letterman and Leno actually be funny with nobody to write their stuff? Well, we may be about to find out. When we come back, a look at the winners and losers in the seven-week-old showdown between Hollywood writers and the studios.

Gigot: If the jokes seem particularly bad at the upcoming Golden Globes and Oscars, blame the ongoing writers strike. The Writers Guild of America denied requests this week to let comedy writers prepare material for both of the annual award shows. The six-week-old strike is threatening to make attendance at the ceremonies scarce as well, with talk of picket lines sure to spook the union-friendly folks in Hollywood.

Dorothy, this fight is about downstream revenues for things like DVDs and new technology, I gather. Who has the upper hand, the studios or writers?

Rabinowitz: In my view, unequivocally the studios have. They have deep pockets. They have a chance now to renegotiate some very extensive contracts. Don't forget, NBC is owned by Westinghouse. These are people who can wait it out. There are writers who have been living for a long time as though they were in the dot-com era making scads of money, some making $10 million a year, and this is the opportunity. They are now going to face problems with the Directors Guild, which is about to set to negotiate separately. And they are not going to support the writers strike.

Somehow or other, the union has put itself in a terrible place. They are not going to win this, because the studios can wait. Now, can you say that they don't have scripts and they don't have--

Gigot: But I thought content was king here. Isn't that what we in the media have been telling ourselves for a long time?

Riley: But it doesn't mean they'll be out of content, first of all. They can negotiate contracts with international studios, for instance. They can bring in writers. They have other channels. As Dorothy said, these are big companies. I mean, Disney owns ABC. GE owns NBC. And these companies would like to see some more efficiencies in the business anyway, so they have an incentive to wait out the large contracts.

Moore: Yeah, but Jason--

Gigot: Hold it. Go ahead, Steve. Steve, you're for the working man.

Moore: I guess Jason and Dorothy aren't watching evening TV, because I am, and it's lousy stuff. I mean ,Dorothy, have you seen this new game show they've got on, "The Duel"? I mean, it's horrible stuff.

The people that I talk to in Hollywood, they're, on both sides, are getting nervous. I call this strike mutually assured destruction. And the one question really is, if these shows go on, like Letterman and Leno and the Oscars--you said are they going to be any less funny? I don't think they're funny right now. And the question is, if Leno and Letterman go on and they're pretty funny, a lot of people are going to wonder, Well, maybe we don't need these writers after all.

Henninger: But let's make one thing clear here. This is not about television, OK? This is about the Web. It's about new distribution channels. It's about cell phones. And no one yet understands how that economic model is going to work, because most people think what they get on the Web should basically be free.

Gigot: And the writers want a big guaranteed take on that? Is that what they want?

Henninger: They want a big guaranteed take. The question is what's the take? Where's it coming from? Nobody knows that yet.

Gigot: Nobody knows what it will be. What about the proliferation of reality TV, which is doing pretty well, it doesn't cost a lot of money? Can't the studios use that, not have to pay a lot of money for content, and ride this out.

Riley: Well, some can.

Rabinowitz: They are doing it.

Riley: FOX's No. 1 show is "American Idol." They're sort of strike-proof here.

Rabinowitz: They are strike-proof. But that started a long time before this writers strike. It was cheap stuff, and it didn't depend on the writers strike.

But the writers learned from the DVD experience, they were getting nothing. And this so enraged them that they have now been catapulted into this adversarial position because they think this world of technology's going to produce that.

Gigot: All right, Jason, briefly, are those actors and actresses going to cross the picket lines at these award shows to--they've got the glitz and the publicity. Will they have to give that up?

Riley: I think some will and some won't. I think they're going to wait and see who does. No one wants to go first, but someone will go first.

Gigot: Someone will cross it.

Moore: They're looking out for No. 1.

Gigot: OK, Steve. All right. Thanks.

We have to take one more break. When we come back, our "Hits and Misses" of the week.

Gigot: Winners and losers, picks and pans, "Hits and Misses." It's our way of calling attention to the best and the worst of the week.

Item one, Dan Henninger's about to get $25 richer. Congratulations, Dan.

Henninger: Thank you. This is a class-action settlement notice that I received in the mail last week, and I suspect a few of our viewers did too. Thirty million of them have been sent out. It involves a class-action settlement with Diner's Club, MasterCard and Visa, which came to $336 million. Now, it involves some surcharges on foreign transactions, but primarily what this says is that if you take the first easy option, you get a refund of $25.

Now, apparently a lot of people who've received this think it's a scam--that it's sort of like swampland sale in South Carolina, and they've been throwing it away. Well, maybe it is a scam, because the lawyers involved are going to get $86 million. Happy New Year.

Gigot: All right, Dan.

Next, a hit to the newest owner of the Magna Carta. Jason?

Riley: Yes, this is a big hit for David Rubenstein. I'm sure we all remember this from ninth-grade history class, but the Magna Carta, which dates to 1215, is one of the most important documents in the history of democracy. And there are only 17 copies in existence, and only one here in the United States. It came up for auction a few days ago, and Mr. Rubenstein, who made a fortune in private equity, went out and paid $21 million to make sure that it stays on display at the U.S. Archives in Washington. That was a very classy move.

Gigot: Yeah, it really is. Terrific.

Finally, the reality TV explosion. Dorothy?

Rabinowitz: Yes, well, how can I persuade you enough that this started long before any writers strike? So ask yourself, what happens when your relatives complain to you there's nothing to watch on television? You know what they're talking about? They're talking about network TV. And why? It's because of these reality shows, one worse than another.

And the worst aspect of them is that everybody is crying and sobbing on them relentlessly and at the drop of the hat. All of the contestants are doing this, whether they've lost 40 pounds or 140 pounds or gained it on this program. They are sobbing.

And I want to ask now, in all honesty, whether if people who are so worried--those political sages--about our place in the world, our profile to the world, why, instead of stopping the administration, don't they pause here first and think about this American image. Can this be the image of America projected around the globe? Can these be the people who will reassure our allies and make our enemies fearful? These sobbing masses? I doubt it.

Gigot: You know, if you keep this up, you're going to get an invitation to be on "Dancing With the Stars." They're going to insist on it.

Henninger: Can't wait.

Gigot: All right, thank you, Dorothy.

That's it for this week's edition of "The Journal Editorial Report." Thanks to my panel and to all of you for watching. I'm Paul Gigot. Merry Christmas. We hope to see you right here next week.

The racist history the Democratic Party wants you to forget.

BY BRUCE BARTLETT


In his new book, "The Conscience of a Liberal," New York Times columnist Paul Krugman makes a strong case for his belief that the political success of the Republican Party and the conservative movement over the past 40 years has resulted largely from their co-optation of Southern racists that were the base of the Democratic Party until its embrace of civil rights in the 1960s. A key piece of evidence for Mr. Krugman is that Ronald Reagan gave his first speech after accepting the Republican presidential nomination in 1980 near Philadelphia, Miss., where three civil rights workers were murdered in 1964. In the course of this speech, Reagan said he supported "states' rights." Mr. Krugman says this was code declaring his secret sympathy for Southern racism.

Others, including Mr. Krugman's Times colleague David Brooks and Reagan biographer Lou Cannon, have come to Reagan's defense, denying that he was a racist or had any racist intent in his 1980 speech. That's fine but unlikely to change the minds of those like Mr. Krugman who are determined to smear the Republican Party with the charge of racism, and who are adept at finding racist code words like "law and order" by Republicans that are completely convincing to liberals and Democrats in support of this accusation, even though they are invisible to those with no political ax to grind.

However, if a single mention of states' rights 27 years ago is sufficient to damn the Republican Party for racism ever afterwards, what about the 200-year record of prominent Democrats who didn't bother with code words? They were openly and explicitly for slavery before the Civil War, supported lynching and "Jim Crow" laws after the war, and regularly defended segregation and white supremacy throughout most of the 20th century.

Following are some quotes from prominent Democrats largely drawn from my new book, "Wrong on Race: The Democratic Party's Buried Past." Even with the exclusion of all quotes that contain the N-word, it is clear that many of the Democratic Party's most important historical figures have long made statements that reduce Reagan's alleged transgression to a drop in the ocean. If we are going to hold him and his party accountable for a single mention of states' rights, then the party of those listed below is far more culpable in promoting and defending racism.

Blacks "are inferior to the whites in the endowments of both of body and mind."

--Thomas Jefferson, 1787
Co-founder of the Democratic Party (along with Andrew Jackson)
President, 1801-09

"I hold that the present state of civilization, where two races of different origin, and distinguished by color, and other physical differences, as well as intellectual, are brought together, the relation now existing in the slaveholding states between the two, is, instead of an evil, a good--a positive good."

--Sen. John C. Calhoun (D., S.C.), 1837
Vice President, 1825-32
His statue stands in the U.S. Capitol.

If blacks were given the right to vote, that would "place every splay-footed, bandy-shanked, hump-backed, thick-lipped, flat-nosed, woolly-headed, ebon-colored Negro in the country upon an equality with the poor white man."

--Rep. Andrew Johnson, (D., Tenn.), 1844
President, 1865-69

"Resolved, That the Democratic Party will resist all attempts at renewing, in Congress or out of it, the agitation of the slavery question, under whatever shape or color the attempt may be made."

--Platform of the Democratic Party, 1852

Blacks are "a subordinate and inferior class of beings who had been subjugated by the dominant race."

--Chief Justice Roger Taney, Dred Scott v. Sandford, 1856
Appointed Attorney General by Andrew Jackson in 1831
Appointed Secretary of the Treasury by Andrew Jackson in 1833
Appointed to the Supreme Court by Andrew Jackson in 1836

"Resolved, That claiming fellowship with, and desiring the co-operation of all who regard the preservation of the Union under the Constitution as the paramount issue--and repudiating all sectional parties and platforms concerning domestic slavery, which seek to embroil the States and incite to treason and armed resistance to law in the Territories; and whose avowed purposes, if consummated, must end in civil war and disunion, the American Democracy recognize and adopt the principles contained in the organic laws establishing the Territories of Kansas and Nebraska as embodying the only sound and safe solution of the 'slavery question' upon which the great national idea of the people of this whole country can repose in its determined conservatism of the Union--NON-INTERFERENCE BY CONGRESS WITH SLAVERY IN STATE AND TERRITORY, OR IN THE DISTRICT OF COLUMBIA" (emphasis in original).

--Platform of the Democratic Party, 1856

"I hold that a Negro is not and never ought to be a citizen of the United States. I hold that this government was made on the white basis; made by the white men, for the benefit of white men and their posterity forever, and should be administered by white men and none others."

--Sen. Stephen A. Douglas (D., Ill.), 1858
Presidential nominee of the Democratic Party, 1860

"Resolved, That the enactments of the State Legislatures to defeat the faithful execution of the Fugitive Slave Law, are hostile in character, subversive of the Constitution, and revolutionary in their effect."

--Platform of the Democratic Party, 1860

"The Almighty has fixed the distinction of the races; the Almighty has made the black man inferior, and, sir, by no legislation, by no military power, can you wipe out this distinction."

--Rep. Fernando Wood (D., N.Y.), 1865
Mayor of New York City, 1855-58, 1860-62

"My fellow citizens, I have said that the contest before us was one for the restoration of our government; it is also one for the restoration of our race. It is to prevent the people of our race from being exiled from their homes--exiled from the government which they formed and created for themselves and for their children, and to prevent them from being driven out of the country or trodden under foot by an inferior and barbarous race."

--Francis P. Blair Jr., accepting the Democratic nomination for Vice President, 1868
Democratic Senator from Missouri, 1869-72
His statue stands in the U.S. Capitol.

"Instead of restoring the Union, it [the Republican Party] has, so far as in its power, dissolved it, and subjected ten states, in time of profound peace, to military despotism and Negro supremacy."

--Platform of the Democratic Party, 1868

"While the tendency of the white race is upward, the tendency of the colored race is downward."

--Sen. Thomas Hendricks (D., Ind.), 1869
Democratic nominee for Vice President, 1876
Vice President, 1885

"We, the delegates of the Democratic party of the United States . . . demand such modification of the treaty with the Chinese Empire, or such legislation within constitutional limitations, as shall prevent further importation or immigration of the Mongolian race."

--Platform of the Democratic Party, 1876

"No more Chinese immigration, except for travel, education, and foreign commerce, and that even carefully guarded."

--Platform of the Democratic Party, 1880

"American civilization demands that against the immigration or importation of Mongolians to these shores our gates be closed."

--Platform of the Democratic Party, 1884

"We favor the continuance and strict enforcement of the Chinese exclusion law, and its application to the same classes of all Asiatic races."

--Platform of the Democratic Party, 1900

"The repeal of the fifteenth amendment, one of the greatest blunders and therefore one of the greatest crimes in political history, is a consummation to be devoutly wished for."

--Rep. John Sharpe Williams (D., Miss.), 1903
House Minority Leader, 1903-08

"Republicanism means Negro equality, while the Democratic Party means that the white man is supreme. That is why we Southerners are all Democrats."

--Sen. Ben Tillman (D., S.C.), 1906
Chairman, Committee on Naval Affairs, 1913-19

"We are opposed to the admission of Asiatic immigrants who can not be amalgamated with our population, or whose presence among us would raise a race issue and involve us in diplomatic controversies with Oriental powers."

--Platform of the Democratic Party, 1908

"I am opposed to the practice of having colored policemen in the District [of Columbia]. It is a source of danger by constantly engendering racial friction, and is offensive to thousands of Southern white people who make their homes here."

--Sen. Hoke Smith (D., Ga.), 1912
Appointed Secretary of the Interior by Grover Cleveland in 1893

"The South is serious with regard to its attitude to the Negro in politics. The South understands this subject, and its policy is unalterable and uncompromising. We desire no concessions. We seek no sops. We grasp no shadows on this subject. We take no risks. We abhor a Northern policy of catering to the Negro in politics just as we abhor a Northern policy of social equality."

--Josephus Daniels, editor, Raleigh News & Observer, 1912
Appointed Secretary of the Navy by Woodrow Wilson in 1913
Appointed Ambassador to Mexico by Franklin D. Roosevelt in 1933
USS Josephus Daniels named for him by the Johnson Administration in 1965

"The Negro as a race, in all the ages of the world, has never shown sustained power of self-development. He is not endowed with the creative faculty. . . . He has never created for himself any civilization. . . . He has never had any civilization except that which has been inculcated by a superior race. And it is a lamentable fact that his civilization lasts only so long as he is in the hands of the white man who inculcates it. When left to himself he has universally gone back to the barbarism of the jungle."

--Sen. James Vardaman (D., Miss.), 1914
Chairman, Committee on Natural Resources, 1913-19

"This is a white man's country, and will always remain a white man's country."

--Rep. James F. Byrnes (D., S.C.), 1919
Appointed to the Supreme Court by Franklin D. Roosevelt in 1941
Appointed Secretary of State by Harry S. Truman in 1945

"Slavery among the whites was an improvement over independence in Africa. The very progress that the blacks have made, when--and only when--brought into contact with the whites, ought to be a sufficient argument in support of white supremacy--it ought to be sufficient to convince even the blacks themselves."

--William Jennings Bryan, 1923
Presidential nominee of the Democratic Party, 1896, 1900 and 1908
Appointed Secretary of State by Woodrow Wilson in 1913
His statue stands in the U.S. Capitol.

"Anyone who has traveled to the Far East knows that the mingling of Asiatic blood with European or American blood produces, in nine cases out of ten, the most unfortunate results. . . . The argument works both ways. I know a great many cultivated, highly educated and delightful Japanese. They have all told me that they would feel the same repugnance and objection to have thousands of Americans settle in Japan and intermarry with the Japanese as I would feel in having large numbers of Japanese coming over here and intermarry with the American population. In this question, then, of Japanese exclusion from the United States it is necessary only to advance the true reason--the undesirability of mixing the blood of the two peoples. . . . The Japanese people and the American people are both opposed to intermarriage of the two races--there can be no quarrel there."

--Franklin D. Roosevelt, 1925
President, 1933-45

"This passport which you have given me is a symbol to me of the passport which you have given me before. I do not feel that it would be out of place to state to you here on this occasion that I know that without the support of the members of this organization I would not have been called, even by my enemies, the 'Junior Senator from Alabama.' "

--Hugo Black, accepting a life membership in the Ku Klux Klan upon his election to the U.S. Senate as a Democrat from Alabama, 1926
Appointed to the Supreme Court by Franklin D. Roosevelt in 1937

"Mr. President, the crime of lynching . . . is not of sufficient importance to justify this legislation."

--Sen. Claude Pepper (D., Fla.), 1938
Spoken while engaged in a six-hour speech against the antilynching bill

"I am a former Kleagle [recruiter] of the Ku Klux Klan in Raleigh County. . . . The Klan is needed today as never before and I am anxious to see its rebirth here in West Virginia. It is necessary that the order be promoted immediately and in every state in the union."

--Robert C. Byrd, 1946
Democratic Senator from West Virginia, 1959-present
Senate Majority Leader, 1977-80 and 1987-88
Senate President Pro Tempore, 1989-95, 2001-03, 2007-present
His portrait stands in the U.S. Capitol.

President Truman's civil rights program "is a farce and a sham--an effort to set up a police state in the guise of liberty. I am opposed to that program. I have voted against the so-called poll tax repeal bill. . .. I have voted against the so-called anti-lynching bill."

--Rep. Lyndon B. Johnson (D., Texas), 1948
U.S. Senator, 1949-61
Senate Majority Leader, 1955-61
President, 1963-69

"There is no warrant for the curious notion that Christianity favors the involuntary commingling of the races in social institutions. Although He knew both Jews and Samaritans and the relations existing between them, Christ did not advocate that courts or legislative bodies should compel them to mix socially against their will."

--Sen. Sam Ervin (D., N.C.), 1955
Chairman, Committee on Government Operations, 1971-75

"The decline and fall of the Roman empire came after years of intermarriage with other races. Spain was toppled as a world power as a result of the amalgamation of the races. . . . Certainly history shows that nations composed of a mongrel race lose their strength and become weak, lazy and indifferent."

--Herman E. Talmadge, 1955
Democratic Senator from Georgia, 1957-81
Chairman, Committee on Agriculture, 1971-81

"These Negroes, they're getting pretty uppity these days and that's a problem for us since they've got something now they never had before, the political pull to back up their uppityness. Now we've got to do something about this, we've got to give them a little something, just enough to quiet them down, not enough to make a difference. For if we don't move at all, then their allies will line up against us and there'll be no way of stopping them, we'll lose the filibuster and there'll be no way of putting a brake on all sorts of wild legislation. It'll be Reconstruction all over again."

--Sen. Lyndon B. Johnson (D., Texas), 1957

"I have never seen very many white people who felt they were being imposed upon or being subjected to any second-class citizenship if they were directed to a waiting room or to any other public facility to wait or to eat with other white people. Only the Negroes, of all the races which are in this land, publicly proclaim they are being mistreated, imposed upon, and declared second-class citizens because they must go to public facilities with members of their own race."

--Sen. Richard B. Russell Jr. (D., Ga.), 1961
The Russell Senate Office Building is named for him.

"I did not lie awake at night worrying about the problems of Negroes."

--Attorney General Robert F. Kennedy, 1961
Kennedy later authorized wiretapping the phones and bugging the hotel rooms of Dr. Martin Luther King Jr.

"I'm not going to use the federal government's authority deliberately to circumvent the natural inclination of people to live in ethnically homogeneous neighborhoods. . . . I have nothing against a community that's made up of people who are Polish or Czechoslovakian or French-Canadian or blacks who are trying to maintain the ethnic purity of their neighborhoods."

--Jimmy Carter, 1976
President, 1977-81
Winner of the Nobel Peace Prize, 2002

"The Confederate Memorial has had a special place in my life for many years. . . . There were many, many times that I found myself drawn to this deeply inspiring memorial, to contemplate the sacrifices of others, several of whom were my ancestors, whose enormous suffering and collective gallantry are to this day still misunderstood by most Americans."

--James Webb, 1990
Now a Democratic Senator from Virginia

"Everybody likes to go to Geneva. I used to do it for the Law of the Sea conferences and you'd find these potentates from down in Africa, you know, rather than eating each other, they'd just come up and get a good square meal in Geneva."

--Sen. Ernest F. Hollings (D., S.C.) 1993
Chairman, Commerce Committee, 1987-95 and 2001-03
Candidate for the Democratic presidential nomination, 1984

"I do not think it is an exaggeration at all to say to my friend from West Virginia [Sen. Robert C. Byrd, a former Ku Klux Klan recruiter] that he would have been a great senator at any moment. . . . He would have been right during the great conflict of civil war in this nation."

--Sen. Christopher Dodd (D., Conn.), 2004
Chairman, Committee on Banking, Housing and Urban Affairs
Candidate for the Democratic presidential nomination, 2008

* "You cannot go into a Dunkin' Donuts or a 7-Eleven unless you have a slight Indian accent."

* "My state was a slave state. My state is a border state. My state has the eighth largest black population in the country. My state is anything [but] a Northeastern liberal state."

* "I mean, you got the first mainstream African American [Barack Obama] who is articulate and bright and clean and a nice looking guy."

* "There's less than 1% of the population of Iowa that is African American. There is probably less than 4% or 5% that is, are minorities. What is it in Washington? So look, it goes back to what you start off with, what you're dealing with."

Sen. Joseph Biden Jr., (D., Del.), 2006-07
Chairman, Committee on the Judiciary, 1987-95
Chairman, Committee on Foreign Relations
Candidate for the Democratic presidential nomination, 2008

Bonus quote:

"It has of late become the custom of the men of the South to speak with entire candor of the settled and deliberate policy of suppressing the negro vote. They have been forced to choose between a policy of manifest injustice toward the blacks and the horrors of negro rule. They chose to disfranchise the negroes. That was manifestly the lesser of two evils. . . . The Republican Party committed a great public crime when it gave the right of suffrage to the blacks. . . . So long as the Fifteenth Amendment stands, the menace of the rule of the blacks will impend, and the safeguards against it must be maintained."

--Editorial, "The Political Future of the South," New York Times, May 10, 1900)

Mr. Bartlett is author of "Wrong on Race: The Democratic Party's Buried Past," to be published next month by Palgrave Macmillan, which is available from the OpinionJournal bookstore.

Why Christians can't visit the holy shrines in Jerusalem.

BY KENNETH L. WOODWARD

A mere nine kilometers separates Bethlehem, where Jesus was born, from Jerusalem, where he was crucified, died and was buried. Pilgrims can easily visit both the Church of the Nativity and the Church of the Holy Sepulcher in half a day--as long as they are not Palestinian Christians. Israel's security wall, its restrictive exit permit system, roadblocks and military checkpoints now make it impossible for most Holy Land Christians to visit the shrines that, for all Christians, make the Holy Land holy.

Like East Jerusalem, Bethlehem is part of the West Bank, not the State of Israel. Temporary exit visas to go from one to the other to worship--or see a doctor or even visit relatives--are hard to come by, of brief duration even when granted, and always subject to the whims of Israeli soldiers.

The squeeze is economic as well as religious. Few producers in Bethlehem can get their goods to markets in Jerusalem. Fewer buyers can get to Bethlehem to sustain its markets. Tourism, a huge segment of the city's economy, is up since 2004, but it is still far from robust.

When last I was in Bethlehem, in 2000, an average of more than 91,000 tourists visited the city monthly. This year, the average is half that number. When buses do arrive, tourists are routinely whisked in and out without time to shop. As a consequence, nearly 100 hotels and restaurants have closed since my last visit. More than 250 workshops that made olive wood crèches, mother-of-pearl crosses and other religious souvenirs have disappeared too. And so, of course, have many of the stores that sold them. In sum, where Bethlehem once enjoyed one of the lowest urban unemployment rates in the Holy Land, it now has one of the highest--by some estimates as much as 60%.

Recently on a visit, former British prime minister Tony Blair tried to boost tourism to Bethlehem, even though his own country, like the U.S., discourages its citizens from traveling there. He also called on Israel, which bans its own citizens from traveling to the West Bank, to ease its restrictions.

Israel, of course, must protect its security. But it cannot blame the Christians' dire circumstances on the second intifada: Muslims are suffering just as much as the tiny Christian minority. Indeed, Bethlehem has historically been one place where Muslim-Christian relations have been remarkably friendly. Now, however, urban Bethlehem finds itself encircled by Israeli settlements, and where the settlers go, there follows the concrete wall, topped in places by razor wire and snipers' towers.

For example, the wall is being completed around Beit Jala, separating this Christian village from 70% of its lands, which are mostly owned by Christian families. Some of the families are attempting to contest the confiscations in court, but construction--and the confiscation--goes on.

In Bethlehem itself, the wall severs the city from nearly three-fourths of its western villages' remaining agricultural lands, as well as water resources that have served the region since Roman times. This area contains much of Bethlehem's remaining room for development and its nature reserve, where city dwellers took their children.

From the Church of the Nativity, Christians can also look out on Har Homa ("Wall Mountain"), a verdant Jewish settlement on a hillside that was formerly Christian land. Since the Annapolis, Md., meeting just a few weeks ago, the Israelis have approved construction on 300 additional homes--despite an official complaint from U.S. Secretary of State Condoleezza Rice--that further constrict the city's population.

Unfortunately, many Christians in the Holy Land have no legal recourse to this absorption of their lands and property. As part of the 1993 treaty between Israel and the Vatican, by which the Holy See officially recognized the State of Israel, Israel was to codify the rights of Christian churches and institutions as part of a comprehensive agreement. But because of disputes over taxation of churches and related issues, the Knesset has yet to act. The Franciscans, the Sisters of Charity and other religious groups both Roman Catholic and Greek Orthodox have had property confiscated and Christian housing destroyed.

Israel cannot afford to lose the Palestinian Christians: They have long represented a moderating force. A century ago, they accounted for 25% or more of the Holy Land population. Today, they represent less than 1.5%. Since 2000, Bethlehem alone has lost 10% of its Christian population.

Palestinian Christians regard their ancestors as the first Christians, and no doubt some of them were. They call themselves the "living stones" of Biblical Christianity, preserving ancient communities and traditions in the midst of repeated armed conflicts. They deserve to keep their land and work for "peace on earth, goodwill toward men."

In this crisis they deserve the support of all Americans, not just Christians. And not just at Christmas.

Mr. Woodward is a contributing editor at Newsweek.

By Jim Wolf

WASHINGTON (Reuters) - The United States called on all sides on Sunday to respect the outcome of Thailand's first parliamentary elections since a September 2006 coup prompted Washington to suspend millions of dollars in aid.

Washington welcomed what it called initial reports the vote had been free and fair, said State Department spokesman Sean McCormack.

The party backing exiled former Prime Minister Thaksin Shinawatra, the People Power Party, declared victory in the poll and said it would seek to form a coalition government.

"We call on all sides to respect the results, and for a fair and transparent process for the adjudication of any disputes or fraud claims," McCormack said in a statement.

A spokesman for President George W. Bush had said on Friday the United States eagerly awaits the return of democracy in Thailand "so that we may resume our close and abiding relationship with this important ally."

Under a U.S. law that curbs aid after an elected leader is deposed by a military coup, Bush suspended about $24 million in assistance to Thailand, including funds designed to promote military professionalism.

"The United States welcomes initial reports indicating that Thailand's parliamentary election today was conducted in a free and fair manner and congratulates the people of Thailand on taking this crucial step toward a return to elected government," McCormack said.

"The United States looks forward to engaging seriously across a range of issues with an elected Thai government," he added.

(Editing by Doina Chiacu)

Coach Declan Kidney has tinkered with his selection for Munster's Magner's League crunch match against Connacht at Musgrave Park on Thursday.

Denis Hurley, John Kelly, Kieran Lewis, Paul Warwick, Frank Sheahan, Tony Buckley, Donnacha Ryan and Niall Ronan have all been ushered to the side.

Kelly, 33, will bow out of his Munster career in the right manner with his first start for the province since pre-season.

MUNSTER (v Connacht): D Hurley; J Kelly, K Lewis, L Mafi, I Dowling; P Warwick, P Stringer; F Pucciariello, F Sheahan T Buckley, D O'Callaghan, D Ryan, D Leamy, N Ronan, A Foley.

Replacements: J Flannery, M Horan, M O'Driscoll, J Coughlan; G Hurley, R O'Gara, B Murphy.

CAMP BASTION, Afghanistan (AFP) — A petite village woman with dark henna on her hands lies wrapped in a blue sheet at the best hospital around -- a British military facility in southern Afghanistan.

Raheena, who puts her age at about 30, was brought here by helicopter in late October with gunshot wounds to her abdomen and chest.

She is one of the lucky Afghan civilians to benefit from world-class health care, at a place where it is not always clear which side the patients are on in the battle for the soul of the war-torn country.

In Raheena's case, she said through an interpreter, her sons found some bullets in the desert and somehow some of them exploded.

"Our children are uneducated," she said. "They were playing."

Helmand province is Afghanistan's opium heartland, an area from which drugs barons extract huge profits -- some of which fund the Taliban -- while villagers live in poverty with little access to decent health care.

But at the British Army Field Hospital at Camp Bastion, a town-like base built out of the vast Afghan desert, Raheena has had the best medical treatment in Afghanistan, perhaps even better than some people could get in Britain.

In the hive of tents that make up the hospital, there are top-class surgeons and consultants instantly available for any speciality -- besides a normal rotation of anaesthetists and nurses.

There is a pharmacy and a pathology lab with virtually instant results for which one might wait an hour in Britain, said Colonel Ian Goulbourne, a leading consultant surgeon in Britain who commands the hospital.

There are digital X-rays that take five seconds, a CT scanner and special blood warmers. A brand-new operating table came in early November.

"We can do most operations here, life- and limb-saving," the colonel said.

The staple is, of course, "typical war surgery" from gun shots, mines and improvised bombs -- one of the biggest threats to the 60,000 international troops in Afghanistan.

Then there was a case when surgeons had to remove a piece of the cranium of one Afghan child embedded in another after a suicide bombing.

"We see more trauma here in a week than most hospitals in the UK would see in a year," Goulbourne said.

The priority of this medical team of about 100 people is the soldiers -- Afghan and international.

The staff also treat the many civilians caught up in Taliban suicide bombings or military air strikes.

And there are the locals who just arrive, even though they are not strictly eligible and it might not be clear where their allegiances lie in Afghanistan's complicated conflict.

"We are set up for wounds of war, no matter which poor person has them," Goulbourne said.

For the team, he said, it may just be a "21-year-old who has a hole in him that needs fixing." If he turns out to be aligned with anti-Western rebel groups, "Maybe he will realise we are not so bad after all."

The hospital is to move in the coming months to a new facility that includes new accommodation and an extension of the runway to allow larger transport planes to land.

Conditions at the forward operating bases that are holding patches of land from the Taliban are more basic, with less access to power and water and none of Bastion's top-line machines.

In extreme cases, these doctors are required to stabilise severely wounded soldiers so they can be airlifted to Bastion.

In his first weeks to early November, doctor Jason Biswas had only encountered a few coughs and colds, skin infections and sand allergies among the troops at his base in Helmand's volatile southern town Garsmer.

But he was under pressure from the few locals in the largely deserted town to open up to the public, with Garmser's modern clinic now ruined and the nearest health facility 50 kilometres (30 miles) away.

"I am not here to treat locals but if locals come in for life- and limb-saving, I will," Biswas said.

Still, he did meet with an intelligence chief recovering from a suicide bombing a few months earlier and took in a little boy sporting a bright, pus-filled lump on a dirt-encrusted hand.

Bastion has had a stream of children wounded in this conflict, which started soon after the Taliban were removed from government in late 2001 in a US-led invasion.

For the kids there is a playroom with bright toys and sparkly fairy wings that are as popular here as anywhere.

They are invited to take some home when they leave but most often don't, said Tim Wright, one of the welfare officers.

"If they are seen to have Westernised toys or items, the Taliban and locals who are against Western culture could harm the family," he said.

The Yomiuri Shimbun

Prime Minister Yasuo Fukuda said Sunday that he will submit a lawmaker-initiated bill to the current extraordinary Diet session to pay compensation to all hepatitis C suffers regardless of when they were administered tainted blood products.

Fukuda's decision is a reversal of the government's policy on an out-of-court settlement of damages suits filed by HCV sufferers against the government and drugmakers.

On Thursday, the government proposed a modified settlement, which acknowledges the government's responsibility for HCV infections depending on when patients were given blood products, and also determines the level of compensation on the same basis.

In response to Fukuda's decision, a group of lawyers for the plaintiffs released a statement in which they said: "At long last, politics has come into play. We regard this as a major step forward." The group also asked the prime minister to meet the plaintiffs as soon as possible.

With Sunday's decision, the suits that began in 2002 can move forward to a complete settlement.

Following the prime minister's instructions, policy chiefs and other members of the ruling coalition will hold discussions Tuesday. They will draw up a framework for the bill before year-end and call upon the opposition bloc to jointly submit the bill. The opposition parties are expected to accept the request.

Speaking to reporters Sunday, Fukuda said, "The day before yesterday [Friday], I began consultations with members of the Liberal Democratic Party, asking them whether it would be possible to deal with the issue by drafting a bill by legislators, and decided to do so to compensate all the sufferers in a uniform way."

Expressing his intention to submit the bill in the ongoing Diet session, which is due to end Jan. 15, Fukuda sought the opposition bloc's cooperation in devising the bill.

Asked about the central government's responsibility for the infection, Fukuda repeated his stance, saying, "The responsibility of the government, which holds responsibility for approving drugs, cannot be avoided."

As for why he changed the government's policy on the settlement issue, Fukuda explained: "We realized that the issue couldn't be solved within the framework of the judicial and administrative systems. As a result, I concluded that we would never get a solution unless we came up with a new approach."

Speaking at a press conference in Fukuoka, Michiko Yamaguchi, 51, who represents the plaintiffs, said: "I hope justice will be done using the power of politics. But we've been messed around by politics so many times that I can't relax yet."

Under the new bill, all those infected with hepatitis C due to treatment with tainted fibrinogen and other products will receive compensation in accordance with the severity of their case, regardless of when they were treated with the infected products.

Those who will receive the relief under the bill will likely be approved by a third-party organization of experts or other bodies based on objective information, such as medical records.

Based on past settlement proposals, the compensation is expected to be an average of 20 million yen per person under the new bill. The bill will cover about 1,000 plaintiffs.

In this case, the compensation will total about 20 billion yen, but the government predicts the number of such patients will likely increase further.

Some plaintiffs have demanded that the government accept responsibility for all cases, regardless of time frame, as part of a comprehensive settlement.

The government is determined not to acknowledge legal responsibility for infections caused by tainted blood products administered to patients other than between August 1985 and June 1988--the time frame specified by the Tokyo District Court.

But to show consideration to the plaintiffs, it has shown willingness to accept responsibility for the delay in reaching a solution to the issue in the preamble to the bill.

In devising the bill, acknowledgement of the government's responsibility will become the main focus.

Speaking to reporters in Tokyo on Sunday, Health, Labor and Welfare Minister Yoichi Masuzoe said, "Regarding the decision on what kind of responsibility to be mentioned [in the preamble], there are legal, political and moral problems surrounding the issue, so I'd like the ruling bloc to discuss it thoroughly," expressing his intention to leave it to the ruling parties.

Banks' Subprime Hits
Weigh on Big and Small,
But Not All Rightfully So

By VALERIE BAUERLEIN

Hardly a day goes by without one of the nation's big banks announcing more bad news tied to subprime mortgages. Investors, worried that the next blowup will hit them square in the portfolio, have driven down bank stocks 28% this year.

The selloff is justified for the likes of Citigroup Inc., Washington Mutual Inc. and Bank of America Corp., but other generally smaller names have been lumped in with the battered big boys. That has created opportunities for investors who are buying high-quality banks that have little or no subprime-mortgage exposure, are trading near book value and may see their businesses improve next year.

Many of these banks are still takeover candidates as the long trend of bank consolidation continues,

Investor favorites run from U.S. Bancorp, the Minneapolis bank with a $55 billion stock-market value, to tiny Community Bancorp of Las Vegas, with a market value of about $185 million.

"We're caught up in the overall hysteria," complains Edward M. Jamison, chairman and chief executive of Community Bancorp, where net income soared 62% in the first nine months of 2007 from a year earlier, helped by two acquisitions. "We have no first-mortgage business, no subprime loans," Mr. Jamison says. "Even though you speak it, the market doesn't hear it."

U.S. Bancorp, the nation's sixth-largest bank by market value, has the highest rate of return on assets, a gauge of efficiency, among its peer group, according to an analysis by SNL Financial of Charlottesville, Va. U.S. Bancorp also has a relatively small 28% of its loan portfolio in real estate.

But U.S. Bancorp shares are down 11% this year, making them look cheap to bank analyst Lori B. Appelbaum of Goldman Sachs. Ms. Appelbaum recommends U.S. Bancorp, describing the company in a Friday research report as "very defensive," as it has shielded itself through careful loan decisions and large reserves.

Kenneth J. Brusda, president of North Star Asset Management Inc., with $1 billion in assets under management, has been steadily adding small bank shares to the Menasha, Wis., firm's portfolio.

"I call it the bank double-play. The valuations are reasonable and you have the possibility of takeouts," he says. "These banks have been beaten up more than they should have."

One of his favorites: First State Bancorp of Albuquerque, N.M., the largest independent bank in New Mexico. A 51% stock-price decline so far this year has pushed the shares below book value, yet loan quality has held up well and the bank is expanding in Colorado. On Friday, First State rose two cents, or 0.2%, to $12.24.

Community's percentage of loans that are nonperforming is less than half that of a peer group. But with Las Vegas known for some of the worst excesses of the housing bubble, the bank's shares are down 40% in the past year. On Friday, they rose 3.5%, or 60 cents, to $17.97 in Nasdaq trading.

One problem facing such banks is their small following on Wall Street, giving them few defenders when investors began turning against the industry. "When Wall Street evaluates them, they have to depend on less-objective measures, like a gut feeling that it's located in a troubled region, or that it has more real-estate exposure than they would like," said Michael Andrews, an analyst with SNL.

Fans of off-the-beaten-track banks say they were far less susceptible to the horrible bets their bigger brethren made on securities tied to subprime loans. Sticking close to home likely helped some of these regional players avoid pitfalls, as long as they didn't get too caught up in real-estate euphoria. Some of these banks were hurt during the boom because more aggressive lenders took away business from them.

Now, not only will they get that lending business back, but less competition also means it will be more profitable.

According to SNL, there are a baker's dozen of small or medium-sized U.S. banks that trade below book value, yet have less than half of their loans in real estate and are outperforming their peers in return on assets. Many of these banks were trading at a premium until the third quarter and aren't haunted by subprime woes.

"Being below book value doesn't make any sense," says Rex Schuette, chief financial officer of United Community Banks Inc., the Blairsville, Ga., parent of 27 community banks in Georgia, North Carolina and Tennessee. With a stock-market value of $819 million, the company has doubled its earnings in the past five years, but the share price has fallen near a five-year low. On Friday, its shares rose 17 cents, or 1%, to $16.99 on Nasdaq.

That said, these cheap banks aren't without potential troubles. Jonathan D. Holtaway, managing director of Danielson Capital Inc., a bank-consulting firm in Vienna, Va., said that while Community Bancorp in Las Vegas is cheap and isn't exposed to mortgages, it does have "massive" exposure to retail-shopping centers. "Can they weather the storm, and after the storm, can they grow?" Mr. Holtaway asks.

Mr. Jamison said his bank has seen continued strong occupancy in retail centers, but acknowledges it will take "consistent performance" to win back wary investors.

Brett Rabatin, a bank analyst at FTN Midwest Securities Corp., says investors who do their homework and are patient will be rewarded when the banking industry starts to rebound. He has been agonizing over a "buy" rating he placed on Sterling Financial Corp. of Spokane, Wash., three months ago. Since then, the stock is down 30%. Sterling rose 71 cents, or 4%, on Friday to $18.60.

Mr. Rabatin is sticking by his call, saying Sterling made solid loans, has clearly divulged its real-estate exposure and its CEO is nearing retirement age, increasing the likelihood of a takeover. "We're getting to a point where if you can hold a stock for two years, these things look awfully attractive," Mr. Rabatin says.

Many smaller banks have long traded at higher valuations in anticipation of a takeover. That premium has disappeared for many because investors feel like the big banks have too many problems to be out shopping. But the pace of deals has continued. There have been 229 bank mergers or takeovers so far this year, down from 247 a year ago, according to SNL.

Mr. Brusda, North Star's president, expects deal activity to accelerate, especially as non-U.S. banks capitalize on the dollar's weakness.

By ELIZABETH HOLMES

PETERBOROUGH, N.H. -- The Republican primary in New Hampshire next month is shaping up to be as frantic and unpredictable as the race in Iowa, though focusing on a different set of issues and cast of characters.

Mitt Romney remains a contender in both states. But while his closest rival in Iowa is former Arkansas Gov. Mike Huckabee, in New Hampshire, Arizona Sen. John McCain is closing in quickly. The increased competition, especially from Mr. McCain, is a blow to Mr. Romney, who has invested more time and resources in both states than his rivals.

A Boston Globe poll released yesterday shows the Arizona lawmaker threatening Mr. Romney's lead in New Hampshire, with 25% of voters supporting Mr. McCain compared with 28% for Mr. Romney, the former governor of neighboring Massachusetts and a part-time resident of New Hampshire. With the poll having a margin of plus or minus 4.9 percentage points, that is a virtual dead heat and a dramatic shift from just a few weeks ago, when a Zogby poll put Mr. Romney 18 points ahead of Mr. McCain there.

At least some of Mr. McCain's success seems to have come at the expense of former New York Mayor Rudy Giuliani, who has dropped in the New Hampshire polls from the mid 20s to the mid-teens.

The Globe poll shows changes in the Democratic camp as well, with Illinois Sen. Barack Obama gaining the support of 30% of voters, putting him neck and neck with the 28% supporting New York Sen. Hillary Rodham Clinton, who has led for much of the year. Former North Carolina Sen. John Edwards trailed with 14% of the vote, followed by New Mexico Gov. Bill Richardson with 7%.

But the upheaval in the Republican race is particularly notable, and is requiring Mr. Romney to attack his opponents differently in the two states. New Hampshire's Jan. 8 primary comes just after the Jan. 3 Iowa caucuses.

In Iowa, where voters pepper candidates with questions about illegal immigration, he last week defended his credentials as a social conservative, a strength of former Baptist minister Mr. Huckabee, the Republican front-runner in that state. Yet the next day, winding his way around snow-covered New Hampshire -- where residents want to know about taxes and foreign policy -- Mr. Huckabee was no more than an aside. Instead, Mr. Romney returned to his business roots, championing himself as a fiscal conservative against Mr. McCain.

"Senator McCain voted twice not to go along with the Bush tax cuts," he said during a house party in Tuftonboro, N.H., on Saturday. "He didn't want tax cuts for the rich. That sounds like Ted Kennedy and John Kerry."

In response to Mr. Romney's remarks, McCain senior adviser Mark Salter issued a statement blasting "Mitt Romney's bizarro world, in which everyone is guilty of his sins. He didn't support Ronald Reagan. He didn't support President Bush's tax cuts. He raised taxes in Massachusetts by $700 million."

Attacks on Mr. McCain are new to Mr. Romney's stump speeches -- and for good reason. Sen. McCain has benefited from a string of recent endorsements, including Sen. Joe Lieberman and notable newspapers in the early states: the Des Moines Register in Iowa and the Boston Globe, the Portsmouth Herald and the New Hampshire Union Leader.

Mr. Romney hasn't been so fortunate. The Concord (N.H.) Monitor published an editorial yesterday urging voters against supporting Mr. Romney. The newspaper called him a "disquieting figure who sure looks like the next president and most surely must be stopped."

Kelly Drew, a 43-year-old from North Conway, N.H., hasn't decided between the two front-runners. Of Mr. Romney, she said, "I like his fiscal responsibility. I like his ideas on how to run a business and how to handle it." Of Mr. McCain, she said, "I like his views on how to handle the world's politics."

Trying to win over those undecided voters, Mr. Romney packed schools, town halls and restaurants throughout New Hampshire over the weekend. He mentioned Mr. McCain multiple times in every speech, slamming him for refusing to support the Bush tax cuts in 2001 and 2003. He will hit New Hampshire after Christmas as well, with stops in the Granite State planned for Dec. 26 and 27.

On Saturday, Mr. Romney interrupted the breakfast of Michael and Cheryl Brooks, of Madison, N.H. Mr. Brooks, who spent six months last year in Iraq, hasn't decided which candidate to support, but would like to meet all of them. "I don't know if you call me old-fashioned or pig-headed," said Mr. Brooks, "but I judge a man by his handshake." Mr. Romney's handshake, he said afterward, was "pretty genuine."

Bob Rowe, a 74-year-old from Rochester, N.H., attended a Romney event Friday evening, though he too is undecided. "If one of them steps out of line or does something that we strongly disagree with, then probably I would switch to the other man," he said.

--Amy Chozick in Marshalltown, Iowa, contributed to this article.

Unit Looks to Expand
In Emerging Markets
As U.S. Business Slows

By LEILA ABBOUD

Philips Electronics NV's medical-equipment division has been a growth engine in recent years. But this year, it hit a speed bump: budget-conscious U.S. officials.

The federal government, concerned about ballooning U.S. health-care spending, beginning this year cut its Medicare reimbursement for out-of-hospital scanning procedures such as X-rays, CAT scans and MRIs. In large part because of the change, Philips's medical division, which had been pegged to grow at 6% a year, is now expected to grow no more than 3% to 4%, as hospitals and outpatient clinics postpone buying expensive medical scanners.

Half of the company's medical business comes from the U.S. The company's trimming of its forecast caused its stock to drop 12% from €30.33 ($43.54 at current exchange rates) on the day of the announcement in October, though it has regained some ground since then. In Friday's trading in Amsterdam, Philips shares fell 2%, or 60 European cents, to €30.11 apiece.

Competitors General Electric Co. and Siemens AG have also been affected and have said sales in their medical businesses would be mostly flat this year. But GE and Siemens have large units in other areas, including aviation, infrastructure and construction, to compensate for the slowdown. As a result, GE and Siemens are forecasting overall revenue growth of 10% or more, while Philips expects overall revenue to grow 5% to 6%.

To offset the slowdown in the U.S. imaging market, Philips is stepping up its efforts in fast-growing emerging markets. The company is also pushing into businesses aimed at medical procedures that appeal directly to consumers and are less dependent on government-reimbursement policies -- one reason behind its deal disclosed Friday to buy Respironics Inc., a U.S. maker of sleep and respiratory products focusing on the U.S. home health-care market, for €3.6 billion.

The company's approach differs from that of GE and Siemens, which seem to be willing to ride out the short-term slowdown in the U.S. The two companies declined to comment.

"We're trying to diversify our health-care portfolio to move into the home," said Stephen H. Rusckowski, who runs the company's Philips Medical Systems division. "We see it as a way we can differentiate ourselves from our competitors."

Philips's medical division was supposed to cure the ills that had begun to plague the 116-year-old company. When Chief Executive Gerard Kleisterlee took over six years ago, the company's big brand-name business of making compact-disc players and TV sets was getting crushed by cheaper Asian competitors, while its computer-chip division was hemorrhaging cash following the bursting of the Internet bubble.

Mr. Kleisterlee retooled the company to make health care the new center of its business, along with its fast-growing lighting division. He won over investors by arguing that focusing on higher-margin products in health and lighting would deliver strong long-term growth.

But the slowdown in the medical business has exposed the pitfalls of betting on health care. Although health-care spending increases every year, it isn't always easy to translate that big promise into profits. Since governments spend so much on health care, their policies have an outsize impact on sales of drugs, devices and treatments. Companies like drug maker Pfizer Inc. and insurer Aetna Inc. are accustomed to managing the risk of reimbursement policies, but Philips is new to the game.

Mr. Rusckowski predicted that the difficulties in the U.S. market would continue for at least an additional six to 12 months. But he was confident that medical sales would eventually rebound. "What happened in 2007 was a slowdown in one specific country, but it doesn't change our long-term expectations for the medical marketplace," he said.

Mr. Rusckowski described a confluence of factors that led to the slowdown. First, the U.S. government ratcheted down the amount it pays each time a patient on Medicare gets a scan or X-ray at a medical clinic outside the hospital. Although the reimbursement for in-hospital scans didn't change, some hospital administrators began to worry that the new lower rate would eventually be expanded to hospitals and backed off purchasing new equipment, said Mr. Rusckowski.

In addition, a new generation of CT scan machines was due to be released by GE, Siemens and Philips in mid-November, so hospitals stopped spending in anticipation of the new technology. Spending on CT scanners was down 20% this year.

Lastly, medical research has focused increased skepticism on devices that open clogged arteries, called stents. That led to a drop in operations to insert stents, lowering demand for equipment for catheterization labs where the operations are performed. Philips is a leader in catheterization lab equipment. Mr. Rusckowski said new studies that reach different conclusions on the issue have since been released and doctors would have to debate the best treatment options.

Scott Geels, an analyst at Sanford C. Bernstein & Co., said despite the downturn, he still believed that medical was a promising high-growth market for Philips. "This is a glitch that will work itself out with time," he said.

Philips's medical division grew 8% to €6.3 billion in revenue in 2005 and 6% to reach €6.7 billion in revenue in 2006. Mr. Geels is forecasting 2% growth and €6.85 billion in revenue this year; Philips's guidance is for 3% to 4% growth on the year.

The medical division accounted for about 40% of Philips's €1.2 billion in earnings before interest, taxes and amortization in the first three quarters of 2007, with lighting contributing 40%, and the rest coming from consumer electronics and household appliances. The overall company reported net income of €2.78 billion during that period.

As part of its efforts to reach emerging markets, Philips signed a joint venture in China with Neusoft, a software and medical technology firm, to design new low-cost imaging equipment tailored for poorer economies and bought an X-ray company in Brazil called VMI-Sistemas Médicos in June.

Philips is also building a consumer health-care business to sell things including home health monitoring and disease-management software. Philips can pitch these products or services directly to patients or their family members who help with their medical care. For example, its Lifeline business connects elderly people to call centers at the push of a button to allow them to live independently.

Deals Gain Momentum as Investors
Seek Alternative to Private Equity

By LYNN COWAN

The black sheep of the IPO world quietly took over a large part of the market in 2007, with so-called blank-check debuts generating nearly a quarter of all new stocks that listed in the U.S.

There were 66 initial public offerings of blank checks -- also known as special-purpose acquisition companies, or SPACs -- priced this year in deals that raised a total of $12 billion. That is 23% of the total number of U.S. IPOs and 18% of the money raised, according to data from Dealogic. In 2006, blank-check IPOs raised $3.4 billion, accounting for 7% of the total money raised in IPOs and 16% of the number of new issues, a percentage-point increase equaled only by the growth in technology IPOs.

Once seen as deals of questionable quality, blank checks are essentially empty shells that generally give themselves 18 months to two years to acquire an operating company with the proceeds from an IPO.

These IPOs mostly lived under the radar for more than a decade before generating new interest from investors beginning in 2004, when 13 such deals priced. It was around that time that many managers made changes to the structure, including putting in more of their own money, that made blank checks more accountable. Still, it is likely that 2007 will be remembered as their breakout year.

The performance of these stocks is attention-worthy. The Morgan Joseph Acquisition Company Index, launched in 2006 to measure the performance of all blank-check companies that went public since 2003 up to the point that they complete an acquisition, was up 28.25% for the year as of Friday.

The increasing popularity of the structure marks a stark change in the deal-making environment. Blank-check companies are like private-equity firms in their mission to acquire operating companies. But private equity, a rival for acquisitions, has been stung in the past few months by strains in the corporate debt market, which they rely on heavily for financing. Blank checks, by contrast, turn to public stock markets for cash and issuance has kept going strong. Some investors like them because the structure offers a quicker route to cashing out of their investments than does private equity.

Wall Street has noticed. SPACs used to be underwritten primarily by smaller investment banks like Morgan Joseph & Co. and Ladenburg Thalmann, but big Wall Street firms and some big names in the world of deal making are joining in. Names such as Citigroup Inc., UBS AG, Deutsche Bank AG, Credit Suisse Group, Lehman Brothers Holdings Inc. and Merrill Lynch & Co. increasingly are showing up on prospectuses alongside the typical blank-check underwriters. Players such as Nelson Peltz and Ronald Perelman also are involved.

As larger underwriters have become involved, the amounts raised in such deals has increased to a half-billion dollars or more from less than $100 million just a few years ago.This month, a deal launched by Citigroup and Lehman, Liberty Acquisition Holdings Corp., raised $1.03 billion, a feat achieved by only a half-dozen "regular" IPOs in the U.S. in 2007. Liberty is the vehicle of billionaire Nicolas Berggruen, head of an eponymous family-owned investment vehicle with assets of more than $1 billion.

London hedge-fund manager GLG Partners Inc., the largest alternative-asset manager in Europe, became a publicly traded company this year after being purchased by Freedom Acquisition Holdings Inc., an empty shell headed by Mr. Berggruen that raised $480 million in 2006 through Citigroup.

"I think everyone has been a bit surprised by the volume that has been done," says Jeffrey Bunzel, head of equity capital markets for the Americas at Credit Suisse Group, which managed the November $400 million launch of Heckmann Corp., headed by Richard J. Heckmann, former chief executive of sporting goods maker K2 Inc. "If the level is running at 20% to 25% of the total IPO market, it's hard to ignore that."

Citigroup bankers say one reason they began to underwrite such deals was investor demand for private-equity type investments with shorter timelines than actual private-equity funds. The investment bank became more involved after underwriting Boulder Specialty Brands Inc., which went public in 2005 and this May acquired Smart Balance Inc., a food marketer best known for its trans-fat-free margarine.

"It became attractive to us only when we believed that M&A targets were taking these offers seriously, and when we saw that the management of these companies was truly capable of going out and sourcing acquisitions," says John Chirico, head of U.S. equity capital markets at Citigroup.

The management teams of several recent blank checks that have either priced or registered include Dallas billionaire and Texas Rangers owner Thomas Hicks; billionaire activist investor Nelson Peltz; Starwood Hotels & Resorts Worldwide founder Barry Sternlicht; and Warren G. Lichtenstein, chief executive of hedge fund Steel Partners.

"This is the most innovative product that Wall Street has created in a long time," says Simon Rose, chief executive of investment bank Dahlman Rose, who once dismissed SPACs as mere "junk." Over the course of the past year, his views changed, and the firm, which specializes in the energy sector, expects to underwrite six to 10 SPAC offerings in 2008.

The segment has become so popular that hedge-fund manager Context Capital Management LLC is changing the focus of its multistrategy Context Opportunistic Fund and plans to invest more than 80% of its assets in blank-check offerings; to date, Context has invested in more than 50.

"The main advantages are liquidity and transparency," says William D. Fertig, chief investment officer of Context Capital. "If investors put money in a private-equity fund, they might get it back in four to five years. They have no say over what the fund buys. In a [blank-check company], investors get to call the shots." If shareholders don't like the proposed acquisition, they can get their money back, less fees, and walk away, even if the majority votes for a deal, he adds.

Blank checks aren't perfect. "A lot of deals get done that shouldn't get done," Mr. Fertig says. "The management team gets 20% of the company's stock for a relatively small investment. Their incentive to get a deal done does not necessarily translate into getting a great deal done."

Write to Lynn Cowan at lynn.cowan@dowjones.com