Enron played a unique role in deregulation, Weaver said, and the company's subsequent collapse was, in some important respects, a product of its genius in creating "a business model that tracked the opening of deregulated energy markets...and was accompanied by a powerful and well-financed political lobbying arm that worked to push government regulation out of the markets."

This point was echoed earlier this month when Robert McCullough, an independent analyst of the electric power industry who is a consultant to many of the agencies that were victims of Enron's trading schemes, testified before the U.S. Senate Policy Committee and described in detail the consequences of what he called "an unfortunate policy decision" made by the Commodities Futures Trading Commission (CFTC) in 1993.

"At the urging of Enron and other energy companies," he said, "CFTC relinquished control of energy-based forward transactions...The purpose of Enron's various market manipulation schemes was to promote an increase in long term prices-an increase that returned over a billion dollars in earnings on an enormous forward position that Enron accumulated just before the onset of the Western [California] Market Crisis."

McCullough did not mention that the CFTC's 1993 decision was made at the urging of its chairwoman, Wendy Gramm, who is an economist and the wife of then-Sen. Phil Gramm, R-Texas. Almost immediately after the vote of the commission to forego regulating electricity trading, Mrs. Gramm resigned from the commission and joined the board of Enron where she remained until just after the bankruptcy in 2001.

Another key aspect of the Enron story described by both McCullough and Weaver is the role of EnronOnline, which handled nearly one-quarter of all gas and electric trades by the end of the 1990's, making it the largest e-commerce system in the world.

Weaver said EnronOnline did not match up buyer and seller for a fee like most commodity trading exchanges. Instead the company was a counterparty to each trade, meaning that it bought products for sale if the price was right and then re-sold them, a business strategy that requires billions of dollars in cash to handle the float.

This need for large amounts of cash for trading, she said, combined with some disastrous deals in hard assets like building a huge power plant in India and overpaying for a water utility in England, neither of which generated any cash flow, sent the company far into debt. It was Enron's use of the accounting gimmicks called Special Purpose Entities to keep this debt off its books that finally caused the bankruptcy.

Weaver concludes her report by saying that the darker side of the market system is that it is controlled by and primarily benefits two "power elites...the elected political elite and the managerial elite that control business enterprises. However, between the two, corporations have the upper hand, because they must be induced with incentives to produce and provide jobs and tax revenues to society. he corporate elite have a privileged position of power in the political system, and political leaders will act to provide business with whatever it says it needs to do its job."

The ultimate danger, she said, of this "enormous influence of the business elite on the legislative policies at all levels of government seriously distorts the democratic nature of our society."

And the ultimate irony is that Enron collapsed by choking on the apple of deregulation which it tried to swallow whole, and that Lay and Skilling, the corporate cheerleaders for deregulation, are victims of their own delusion.

Wallace Roberts is an independent journalist writing on public policy issues. His work on deregulation of the electric power industry was assisted by a grant from the Fund for Investigative Journalism.

Would someone of Paulson's stature take the job with limits? It's possible, says Harris, who adds, "Treasury Secretary is a great way to cap a career under almost any circumstances." For the most part, though, economists agree that Paulson likely will be asked to shape policy, which should give him a stronger voice on all economic issues.

That's no small matter, given that the budget deficit is soaring and the economy appears to be slowing while the critical housing market clearly is weakening. With a new, untested team at the Federal Reserve, Paulson's credentials are more important than ever. He's also well-known in China, which holds massive stores of U.S. housing debt and could get spooked if the housing market takes a sharp turn down.

So what imprint will Paulson try to put on economic policy? He cannot tackle the big issues-Social Security and tax reform. The wind is gone from those sails and the Bush Presidency doesn't have the broad support it would need for any big new initiatives. Yet Paulson will need some kind of win to cement his authority. That likely will come in the area of spending cuts.

"This is still a President who hasn't vetoed a bill," says Gus Faucher, director of macroeconomics at Moody's Economy.com. Bush wants to make his tax cuts permanent, which will be expensive, and the nation is fast approaching the retirement years of the Baby Boom generation, which will be costly as well. Paulson needs to start the nation down the road of deficit reduction-and Bush needs to give him a free hand.

If Paulson can rein in spending enough to turn the deficit around it will be clear that there was no pre-nup, and his words will carry the full weight of the U.S. government the first time he confronts an international or domestic crisis. He needs that, as do we all.

"It's a knife in the back to New York and I'm going to do everything I can to make them very sorry they made this decision," said King, who also chairs the House Homeland Security Committee.

Forty-six cities on the Homeland Security list will share this year's pot of $740 million US in grants, which are intended to finance the prevention of and response to terrorist attacks and natural disasters.

Last year, $865 million US was available for the same purpose, leading critics of the Bush administration to complain that it is easing back on homeland security initiatives.

Municipalities around Washington, D.C. will get $46 million US, down from $77.5 million US in 2005.

The hurricane-ravaged city of New Orleans, which received $9.3 million US in 2005 prior to the catastrophic flooding caused by hurricane Katrina, will get just $4.6 million US this year.

Population no longer sole factor

Population used to be the sole consideration for the grants, which began in the wake of the al-Qaeda attacks against the United States on Sept. 11, 2001.

Now, assessments are based on intelligence about terrorist threats and the risk of damage from natural disasters, as well as information from law enforcement agencies.

Three cities that didn't make the list in 2005 will get funding this year to train and equip emergency personnel.

They are Memphis, Tenn., and the Florida cities of Orlando and Fort Lauderdale.

"At the end of the day our job is to make sure that we apply resources in an appropriate manner across the full breadth of this nation so that we get the maximum benefit out of those dollars," Homeland Security Undersecretary George Foresman told reporters in Washington.

State and local officials also need to budget for disaster preparations, Foresman said, calling the federal grants "designed to help us address the extraordinary, not the ordinary."

The money generally pays for training and equipment for emergency first responders.

But the cut was attacked by the chairman of the House Homeland Security Committee, who represents the New York suburbs and vowed to hit back at the department.

"It's absolutely indefensible, it's disgraceful. As far as I'm concerned the Department of Homeland Security and the administration have declared war on New York," Republican Rep. Peter King told the Associated Press.

"It's a knife in the back to New York and I'm going to do everything I can to make them very sorry they made this decision," King said.

Homeland Security assistant secretary Tracy A. Henke said the biggest share of the dollars still would go to the nation's largest cities, with New York City winning the largest share - $124 million, down from $207 million in 2005. The national capital region, which encompasses Washington and its Maryland and Virginia suburbs, will receive $46 million, compared to $77.5 last year.

Hurricane-ravaged New Orleans will receive half of what it got last year - $4.6 million, down from $9.3 million - although Homeland Security said the money was to help cities grapple with catastrophic disasters from Mother Nature and terrorists alike.

But several cities saw boosted bottom lines, including three that didn't get any money last year. Fort Lauderdale, Fla., won $9.9 million for 2006 after receiving what Rep. Rep. Clay Shaw Jr., R-Fla., called a paltry share last year compared with Miami.

"I'd been telling Homeland Security, 'We want a divorce,'" said Shaw, who represents the Fort Lauderdale area. "And we got it. ... As far as grants go, I think this is a very good result."

The funding is part of an overall $1.7 billion Homeland Security grant program. Under the program, each state and U.S. territory gets some funding, this year totaling $550 million. Another $450 million will go to state public safety projects, medical responders and to help citizens prepare for disasters.

Until now, the grants largely have been awarded based on cities' populations. Homeland Security still is weighing population as a factor in the grants, but it is mostly awarding the money based on a city's threat risk and how effectively the city will use the funds.

The grants for cities make up the largest chunk of the funding, and has always been the subject of fierce lobbying by local leaders and members of Congress. The final awards often anger many officials who feel residents of their cities are slighted by not getting enough money - or none whatsoever.

The Santa Clara, Calif., company anticipates that the cuts will save it $480 million to $590 million annually by the fourth fiscal quarter in 2007.

"We've worked hard to reinvent the entirety of Sun's product line, from software to systems, storage and services," Schwartz said in a statement. "It's on that rebuilt foundation that we are reinventing our business model on a far simpler base, and focusing our energies on the automation, energy efficiency and network innovation at the heart of our technology leadership."

Schwartz, who was named Sun's chief executive last month, has wasted no time in paring down the company's headcount since taking the reins. As a result, he may avoid the criticism encountered by company founder and CEO predecessor Scott McNealy, who was faulted by many industry observers and some former Sun executives as having moved too slowly in bringing Sun's costs in line with its falling revenue.

Sun cut more than 13,000 jobs between 2001 and 2005, but it wasn't enough to keep costs in line with slumping sales. Revenue dropped 39.3 percent from fiscal 2001 to 2005, while operating expenses dropped only 26.5 percent, according to analysts.

The layoffs, in part, may not come as a surprise, given that Sun's former chief financial officer, Michael Lehman, was pulled out of retirement three months ago to rejoin the company.

Sun said Lehman would take a "fresh look at everything" upon his return and assemble a "leaner and more efficient business model."

Lehman and Schwartz began extensive reviews of the company's global operations about a month ago, Sun said.

As part of its efforts to save costs via consolidating its real estate holdings, Sun will sell its Newark, Calif., campus and also give up leased facilities in Sunnyvale, Calif. The company noted, however, that it will continue operations at its two major Bay Area campuses in Menlo Park and Santa Clara, Calif.

The company, which is facing pressure from investor Nelson Peltz to return more money to shareholders and cut costs, also forecast a better-than-expected 10 percent increase in earnings per share for fiscal 2007 and said it would raise its dividend 16.7 percent.

The company's board of directors also approved $1 billion for share repurchases over the next two years. The company said it plans to cut $355 million in costs over the next two years.

Heinz shares rose to $42.46 on Thursday morning on the Inet electronic broker system from Wednesday's
New York Stock Exchange close of $42.35.

Heinz, whose products range from its namesake ketchup to Ore-Ida frozen potatoes, said net income fell to $167.9 million, or 50 cents a share, in the fiscal fourth quarter ended May 3, from $206.5 million, or 59 cents a share, a year earlier.

Excluding a gain on the sale of the company's European seafood business, its Tegel poultry business and other, smaller assets, as well as a writedown of its operations in Zimbabwe, earnings were 54 cents a share. Analysts on average forecast 49 cents a share, according to Reuters Estimates.

Still, earnings before items fell from 59 cents a year earlier as the company's tax rate jumped to 37.3 percent from 27 percent, and its interest costs rose.

Sales rose 7.6 percent to $2.40 billion, helped by acquisitions and double-digit increases in sales of Ore-Ida potatoes, Classico pasta sauces and Smart Ones frozen meals.

As part of the cost-cutting plan, Heinz said it expects to cut 2,700 jobs and exit 15 plants in 2007. The company said another five plants could be closed in 2008.

The forecast and two-year financial plan comes as Heinz battles a proxy fight from Peltz and his Trian Fund Management group. Trian is seeking to put five representatives on Heinz's 12-member board and has called on Heinz to divest more assets and cut selling and other costs by $575 million annually.

MORE PRODUCTS, LESS COSTS

Heinz said it plans to increase advertising and marketing spending by 18.7 percent to $317 million in fiscal year 2007 and to increase research and development spending.

Heinz said it plans to introduce more than 100 new products in fiscal 2007, including organic versions of its Classico sauces and larger ketchup bottles that fit more easily in a refrigerator door.

To help fund the increases in marketing spending and product development, Heinz said it plans $355 million in cost cuts, including the plant closings, and an additional reduction of about $145 million in the deals and allowances it gives to retailers in exchange for premium shelf space and other benefits.

Trian had called on Heinz to cut promotional spending to retailers by at least $300 million.

In recent years, Heinz has divested several businesses as it tries to focus on ketchup, condiments and sauces, baby food, and meals and snacks. Analysts have questioned how much more the company can divest and said Trian's proposed cuts might be unrealistic.

Trian has suggested Heinz could sell its Plasmon baby food business in Italy, but the company on Thursday named Plasmon as one of its strong brands.

Trian also said the company should stop spending money on emerging markets and instead focus on fixing its European operations.

Heinz on Thursday said it plans to get one quarter of its sales growth in 2007 from Russia, India, China, Poland and Indonesia.

A Trian spokeswoman could not be reached for comment on Heinz's plan on Thursday.

Heinz forecast 2007 earnings of $2.35 a share on a 3 percent to 4 percent sales increase and 2008 earnings of $2.54 a share on a 4 percent sales increase. Analysts on average forecast earnings per share of $2.25 in 2007 and $2.38 in 2008, according to Reuters Estimates.

The higher dividend rate, equal to $1.40 a share per year, will first be paid in a 35 cent quarterly dividend, payable July 10, to shareholders of record on June 24.

Though Wednesday, Heinz shares were up 15.4 percent since mid-February, when rumors first surfaced that Peltz could stage a proxy fight. That compares with a 4.5 percent increase for the Standard & Poor's Packaged Food Index .15GSPFOOD.

"Everything is gearing off the reality that interest rates will be moving higher. The more I read through the FOMC statement, it reinforces the thinking that interest rates will continue to rise," said Peter Dunay, chief investment strategist at Leeb Index Trader in New York.

U.S. stocks ended higher on Wednesday as a drop in crude oil prices overshadowed the interest rate concerns.

S&P 500 futures were down 4.10 points, slightly below fair value, a mathematical formula that evaluates pricing by taking into account interest rates, dividends and time to expiration on the contract.

Dow Jones industrial average futures were down 38 points, and Nasdaq 100 futures were down 5.75 points.

On Thursday's economic agenda, the Institute for Supply Management will release its May manufacturing index at 10 a.m. EST. Economists in a Reuters survey expect a median reading of 55.5 versus 57.3 in April.

Also at 10 a.m., the Commerce Department will report April construction spending, and the National Association of Realtors will issue the pending home sales index for April.

Shares of Sun Microsystems Inc. could decline as analysts said a cost-cutting plan announced by the computer maker didn't seem aggressive enough. Its stock slipped by 0.2 percent to $4.62 after the closing bell on Wednesday.

In other corporate news, Motorola Inc., the world's second-largest mobile phone maker, said it had agreed to buy Britain's TTP Communications, which develops software for 3G applications, for 103 million pounds ($193.5 million).

Alcoa Inc. said it reached a tentative contract with its labor union, averting a strike.

Wal-Mart Stores Inc., the world's largest retailer, is considering selling ethanol-based fuel at its more than 380 gasoline stations, according to a Wall Street Journal report.

On Wednesday, the Dow Jones industrial average rose 73.88 points, or 0.67 percent, to end at 11,168.31. The Standard & Poor's 500 Index gained 10.25 points, or 0.81 percent, to finish at 1,270.09. The Nasdaq Composite Index climbed 14.14 points, or 0.65 percent, to close at 2,178.88.

The two sides vowed to establish a dialogue mechanism to further promote their energy cooperation. Under the mechanism, China and the Arab countries agree to increase visits and dialogue and coordinate in relevant activities of the United Nations and other international organizations.

"The two sides attach importance to energy cooperation, particularly the cooperation in the sectors of oil, natural gas and renewable energy," says the action plan.

The plan says China and the Arab countries will encourage their enterprises to enhance investment and set up joint ventures and conduct cooperation in exchanging experience and technology transfer in the energy sector.

The Arab countries have been China's largest crude oil supplier. China imported 55.36 million tons of crude oil from Arab countries in 2005, 43.7 percent of its total oil import.

Energy cooperation constitutes an important part of China-Arab cooperation, which complies with interests of both sides and contributes to the stability of international energy market, said Zhai Jun, the director general of Chinese Foreign Ministry's Asian and African division.

The two-day meeting was attended by delegates from China and 22Arab countries, who also signed the meeting's communique, an environmental cooperation plan and a memorandum of understanding for a meeting between Chinese and Arab entrepreneurs.

According to these documents, Arab-China trade volume is expected to reach 100 billion U.S. dollars in 2010.

China's trade with the Arab world has grown tenfold in the past decade to hit 51.27 billion US dollars in 2005.

The third ministerial meeting of the China-Arab Cooperation Forum will take place in Bahrain in 2008.

From 2006 to 2008, China will train 500 Arab professionals in various fields every year.

The second meeting between Chinese and Arab entrepreneurs will be held in Jordan. More activities include an Arab arts festival in Beijing, a China-Arab civilization dialogue seminar and a China-Arab friendship conference.

Chinese Foreign Minister Li Zhaoxing said that the China-Arab Cooperation Forum has been the channel for China and Arab states to exchange views on international and regional issues.

"The just concluded meeting has injected new vitality into China-Arab substantive cooperation," Li said.