By PAMELA HESS
Associated Press Writer
WASHINGTON (AP) - John Brennan, President-elect Barack Obama's top adviser on intelligence, took his name out of the running Tuesday for any intelligence position in the new administration.
Brennan wrote in a Nov. 25 letter to Obama that he did not want to be a distraction. His potential appointment has raised a firestorm in liberal blogs that associate him with the Bush administration's interrogation, detention and rendition policies.
"It is with profound regret that I respectfully ask that my name be withdrawn from consideration for a position within the intelligence community. The challenges ahead of our nation are too daunting, and the role of the CIA too critical, for there to be any distraction from the vital work that lays ahead," Brennan wrote.
Obama's advisers had grown increasingly concerned in recent days over online blogs that accused Brennan of condoning harsh interrogation tactics on terror suspects, including waterboarding, which critics consider torture.
Obama spokesman Denis McDonough did not immediately respond to a request for comment Tuesday.
AP reported Monday that Brennan had emerged as Obama's top choice to head the CIA.
Brennan, a 25-year CIA veteran, privately told colleagues that he opposed waterboarding and questioned other interrogation methods that many in the CIA feared could be later deemed illegal. He helped establish the National Counterterrorism Center and was its first director in 2004.
"It has been immaterial to the critics that I have been a strong opponent of many of the policies of the Bush administration such as the pre-emptive war in Iraq and coercive interrogation tactics, to include waterboarding."
A group of about 200 psychoanalysts published an open letter to Obama on Nov. 22 opposing Brennan's leadership of the CIA. They cited several media interviews in which they deemed Brennan insufficiently opposed to rendition and harsh interrogation to make a clean break with the Bush administration's policies.
They noted that he told the National Journal in March that he would favor "continuity" in intelligence policies in the early days of the Obama administration.
"I would argue for continuity in those early stages. You don't want to whipsaw the (intelligence) community," Brennan said. "I'm hoping there will be a number of professionals coming in who have an understanding of the evolution of the capabilities in the community over the past six years, because there is a method to how things have changed and adapted," he said.
In a 2005 interview on the News Hour with Jim Lehrer, Brennan defended rendition as "an absolutely vital tool." In 2007 on CBS News, he said the CIA's harsh interrogation program, which included waterboarding on at least three prisoners, produced "life saving" intelligence. Waterboarding is a form of simulated drowning.
"The fact that I was not involved in the decisionmaking process for any of these controversial policies and actions has been ignored," he wrote in a letter obtained by The Associated Press. "Indeed, my criticism of these policies within government circles was the reason why I was twice considered for more senior-level positions in the current administration only to be rebuffed by the White House."
One former intelligence official said Bush in 2005 rejected nominating Brennan, then interim National Counterterrorism Center director, as the actual director.
"The politicos at the White House said no because they thought he was too outspoken in his criticism of the administration and not sufficiently on board with their program," he told AP.
National Intelligence Director Mike McConnell approached Brennan in 2007 to become his principal deputy director, the second-highest position at the organization. The White House again rejected him, the intelligence official said.
BC-Economy, 6th Ld-Writethru,1326
Stock market doesn't flinch despite economic data
Eds: UPDATES with market having three straight days of gains for first time since meltdown began. Moving on general news and financial services. AP Video.
AP Photo NYRD112, ILPM101, CAPS301, ILSP102, GFX872, GFX874
AP Graphics GDP, HOME PRICES, CONSUMER CONFIDENCE
By JEANNINE AVERSA
AP Economics Writer
WASHINGTON (AP) - Bad news was no news to the battered American economy Tuesday.
The government released a triple dose of discouraging data: The economy shrank over the summer even more than previously believed, and consumers reduced their spending by the largest amount in 28 years. During the same period, home prices fell to levels not seen since early 2004.
"Consumers and businesses were like deer in the headlights ... frozen," said economist Ken Mayland, president of ClearView Economics.
Most of the numbers were updates of previously released figures, and the revisions indicated that economic conditions were growing worse.
But Wall Street barely flinched and actually recorded its third straight day of gains, something that had not happened since the financial meltdown began almost 2.5 months ago. The Dow Jones industrials closed up 36 points, following a two-day rally in which the major indexes soared more than 11 percent.
The updated reading on the economy's performance from the Commerce Department showed the gross domestic product shrank at a 0.5 percent annual rate in the July-September quarter.
That was weaker than the 0.3 percent rate of decline first estimated a month ago, and it marked the worst showing since the economy contracted at a 1.4 percent pace in the third quarter of 2001, when terrorists attacked the U.S. and the nation was suffering through its last recession.
GDP measures the value of all goods and services produced within the U.S. and is considered the best barometer of the country's economic fitness.
The new GDP figure matched economists' expectations, but nevertheless underscored just how quickly the economy deteriorated as the housing and credit crisis intensified. The economy logged growth of 2.8 percent in the second quarter.
White House press secretary Dana Perino called the lower GDP figure "troubling" and said $800 billion in new government efforts announced Tuesday should help spur more consumer spending by expanding the availability of loans and credit cards at cheaper rates.
Meanwhile, the Federal Deposit Insurance Corp. said the list of banks it considers to be in trouble shot up nearly 50 percent to 171 during the third quarter - the highest level since late 1995.
The FDIC also said that commercial banks and savings institutions suffered a 94 percent drop in third-quarter profits to $1.7 billion. Except for the fourth quarter of 2007, it was the lowest profit since the fourth quarter of 1990.
The FDIC does not reveal the institutions on its "troubled" list, but on average, about 13 percent of them end up failing.
Nine banks failed in the third quarter, reducing the FDIC's deposit insurance fund to $34.6 billion from $45.2 billion in the second quarter. Both figures are below the target minimum level set by Congress.
Twenty-two banks have failed so far this year compared with three for all of 2007, and more failures are expected.
Elsewhere, the New York-based Conference Board said its Consumer Confidence Index for November rose to 44.9, from a revised 38.8 in October. Last month's reading was the lowest since the research group started tracking the index in 1967, and Americans' views on the economy remain the gloomiest in decades as they grapple with massive layoffs, slumping home prices and dwindling retirement funds.
To revive the economy, President-elect Barack Obama says a top priority will be working with Congress to enact a massive stimulus package that he says will generate millions of new jobs.
The new, lower third-quarter GDP reading mostly reflected an even sharper cutback in spending by consumers and slower sales growth of U.S. exports.
American consumers - the lifeblood of the economy - slashed spending in the third quarter at a 3.7 percent pace. That was deeper than the 3.1 percent cut initially reported and marked the biggest reduction since the second quarter of 1980, when the country was in the grip of recession.
Consumers have grown nervous about spending because of job losses, declining investment portfolios and sinking home values.
Underscoring the strain, the report showed that Americans' disposable income fell at an annual rate of 9.2 percent in the third quarter, the largest quarterly drop on records dating back to 1947. The government's initial estimate had showed a record 8.7 percent decline in disposable income for the quarter.
Sales of U.S. exports grew at a 3.4 percent pace in the third quarter. That was lower than a 5.9 percent growth rate initially estimated and marked a sharp slowdown from the second quarter's blistering 12.3 percent growth rate. The deceleration reflects less demand from overseas buyers coping with their own economic problems.
Home builders slashed spending at a 17.6 percent pace, marking the 11th straight quarterly cut and fresh evidence of the depth of the housing slump.
Also Tuesday, a report on home prices and downbeat earnings results from homebuilder D.R. Horton showed further deterioration in the housing market. The Standard & Poor's/Case-Shiller U.S. National Home Price Index said that home prices tumbled a record 16.6 percent during the third quarter from the same period a year ago. Prices are at levels not seen since the first quarter of 2004.
Fort Worth, Tex.-based D.R. Horton Inc. reported a nearly $800 million loss in its fiscal fourth quarter on slower home sales and more than $1 billion in charges amid a battered housing market.
To help revive the economy, the Federal Reserve is expected to lower interest rates when its meets on Dec. 16, its last session of the year. Last month, the Fed dropped its key rate to 1 percent, a level seen only once before in the last half-century.
So far, though, the Fed's rate reductions - a $700 billion financial bailout package and a flurry of other radical actions - have been unable to break though a dangerous credit clog, restore stability to financial markets and help the sinking economy.
The nation's unemployment rate is at 6.5 percent, a 14-year high, and is expected to climb. Employers have cut payrolls every month so far this year. The total number of unemployed in October was just over 10 million, the most in 25 years.
Given all the bad news, consumers are likely to make still more cuts, probably ensuring that the economy continues to shrink for the remainder of 2008 and into 2009.