US presence in Iraq only contracts

Soldiers gone, but contractors remain in Iraq. U.S. relies heavily on civilians, with even more in Afghanistan.

State Department officials have said they expect that 5,000 security contractors will be needed in Iraq next year to protect U.S. diplomats.

A “life support” team of an additional 4,500 contractors will cook, clean and provide transportation and other services.

In Afghanistan, 105,000 U.S. troops are supported by about 101,000 civilian contractors.

Only 23,000 of those contractors are U.S. citizens. About 50,000 are Afghans, and 27,900 come from other countries.

“The U.S. military can't move, fight or sustain itself without contractor support today,” said Steven Schooner, a law professor at George Washington University who has studied contractor fatalities.

According to a report released in August by the congressionally chartered Commission on Wartime Contracting in Iraq and Afghanistan, at least $31 billion — and possibly as much as $60 billion — has been lost to contract waste and fraud. It concluded that the government was relying too much on contractors and that major reforms were needed.

Read more: http://www.mysanantonio.com/news/local_news/article/Soldiers-gone-but-contractors-remain-in-Iraq-2426228.php#ixzz1hiwaDxN2

Guilty until proven innocent?

Swedish journalists receive 11 years in jail

Two Swedish journalists who were found guilty in Ethiopia of supporting terrorism were sentenced to 11 years in jail Tuesday, the Swedish foreign ministry said.

Ethiopian troops captured Persson and Schibbye in July during an exchange of gunfire with a rebel group in the Ogaden, a prohibited region along the nation's border with Somalia, according to state media.

Ethiopians officials have accused the journalists of being accomplices to terrorism after the government declared the Ogaden National Liberation Front a terrorist group in June.

Persson and Schibbye were convicted on two counts: entering the country illegally and providing assistance to a terrorist organization, according to the Committee to Protect Journalists (CPJ).

Both journalists pleaded guilty to entering the country illegally through Somalia without accreditation, according to the CPJ, which says Ethiopian officials deny media access without government minders.

"Our starting point is and remains that they have been in the country on a journalistic mission," Swedish Prime Minister Frederick Reinfeldt said in a statement last week. "They should be freed as soon as possible and be able to rejoin their families in Sweden."

But presiding judge Shemsu Sirgaga said the two "have shown that they are esteemed journalists, but we cannot conclude that someone with a good reputation does not engage in criminal acts," Sirgaga said.

"They have not been able to prove that they did not support terrorism."

Of oligopolies past and future

Guambat is toward the end of his short annual Sydney sojourn, where the weather has been as cruel as the economy. His attention is more closely directed to the Aussie news, and this item is big on his radar.

The story is about how the so-called "Big Four" or "Four Pillars" or 'bankster cartel' set their interest rates, otherwise referred to as resale price maintenance.

First, it looks at how the group have conducted their little cozy business in the past, then suggests a new strategy, characterized as a lone (pun alert) break-out by one of the four. Guambat is dubious. This is a well orchestrated monkey-see, monkey-pas-de-deu, as well choreographed as Olympic synchronous swimming (if there remains any such thing).

See what you think:

ANZ a wildcard as it leads pack by Anne Knight

ON TUESDAY, leak-proof bunkers were set up to house four senior banking teams. They are, in effect, war rooms where interest rate battle strategies are hatched and various scenarios are accessed and tested. Two are in Melbourne - ANZ and National Australia Bank - and the other two in Sydney's CBD are occupied by teams from Commonwealth Bank and Westpac

The participants comprise the heavyweights of each business, its chief executive, finance director, the head of the retail operations, treasury, marketing and corporate affairs.

The pressure is intense. Each team watches every piece of media coverage - newsflashes, the online updates and reads newspaper commentary. They listen to every utterance from the government - the impromptu press conferences known in the media trade as door stops. But they watch their competitors' moves even more closely.

When the RBA announced a 25 basis point cut to its cash rate at 2.30pm on Tuesday the clock started ticking.

The top dogs in finance and treasury have the task of assessing how much it will cost their bank to pass on the full rate cut and how much they can save by shaving a couple of percentage points off a full cut. In order to play this game of chicken they must also understand how much financial pain/gain will be sustained by the other three.

Inside the bunkers, the marketing and retail services operatives must overlay the financial outcomes against the government backlash, PR fallout and the possibility of customer leakage.

None of the banks wanted to pass on the full 25 basis points, but none wanted to be the first to do so. There is no first mover advantage in this game. It might be unpopular to agree with the banks on this issue, but thanks to the state of offshore credit markets the banks' cost of borrowing has gone up. If they needed to wade into these wholesale markets tomorrow it would be expensive. The scenarios worked through by these war cabinets would have involved a matrix of possibilities.

They even debate whether it should be a Sydney or a Melbourne bank that moves first.

But all understand that to the extent they would fall short of matching the Reserve Bank it would be better to do so as a pack.

NAB would have been desperate to see the others pass on less than 25 basis points, providing it with the excuse to stay with the pack. But nothing this week has gone to script. Within hours of ANZ's move NAB followed, passing on the full 25 basis points.

OK. There you have the description of how the oligopoly past behaves. Now the vision of the oligopoly future, perhaps?

Yesterday at 12.30 ANZ became the first breakaway - it announced a cut of the full 25 basis points. But with the ANZ announcement came an unexpected kicker: in future it will not respond to changes in the Reserve Bank's cash rate but change its variable interest rates on its own timetable, the second Friday of each month. And, more importantly, the movement will reflect changes to its own cost of funds.

This decoupling is all about convincing consumers that the bank's cost of borrowing has little to do with the benchmark rate set by the Reserve Bank. In doing so, ANZ will be less tied to central bank settings and is more likely to move rates up next month if European debt markets remain in a parlous state. It's a clever strategy, albeit probably unpopular. It is also a game-changer.

Most consumers will not understand the significance of ANZ moving away from the Reserve Bank's rate agenda. They will just see a 25-basis-point rate cut as a win.

But the breakaway is sufficiently radical and unexpected that the rest will need to reform their strategies.

It is now a fair bet that the others will fall into line. A new pack has formed and to stay outside it would be dangerous.

Read more: http://www.smh.com.au/business/anz-a-wildcard-as-it-leads-pack-20111208-1olam.html#ixzz1fyhtyPq

If there truly were any competitive instincts in the cartel, the ranks will break with this move. Time will tell. Guambat reckons the rank oligopoly will reform and hold as tight as the one of olde.


FAIRNESS DOCTRINE FOLLOW UP:

Further to above, consider this:

Banks damned if they do and damned if they don't

This week's apparent indecision was in marked contrast to what happened just four weeks ago.

Then, the two biggest banks, the Commonwealth and Westpac, announced within a short period of each other and not long after the RBA's 2.30pm Melbourne Cup day cut they would follow suit and reduce their interest rates

ANZ left it to the next day, leaving National Australia Bank as the odd one out by only passing on part of the rate cut - 0.20 per cent - rather than the full 0.25 per cent.

NAB was vilified, not surprisingly perhaps, given it had sought to make a virtue of being the odd one out by projecting itself as the consumers' friend just a year before with its "breaking up with the big four" home loans campaign.

In little more than a day, NAB had handed back some of its hard-fought PR gains over what appeared, in public at least, to be a miserly amount - just five basis points, or 0.05 of a per cent.

As small as that seemed, it was in fact a significant turning point in what has become a hugely competitive battle for market share

Before last month's shenanigans, NAB had been successful in grabbing market share through the use of a classic retail-style price war. And in doing so, it was prepared to sacrifice some of its profit margin to buy that volume.

But all of this has come at a cost, a factor highlighted in prescient comments made just a week ago in the Herald by banking analyst Brett Le Mesurier of brokers BBY.

"From their [NAB] accounts to September it looked like to me like it was a pure 'price versus volume' trade-off," he said. "So more volume, lower price. And you multiply the two and you end up no better from a growth perspective."

But it wasn't just about the growth or the quality of that bigger market share. It was also about the cost of funding that growth. Put simply, NAB's lower-priced mortgages have been hurting its bottom line since its own cost of borrowing is no cheaper than its rivals.

In fact, the battle in the lending market has been matched by an equally expensive fight for deposits, which has only added to the pressure on profit margins.

Read more: http://www.smh.com.au/business/banks-damned-if-they-do-and-damned-if-they-dont-20111209-1ongv.html#ixzz1g3L5VDWP

As always, be sure to read the whole linked article. Much has been left out here. Guambat is still not wholly convinced that mere marketing wars constitute competition. In the classic sense, competition drives down price, and the Big Four show little ambition to do anything so brash for very long.

The very foundations of the Four Pillars Policy is to avoid the kind of price competition that would yield the kind of creative destruction of any of the existing banks that classic economics finds useful. Bank competition in Australia is more akin to rearranging deck chairs. Which is what oligopolies do.

Of public capital and public interest

First, on the matter of public capital, we are the 99.9%, according to this Forbes article/opinion piece carried on Yahoo Finance, excerpts extracted:

The Top 0.1% Of The Nation Earn Half Of All Capital Gains

The top 0.1%-- about 315,000 individuals out of 315 million-- are making about half of all capital gains on the sale of shares or property after 1 year; and these capital gains make up 60% of the income made by the Forbes 400.

The [Bush 2003]reduction in the [capital gains] tax from 20% to 15% continued the step-by-step tradition of cutting this tax to create more wealth. It had first been reduced from 35% in 1978 at a time of stock market and economic stagnation to 28%. Again 1981, at the start of the Reagan era, it was reduced again to 20%-- raised back to 28% in 1987, on the eve of the October 19 th-- 23% crash in the market [obvious transcription error in article here]. In 1997 Clinton agreed to reduce it back to 20%, which move was an inducement for the explosion of hedge funds and private equity firms-- the most "rapidly rising cohort within the top 1 per cent."

The facts are clear according to the Congressional Budget Office more than 80% of the increase in income inequality was the result of an increase in the share of household income from capital gains. In fact, you can go so far as to claim that "Capital Gains income is the most unevenly distributed-- and volatile-- source of household income," according to Laura D'Andrea Tyson, University of California business professor and former chairwoman of the Council of Economic Advisers under President Clinton.

I commend you to the late Justice Louis Brandeis warning to the nation that " We can have democracy in this country, or we can have great wealth concentrated in the hands of a few, but we can't have both."

Coincidentally, Guambat finally received his New Yorker magazine for October 24 in the mail today (thank you Captain Jack), and found resonance with its cover:



As as to public interest in those capital gains (and losses), consider the opinion of US District Court Judge Jed S. Rakoff, when asked to rubber stamp a "settlement" of a complaint by the SEC against Citibank. On October 19, 2011, the U.S. Securities and Exchange Commission
(the "S.E.C.") filed lawsuit [as well as a parallel Complaint filed the same day against Citigroup employee Brian Stoker], accusing defendant Citigroup Global Markets Inc. ("Citigroup") of a substantial securities fraud. Excerpts, snippets and such follow.

Although this would appear to be tantamount to an allegation of knowing and fraudulent intent ("scienter," in the lingo of securities law), the S.E.C., for reasons of its own, chose to charge Citigroup only with negligence.

The Court turns first to the standard of review. In its original Memorandum in support of the proposed Consent Judgment! filed before the case had been assigned to any judge, the S.E.C. expressly endorsed the standard of review set forth by this Court in its Bank of America decisions, i.e., "whether the proposed Consent Judgment ... is fair, reasonable, adequate, and in the public interest."

In its most recent filing in this case, however, the S.E.C. partly reverses its previous position and asserts that, while the Consent Judgment must still be shown to be fair, adequate, and reasonable, "the public interest ... is not part of [the] applicable standard of judicial review." This is erroneous.

As a fall-back, the S.E.C. suggests that, if the public interest must be taken into account, the S.E.C. is the sole determiner of what is in the public interest in regard to Consent Judgments settling S.E.C. cases. That, again, is not the law.

[A] court, while giving substantial deference to the views of an administrative body vested with authority over a particular area, must still exercise a modicum of independent judgment in determining whether the requested deployment of its injunctive powers will serve, or disserve, the public interest. Anything less would not only violate the constitutional doctrine of separation of powers but would undermine the independence that is the indispensable attribute of the federal judiciary.

Before the Court determines whether the settlement is fair, it must ask a preliminary question: fair to whom? As the holding of Trucking Employers quoted above makes plain, the answer is fair to the parties and to the public.

Purely private parties can settle a case without ever agreeing on the facts, for all that is required is that a plaintiff dismiss his complaint. But when a public agency asks a court to become its partner in enforcement by imposing wide-ranging injunctive remedies on a defendant, enforced by the formidable judicial power of contempt,3 the court, and the public, need some knowledge of what the underlying facts are: for otherwise, the court becomes a mere handmaiden to a settlement privately negotiated on the basis of unknown facts, while the public is deprived of ever knowing the truth in a matter of obvious public importance.

Applying these standards to the case in hand, the Court concludes, regretfully, that the proposed Consent Judgment is neither fair, nor reasonable, nor adequate, nor in the public interest. Here, the S.E.C.'s long-standing policy - hallowed by history, but not by reason - of allowing defendants to enter into Consent Judgments without admitting or denying the underlying allegations,4 deprives the Court of even the most minimal assurance that the substantial injunctive relief it is being asked to impose has any basis in fact.

As a matter of law, an allegation that is neither admitted nor denied simply that, an allegation. It has no evidentiary value and no collateral estoppel effect.

As for common experience, a consent judgment that does not involve any admissions and that results in only very modest penalties is just as frequently viewed, particularly in the business community, as a cost of doing business imposed by having to maintain a working relationship with a regulatory agency, rather than as any indication of where the real truth lies. This, indeed, is Citigroup's position in this very case.

Of course, the policy of accepting settlements without any admissions serves various narrow interests of the parties.

In this case, for example, Citigroup was able, without admitting anything, to negotiate a settlement that (a) charges it only with negligence, (b) results in a very modest penalty, (c) imposes the kind of injunctive relief that Citigroup (a recidivist) knew that the S.E.C. had not sought to enforce against any financial institution for at least the last 10 years, and (d) imposes relatively inexpensive prophylactic measures for the next three years.

In exchange, Citigroup not only settles what it states was a broad-ranging four-year investigation by the S.E.C. of Citigroup's mortgage-backed securities offerings, but also avoids any investors' relying in any respect on the S.E.C. Consent Judgment in seeking return of their losses. If the allegations of the Complaint are true, this is a very good deal for Citigroup; and, even if they are untrue, it is a mild and modest cost of doing business.

It is harder to discern from the limited information before the Court what the S.E.C. is getting from this settlement other than a quick headline. By the S.E.C.'s own account, Citigroup is a recidivist [external link added], and yet, in terms of deterrence, the $95 million civil penalty that the Consent Judgment proposes is pocket change to any entity as large as Citigroup.

While the S.E.C. claims that it is devoted, not just to the protection of investors but also to helping them recover their losses, the proposed Consent Judgment, in the form submitted to the Court, does not commit the S.E.C. to returning any of the total of $285 million obtained from Citigroup to the defrauded investors....

the Court is forced to conclude that a proposed Consent Judgment that asks the Court to impose substantial injunctive relief, enforced by the Court's own contempt power, on the basis of allegations unsupported by any proven or acknowledged facts whatsoever, is neither reasonable, nor fair, nor adequate, nor in the public interest.

It is not reasonable, because how can it ever be reasonable to impose substantial relief on the basis of mere allegations? It is not fair, because, despite Citigroup's nominal consent, the potential for abuse in imposing penalties on the basis of facts that are neither proven nor acknowledged patent. It is not adequate, because, in the absence of any facts, the Court lacks a framework for determining adequacy. And, most obviously, the proposed Consent Judgment does not serve the public interest, because it asks the Court to employ its power and assert its authority when it does not know the facts.

An application of judicial power that does not rest on facts is worse than mindless, it is inherently dangerous. The injunctive power of the judiciary is not a free roving remedy to be invoked at the whim of a regulatory agency, even with the consent of the regulated. If its deployment does not rest on facts - cold, hard solid facts, established ei by admissions or by trials - it serves no lawful or moral purpose and is simply an engine of oppression.

Finally, in any case like this that touches on the transparency of financial markets whose gyrations have so depressed our economy and debilitated our lives, there is an overriding public interest in knowing the truth.

the S.E.C., of all agencies, has a duty, inherent in its statutory mission, to see that the truth emerges; and if fails to do so, this Court must not, in the name of deference or convenience, grant judicial enforcement to the agency's contrivances.
Accordingly, the Court refuses to approve the proposed Consent Judgment. Instead, the Court hereby consolidates this case with the Stoker action, adopts the Case Management Order in that action as equally applicable to the instant case, and directs the parties to be ready to try this case on July 16, 2012.

Clearly, the Court believes the public not only can handle the truth hidden by settlements such as this, but they are entitled to know it. We need more same same decisions.