A Different Newspaper

In the past year or so I've written several posts based on articles in the McClatchy newspapers. I think it's one of the best newspapers in this country. I've been surprised this past week when two other publications I read - The Wall Street Journal and the NY Review of Books - featured the McClatchy chain.

The Journal's article talked about the recent problems McClatchy has had after a long run of being king of the hill. Michael Massing in the NY Review praises the Iraqi blog, Inside Iraq, as being truly reflective of daily life in Iraq for Iraqis. Surprisingly, Leila Fadel, the bureau chief, is only 26 years old. This is just another indication that McClatchy is a different newspaper company.

Which is it?

Two headlines in today's McClatchy Newspapers web site:  

Early signs of positive jobs report to launch campaign’s last stretch
By Kevin G. Hall | McClatchy Newspapers

Unemployment down to 8.1 percent but August jobs number lower than expected
By Kevin G. Hall | McClatchy Newspapers

McClatchy and the NRO

Last month I talked about McClatchy Newspapers opening an investigation into the National Reconnaissance Office (NRO), which is another of our major spy agencies.  It has a budget of $15 billion and a lot of power, perhaps as much as the CIA and NSA.

The next edition of the investigation concerns allegations of criminal behavior regarding contracting and attempts by the agency to cover things up.  As befits a spy agency, the situation is cloudy, but it does appear that there is considerable effort to pretend everything is wonderful.

Senate vs. CIA & White House?

It looks as though the White House is involved in the dispute between the CIA and the Senate. McClatchy has found that the White House has been withholding for five years more than 9,000 top-secret documents sought by the Senate Select Committee on Intelligence for its investigation into the now-defunct CIA detention and interrogation program, even though President Barack Obama hasn’t exercised a claim of executive privilege. The White House does not deny this. In a statement to McClatchy, the White House confirmed that “a small percentage” of the 6.2 million pages of documents provided to the committee were “set aside because they raise executive branch confidentiality interests.”

I'm glad Obama runs such a transparent operation.

McClatchy Again

McClatchy has another prize-winning article. This one is about Guantanamo. The author interviewed 66 released detainees, more than 12 Afghan officials and U.S. officials with deep knowledge of the situation. The conclusion is in the title of the article, "America's Prison for Terrorists Often Held The Wrong Men."

Of the 66 detainees interviewed, 34 had a connection to militants, but 23 of these 34 had little information as they were very low level operatives. Seven of the 66 were fairly high up in the hierarchy and likely had valuable information. Some were in their 70s, one was 80.

Former Secretary of the Army, Thomas White, said that, as early as 2002, "it was obvious that at least a third of the population did not belong there." And why should they, as many were there because we offered money for nasty people or people were settling old grudges by accusing their neighbor of chicanery.

Then, there is the whole question of how we treated - and treat - the detainees. The answer in large measure indicates how far we have fallen away from the ideals of this country.

We need an attitudinal shift...

on the part of Summers, Geithner etal. They've been so used to working for the money crowd, they may never understand that now they are working for us. How can Summers really question the doings of the hedge funds when he got $5+ million from one of them last year?

Today, McClatchy raises the issue of why Geithner did not try to negotiate a lower payment by AIG to its counterparties. The issue has been raised before. McClatchy is asking for only a 10 -15% discount. If it were your money and your deal, you would have started at 50%.

Would we be better or worse off if both of them left?

Speaking up for free speech

I've been impressed with McClatchy newspapers since I started writing this blog.  Now they are one of the few - if not the only - newspaper not willing to cede a censorship role to the government when it comes to quoting the subjects of interviews.   Other newspaper have given government sources the right to clear and alter quotes as a prerequisite to granting an interview.  McClatchy says no.

The National Reconnaissance Office

Every few months McClatchy publishes a "Special Report", a series of articles about an important issue, such as Mexico, Bin Laden's killing, etc.  It looks like they have started a report about the National Reconnaissance Office (NRO), an office I had never heard of.

The NRO is another of our spy agencies.  With its annual budget of $15 billion it manages our satellites so that "when the United States needs eyes and ears in critical places where no human can reach – be it over the most rugged terrain or through the most hostile territory – it turns to the NRO".  The report is not about the the success or failure of the NRO.  It is about the office's interviewing of job applicants and employees.  

The office is rightly concerned with spies who are seeking to get inside the office.  One technique it uses to prevent such infiltration is polygraphy.  The office was given strict rules about the use of polygraphy, what can be asked, what cannot be asked.  McClatchy's work seems to indicate that these rules are being broken quite often in that considerable information is being obtained about people's private lives.  In fact, it looks as though the office is encouraging this rule-breaking by giving bonuses to those who obtain private information.  

It is not clear as to the use the office makes of this personal information, although it is stored in a database.  When someone confesses to having committed a crime, the office does not notify the police.

Read more here: http://www.mcclatchydc.com/2012/07/10/155587/national-reconnaissance-office.html#storylink=cpy

Today's DOD Accounting

Yesterday I wrote about the fact that DOD's books can't be audited. Well, according to McClatchy certain departments of DOD can be. Howsomever, the results of the audit are highly questionable. Here are McClatchy's conclusions:

– Outside audits by a certified public accounting firm of the Defense Finance and Accounting Service’s books turned out to be shoddy, according to the Pentagon’s own accountants, although that same CPA firm had endorsed the agency’s previous fiscal records for years.

– In reaction to the skeptical evaluations, Pentagon officials pressured their accountants to suppress their findings, then backdated documents in what appears to have been an effort to conceal the critiques.

– The Defense Department’s Office of the Inspector General, which was brought in to watchdog the audit, not only helped squelch the critical work but also allowed the outside firm to be paid despite the serious questions about the quality of its work.

I guess one can still conclude that DOD's books cannot be audited.

McClatchy Reports on the Credit Agencies Hearing

It's a pretty strong example of greed overcoming obligations to the financial community.

My emphases.

WASHINGTON — The chairman and chief executive of Moody's Corp. said Friday that he didn't know that his company continued to give investment-grade ratings to complex financial instruments backed by shaky subprime mortgages even after it downgraded billions of dollars worth of such deals in the summer of 2007.

His admission came during a daylong hearing by the Senate Permanent Subcommittee on Investigations, which is looking into the origins of the nation's worst financial crisis since the Great Depression.

Moody's chief Ray McDaniel, under questioning, said that he didn't think his company had continued to rate complex deals backed by U.S. mortgages after it and competitor Standard & Poor's jolted the markets in July 2007 with massive downgrades of earlier deals.

"I apologize, I do not recall that," McDaniel said.

The panel's chairman, Sen. Carl Levin, D-Mich., then presented him with documentation that both Moody's and S&P gave investment-grade ratings to a Citigroup deal in December 2007, worth almost $400 million, backed by shaky subprime loans that by then clearly were toxic.

The point Levin was making — and made repeatedly — is that credit-rating agencies did whatever was needed to get lucrative fees, some as high as $1.4 million, for rating complex deals.

Later, McDaniel stressed that preserving market share "is not as important as ratings quality."

While other Wall Street executives have expressed contrition when they appeared before Congress, McDaniel and former S&P President Kathleen Corbet were unapologetic on Friday.

Throughout the day in earlier testimony and in e-mails released by Levin, however, former Moody's and S&P officials told how they were pushed out or quit in frustration because managers badgered them to "massage" complex deals until they could land the business.

A McClatchy investigation in October documented how top managers from the structured finance division, which rated the complex deals, were moved into the top executive suites at Moody's and effectively took over the company.

McDaniel and Corbet said they were unaware that their analysts felt pressured to sacrifice the quality of investment-grade ratings to maintain market share and earn the huge accompanying fees.

Investment-grade ratings gave investors the illusion of safe bets, allowing big Wall Street firms such as Goldman Sachs to peddle the securities across the globe. Moody's and its chief competitors were key players in the prelude to a near meltdown of global finance in September 2008.

Called to appear before the panel, Richard Michalek, a former Moody's vice president and senior credit officer, described the ratings process for deals that could bring more than $1 million in fees as a "must say yes" atmosphere.

Frank Raiter, a former managing director at S&P and the head of the group that rated pools of residential mortgages, told the panel that analysts routinely sought direction from top management about the shaky deals they were being asked to rate.

"The guidance was not forthcoming from the top," he said, later adding, "I retired because I got tired of the frustration."

Levin read e-mail after e-mail from inside the ratings agencies about deals that never should have been rated, much less received investment-grade ratings.

"These e-mails are just devastating to the kind of culture that is going on here," he said.

Most striking was testimony from Eric Kolchinsky, a Moody's managing director who in 2007 was in charge of the division that rated the complex deals called collateralized debt obligations. CDOs are securities backed by pools of U.S. mortgages that have been packaged together into bonds and sold to investors.

Kolchinsky recounted how in the first two quarters of 2007, his group generated more than $200 million in revenue for Moody's by giving complex deals investment-grade ratings _ which told investors that they were safe bets. In the late summer of 2007, however, Kolchinsky was informed by superiors that bonds issued a year earlier were about to be severely downgraded.

That should have required a new methodology for ratings on deals that were still pending, but when he tried to do that, he was told not to. It amounted to securities fraud, in his opinion.

"My manager declined to do anything about the potential fraud, so I raised the issue to a more senior manager," he testified. He said that the complaint resulted in a change to methodology. "I believe this action saved Moody's from committing securities fraud. Because of the culture, I knew what I did would possibly jeopardize my role at Moody's."

He was right. A month later, he was sent a nasty e-mail asking why his market share slipped from 98 percent to 94 percent in the third quarter. The e-mail came, he said, just days after Moody's had downgraded more than $33 billion in bonds backed by subprime mortgage loans. Less than two months after challenging the integrity of the ratings, Kolchinsky was removed from his post and given a lower-paying job elsewhere in the company with far less responsibility. He eventually left.

Under questioning from Levin, Kolchinsky acknowledged that he and his staff rated the complex Goldman Sachs deal that this month became the subject of fraud charges brought against Goldman by the Securities and Exchange Commission.

The SEC alleges that Goldman failed to disclose to investors that hedge fund mogul John Paulson helped pick the mortgages in the deal with an eye toward betting that they'd fail. Kolchinsky said this information was never shared with Moody's.

"I did not know and … I am fairly certain my staff did not know either," Kolchinsky said.

Asked by Levin whether that would have affected the rating the deal received, Kolchinsky said yes.

"From my perspective it is something I would have wanted to know. It is more of a qualitative, not quantitative assessment. It changes the incentives of the structure," Kolchinsky said. "It just changes the whole dynamic of the structure."

In one e-mail presented by Levin, an S&P employee inquiring about evidence that subprime lender Fremont General was showing problems with poor underwriting was told not to worry about it. Levin seized on this e-mail when grilling Susan Barnes, an S&P managing director, angrily asking her why relevant information and poor performance was discarded.

"Why doesn't the supervisor say, 'Damn right, it's relevant,'?" demanded Levin, eventually coaxing a response from Barnes.

Barnes said that, "The assumptions we use in our criteria have obviously not panned out the way we had expected."

In written remarks, Corbet gave no ground. She said all deals were rated by teams of analysts, who were supervised by individual managers. Her role as president, Corbet said, was to set overall strategy and work with her parent company, McGraw-Hill.

McDaniel also offered no apology. Instead, he said that his company took steps to remedy what was going wrong as information became available. Former Moody's executives testified to the contrary.

McDaniel said that Moody's warned of declining underwriting standards for mortgages as early as 2003. However, Moody's continued to rate the complex deals backed by U.S. mortgages, which became a huge portion of the company's business.

Moody's is under pressure on many fronts. California Attorney General Jerry Brown this week filed a court action seeking to force Moody's to comply with a subpoena he issued for information seven months ago. A special Financial Crisis Inquiry Commission, charged by Congress to report on the causes of the crisis, issued a subpoena to Moody's, complaining that the company has failed to provide information in a timely manner.

Leila Fadel on the Surge

Leila Fadel is the Baghdad Bureau Chief for McClatchy. She's a young woman who has been quietly and intelligently reporting from Iraq for a couple of years now. Read her blog for some of the best writing on Iraq.

Numbers, numbers. Who's got the numbers?

There has been considerable debate about the numbers being used to justify or rebut the surge efforts. This one conducted by the BBC, ABC and NHK of Japan shows that at least one important group, Iraqis, don't think the surge is going well.

The McClatchy newspapers also have a comprehensive article on life on the ground in Iraq since th surge began. It's not good.

Greed

Earlier this month I wrote briefly about Moody's appearance before the House Financial Subcommittee on Capital Markets. It looked at that time that Moody's was basically not being prudent. Kevin Hall of McClatchy has looked into the situation more closely and attributes Moody's shortcomings to that old standby, greed.

Hall asserts that Moody's "purg[ed]analysts and executives who warned of trouble and promoting those who helped Wall Street plunge the country into its worst financial crisis since the Great Depression." All for the sake of increasing revenues and, ultimately, profits; revenues went from $800,700,000 in 2001 to $2.037 billion in 2006.

Advice and Assistance

That's what our troops in Iraq are now there to do - provide advice and assistance to the Iraqis. I guess that is being done although how advice and assistance is defined is another matter. McClatchy reports on three cases of "advice and assistance" in the past two weeks and it seems that we have a very broad definition of those terms.

In one case the Iraqis could not defeat 25 insurgents without our help. In a second case, we were along on a raid which resulted in the killing of a child and injuring of a 90-year-old woman; the raid has been the subject of protests. In a third case insurgents were able to penetrate an Iraqi military base and kill some of the occupants before our troops killed the invaders.

Yes, we're told it is early days. How long will we be told this?

Again, the Managerial Thing

It's not easy hiring people. It is not something one does lightly, particularly if the candidate will be working directly for you. It's beginning to sound as though McCain does not have the same ideas.

Media reports say that he has met Palin once and maybe spoken with her another time. McClatchy says that no one in Alaska has been asked about Palin, not her neighbors, not politicians for or against her. The FBI is not talking.

This has to be a very strange way to choose someone who may have her hand on the nuclear trigger. How can this guy feel that he has the qualifications to manage this country? How could anyone vote for him?

"People are angry at both sides"

When I first saw the headline "Radical Islamists No Longer Welcome in Pakistani Tribal Areas", I thought that this article in the McClatchy papers would show how much better things have gotten in Pakistan. I was wrong.

These people in the tribal areas bordering Pakistan are really getting hurt by both sides. Although they rebuffed the Islamists in the recent election, the locals are still getting killed and maimed by them and by the battles between the Islamists and the government.

Islamists have forbidden girls to attend school. To make their point they cut off the head of a female teacher. The government seems to condone this behavior as long as the government is not criticized.

On the other side of the coin you have a tribal leader saying, "If you have a friend like the United States, then you have no need for an enemy". His comments are driven by the actions of our forces trying to kill the Taliban stationed in Pakistan; in most cases, civilians rather than Taliban are killed.

Rising Food Prices Stoke Revolutions

That's the argument put forth by Kevin Hall of the McClatchy Newspapers. Food prices probably have had an influence on the unrest in Egypt; they've also affected events in Jordan, Algeria and Tunisia. Even the rising giants, India and China, seem to be concerned about food prices. The FAO recorded peak prices in its index of basic food prices of December. The UN has issued warnings about the issue.

The weather has been a factor in the rising prices. More people are leaving the developing world and want what developed nations have, including food. It's also likely that the Fed's quantitative easing policy has had an effect. The policy tends to raise asset prices, no matter what kind of assets we're talking about, including food stocks. Since Bernanke announced the policy in August, prices of basic food have increased quite a bit: corn 53%, soybeans 37%, wheat 24%.

It's not getting better

Next week the State Department will release its annual terrorism report. The McClatchy newspapers, which I find myself referring to me more and more, claim that the report will show an increase in the number of terrorism attacks on non-combatants. It's up 29% (to 14,338) in 2006. About 41% of these attacks resulted in at least one death.

When are we going to impeach them?

From an article on a report for the Physicians for Human Rights as reported by McClatchy (who else?):

"After years of disclosures by government investigations, media accounts and reports from human rights organizations, there is no longer any doubt as to whether the current administration has committed war crimes," Major General Antonio Taguba wrote. "The only question that remains to be answered is whether those who ordered the use of torture will be held to account."

Taguba led the investigation into Abu Ghraib.

He wasn't so bad

I admit I was not a fan of Richard Nixon when he was a political player. My views have changed, especially when you look at those who succeeded him, especially the last two, George W and Barack. 

McClatchy has a retrospective of him on what would have been his hundredth birthday.   One of his former aides who now helps curate the Nixon Museum has this summary, "His greatest legacy is that he left the world a safer and more peaceful place, and he appreciated the difference government could make in the lives of average Americans. He knew how to get things done.”  Some of the good things he got done include: the opening to China, the SALT treaty, the EPA, expansion of affirmative action.

Read more here: http://www.mcclatchydc.com/2013/01/08/179319/hes-back-richard-nixon-at-100.html#storylink=cpy