The Obama administration has unveiled plans to boost
government regulation over the financial system. On Thursday, Treasury Secretary Timothy Geithner outlined proposals including expanding federal regulation for the first time to cover financial derivatives trading, large hedge funds and insurers such as AIG. Regulators would also impose uniform standards to limit the range of functions of major financial firms, including banks. Speaking before the House Financial Services Committee, Geithner said the changes were prompted by the failure of the economic system to regulate excess and greed.
Treasury Secretary Timothy Geithner: “Our system failed in basic fundamental ways. Compensation practices rewarded short-term profits over long-term return. Pervasive failures in consumer protection left many Americans with obligations they did not understand and could not sustain. The huge apparent returns to financial activity attracted fraud on a dramatic scale. Market discipline failed to constrain dangerous levels of risk-taking throughout the system.”
The new rules come on top of previously announced proposals for government authority to seize troubled non-banking financial firms. President Obama is expected to promote the plan in meetings with top Wall Street bankers later today.
The insurance giant AIG is facing new congressional and legal scrutiny over how it funneled tens of billions of dollars in taxpayer bailout money to banks facing huge losses that AIG had insured. In what some have called the “backdoor bailout,” AIG gave nearly $13 billion to Goldman Sachs and tens of billions more to other firms, including Bank of America, Merrill Lynch, JPMorgan Chase, Morgan Stanley and several foreign banks. On Thursday, twenty-six House Democrats signed a letter by Congress member Elijah Cummings asking the bailout program’s inspector general to investigate the payments. Meanwhile, New York State Attorney General Andrew Cuomo subpoenaed AIG for information related to the derivatives payments funneled to the banks.
President Obama is expected to unveil today a major expansion of US military efforts in Afghanistan and Pakistan. Following a two-month review, Obama will reportedly order an additional 4,000 troops to Afghanistan on top of the 17,000 new combat troops authorized last month. The Washington Post reports Obama’s plan will require a 60 percent increase to the $2 billion in monthly US military costs in Afghanistan. Administration officials also say they’ll impose new “benchmarks” on their allies in the Afghan and Pakistani governments. The plan will also reportedly include reconciliation efforts aimed at low-level Taliban fighters while shunning top leaders. On Thursday, National Intelligence Director Dennis Blair estimated some two-thirds of pro-Taliban groups are motivated by basic concerns such as inadequate water supplies or access to education.
Meanwhile, in Pakistan, at least forty-eight people were killed and dozens more wounded in a suicide attack on a mosque earlier today. The bombing came in the town of Jamrud near Pakistan’s border with Afghanistan.
In Iraq, sixteen people were killed and another forty-five wounded Thursday in a car bombing in northeast Baghdad. It was the fifth major bombing attack to hit Iraq this month.
US officials have confirmed that Israel was behind a deadly air strike that killed dozens of people in Sudan this past January. The US says Israel attacked a convoy of seventeen trucks suspected of carrying weapons intended for smuggling into the Gaza Strip. Estimates of the death toll range from thirty-nine to more than 100. In Israel, outgoing Israeli Prime Minister Ehud Olmert declined to comment on the specific attack but said Israel can “operate near and far.”
Israeli Prime Minister Ehud Olmert: “We are taking action wherever we can strike terror infrastructure, in places that are nearby and not that close. We are hitting them, and in a way that strengthens deterrence and the image of deterrence.”
US officials say they believe the alleged weapons could have come from Iran but haven’t offered evidence. Meanwhile, in the Gaza Strip, senior Hamas official Osama al-Muzaini denied receiving outside weaponry.
Osama al-Muzaini: “Hamas does not receive weapons from any country or any other side. To have convoys driving weapons to Hamas is a false statement and comes under the mockery and censorship which Israel always tries to execute. We affirm that Hamas has their own means, which are far from the official and international means, to get weapons.”
Supporters of Palestinian rights have long criticized Israeli and US indignation at Palestinian efforts to arm themselves, when most of Israel’s military arsenal is funded and supplied by the United States.
The Israeli government has released an investigation downplaying the number of civilian deaths in its attack on the Gaza Strip. On Thursday, the Israeli military gave a death toll of 1,166 and said most of the dead were combatants. In Gaza, Khalil Abu Shammala of the Palestinian Center for Human Rights dismissed the Israeli claims.
Khalil Abu Shammala: “All of the international human rights organizations emphasized that Israel committed war crimes against the Palestinians. Israel will try to deceive the people, will try to deceive the international public opinion, in order to show that they did not kill this huge number of the civilians during the last aggression on the Gaza Strip.”
Palestinians say Israel killed more than 1,400 people, most of them civilians.
A top UN official says the global economic crisis has pushed the number of chronically hungry people past the one billion mark for the first time. Food and Agriculture Organization head Jacques Diouf disclosed the figure to the Financial Times. Last year the FAO estimated about 960 million people were chronically hungry worldwide.
President Obama fielded questions from internet users nationwide Thursday in the White House’s first-ever online town hall. Obama said he expects more job losses during the current recession.
President Obama: “We’re going to have to be patient and persistent about job creation, because I don’t think that we’ve lost all the jobs we’re going to lose in this recession. We’re still going to be in a difficult time for much of this year.”
The questions were selected following an online vote. The most popular question asked Obama to comment on whether he thinks legalizing marijuana could help boost the economy. Obama answered no, but didn’t rule out legalization outright. White House Press Secretary Robert Gibbs, however, later said Obama opposes legalization.
In North Dakota, the town of Fargo is bracing for a potential major flood as the Red River continues to rise. The river currently stands at nearly forty feet, with predictions it could hit forty-three feet by Saturday. Hundreds of volunteers have turned out to help sandbag dikes around the city, which are now as high as forty-three feet. Evacuations have already taken place in nearby towns hit by flooding and frozen temperatures.
In Pennsylvania, the state Supreme Court has overturned hundreds of juvenile convictions handed down by two corrupt judges who took bribes in return for placing the youths in privately owned jails. Judges Mark Ciavarella and Michael Conahan are said to have received $2.6 million for ensuring that juvenile suspects were sent to private prisons. Some of the young people were jailed over the objections of their probation officers. The judges pleaded guilty to fraud last month and face up to seven years in prison. On Thursday, the Pennsylvania court ruled Ciavarella violated the constitutional rights of youth suspects in his courtroom from 2003 to 2008.
New figures show the economic downturn has led to an increase in defaults on student loans. The US Department of Education says the student loan default rate last year rose to 6.9 percent from 5.2 percent a year earlier. An estimated half-trillion dollars in federal student loan debt is now outstanding.
Independent Senator Bernie Sanders of Vermont has introduced a measure to establish a single-payer healthcare system. The American Health Security Act of 2009 would establish a single government program to guarantee healthcare to all Americans, including the 46 million currently uninsured. Advocates say the proposal would save some $400 billion by eliminating the bureaucratic costs of the current privately run system. The measure is similar to bills introduced by Democratic Congress members Jim McDermott of Washington and John Conyers of Michigan in the House.
In other healthcare news, a new study shows nearly one in five US workers are uninsured. The figure marks an increase over the mid-1990s, when fewer than one in seven workers were uninsured. That translates to around six million more uninsured workers over the last decade.
The House has approved what’s being called the biggest expansion of wilderness protection in fifteen years. The bill would extend federal protection to two million acres across nine states and launch a river restoration program in western states. The Senate passed its version of the measure last week. With his expected signature, President Obama will make the bill the first major conservation effort of his presidency.
Senator Jim Webb of Virginia is calling for a comprehensive review of the nation’s criminal justice system to reduce the growing prison population. Under the proposal, a blue-ribbon panel would conduct a more than year-long investigation and propose reforms on issues including law enforcement, court sentencing, reintegrating prisoners. The proposed commission would also tackle gang violence, drug policy, mental illness, and prison administration.
And in Canada, a US war resister has been granted a last-minute stay of deportation. The Canadian Federal Court says Kimberly Rivera will be allowed to remain in Canada pending a review of her deportation order. Rivera fled the US in January 2007 along with her husband and two children to avoid returning to Iraq.
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