Public Intelligence

In May 2011, the USAID Office of the Inspector General published a report on the agency’s supervision and oversight of assistance activities in Afghanistan and the Kabul Bank crisis. This report was quickly withdrawn and the Federation of American Scientists’ Steven Aftergood quoted a USAID official as saying that “At the time our report was issued, it was written utilizing information from non-classified sources. After our report had been issued, USAID subsequently classified two documents that were cited in our report. This action resulted in the report becoming classified and we removed it from the web site.” Now that an “Unclassified” version of the report has been released, a comparison of the two versions reveals the “classified” portions of the report that were concealed by USAID. These sections of the report indicate that a material loss review was commissioned by USAID/Afghanistan and completed in May 2010 indicating that $850 million, or 94 percent of the value of the bank’s outstanding loans, had been fraudulently diverted to “insiders” connected with the bank. The concealed sections also indicate that Deloitte and Da Afghanistan Bank failed to provide this report to USAID for nearly six months.

linmtheu – http://www.flickr.com/photos/26040773@N07/
SekaRuis – http://www.flickr.com/photos/sekarius/
endiaferon – http://www.flickr.com/photos/endiaferon/
cortlinux – http://www.flickr.com/photos/cortlinux/

In a national referendum Saturday, Icelanders, for the second time, voted against a government proposal to pay the big losses of some of their bankers and their foreign customers, with 60% voting “No” and 40% in favor. For those of us who welcome capitalists, but want them to operate at their own risk, this hopefully sets an example for the rest of Europe. How Icelandic taxpayers got stuck with this bailout bill is a strange saga. When the international financial crisis hit bottom in the fall of 2008, it became clear that the Icelandic Insurance Fund for Depositors could not cover all the liabilities of the foreign branches of the private Icelandic bank Landsbanki. In order to avoid a general run on their own banks, the British and the Dutch governments decided to reimburse depositors, for not only the principal, but also the interest due, in Landsbanki branches in their countries, up to a certain level.

The US investment bank said there is a danger Britain’s toxic mix of problems will come to a head as soon as next year, triggered by fears that Westminster may prove unable to restore fiscal credibility. “Growing fears over a hung parliament would likely weigh on both the currency and gilt yields as it would represent something of a leap into the unknown, and would increase the probability that some of the rating agencies remove the UK’s AAA status,” said the report, written by the bank’s European investment team of Ronan Carr, Teun Draaisma, and Graham Secker.

In a report entitled “Worst-case debt scenario”, the bank’s asset team said state rescue packages over the last year have merely transferred private liabilities onto sagging sovereign shoulders, creating a fresh set of problems. Overall debt is still far too high in almost all rich economies as a share of GDP (350pc in the US), whether public or private. It must be reduced by the hard slog of “deleveraging”, for years. “As yet, nobody can say with any certainty whether we have in fact escaped the prospect of a global economic collapse,” said the 68-page report, headed by asset chief Daniel Fermon. It is an exploration of the dangers, not a forecast.

Bank of America Corp is operating under a secret U.S. regulatory sanction that requires it to overhaul its board and address perceived problems with risk and liquidity management, The Wall Street Journal reported, citing people familiar with the situation.