Political India: Engaging America

From The Hindu

On the first day of a summit focussed on global Muslim entrepreneurship he hosted here, U.S. President Barack Obama told delegates that they were all there “because we know that over the years, despite all we have in common, the United States and Muslim communities around the world too often fell victim to mutual mistrust”.

Underscoring the importance of the summit as a follow-on from his speech in Cairo last year, Mr. Obama said, that he had then called for a new beginning between the U.S. and Muslim communities, based on mutual interest and respect. “I knew that this vision would not be fulfilled in a single year, or even several years. But I knew we had to begin and that all of us have responsibilities to fulfil,” he said

Touching upon the core issue of concerns that the Muslim communities might have with U.S. foreign policy Mr. Obama explained, that he had “worked to ensure that America once again meets its responsibilities, especially when it comes to the security and political issues that have often been a source of tension.”

In particular, he said, the U.S. was “responsibly ending the war in Iraq, and we will partner with Iraqi people for their long-term prosperity and security. In Afghanistan, in Pakistan and beyond, we're forging new partnerships to isolate violent extremists, but also to combat corruption and foster the development that improves lives and communities.” He also vowed never to waver in the U.S.' pursuit of a two-state solution ensuring the rights and security of Israelis and Palestinians.

On the importance of entrepreneurship, Mr. Obama said it was an “area where we can learn from each other; where America can share our experience as a society that empowers the inventor and the innovator.” He also underscored the reciprocal nature of benefits derived from entrepreneurship, saying trade between the U.S. and Muslim-majority countries still had much potential to grow further.

Mr. Obama announced that Turkish Prime Minister Erdogan had agreed to host the next Entrepreneurship Summit next year in his country.

Labels: Barack Obama, US

From The Hindu

Senate Republicans on Monday blocked Congress from further considering a major bill that proposed an overhaul of financial regulation in the aftermath of the credit crunch. The move comes even as investment bank Goldman Sachs faced a Congressional hearing on Tuesday that sought to understand the bank’s role in the recent financial crisis.

The regulation reform bill, called the Restoring American Financial Stability Act of 2010 (RAFSA), is the creation of the Senate Banking Committee headed by Democrat Chris Dodd. RAFSA is described by the Committee as “a direct and comprehensive response to the financial crisis that nearly crippled the U.S. economy beginning in 2008”.

Following the move by all 41 Senate Republicans and one Democrat, Ben Nelson, to block the bill from being taken forward to vote in the coming weeks, President Obama said, “I am deeply disappointed that Senate Republicans voted in a block against allowing a public debate on Wall Street reform to begin.” Democrats need 60 votes to push the bill through.

The President charged the bill’s blockers of believing that such obstruction was a good political strategy and seeing this delay as “an opportunity to take this debate behind closed doors, where financial industry lobbyists can water down reform or kill it altogether”.

However, he argued, “The American people can’t afford that. A lack of consumer protections and a lack of accountability on Wall Street nearly brought our economy to its knees, and helped cause the pain that has left millions of Americans without jobs and without homes.” He urged the Senate to get back to work and “put the interests of the country ahead of party”.

Yet Republicans were quick to clarify the grounds on which they objected to the bill, in a bid to pre-empt accusations of obstructionism and siding with Wall Street over Main Street.

Orderly liquidation authority

A key point of opposition from the Republicans was the reform that aimed at ending “too big to fail bailouts” through an orderly liquidation authority which would give the government a “viable alternative to the undesirable choice it faced during the financial crisis between bankruptcy of a large, complex financial company that would disrupt markets and damage the economy, and bailout of such financial company that would expose taxpayers to losses and undermine market discipline”.

The main objection was to the Dodd proposal requiring large financial companies to contribute $50 billion over a period of five to ten years to a fund held at the Treasury, which would only be used by the Federal Deposit Insurance Corporation in the “orderly liquidation of a failing financial company with the approval of the Treasury Secretary”.

Further, Senator Judd Gregg was reported as quoting Federal Reserve staffers who said the proposed controls over derivatives trading would “impair financial stability and strong prudential regulation of derivatives; would have serious consequences for the competitiveness of U.S. financial institutions; and would be highly disruptive and costly, both for banks and their customers”.

Senator Gregg said of the Dodd proposals in this regard: “This is just punitive language put in out of spite because there is a movement in this country and in this Congress, unfortunately, which I call pandering populism, which just simply dislikes anything that has to do with Wall Street.”

Senate majority leader Harry Reid however struck back saying, “Chairman Dodd has worked for months with several Republicans on the Banking Committee and has included many Republican-supported ideas in his proposal.” He added that by blocking Democrats from even opening debate on how to hold Wall Street accountable, Republicans were voting “to protect the big banks and their bonuses and to keep this important debate hidden from public scrutiny”.

Underscoring the Democrats determination to get this bill through Congress Mr. Reid said, “Senate Democrats are committed to holding Wall Street accountable and putting consumers back in control. We remain open to working with our Republican colleagues, but we will not tolerate efforts to slow-walk this process or water down this reform because it is too important to middle-class families… across America.”

Labels: regulation reform bill, Senate Republicans, Senator Judd Gregg, Wall Street

From The Hindu

Duvvuri Subbarao, Governor of the Reserve Bank of India, struck an optimistic note on India’s growth path through the recent financial crisis and its prospects for the future.

Speaking at the Peterson Institute here on Monday following his attendance of the Spring Meetings of the International Monetary Fund-World Bank over the weekend, Mr. Subbarao said, “The growth drivers that powered India’s high growth in the years before the crisis are all intact.”

He added that the challenge for the government and the Reserve Bank of India was to move forward with reforms to steer the economy to a higher growth path that was sustainable and equitable.

Mr. Subbarao touched upon five key policy areas during his speech — capital flows, exchange rate management, inflation targeting, the harmonising of monetary and fiscal policies, and necessary improvements in India’s monetary policy transmission.

Arguing that India clocked an average growth rate of 9 per cent in the five years prior to 2007–08, he said that growth momentum had indeed been interrupted by the financial crisis, “more than we had originally thought but less than it did most other countries”.

He said that despite growth falling below 6 per cent for one quarter, the growth for the full year 2008–09 was “a resilient 6.7 per cent… [and] current estimates are that the economy had grown between 7.2 and 7.5 per cent for the just ended fiscal year 2009–10 and that growth for 2010–11 will be +8 percent”.

On capital flows, Mr. Subbarao said, “India’s approach to managing capital flows too has been pragmatic, transparent, and contestable. We prefer long-term flows to short-term flows and non-debt flows to debt flows.”

He corroborated this policy stance with evidence from the aftermath of the financial crisis: “The recent crisis saw, across emerging economies, a rough correlation between the extent of openness of the capital account and the extent of adverse impact of the crisis. Surely, this should not be read as a denouncement of open capital account, but a powerful demonstration of the tenet that premature opening hurts more than it helps.”

Mr. Subbarao added that it was notable that the IMF published a policy note in February 2010 that reversed its long-held orthodoxy and admitted there could be certain “circumstances in which capital controls can be a legitimate component of the policy response to surges in capital flows”.

Regarding exchange rate management, Mr. Subbarao clarified that the RBI intervened in the market only to smooth volatility that is harmful to trade and investment. He said the “abrupt” reversal of capital flows in the crisis year 2008–09 — in marked contrast to prior years — however showed that India did in fact have a flexible exchange rate, and “also evidences the increasing flexibility of the rate over time in relation to the magnitude of flows”.

On inflation targeting, Mr. Subbarao claimed that the RBI would never be a pure inflation targeter given the larger developmental context in India. He further said, “Price stability does not necessarily ensure financial stability.”

However, he noted that with regard to harmonising fiscal and monetary policies, both the government and the RBI had begun the process of exit from the expansionary stances of the crisis period. “The government has programmed a reduction in the gross fiscal deficit from 6.8 percent of GDP in fiscal year 2009–10 to 5.5 percent of GDP in 2010–11,” he explained.

On India’s monetary transmission mechanism, the process by which the central bank's policy signals influence the financial markets, Mr. Subbarao said in India it “has been improving but is yet to fully mature”. However. he said that improving monetary transmission was important if the RBI’s efforts at promoting growth with price stability were to be effective.

Labels: economic policy, Indian economy, inflation, RBI Governor

From The Hindu

When Jan Brewer, Governor of Arizona, signed into law a new immigration bill last Friday she could have had little doubt that she would be courting controversy. The Support Our Law Enforcement and Safe Neighborhoods Act, now better known as SB 1070, would make the failure to carry immigration documents a punishable offence; it also gives police sweeping powers to detain anyone suspected of being in the country illegally.

While the Ms. Brewer's administration has argued the law will help identify, prosecute and deport illegal immigrants, critics including representatives of the Latin American immigrant communities — who would be most affected by the changes — have condemned the legislation as excessively stringent.

The National Association of Latino Elected and Appointed Officials (NALEO) Educational Fund said it “strongly condemns” the action of Arizona Governor Jan Brewer. It said the law was “an unconstitutional and costly measure that will violate the civil rights of all Arizonans. It will jeopardise public safety and subject Arizona's Latinos and newcomers to discrimination and racial profiling.”

President Obama also criticised the bill ahead of it being signed into law. In a televised address, he called the law “irresponsible” and that it threatened to undermine basic notions of fairness that Americans cherished, including the trust between police and local communities.

He said, “I have instructed members of my administration to closely monitor the situation and examine the civil rights and other implications of this legislation. But if we continue to fail to act at a federal level, we will continue to see misguided efforts opening up around the country.”

As per the new law, a law enforcement officer, without a warrant, may arrest a person if the officer has “probable cause to believe that the person has committed any public offense that makes the person removable from the United States.”

The significant shift in the discretionary power that such wording would give Arizona police to target immigrant communities is exacerbated by other clauses of the bill too: “Where reasonable suspicion exists that the person is an alien who is unlawfully present in the United States, a reasonable attempt shall be made, when practicable, to determine the immigration status of the person.”

The NALEO Educational Fund said that it would join state-wide efforts “to challenge this unconstitutional measure in court.” It argued that the enactment of SB 1070 highlighted the urgent need for federal legislation to fix the nation's broken immigration system, calling on the President and Congress to make comprehensive immigration reform a reality in 2010.

Labels: Arizonia, immigration laws, United States

From The Hindu

At the end of two days of the annual Spring Meetings of the International Monetary Fund and the World Bank, its constituents endorsed “voice reform” to increase the voting power of developing and transition countries (DTC) in the World Bank by 3.13 per cent, bringing their proportional voice to 47.19 per cent.

World Bank members including India also agreed to boost the “selective capital” of the institution by over $86 billion along with giving developing countries slightly over 47.19 per cent of the total votes. The advanced economies’ share under the new arrangements would drop to under 52.81 per cent.

However Ashok Chawla, Secretary, Department of Economic Affairs Leader of the Indian Delegation to the Development Committee Representing the Constituency consisting of Bangladesh, Bhutan, India and Sri Lanka, said, “What we have in front of us today is not a perfect set of arrangements. It is a compromise package.” Mr. Chawla argued that while a few of the outcomes that the DTC had hoped for had been met, the new structure still had flaws.

He argued that for the future, economic weight must be based on a blend that gives more weight to GDP at purchasing power parity, which captures the dynamism of economic growth and the real economy much better. Mr. Chawla said, “We can live with it today. But the future composition of the blend needs to be debated further.”

At the meetings, the first steps towards voice reform in the International Finance Corporation were also announced. The restructuring included an increase in basic votes and a selective capital increase of $200 million according to which DTC voting power would rise to 39.48 per cent and “move towards a broad and flexible alignment with IBRD [World Bank] shareholding.” Regarding the IFC restructuring Mr. Chawla said, “We support the increase in Basic Votes to 5.55 percent.”

Labels: developing countries, DTC, International Monetary Fund, Narayan Lakshman, World Bank

From The Hindu

Activists who raised the issues of unethical groundwater use and pollution by Coca-Cola plants in India during the soft drinks giant's annual shareholders' meeting in Atlanta this week have expressed disappointment with the response of Coca-Cola CEO Muhtar Kent, accusing him of misleading investors about the problems the company had run into with regulators.

Speaking to The Hindu, Amit Srivastava of the India Resource Centre — which campaigns for the rights of communities in the affected areas — said that he had brought up the recommendations made on March 22 by an High Power Committee (HPC) set up by the Kerala government, according to which Coca-Cola should be held liable for $48 million (Rs.216.26 crore) in “damages to the community and the environment around its bottling plant in Plachimada”.

On the discussion at the shareholders' meeting, Coca-Cola representative Lisa Manley told The Hindu that Mr. Srivastava was a lone voice speaking out on the matter. She said: “Mr. Srivastava did ask a question about the Kerala committee's report… this topic was otherwise not an issue of focus during the meeting.”

Yet, it is a fact that the Coca-Cola bottling plant in Plachimada has been shut since March 2004 on government orders. According to the HPC, the Kerala Agricultural University found that fodder, milk, meat and egg samples collected from the Plachimada area contained copper, cadmium, lead and chromium at levels considered toxic by World Health Organisation standards.

The HPC adds that the deterioration in the quality and quantity of groundwater and the consequent public health problems, displacement and migration of labour and destruction of the agricultural economy were the main problems in Plachimada identified as caused and contributed by the Coca-Cola plant.

The company has also been involved in a controversy in Kala Dera in Rajasthan, where groundwater resources had been declared as “over-exploited” by the government in 1998. Yet, Coca-Cola built a new plant there in 2000, leading to severe water shortages in at least 40 villages in the vicinity of the plant, according to reports.

However, Ms Manley said Coca-Cola did not have all these details as it had not been given a copy of the Kerala committee's report and “at this point, it is simply a recommendation from a committee. The government has not yet acted on the committee's recommendations”.

She said Coca-Cola disagreed with the recommendations, “and we will defend ourselves against any actions that may result. As always, we will continue to work with the proper authorities to resolve this matter”.

Ms Manley also said that numerous investigations by the government of Kerala had shown that the Coca-Cola system was not the cause of local watershed issues and it was Coca Cola's view that any government committee or panel reviewing claims should “first determine through an established process of law whether any damage was caused to the residents of Palakkad [the district where Plachimada is located], and second, if such damage was caused, who was responsible.”

“It is unfortunate that the committee in Kerala was appointed on the unproven assumption that damage was caused, and that it was caused by Hindustan Coca-Cola Beverages,” she added.

Mr. Srivastava, however, took exception to Mr. Kent's response to the effect that Coca-Cola “could open the Plachimada plant any time”. This was untrue, Mr. Srivastava said, adding that he challenged them to “try and reopen the plant tomorrow — we can guarantee that they cannot open the plant again”.

Misleading

He emphasised that the IRC had been campaigning to get the company's shareholders to realise that “the Coca-Cola management, including board of directors, is misleading shareholders about the financial and criminal liabilities that Coca-Cola is incurring in India”.

Mr. Srivastava said Coca-Cola had passed on the issue to its public relations department, rather than seeing it as an operational issue. But this was not a PR issue, certainly not for the communities in Plachimada and Kala Dera, he said.

Ms Manley contested this point, telling The Hindu that managing water responsibly was the highest priority in Coca-Cola's approach to environmental policy and corporate social responsibility in India. She said: “Our goal in India is to be a ‘net zero' user of groundwater, which means we are working to create a potential recharge of the amount of groundwater equivalent to that used in our operations in India.”

Ms Manley added that such recharge was happening through support for rainwater harvesting, drip irrigation and other initiatives such as helping restore traditional water storage systems that local communities use. “By the end of 2009, we had achieved a recharge rate of 93 per cent of the groundwater that we use throughout India and we aim to achieve a net zero balance at the end of 2010,” she said.

However, government figures that Mr. Srivastava quoted cast doubt on this as they suggest that “in the nine years prior to Coca-Cola's bottling operations in Kala Dera, groundwater levels fell just 3 meters and in the nine years since Coca-Cola has been operating in Kala Dera, the groundwater levels have dropped 22.36 metres.”

Coca-Cola's shareholders have also been important in the debate. While the shareholder group had been more responsive in the past and had passed a few resolutions, Mr. Srivastava admitted that they did not get a very positive response this time. He said the shareholders were myopic in their views and more concerned with the company's sales, which had been on the decline in the U.S and in Europe for some time now.

Arguing that even in this regard there has been an injustice towards Indian consumers, Mr. Srivastava said the reason for declining sales in the West was that consumers “are wising up to the negative impact of these high-sugar drinks”.

Rising sales

However, sales in countries such as India are rising and the company itself is focusing much more on its operations outside the U.S. According to recent reports, overall sales volume rose by three per cent in the first quarter of 2010 “and was largely driven by an 11 per cent increase in its Eurasian and African arm, as well as a 29 per cent boost at its Indian business”. The sales rise came primarily from across Asia, boasting double-digit growths in India, Vietnam and the Philippines as new consumers developed a taste for the company's drinks, a report explained.

But was Coca-Cola any better for the health of Indians? Mr. Srivastava asked, noting that India had a growing proportion of diabetics and obese in its population and this “reeks of a double standard”.

In an earlier statement, Mr. Srivastava also noted: “It is difficult to fathom why Coca-Cola located some of its plants in water stressed areas in India. It was either sheer incompetence on the part of the company or sheer arrogance. Experience tells us it is a lot of both.”

Labels: Coca Cola, groundwater exploitation, Kerala Agricultural University, Palakkad, Plachimada activists, pollution

From The Hindu

Indian professionals pay “huge amounts” as social security contributions in the United States but are unable to draw any benefits on the basis of such contributions, Labour and Employment Minister Mallikarjun Kharge said on Thursday at a meeting with his United States counterpart Hilda Solis.

Mr. Kharge echoed the comments made last month by Minister of State for Communications and Information Technology Sachin Pilot. Speaking at a gathering of business leaders here, Mr. Pilot said Indian companies operating in the U.S. make “contributions to social security that they never see at any point.”

Following two meetings during an employment-focussed summit here, Mr. Kharge told Ms. Solis that Indian professionals were not allowed to stay long enough to qualify to receive the benefits of social security contributions. It would be mutually beneficial to work out a suitable reciprocal arrangement to “avoid the hardship of double payment of social security,” he pointed out.

In an indication of growing concern within the Indian establishment about the situation Indian entities paying for social security in the U.S. find themselves in, Mr. Kharge called for the commencement of negotiations on a bilateral Totalisation Agreement to remedy the situation.

At the meeting with Secretary Solis and other U.S. officials, the Indian delegation also emphasised that India had achieved “significant progress towards comprehensive social security coverage,” according to Minister for Press, Information and Culture Rahul Chhabra.

Labels: Mallikarjun Kharge, social security benefits, Totalisation agreement, U.S. Labour Secretary Hilda Solis

From The Hindu

President Barack Obama travelled to New York on Thursday where he reached out to Wall Street to win its cooperation on his major financial regulation overhaul package awaiting a Senate vote.

Speaking at the Cooper Union educational institution in Lower Manhattan he said, ?I am here today because I want to urge you to join us, instead of fighting us in this effort. I am here because I believe that these reforms are, in the end, not only in the best interest of our country, but in the best interest of our financial sector. And I am here to explain what reform will look like, and why it matters.?

The House of Representatives already passed a bill last December with sweeping reforms and now Mr. Obama hopes the Senate will follow suit in four key areas of regulation in the coming weeks after which he could sign the reforms into law.

First, Mr. Obama said, the bill being considered in the Senate would create new protections for the financial system and the broader economy, in particular ensuring that ?taxpayers are never again on the hook because a firm is deemed ?too big to fail.?? Arguing that the recent financial crisis had occurred because there was no process ?designed to contain the failure of a Lehman Brothers,? he said that it was for this reason that ?we need a system to shut these firms down with the least amount of collateral damage to innocent people and businesses. He said that he had insisted that the financial industry ? and not taxpayers ? shoulder the costs in the event that a large financial company should falter, with the goal being to make certain that taxpayers are never again on the hook because a firm is deemed ?too big to fail.?

Second, Mr. Obama argued that regulatory reform ought to bring new transparency to financial markets, for example by preventing firms such as AIG from making ?huge and risky bets using derivatives and other complicated financial instruments in ways that defied accountability, or even common sense.? In this regard he said that there was a legitimate role for these financial instruments in our economy, to allay risk and spur investment.

Third, he explained that his administration would enact the ?strongest consumer financial protections ever,? to protect people taking on mortgages and credit cards and auto loans from being misled by ?bandit? companies and losing their homes and fortunes.

Finally, he said that the Wall Street reforms he was proposing would give shareholders ?new power? in the financial system, including having a say on the salaries and bonuses awarded to top executives and a stronger role in determining who manages the companies in which they?ve placed their savings. ?Americans don?t begrudge anybody for success when that success is earned. But when we read in the past about enormous executive bonuses at firms even as they were relying on assistance from taxpayers, it offended our fundamental values,? Mr. Obama said, adding that this compensation structure had also created perverse incentives to take "reckless risks."

Labels: Barack Obama, House of Representatives, Wall Street

From The Hindu

Strengthening social protection systems and active labour market policies is the need of the hour given that many people, including the most disadvantaged, “will remain unemployed even after recovery takes hold.”

This was one of the key recommendations made to President Obama by United States Secretary of Labour Hilda Solis and her fellow G20 labour and employment ministers attending a two-day meeting here focussed on helping nations’ leaders coordinate labour market policy.

The ministers additionally recommended that continued attention must be paid to job creation and job preservation, including “vigorous implementation of existing policies and consideration of additional employment measures.” They said that especially in countries with extensive underemployment it was important to target efforts to generate employment for poor households and vulnerable groups, “utilizing lessons learned from recent policy innovations.”

The Department of Labour said that in this context the attending ministers reviewed the “massive programmes” launched in the last year in response to the crisis and discussed additional measures to ensure a sustained recovery that produces enough jobs for workers. They also discussed a 21st-century job skills training strategy, the Department of Labour added.

At the meeting the Indian Minister for Labour and Employment Mallikarjun Kharge made a detailed presentation on the Mahatma Gandhi National Rural Employment Guarantee Scheme and Rashtriya Swasthya Bima Yojana, two flagship employment policies of the Government of India.

According to the Indian Minister for Press here, Rahul Chhabra, Mr. Kharge’s presentation “generated discussion among the labour ministers who wanted to learn more about these two schemes which had touched the lives of such a large number of beneficiaries.”

In particular labour ministers of other nations expressed an interest in learning about how technology was used to reach the rural masses in remote areas, Mr. Chhabra said, adding that the Brazilian Labour Minister Carlos Lupi had also praised India’s achievements through such schemes and stated that these initiatives are specially worth replicating for large countries with diverse populations.

Secretary Solis added, “At the end of the day, recovering from the crisis and restoring sustained and balanced growth that creates enough good jobs for our people are goals that we cannot accomplish alone in our own countries. In an integrated global economy, we have to work together.”

Labels: G20, Labour and Employment Minister, Labour Ministers conference, Mallikarjun Kharge, NREGA scheme, social protection system

From The Hindu

Kal Penn, an Indian-American actor and recent appointee to a White House position, was robbed at gunpoint near Dupont Circle in central Washington DC, but otherwise left unharmed, according to reports.

According to police reports an armed robber forced the victim – who was not named – to lie on the ground and give up their cell phone and other possessions. However Mr. Penn's former publicist Jennifer Goodwin confirmed a media report that Mr. Penn had been robbed. Mr. Penn has not commented on the case so far.

Mr. Penn, whose real name is Kalpen Suresh Modi, is the star of the TV dramas such as House and 24, and the Harold and Kumar series of films. In his role as Associate Director to the White House Office of Public Engagement, Mr. Penn is charged with liaison between the President the Asian-American and Pacific Islander communities.

Mugging and related crimes occur intermittently in Washington DC. In June 2008, the Supreme Court overturned a 1976 ban on handgun ownership in the area, finding the law incompatible with the Second Amendment, which guarantees Americans the right to own a gun for self-defence.

Labels: gunpoint, Kal Penn, robbery

From The Hindu

The Federal Reserve unveiled a new design for the United States $100 bill. While the new bill retains the traditional look of U.S. currency, it was loaded with “advanced technology to combat counterfeiting,” according to a statement by the Fed.

There key security features in the redesigned $100 note include a 3-D Security Ribbon and a Bell in the Inkwell, according to the Fed – security features that aimed to make it easy for consumers and merchants to authenticate their currency.

Elaborating on the technology, the Fed explained that the blue 3-D Security Ribbon on the front of the new $100 note contained images of bells and 100s that “move and change from one to the other as you tilt the note,” and the Bell in the Inkwell on the front of the note changed colour from copper to green when the note was tilted.

Treasurer Rosie Rios said, “The new security features announced today come after more than a decade of research and development to protect our currency from counterfeiting.” She added that the government would conduct a global public education programme to ensure a seamless introduction of the new $100 note into the financial system and spread awareness of the new security features.

Speaking on the occasion Fed Chairman Ben Bernanke said, “This job has become more complex in recent years as technology advances and U.S. dollar flows expand and increase.” In just the past 25 years, the value of Fed notes in circulation grew from $180 billion to $890 billion, an increase of almost 400 percent, he noted, adding that approximately two-thirds of all $100 notes circulated outside U.S. borders.

Mr. Bernanke said that the global public education program was crucial to the successful introduction of the new $100 note, because “a well-informed public is our first and best line of defence against counterfeiting.” He further explained that when the new-design $100 note is issued on February 10, 2011, the approximately 6.5 billion older-design $100s already in circulation would remain legal tender.

Touching upon the serious threat of counterfeiting Director Mark Sullivan of the Secret Service said, that his agency had learned to evolve to keep pace with the “advanced methodologies employed by the criminals we pursue.” Although less than 0.01 percent of the value of all U.S. currency in circulation is reported counterfeit, the $100 note is the most widely circulated and most often counterfeited denomination outside the U.S., he noted.

Labels: Federal Reserve, Security Ribbon

From The Hindu

General Motors has fully repaid its debt under the Troubled Asset Relief Programme, the Department of the Treasury announced on Thursday.

According to a statement GM paid the outstanding amount of $4.7 billion of the total $6.7 billion in debt that it owed to Treasury. The Treasury added that the repayment came five years ahead of the loan maturity date and “ahead of the accelerated repayment schedule the company announced last year.”

With this repayment the total TARP repayments now stand at $186 billion, which was “well ahead of last fall's repayment projections for 2010,” the Treasury said, and at this point less than $200 billion in TARP disbursements remain outstanding.

On the occasion Treasury Secretary Tim Geithner said, “We are encouraged that GM has repaid its debt well ahead of schedule and confident that the company is on a strong path to viability.” He added that such continued progress was a positive sign for the United States government’s auto investments, as not only were –funds recovered for the taxpayer but countless jobs had also been saved and a vital industry successfully stabilised.

The remaining Treasury stake in GM consists of $2.1 billion in preferred stock and 60.8 percent of the common equity after this repayment, the Treasury noted.

In recent weeks the Department of the Treasury said it had received full repayment on its TARP investments in the Hartford Financial Services Group and also repayments from PNC Financial Services and General Motors – a sum of over $4.4 billion. At that point the Treasury had said, “TARP repayments now total $181 billion, well ahead of last fall’s repayment projections for 2010.”

The Treasury had also then estimated that its programs aimed at stabilizing the banking system would earn a profit from dividends, interest, early repayments, and the sale of warrants. It struck a note of optimism for taxpayers saying that while the total bank investments of $245 billion in the financial year 2009 were initially projected to cost $76 billion, they were currently “projected to bring a profit.”

It noted that taxpayers had already received $14 billion through interest and dividends and “that number could be considerably higher by the end of this year.”

Labels: business, Department of Treasury, General Motors, TARP loans

From The Hindu

Striking a note of optimism about the global recovery following after one of the most serious recessions since the 1930s, the International Monetary Fund today said that the recovery had “evolved better than expected.”

In its just-released World Economic Outlook the Fund said that economic activity was recovering at varying speeds across nations, however, at a “tepid” in many advanced economies but “solidly” in most emerging and developing economies.

Emphasising the particularly positive news coming out of developing countries the influential report said that “countries such as Brazil, China, India, and Indonesia are already sustaining a strong rebound, even in the face of weak recovery in the advanced economies, quickly re-attracting capital flows.”

The Fund attributed this rebound to the absence of both long-lasting shocks to the financial systems of developing countries and of large increases in unemployment rates. As a result many of these countries were able to “deploy sizable fiscal and monetary stimulus.”

Reflecting the new concern about inflation, which the Reserve Bank of India recently moved to quell through an interest rate hike, the report said, “In various Latin American, Middle Eastern, and CIS economies, inflation slowed but remained relatively high throughout the cycle, and in India it rose strongly.”

Amongst advanced economies the IMF said policy support had been essential to “jump-start” the recovery. In particular monetary policy was highly expansionary and supported by “unconventional liquidity provision,” while fiscal policy had provided a major stimulus in response to the deep downturn. The Fund noted that among advanced economies, the United States was “off to a better start” than Europe and Japan.

World economy poised for further growth

Expressing cautious optimism for the prognosis of global growth the Fund argued that world economy would continue to recover “but at varying speeds across and within regions.” It said that global growth was projected to reach 4.5 percent in 2010 and 2011.

Advanced economies were now expected to expand by 2.5 percent in 2010 and 2011, following a decline in output of more than 3 percent in 2009, the IMF said, adding that growth in emerging markets would however be “over 6.5 percent during 2010–11,” following a modest 2.5 percent growth in 2009.

Labels: economic recovery, economy, global recovery, growth, IMF

From The Hindu

Activist Dorothy Height, described by President Obama as the “the godmother of the civil rights movement” passed away at the age of 98 years today after weeks of being in a serious condition. Ms Height, a pioneer of the 1960s movement, had joined historic marches with Martin Luther King Jr. and led the National Council of Negro Women for 40 years.

Ms. Height continued to speak out on racial issues and civil rights even until her 90s. She often got as much recognition for her speeches as for her bright, colourful hats.

Speaking after her passing President Obama was reported as saying, “Dr. Height devoted her life to those struggling for equality ... and served as the only woman at the highest level of the Civil Rights Movement – witnessing every march and milestone along the way.”

He said, “And even in the final weeks of her life – a time when anyone else would have enjoyed their well-earned rest, Dr. Height continued her fight to make our nation a more open and inclusive place for people of every race, gender, background and faith.”

Ms. Height’s civil rights involvement began in 1933 when she took on a leadership role at the United Christian Youth Movement of North America. At that time she devoted herself to fighting the practice of lynching and she also pushed for desegregation of the armed forces.

As a teenager, Ms. Height marched in New York's Times Square shouting, “Stop the lynching.” She was also known for forceful statements urging immediate civil right reform: “If the time is not ripe, we have to ripen the time,” she was known to say, and “agitate, agitate, agitate,” quoting the 19th century abolitionist Frederick Douglass.

In more recent days she had argued that the sense of unity fostered by the 1963 marches had dissipated and in the 1990s civil rights movement was on the defensive with many African-American families still not economically secure.

Ms. Height received the Presidential Medal of Freedom in 1994 from President Bill Clinton.

Labels: civil rights movement, Dorothy Height, Godmother

From The Hindu

Ever heard the term “fat-fighters” or “adipose army” bandied about in a light-hearted moment? Well the United States military is in no mood for such jokes so watch out.

On Tuesday U.S. Senator Richard Lugar and Agriculture Secretary Tom Vilsack joined retired generals and admirals who are members of the non-profit group, Mission: Readiness, to release new findings on the “dramatic increase of obesity among young adults” in the country between the ages of 17 and 24 – a trend that they argue is reducing the pool of healthy young adults available for military service.

The findings are part of a report called Too Fat to Fight, which argues that weight problems have become “the leading medical reason why recruits are rejected for service.” The report would not be the first time that the military has spoken out about children’s health in the U.S. – in 1945, military leaders expressed concern about the “poor health and nutrition experienced by many potential recruits,” and Congress responded by creating the national school lunch program as a matter of national security.

Rising childhood obesity has increasingly worried policymakers here and even the First Lady, Michelle Obama, recently launched a campaign called “Let’s Move!” to bring together community leaders, teachers, doctors, nurses, and parents in a nationwide effort to tackle the challenge of childhood obesity within a generation.

Representing ‘Mission: Readiness’ Lieutenant General Norman Seip said, “We believe that the child obesity issue is so serious it has become a threat to our national security.” Rear Admiral James Barnett added, “While we are meeting our recruitment targets today, those of us who have served in command roles are worried about the trends we see.”

He said that U.S. national security in the year 2030 would be absolutely dependent on reversing the alarming rates of child obesity: “When over a quarter of young adults are too fat to fight, we need to take notice. We urge Congress to take action on child nutrition this year,” he argued.

The report noted additional research showing that up to 40 percent of children’s daily calorie intake occurs at school and that 80 percent of children who were overweight between the ages of 10 to 15 were obese by age 25. “Improving school nutrition is therefore a crucial area for reducing or preventing child obesity,” it said.

In meetings with Congress the retired military leaders plan to call upon legislators to enact a “robust child nutrition bill” that would get the junk food and remaining high-calorie beverages out of the nation’s schools; support the administration’s proposal of an increase of $1 billion per year for ten years for child nutrition programs that would improve nutrition standards, upgrade the quality of meals served in schools and enable more children to have access to these programs; and help develop new school-based strategies, based on research, that help parents and children adopt healthier life-long eating and exercise habits.

“In 1946, Congress passed the National School Lunch Act as a matter of national security,” Amy Dawson Taggart, national director of Mission: Readiness said. “Back then young people were undernourished, and now they are poorly nourished. Too many kids are carrying too many pounds, and improving school nutrition is an important place to start. This isn’t about looking good in a uniform, it’s about being healthy and fit to do the work of the nation.”

In Congress Mission: Readiness will argue that the U.S. is “confronted by a sobering statistic: [that] 75 percent of young Americans are ineligible to serve their country because they have either failed to graduate high school, engaged in criminal activity, or are physically or mentally unfit.” In particular it will emphasise that more than 9 million young adults – 27 percent of all Americans age 17 to 24 – are too overweight to join the military

The U.S. Senate Committee on Agriculture, Nutrition and Forestry recently approved a child nutrition bill that takes important first steps toward addressing childhood obesity. The bill now goes to the full Senate for consideration.

Labels: Child Nutrition Bill, childhood obesity, Mission: Readiness, School Lunch Act, U.S. Army recruitment

From The Hindu

Labour and Employment Ministers of the G-20 nations will meet here to assess how the global economic crisis has affected employment, according to the United States Department of Labour (DoL). As per a press release, Mallikarjun Kharge, Union Minister of Labour and Employment, will head the Indian delegation.

The event, being held on April 20 and 21 and hosted by Labour Department Secretary Hilda Solis, will “compare experiences and policy responses, and offer recommendations for putting quality jobs at the heart of the global economic recovery,” said the DoL.

It said the G20 nations accounted for 85 per cent of the economy and more than two thirds of the world's population. This meeting was therefore an “unprecedented opportunity to tackle one of the worst legacies of the global economic crisis: the loss of millions of jobs”.

The DoL said while a few economic vital signs were improving, global unemployment has surged by 34 million, reaching a record 212 million in 2009. Even where economies were growing, unemployment remained high and was likely to rise.

The meeting conveners also worried that the “lingering job loss” had a particularly risky prognosis given that even milder recessions in the past had produced heightened unemployment for an average of four years; and “this recession has wreaked more havoc than any since the Great Depression,” the DoL cautioned.

At the 2009 Pittsburgh Summit the G20 nations declared, “We cannot rest until the global economy is restored to full health and hard working families the world over can find decent jobs.” Further they had pledged to implement recovery plans that “support decent work, help preserve employment, and prioritise job growth,” and to continue to “provide income, social protection, and training support for the unemployed.”

In a statement the DoL struck a note of hope and reiterated these intentions saying “The G20 countries have already taken forceful and innovative steps to create and protect jobs and livelihoods. The ILO estimates that this year and last year alone, economic stimulus programmes and automatic stabilisers in place in G20 countries have saved or created 21 million jobs that would otherwise have vanished, cutting job losses by nearly 40 per cent.”

In particular the wrenching conditions in labour markets globally have spurred on many countries to significantly strengthen their social safety nets, expanding unemployment benefits, cash transfer programmes and access to health care and pensions. The U.S. has led these efforts in the West, with massive stimulus and unemployment benefits packages put in place early last year.

Regarding the DoL's intention behind the gathering, it hoped that “the Labour and Employment Ministers' Meeting will enable Ministers to showcase what they've done and share information about what has worked and what has not — and why.” It said they would take stock of current trends in labour markets and the latest research by the ILO and OECD and then decide on additional steps needed to create even more jobs, adding that they would prepare a series of recommendations for the G20 Leaders.

Labels: Department of Labour, G-20 nations, job crisis, job fair, U.S.

From The Hindu

Investment bank Goldman Sachs on Tuesday announced profit of $3.46 billion for the first quarter (January-March) of 2010, even as it faced a double embarrassment of the U.K. market regulator joining the United States' Securities and Exchange Commission in announcing fraud investigations into the firm's activities.

Goldman Sach's first quarter performance came on the back of net revenues of $12.78 billion with an annualised return on equity of 20.1 per cent for the quarter. The bottom line was boosted by especially strong performance in the bank's fixed income, commodities and currency division, which generated quarterly net revenues of $7.39 billion.

While Goldman noted that compensation and benefits — including bonuses — to its staff had dropped to 43 per cent of net revenues for the quarter, down from 50 per cent a year ago, it still left its staff with a combined pay package of $5.49 billion, or about $169,000 on an average per employee.

The firm's stellar performance, in the face of continuing economic woes in the U.S., came shortly after the U.K.'s Financial Services Authority announced that “Following preliminary investigations the FSA has decided to commence a formal enforcement investigation into Goldman Sachs International in relation to recent SEC allegations.”

The regulator added that it would be liaising closely with the SEC in this review.

Last week the SEC announced that it had charged Goldman Sachs and one of its vice presidents, Fabrice Tourre, for “defrauding investors by misstating and omitting key facts about a financial product tied to subprime mortgages,” even as the U.S. housing market began to collapse.

The regulator had alleged that when Goldman Sachs structured and marketed a synthetic collateralised debt obligation (CDO) whose value was based on the performance of subprime security it did not disclose to investors the fact that Paulson and Company — a major hedge fund that had bet against CDO — played a key role in the decision to include that CDO in investors' portfolios.

Labels: CDO, fraud, Goldman Sachs, RMBS, SEC, sub-prime mortgages

From The Hindu

Labour and employment ministers of the G-20 nations will convene this week in Washington to assess how the global economic crisis has affected employment worldwide, according to the United States Department of Labour. As per a press release by the DoL, India will be sending Mallikarjun Kharge, Union Minister of Labour and Employment, to head up its delegation.

The event, to be held on April 20 and 21, will be hosted by Labour Department Secretary Hilda Solis, and will be an opportunity for ministers and senior bureaucrats to “compare experiences and policy responses, and offer recommendations for putting quality jobs at the heart of the global economic recovery,” the DoL said.

Setting the stage for the event the DoL argued that the G20 nations accounted for 85 per cent of the global economy and more than two thirds the world’s population. This meeting was therefore an “unprecedented opportunity to tackle one of the worst legacies of the global economic crisis: the loss of millions of jobs,” according to the DoL.

The DoL noted that while a few economic vital signs were improving, global unemployment has surged by 34 million, reaching record 212 million in 2009. Even where economies were growing, unemployment remained elevated was likely to rise further.

The meeting conveners also worried that the “lingering job loss” had a particularly risky prognosis given that even milder recessions in the past had produced heightened unemployment for an average of four years; and “this recession has wreaked more havoc than any since the Great Depression,” the DoL cautioned.

At the 2009 Pittsburgh Summit the G20 nations declared, “We cannot rest until the global economy is restored to full health and hard working families the world over can find decent jobs.” Further they had pledged to implement recovery plans that “support decent work, help preserve employment, and prioritise job growth,” and to continue to “provide income, social protection, and training support for the unemployed.”

In a statement the DoL struck a note of hope and reiterated these intentions saying “The G20 countries have already taken forceful and innovative steps to create and protect jobs and livelihoods. The ILO estimates that this year and last year alone, economic stimulus programmes and automatic stabilizers in place in G20 countries have saved or created 21 million jobs that would otherwise have vanished, cutting job losses by nearly 40 per cent.”

In particular the wrenching conditions in labour markets globally have spurred on many countries to significantly strengthen their social safety nets, expanding unemployment benefits, cash transfer programmes and access to health care and pensions. The U.S. has led these efforts in the West, with massive stimulus and unemployment benefits packages put in place early last year.

Regarding the DoL’s intention behind the gathering, it hoped that “the Labour and Employment Ministers’ Meeting will enable ministers to showcase what they’ve done and share information about what has worked and what has not — and why.” It said they would take stock of current trends in labour markets and the latest research by the ILO and OECD and then decide on additional steps needed to create even more jobs, adding that they would prepare a series of recommendations for the G20 Leaders.

Labels: G-20 nations, global economic crisis

From The Hindu

In yet another “historic appointment” for the Indian-American community under the Obama administration Vijay Gandhi was sworn in as a Magistrate Judge for the United States District Court of the Central District of California.

Mr. Gandhi is the first Indian-American federal judge in California and only the second ever Indian-American federal judge in the history of the United States. The first was Judge Amul Thapar, who was appointed to the U.S. District Court of the Eastern District of Kentucky after a Senate confirmation on December 13, 2007.

The National Asian Pacific American Bar Association said that at 38 years of age Judge Gandhi was also “one of the youngest federal judges currently serving in the Central District.” Mr. Gandhi will preside in Los Angeles and serve more than 19 million people in the largest district in the nation, a NAPBA press release said.

NAPABA emphasised the recognition Mr. Gandhi had gained as a “Rising Star Lawyer” in the “Super Lawyers” magazine and also as a prolific writer and speaker on securities and business litigation including co-authoring a book on securities law.

Speaking to The Hindu Tina Matsuoka, NAPABA Executive Director, said that she was “very excited about nomination of Judge Vijay Gandhi” as the community had been “severely under represented in the federal courts and this appointment goes a long way in remedying that.” She added that she was hopeful that the pendulum was swinging towards inclusion and diversity.

While Mr. Gandhi was not appointed by the White House he had to go through a rigorous district courts selection process including appearing before a merit selection panel, interviews by the full court and appointment by statute, Ms. Matsuoka said.

Mr. Gandhi joined the District Court with 12 years of experience as a litigation partner at law firm Paul, Hastings, Janofsky and Walker LLP. He also worked on a full-time basis as a volunteer Deputy District Attorney and first-chaired multiple jury trials as a prosecutor, according to NAPABA. Earlier Mr. Gandhi had clerked for U.S. District Court Judge Kenneth Hoyt at the Southern District of Texas. Mr. Gandhi is an alumnus of the University of Southern California law school, from where he graduated “Order of the Coif” and received multiple American Jurisprudence awards.

Other high-profile appointments of Indian-Americans by the Obama administration include Rajiv Shah, Administrator, USAID, Vivek Kundra, Federal Chief Information Officer, Aneesh Chopra, First Chief Technology Officer, Farah Pandith, Special Representative to Muslim communities, Richard Verma, Assistant Secretary for Legislative Affairs at the State Department, Preet Bharara, U.S. Attorney for Southern District of New York, and more recently, actor Kal Penn, White House’s associate director of the Office of Public Liaison.

Labels: Indian American Federal Judge, Rajiv Shah, Vijay Gandhi, Vivek Kundra

From The Hindu

The Major Economies Forum, a platform for ministerial discussions on energy and climate issues, wrapped up today after two days of meetings focussing on preparing for the summit on climate change in Cancun in November 2010. The Forum was chaired by National Security Advisor for International Economic Affairs Michael Froman and led on the United States side by Todd Stern, Special Envoy for climate and Deputy.

At a press interaction on Friday State Department spokesman P.J. Crowley said, “We are going to see if we cannot continue our dialogue among major developed and developing economies to make progress in meeting our objectives on climate change and the Clean Energy Challenge.” He added that there was clearly a gap between the views of the developing and developed world, and “We are going to see if we can, through the course of this discussion, narrow that down.”

Indian Minister of State for Environment and Forests Jairam Ramesh, who could not participate due to the volcanic ash cloud from Iceland disrupting travel plans, also touched upon the question of divergent views among climate change interlocutors.

In his statements to the Forum, which he shared with The Hindu, Mr. Ramesh stressed the importance of “reducing the huge ‘trust deficit’ that prevails in the climate change negotiating community.” To do so, Mr. Ramesh argued, it should be recognised that the two-track negotiating process is the only one that has legitimacy that even though the Copenhagen Accord was important. He further said that “visible triggers” were needed to ensure that “Cancun does not repeat Copenhagen.

One such trigger would be the start of the actual disbursement of the $10 billion promised by the developed countries for this year for vulnerable economies and another could be an agreement on the United Nations Collaborative Programme on Reducing Emissions from Deforestation and Forest Degradation in Developing Countries, he said.

Mr. Ramesh also stressed India’s emphasis on the need for equity in arrangements for mitigating the effects of climate change, saying that such arrangements “must be firmly embedded in a demonstrably equitable access to atmospheric space with adequate finance and technology available to all developing countries.”

Finally he also questioned the “mantra” ‘internationally legally-binding agreement’ which, he said, some developed countries kept chanting: What does it mean in practice, he asked, and what consequences of non-fulfilment would follow?

The Major Economies Forum has so far held five meetings at the leaders’ representatives level and one leaders meeting in July 2009 at L’Aquila in Italy. The declaration following the leaders’ meeting agreed on various goals including undertaking nationally appropriate mitigation actions, adaptation to the adverse effects of climate change, a global partnership to drive transformational low-carbon, climate-friendly technologies, scaling up of financial resources for mitigation and adaptation and a continuing schedule meetings to coordinate the fight against climate change

The 17 major-economy members of the Forum are: Australia, Brazil, Canada, China, the European Union, France, Germany, India, Indonesia, Italy, Japan, Korea, Mexico, Russia, South Africa, the United Kingdom, and the U.S.

Labels: Cancun, climate change, economies forum, Jairam Ramesh, P.J. Crowley

From The Hindu

Setting the stage for a major overhaul of financial regulation in the coming weeks, U.S. President Barack Obama on Saturday said Wall Street banks and other financial institutions had been “reckless” and “irresponsible” and they, along with their “special interest” representatives in Washington, were to blame for the crisis that has “ripped through our economy”. He added that his administration would hold them accountable and protect and empower consumers going forward.

Quoting investment guru Warren Buffet during his weekly address to the nation Mr. Obama put derivatives trading in the regulatory spotlight arguing that “derivatives bought and sold with little oversight [are] financial weapons of mass destruction”. He noted that the crisis was in part caused by firms such as AIG making “huge and risky bets — using things like derivatives — without accountability”.

In the context of the financial regulation legislation awaiting a Senate debate and vote over the coming weeks and months, Mr. Obama also sharply criticised the Republicans for siding with the special interests of Wall Street and waging “a relentless campaign to thwart even basic, common-sense rules — rules to prevent abuse and protect consumers”.

In a direct attack on the Republican leadership including Senate minority leader Mitch McConnell and Republican Senatorial Committee chairman John Cornyn, he said they had recently met two dozen top Wall Street executives to talk about how to block progress on this issue.

“Lo and behold, when he returned to Washington, the Senate Republican leader came out against the common-sense reforms we've proposed. In doing so, he made the cynical and deceptive assertion that reform would somehow enable future bailouts — when he knows that it would do just the opposite,” said Mr. Obama.

In addition to tighter controls over derivatives trading, he outlined a range of key areas of regulatory reform, including consumer financial protections, closing loopholes that allowed executives in institutions that were “too big to fail” to take risks that endangered the entire economy, and giving shareholders “new power” in the financial system, such as a vote on the salaries and bonuses awarded to top executives.

Underscoring his determination to get the legislation passed, Mr. Obama said: “This is certain: one way or another, we will move forward. This issue is too important. The costs of inaction are too great.”

Labels: Barack Obama, financial crisis, U.S. politics, Wall Street

From The Hindu

Coimbatore Krishnarao Prahalad, Distinguished Professor in the Ross School of Business at the University of Michigan, and a world authority on management thought, passed away on Friday in San Diego after a brief illness. He was known for his work specialising in corporate strategy focussing on top management in large, diversified, multinational corporations.

Professor Prahalad's seminal work, alongside Gary Hamel in the 1990s, on the concept of “core competence” of companies won the McKinsey Prize and sold the maximum number of reprints in the entire 80-odd years of history of its publisher, the prestigious Harvard Business Review.

In his paper with Hamel, he urged corporate leaders to think of diversified company as a tree: “The trunk and major limbs as core products, smaller branches as business units, leaves and fruit as end products. Nourishing and stabilising everything is the root system: core competencies.”

He was also known widely for his interest in the “Fortune at the Bottom of the Pyramid” and his book on the subject is considered an authoritative exposition of the potential for large corporations to improve the conditions of the poor in countries such as India. They could do so, he argued, by “mobilising investment capacity [along with] the commitment of NGOs and the communities that need help.” The poor must become active, informed and involved consumers, he urged.

Yet Professor Prahalad's illustrious career was not restricted to academe: he equally established his reputation as a corporate consultant par excellence, working with a wide cross-section of companies from the CEOs of the top 30 Fortune 200 firms to Hindustan Lever Limited and Microsoft Corporation, India.

Growing up in Chennai, where his father was a Sanskrit scholar and judge, Professor Prahalad worked initially with Union Carbide after completing a B.Sc. degree from Loyola College in 1960. He then went on to obtain a Postgraduate Diploma in Business Administration from the Indian Institute of Management, Ahmedabad in 1966 and a Doctorate in Business Administration in the Harvard Business School in 1975. He is survived by his wife and two children.

Chennai Special Correspondent reports:

Gopal Srinivasan, former Chairman of the Tamil Nadu State Council of the Confederation of Indian Industry, said Professor Prahalad had dreamt of India becoming an economic leader and a moral leader in the comity of nations.

Recalling Prahalad's involvement in the preparation of the CII's vision document, India at 75, Mr. Srinivasan described him as one of the great management thinkers. Professor Prahalad, he said, had crusaded for the transformation of Indian business into globally competent business. He had emphasised that entrepreneurship held the key to freedom.

Mr. Srinivasan, who is the Chairman and Managing Director of TVS Capital Funds, recalled that the management thinker was one of the founder-directors of the organisation.

“Amazingly intelligent”

Jairam Varadaraj, Managing Director of Elgi Equipments, who was a student of Professor Prahalad for four years in the University of Michigan, described him as “amazingly intelligent.”

“He had a tremendous desire to make change happen that would have an impact on a large section of people.”

Mr. Varadaraj recalled how Professor Prahalad, in 1997, brought his family to Coimbatore to show them his roots.

Labels: C.K. Prahalad, Management guru, Ross School of Business, University of Michigan

From The Hindu

The United States Securities and Exchange Commission on Friday announced that it has charged investment bank Goldman Sachs and one of its vice presidents, Fabrice Tourre, for “defrauding investors by misstating and omitting key facts about a financial product tied to subprime mortgages,” even as the U.S. housing market began to collapse.

According to the SEC filing in a U.S. court in the Southern District of New York, the cost of Goldman’s fraudulent activities to investors was more than $1 billion.

In a statement the SEC alleged that when Goldman Sachs structured and marketed a synthetic collateralized debt obligation (CDO) whose value was based on the performance of subprime residential mortgage-backed securities (RMBS), it failed to disclose to investors the fact that Paulson and Company – a major hedge fund that had bet against CDO – played a key role in the decision to include that CDO in investors’ portfolios.

The SEC further alleged that Tourre had “devised the transaction, prepared the marketing materials and communicated directly with investors,” knowing fully of Paulson and Company’s short interest in the instruments and its role in the collateral selection process.

Tourre also misled a third-party fund marketing firm into believing that Paulson and Company invested approximately $200 million in a long position on the instrument and, accordingly, that Paulson and Company’s interests in the collateral section process were aligned with the fund marketer’s. In reality Paulson and company’s interests were sharply conflicting.

“The product was new and complex but the deception and conflicts are old and simple,” according to Robert Khuzami, Director of the Division of Enforcement at the SEC.

Kenneth Lench, Chief of the SEC's Structured and New Products Unit, added that the SEC continued to investigate the practices of investment banks and others involved in the securitization of complex financial products tied to the then floundering U.S.. housing market.

In a move that heralds a first major prosecution in the aftermath of the financial markets collapse of 2008 the SEC alleged that Paulson and Company paid Goldman Sachs to structure the transaction such that in which Paulson and Company could “take short positions against mortgage securities chosen by Paulson and Company based on a belief that the securities would experience credit events.”

In other words Paulson and Company bet that the instrument would lose value and in a bid to maximise its profit from that event it paid Goldman Sachs to get its clients to bet that it would gain in value.

As per the SEC’s charges the marketing materials for the CDO all “represented that the residential mortgage-backed securities portfolio underlying the CDO was selected by ACA Management LLC, a third party with expertise in analyzing credit risk in RMBS.

The SEC alleged that undisclosed in the marketing materials and unbeknownst to investors Paulson and Company played a significant role in selecting which RMBS should make up the portfolio.

According to the SEC's complaint, the deal closed on April 26, 2007, and Paulson & Co. paid Goldman Sachs approximately $15 million for structuring and marketing the instruments. The SEC went on to note that by October 24 2007, 83 percent of the portfolio had been downgraded and 17 percent were on “negative watch”; by January 29 2008, “99 percent of the portfolio had been downgraded,” the SEC said.

In the filing the SEC sought “injunctive relief, disgorgement of profits, prejudgment interest, and financial penalties.”

Labels: CDO, fraud, Goldman Sachs, mortgages, RMBS, SEC

From The Hindu

U.S. President Barack Obama on Thursday set the National Aeronautical and Space Administration on a firm trajectory to a Mars landing when he said: “By the mid-2030s, I believe we can send humans to orbit Mars and return them safely to Earth. And a landing on Mars will follow.”

In a speech on space exploration in the 21st century, delivered at the John F. Kennedy Space Centre in Florida, Mr. Obama said that by 2025, he expected to see new spacecraft designed for long journeys that would allow the United States to begin “the first-ever crewed missions beyond the Moon into deep space”.

In redefining some aspects of his administration's space exploration policy, Mr. Obama said he would be providing even more funding for NASA projects in return for which he expected them to meet the challenge of the need for “breakthrough propulsion systems and other advanced technologies”

As part of this strategy the White House announced earlier this year — amidst some harsh criticism — that it would be ending parts of the older Constellation programme and instead invest more in newer programmes such as Orion project.

In this context, Mr. Obama said: “It is precisely by investing in groundbreaking research and innovative companies that we will have the potential to rapidly transform our capabilities — even as we build on the important work already completed, through projects like Orion, for future missions.”

“We start by increasing NASA's budget by $6 billion over the next five years… even as we have instituted a freeze on discretionary spending and sought to make cuts elsewhere in the budget.”

Among the space projects financed, $3 billion will be invested to conduct research on an advanced “heavy lift rocket” needed for crew capsules, propulsion systems and large quantities of supplies to reach deep space.

Mr. Obama also stressed the need for further development of the Orion crew capsule and said he had directed NASA administrator Charlie Bolden to “immediately begin developing a rescue vehicle using this technology, so we are not forced to rely on foreign providers if it becomes necessary to quickly bring our people home from the International Space Station.”

The boost to NASA finances would also be used to ramp up robotic exploration of the solar system, including a probe of the Sun's atmosphere; new scouting missions to Mars and other destinations, Mr. Obama added. There would also be focus on developing an advanced telescope to follow Hubble, “allowing us to peer deeper into the universe than ever before”.

Emphasising the job-creating benefits of his new space policy, Mr. Obama said: “Despite some reports to the contrary, my plan will add more than 2,500 jobs along the Space Coast in the next two years compared to the plan under the previous administration.”

In that regard he also sought to downplay fears some had expressed over the plan to utilise the services of private companies: “NASA has always relied on private industry to help design and build the vehicles that carry astronauts to space, from the Mercury capsule that carried John Glenn into orbit nearly 50 years ago, to the space shuttle Discovery currently orbiting overhead.”

Labels: deep space research, Mission to Mars, NASA

From The Hindu

The assassination of former Pakistani Prime Minister Benazir Bhutto was preventable and the failures of the investigation into her killing were deliberate, according to a long-awaited report by a United Nations Commission of Inquiry into the matter.

The 70-page report, released on Thursday said “The responsibility for Ms. Bhutto’s security on the day of her assassination rested with the federal Government, the government of Punjab and the Rawalpindi District Police.” However none of these entities took the necessary measures to respond to the “extraordinary, fresh and urgent security risks that they knew she faced,” the report said.

Ms. Bhutto was assassinated on December 27, 2007 as she was leaving a campaign event at Liaquat Bagh in Rawalpindi; 24 other people were killed as well and 91 injured.

In a damning indictment of the police and intelligence authorities charged with investigating the assassination the UN report said that the Rawalpindi district police’s actions and omissions in the immediate aftermath of the event, including the hosing down of the crime scene and failure to collect and preserve evidence, “inflicted irreparable damage to the investigation.”

Further the Commission complained of authorities’ obstruction of its own investigation, saying, “The Commission was mystified by the efforts of certain high- ranking Pakistani government authorities to obstruct access to military and intelligence sources, as revealed in their public declarations.”

The report also said blame for the failure to protect Ms. Bhutto must be laid squarely on the federal Government under Pervez Musharraf which, the Commission argued, was “fully aware of and tracking the serious threats to Ms. Bhutto, [yet] did little more than pass on those threats to her and to provincial authorities and were not proactive in neutralizing them or ensuring that the security provided was commensurate to the threats.”

This was an “especially grave failure” given that there had been an attempt on her life in Karachi when she returned to Pakistan on October 18, 2007, the report said.

Speaking to The Hindu, Bruce Riedel, Senior Fellow, Foreign Policy, at the Brookings Institution, said, “It is clear from the report that Gen Musharraf did not intend to provide protection to Ms. Bhutto.” Mr. Riedel, a former CIA officer, added, “I have been in Islamabad when they have wanted to put in place adequate arrangements and they are very much capable of doing that. In this case it appears they did not want to put such security measures in place.”

Unsurprisingly Pakistan’s Inter-Services Intelligence did not escape the indictment of the UN Commission either: “The investigation was severely hampered by intelligence agencies and other government officials, which impeded an unfettered search for the truth… The ISI conducted parallel investigations, gathering evidence and detaining suspects,” the report said. It also pointed out that the evidence gathered from these parallel investigations was only selectively shared with the police.

In conclusion the report said that it remained the responsibility of the Pakistani authorities to carry out a “serious, credible criminal investigation that determines who conceived, ordered and executed this heinous crime of historic proportions, and brings those responsible to justice.”

In terms of what impact the report’s “devastating” statements may have in Pakistan’s polity Mr. Riedel said “I suspect that the investigation of the actual assassins has gone so cold that it would be very hard to find them.”

He added that an important question was whether the Musharaf regime would face consequences including Ashfaq Kayani, the erstwhile head of ISI and currently Chief of Army Staff. “There may be questions about what he did as director-general of ISI in response to information that terrorists were stalking Ms. Bhutto,” Mr. Riedel said.

While the UN Commission report was due to be published on March 30, it was delayed by two weeks, reportedly upon the request of the Pakistani authorities.

Labels: Benazir Bhutto assassination

From The Hindu

After two days of negotiations during the Nuclear Security Summit here earlier this week, a range of national commitments towards strengthening the security of nuclear materials were made by attending countries, including a promise by the United States and Russia to dispose of weapons-grade plutonium.

Announcing the plutonium elimination deal, the two countries said they had signed a protocol to “amend and update” the U.S.-Russian Plutonium Management and Disposition Agreement (PMDA) of the year 2000 — a “major step” in efforts to eliminate nuclear-weapon-grade materials, according to an official statement.

As per the protocol, both the U.S. and Russia are now committed to disposing of a minimum of 34 metric tonnes of excess weapon-grade plutonium with further disposition likely over time. According to the State Department and remarks made by President Barack Obama, the initial combined amount — 68 metric tonnes — represented “enough material for approximately 17,000 nuclear weapons”.

Following the announcement of the protocol Russian President Medvedev also announced the imminent shutdown of the country's last plutonium reactor, the ADE-2. According to reports the reactor has produced weapons-grade plutonium for nearly 52 years in the formerly secret Siberian city of Zheleznogorsk.

Mr. Obama highlighted a range of commitments made by the other countries attending the summit, saying the 49-nation gathering had made “unprecedented progress in confronting one of the greatest threats to our global security”, namely nuclear terrorism.

Mr. Obama mentioned Canada's decision to give up a significant quantity of highly enriched uranium, Chile's move to give up its entire stockpile and Ukraine's and Mexico's announcements to do the same.

In the context of the Megaports Initiative for detecting radioactive materials in containerised cargo, Mr. Obama said that Argentina and Pakistan had announced new steps to strengthen port security and prevent nuclear smuggling.

Mr. Obama also detailed the commitments of nations such as Argentina, the Philippines, Thailand and Vietnam to join and strengthen the treaties and international partnerships “that are at the core of our global efforts”. He added that Italy, Japan, India and China would be creating new centres “to promote nuclear security technologies and training”.

Mr. Obama also said the U.S. had taken concrete steps to secure its nuclear materials further, and was joining Canada in “calling on nations to commit $10 billion to extending our highly successful Global Partnership” to strengthen nuclear security.

Labels: Nuclear Security Summit, U.S.-Russian nuclear policy

From The Hindu

“Addressing the [United States'] fiscal problems will require difficult choices, but postponing them will only make them more difficult,” said Federal Reserve Chairman Ben Bernanke during a Congressional testimony on Wednesday.

Reiterating a note of concern about the country's fiscal position, which he also mentioned in a speech earlier this month, Mr. Bernanke cautioned that though sizable deficits were unavoidable in the short term, maintaining the confidence of the public and financial markets required policymakers to “move decisively” to set the federal budget on a trajectory toward sustainable fiscal balance.

In very similar language — and his language is carefully watched by U.S. economists to gauge his view on the economy's prospects — Mr. Bernanke said in an earlier speech that addressing the fiscal challenges posed by an aging population would require “a willingness to make difficult choices”.

In his testimony, he struck a more positive note arguing that “On balance, the incoming data suggest that growth in private final demand will be sufficient to promote a moderate economic recovery in coming quarters”.

Mr. Bernanke, nevertheless, underscored “weakness” in residential and non-residential construction and the “poor fiscal condition” of state and local governments. He said that the sales of new and existing homes had dropped in January and February, and “the pace of new single-family housing starts has changed little since the middle of last year.”

He added that pressures on state and local budgets, though bolstered by federal support, “have led to continuing declines in employment and construction spending by state and local governments”.

While again striking a note of optimism on the job fronts for the future, he said that the present scenario appeared bleak: “The labour market was particularly hard hit by the recession. Recently, we have seen some encouraging signs that layoffs are slowing and that employment has turned up.”

He noted, however, that “if the pace of recovery is moderate, as I expect, a significant amount of time will be required to restore the 8-1/2 million jobs that were lost during the past two years”.

He expressed concern about the fact that, in March, “44 percent of the unemployed had been without a job for six months or more.”

Labels: Ben Bernanke, fiscal problems

From The Hindu

The one notable absentee from the list of national or country-level commitments made at the just-concluded Nuclear Security Summit is Pakistan, which finds no mention in a White-House issued document titled “Highlights of National Commitments at the NSS”.


The document lists commitments of 30 countries and the International Atomic Energy Agency, including India's commitment “Announcing the creation of a Nuclear Energy Centre with a nuclear security component,” and China's commitment “Announce cooperation on nuclear security Centre of Excellence”.


One mention of Pakistan's commitments came from President Obama himself, during a press conference at the close of the summit. Mr. Obama said: “Pakistan… announced new steps to strengthen port security and prevent nuclear smuggling.” This was a reference to the Megaports Initiative which aims to detect radioactive materials in containerised cargo. The National Nuclear Security Administration, responsible for the Megaports Initiative and the Secure Freight Initiative, also does mention that since the start of the Megaports Initiative in 2003, NNSA has completed installations at 27 ports including in Pakistan.


However a 2008 Congressional testimony on the initiatives by NNSA Assistant Deputy Administrator David Huizenga suggests that Pakistan's enrolment in the initiatives significantly predates the Nuclear Security Summit.

Labels: Nuclear Security Summit, Pakistan's nuclear policy

From The Hindu

President Barack Obama marked the close of the two-day Nuclear Security Summit here saying that the 49-nation gathering had made “unprecedented progress in confronting one of the greatest threats to our global security,” namely nuclear terrorism.

He said that world leaders had focused on taking “tangible steps” and making “concrete commitments” to secure nuclear materials so that they could never fall into the hands of terrorists “who would surely use them”.

Citing numerous examples of such steps taken and commitments made, Mr. Obama mentioned Canada’s decision to give up a significant quantity of Highly Enriched Uranium, Chile’s move to give up its entire stockpile and Ukraine’s and Mexico’s announcements to do the same.

In the context of the Megaports Initiative for detecting radioactive materials in containerised cargo, Mr. Obama said that Argentina and Pakistan had announced new steps to strengthen port security and prevent nuclear smuggling.

The President also detailed the commitments of nations such as Argentina, the Philippines, Thailand and Vietnam to join and strengthen the treaties and international partnerships “that are at the core of our global efforts”. He added that Italy, Japan, India and China would be creating new centres “to promote nuclear security technologies and training”.

Describing a “major development” in the course of the summit, Mr. Obama said that Russia’s announcement regarding the closure of its last weapons-grade plutonium production reactor would strengthen U.S.-Russia efforts to eliminate such plutonium from the world.

He said that this move would result in the elimination of 68 tonnes of plutonium for the two countries’ weapons programmes, which was “plutonium that would have been enough for about 17,000 nuclear weapons”.

Mr. Obama also said that the U.S. had also taken concrete steps to secure its nuclear materials further, and was joining Canada in “calling on nations to commit $10 billion to extending our highly successful Global Partnership” to strengthen nuclear security.

In bringing the summit to a close Mr. Obama outlined four key areas of agreement between the attending countries.

First, he said that there was agreement on the urgency and seriousness of the threat of nuclear terrorism. He said, “Coming into this summit, there were a range of views on this danger… Today, we are declaring that nuclear terrorism is one of the most challenging threats to international security.” He added that countries had agreed that the most effective way to prevent terrorists and criminals from acquiring nuclear materials was through strong nuclear security and preventing nuclear smuggling.

Second, Mr. Obama reiterated his satisfaction with the 49 countries’ endorsement of the goal to secure all vulnerable nuclear materials around the world in four years — a goal that he had outlined in Prague a year ago. Even if this was an ambitious goal, “This is a goal that can be achieved,” he said.

Third, the summit attendees reaffirmed that it was their fundamental responsibility to “maintain effective security of the nuclear materials and facilities under [their] control [including] strengthening national laws and policies, and fully implementing the commitments we have agreed to”.

Finally, Mr. Obama explained, the nuclear terrorism threat “cannot be addressed by countries working in isolation”. To this end they had committed to a sustained, effective program of international cooperation on nuclear security, which included the plan for South Korea to host the next nuclear security summit two years on.

In concluding President Obama said that events such as the present summit ought to be considered as part of a larger, comprehensive agenda that he outlined in Prague based on the vision of peace and security in a “world without nuclear weapons”. In this context the new START treaty signed recently by Russia and the U.S. set the stage for “further cuts and cooperation between our countries”. Mr. Obama also underscored the new Nuclear Posture Review, which he argued would reduce “the role and number of nuclear weapons in our national security strategy”.

Looking to the future he indicated that the focus next month in New York would be on the NPT review a “cornerstone of our global efforts to prevent the spread of nuclear weapons even as we pursue greater civil nuclear cooperation.” All of these efforts are connected, he said, arguing that “When the United States fulfils our responsibilities as a nuclear power committed to the NPT, we strengthen our global efforts to ensure that other nations fulfil their responsibilities”.

Labels: Barack Obama, Highly Enriched Uranium, Nuclear Security Summit

From The Hindu

The United States and Russia on Wednesday announced the signing of a Protocol to “amend and update” the U.S.-Russian Plutonium Management and Disposition Agreement (PMDA) of the year 2000. The Protocol was signed by Secretary of State Hillary Rodham Clinton and Russian Foreign Minister Sergey Lavrov and represented a “major step” towards eliminating nuclear-weapon-grade materials, according to an official statement.

As per the Protocol both U.S. and Russia are now committed to disposing of a minimum of 34 metric tons of excess weapon-grade plutonium with further disposition of weapon-grade plutonium likely over time. According to the State Department the initial combined amount, 68 metric tons, represented “enough material for approximately 17,000 nuclear weapons.” In a press conference at the end of the Nuclear Security Summit, President Obama also quoted this figure.

The Protocol also seeks to ensure that weapons-grade plutonium is disposed in a safe, secure, transparent and effective way and strengthens barriers against accumulating new separated weapon-grade plutonium, the State Department said. It added that the amended PMDA would allow, “as appropriate, for International Atomic Energy Agency verification.”

The actual disposition is set to begin by 2018, once the necessary facilities have been established.

Russia to shut down last plutonium reactor

Following the announcement of the Protocol to update the PMDA on Tuesday, Russian President Medvedev announced the imminent shutdown of the country’s last plutonium reactor, the ADE-2. According to reports the reactor has produced weapons-grade plutonium for nearly 52 years in the formerly secret Siberian city of Zheleznogorsk.

In a statement about the shutting down of the reactor President Obama said, “I welcome this significant announcement from President Medvedev. This important step forward continues to demonstrate Russia’s leadership on nuclear security issues, and will add momentum to our shared global effort.”

Labels: Nuclear Security Summit