Today's Hot Stories - February 07, 2013 - PT education

Today's Hot Stories - February 07, 2013

10 Headlines for Today

(1) 3 held for online abuse of Kashmir girls rock band
(2) Narendra Modi meets PM, seeks parity in gas pricing
(3) British parliament approves gay marriage
(4) Apex court pulls up SEBI for not freezing Sahara’s accounts
(5) Onion prices will come down: Pawar
(6) Huawei, ZTE await domestic-maker tag
(7) Somdev in 2nd round of Zagreb ATP event 7
(8) Venus Williams pulls out of Qatar Open
(9) Did not expect Lanka to make 282: Mithali
(10) Military might on show as Aero India 2013 opens

5 Stories for Today

(1) Army’s stand makes it hard to amend AFSPA: Chidambaram
(2) S.Korea, U.S. begin naval drills
(3) RIL wants CAG audit under production sharing contract
(4) Emails show alarm at S&P as mortgage crisis exploded
(5) ADB optimistic on India’s economic recovery

(1) Army’s stand makes it hard to amend AFSPA: Chidambaram


Union Finance Minister P. Chidambaram on Wednesday stressed the need for making the controversial Armed Forces (Special Power) Act (AFSPA) a more “humanitarian” law, but said the Union government could not move forward as there was “no consensus” between it and the Army on the issue.

“The Army has taken a strong stand against any dilution of the AFSPA… We can’t move forward because there is no consensus. The present and former Army Chiefs have taken a strong position that the Act should not be amended... They also do not want the government notification [of bringing areas under the AFSPA] to be taken back. How does the government move forward…to make the AFSPA a more humanitarian law?,” he said, delivering the K. Subrahmanyam Memorial Lecture on ‘India’s National Security- Challenges and Priorities’ at the Institute for Defence Studies and Analyses.

Notably, the Justice Verma Committee highlighted misuse of the AFSPA by Army personnel and recommended that “sexual violence against women by members of the armed forces or uniformed personnel be brought within the purview of the ordinary criminal law.” But the Centre has not included this suggestion in its recent ordinance to strengthen laws to tackle sexual assaults.

On corruption

Calling for strong punishment to those involved in corruption, which destroyed the very fabric of society, Mr. Chidambaram, however, lamented “trial by media” of those accused of corruption. “We convict first, then ask for evidence and then frame charge… This is complete inversion of jurisprudence. I understand people’s anxiety to root out… corruption… but [through trial by media] we are sowing seeds that will destroy our law and order system. We should leave it to our courts.”

Referring to security challenges, he said: “It is a matter of regret that we are not ploughing more funds and more human resources into research and design [R&D], especially R&D that is related to national security. The situation will not change unless we allow more players, who will bring more resources, into the security-related manufacturing and services sectors. If we wish to scale up, both on technology and numbers, we need far more resources than what we can afford today.”

He, however, parried questions on a possible Rs.10,000-crore cut in defence expenditure in the coming budget. “If it is cut for this year, it is cut, you cannot do anything about it. That money you cannot have. Can it be provided next year? We can, provided we grow at a higher rate and we have more money.”

Mr. Chidambaram, however, pointed out that a cut in defence expenditure or in police forces would severely compromise the country’s defence and security preparedness and affect its capacity to meet security challenges.

Expressing concern at the growing fiscal and revenue deficit that affected government spending in all sectors, he said the country must “have the money to provide the money. If we do not have the money, we cannot borrow and provide the money. Borrowing is not an option for India… We can borrow within limits.”

Source: The Hindu

(2) S.Korea, U.S. begin naval drills


North Korea’s state media said on Sunday that at a high-level Workers’ Party meeting, leader Kim Jong Un issued "important" guidelines meant to bolster the army and protect national sovereignty.

South Korean and U.S. troops began naval drills on Monday in a show of force partly directed at North Korea amid signs that Pyongyang will soon carry out a threat to conduct its third atomic test.

The region is also seeing a boost in diplomatic activity focused on North Korea’s announcement last month that it will conduct a nuclear test to protest U.N. Security Council sanctions toughened after a December satellite launch that the U.S. and others say was a disguised test of banned missile technology.

Pyongyang’s two previous nuclear tests, in 2006 and 2009, both occurred after it was slapped with increased sanctions for similar rocket launches. As it issued its most recent punishment, the Security Council ordered North Korea to refrain from a nuclear test or face “significant action.”

North Korea’s state media said on Sunday that at a high-level Workers’ Party meeting, leader Kim Jong Un issued “important” guidelines meant to bolster the army and protect national sovereignty. North Korea didn’t elaborate, but Kim’s guidelines likely refer to a nuclear test and suggest that Pyongyang appears to have completed formal procedural steps and is preparing to conduct a nuclear test soon, according to South Korean analyst Hong Hyun-ik.

“We assess that North Korea has almost finished preparations for conducting a nuclear test anytime and all that’s left is North Korea making a political decision” to do so, Defence Ministry spokesman Kim Min-seok told reporters Monday.

The spokesman said he couldn’t disclose further details because they would involve confidential intelligence affairs. Recent satellite photos showed North Korea may have been sealing the tunnel into a mountainside where a nuclear device could be exploded.

Source: The Hindu

(3) RIL wants CAG audit under production sharing contract


It seeks Petroleum Ministry’s intervention to ensure audit of KG-D6 block is not carried out under CAG (DPC) Act

The Mukesh-Ambani-owned Reliance Industries Limited (RIL) has written to the Petroleum and Natural Gas Ministry seeking its intervention and an assurance that the audit of the KG-D6 block by the Comptroller and Auditor-General (CAG) would not be carried out under the CAG Duties, Powers and Conditions of Service (DPC) Act and that the CAG should clearly distinguish between its audit of the Petroleum Ministry and that of RIL.

In a letter to Joint Secretary (Exploration), A. Giridhar, the company has argued that the audit could not be commenced under Section 1.9 of the accounting procedure of the Production Sharing Contract (PSC) while the scope, extent and manner of such audit was laid down by the CAG (DPC) Act. “It is imperative to obtain a confirmation from the CAG that it does not consider the CAG (DPC) Act to apply to the proposed audit of the contract (RIL) and that it will distinguish between its audit of the Petroleum Ministry and its audit of the Contractor under Section 1.9 of the Accounting Procedures to the PSC,” said president and COO (Business) B. Ganguly in the letter.

The letter claimed that while the Ministry had maintained, all this while, that the proposed audit would not be a performance audit of the Contractor, the CAG had now introduced the concept of propriety audit, which went beyond the mere certification or tracing of charges and credits by reference to the underlying invoices, receipts and contracts. “We had agreed to an audit of the Contractor where, in accordance with Section 1.9 of the Accounting Procedure to the PSC, we would be providing the CAG with all records for certification of charges and credits as required under the PSC and would be happy to provide justification if there is any procedural deviation,” it states.

The company claimed that it had, during the kick-off meeting with the CAG on January 9 and the subsequent meeting on January 16, sought that the audit team confirm that it had been appointed as the government’s representative under Section 1.9.2 of the accounting procedures to the PSC to audit the contractor and that RIL would be the auditee of the CAG.

Source: The Hindu

(4) Emails show alarm at S&P as mortgage crisis exploded


The executive at Standard & Poor’s was clear: “This market is a wildly spinning top which is going to end badly.”

That sober assessment of certain mortgage-related investments, delivered to colleagues in a confidential memo in December 2006, is now part of a trove of internal emails and documents that have come to light in a federal suit against S&P, the nation’s largest credit rating agency.

The correspondence, made public in court documents late on Monday, provides a glimpse into the inner workings of an institution that the Justice Department says fraudulently inflated credit ratings, with dire consequences for the entire economy.

In a series of emails, tensions appeared to be escalating inside the firm’s headquarters in Lower Manhattan as it publicly professed that its ratings were valid, even as the home loans bundled into mortgage-backed securities, or MBS, were failing at accelerating rates.

One comes from an S&P analyst in March 2007 borrowing from the Talking Heads song “Burning Down the House,” creating new lyrics: “Subprime is boi-ling o-ver. Bringing down the house.”

S&P said prosecutors cherry-picked emails and that it would vigorously defend itself from “these unwarranted claims.”

Together, the documents show a portrait of some executives pushing to water down the firm’s rating models in the hope of preserving market share and profits, while others expressed deep concerns about the poor performance of the securities and what they saw as a lowering of standards.

U.S. Attorney General Eric Holder, joined by attorneys general from 16 states, unveiled the case on Tuesday in Washington, accusing S&P and its parent, McGraw-Hill Cos., of intentionally propping up ratings of shaky mortgage investments and setting them up for a crash when the financial crisis struck.

Govt seeks $5 b penalties

The government is seeking $5 billion in penalties to cover losses to investors like state pension funds and federally insured banks and credit unions.

The amount would be more than five times what S&P made in 2011.

“The action we announce today marks an important step forward in the administration’s ongoing effort to investigate — and punish — the conduct that is believed to have contributed to the worst economic crisis in recent history,” Mr. Holder said.

The government, by bringing the civil fraud charges under a 1989 law created after the savings and loan crisis, faces a lower burden of proof when the victims are federally insured banks. But prosecutors could still face a high bar in convincing a jury by a preponderance of evidence that S&P knew that its ratings were faulty and that it intended to deceive investors.

“If the facts prove out, it certainly seems like Standard & Poor’s intentionally cooked its models in order to make the ratings higher than they otherwise thought they should be, in violation of the firm’s own policies and standards,” said Neil Barofsky, a former federal prosecutor who served as the special inspector general for the U.S. Treasury’s Troubled Asset Relief Program from 2008 to 2011.

“What we don’t know yet is, what’s the other stuff that could be out there?” he added, noting that the vast body of internal documents might also contain exculpatory material for S&P.

The ratings agency said in a statement, “Claims that we deliberately kept ratings high when we knew they should be lower are simply not true.”

The company said that it had always been committed to “providing independent opinions on creditworthiness based on available information.”

It added that its actions reflected its best judgments about the investments at the heart of the suit — about 40 collateralised debt obligations, or CDOs, an exotic type of security made up of bundles of residential mortgage-backed securities, which in turn were composed of individual home loans.

Those securities were packaged by banks, rated by S&P and sold to investors in 2007.

Internal memos

“Unfortunately,” the company’s statement said, “S&P, like everyone else, did not predict the speed and severity of the coming crisis and how credit quality would ultimately be affected.”

Remarks that S&P employees made in internal memos and electronic communications show that as early as spring 2004, certain executives wanted to change the firm’s rating methodology, but only after polling “an appropriate number of issuers and investment bankers” as to the “rating implications.”

The idea of asking bankers what they thought about a change in the firm’s methods shocked some S&P analysts and executives, including one who fired back, “What does ‘rating implication’ have to do with the search for truth? Are you implying that we might actually reject or stifle ‘superior analytics’ for market considerations?”

In May 2004, an analyst warned that S&P had just lost to its competitor Moody’s Investors Service the chance to rate a very large deal by being too hard-nosed about the amount of collateral that would be required to get a good rating. More collateral would mean less profit for Mizuho, the bank putting that deal together.

“We must address this now,” she said — otherwise the firm would lose more deals.

The complaint describes a debate in 2004 and 2005, about whether S&P should change its model for rating CDOs, and what effect the proposed changes might have on its business. The change was scheduled for July 2005, but before it could happen, an analyst sent an email saying that according to the investment bank Bear Stearns, the older model “had been the ‘best,”’ at rating weaker pools of mortgages, compared with Moody’s and Fitch.

“The email excerpts cherry-picked by DOJ have been taken out of context, are contradicted by other evidence, and do not reflect our culture, integrity or how we do business,” the statement added.

It was unclear whether the Justice Department was looking at the other two major ratings agencies, Moody’s and Fitch. Tony West, the acting associate attorney general, said he would not discuss actions against other ratings agencies.

Settlement talks between S&P and the Justice Department broke down in the last two weeks after prosecutors sought a penalty in excess of $1 billion and insisted that the company admit wrongdoing, several people with knowledge of the talks said.

S&P had proposed a settlement of about $100 million, while the government pressed for an admission of guilt to at least one count of fraud, said the people.

Source: The Hindu

(5) ADB optimistic on India’s economic recovery


Fiscal consolidation road map will help in achieving 8-9 per cent growth: Kuroda

Painting a rosy picture in the midst of gloom and doom with various multilateral lending agencies scaling down their projections on India’s GDP (gross domestic product) growth, the Asian Development Bank (ADB) on Friday stated the government’s fiscal consolidation road map would help in getting back to a high growth trajectory of 8-9 per cent in the years ahead.

Addressing a press conference here on his India visit, ADB president Haruhiko Kuroda said: “The government is, I think, taking quite appropriate fiscal consolidation efforts and measures. Indian economy is likely to recover in 2013 fiscal year…”

“I understand that [the] Indian government has been taking this appropriate policy stance so that, over the medium-term, full potential of the Indian economy can be realised. I personally think that Indian economy can achieve eight to nine per cent growth annually in medium to long term,” the ADB chief said while pointing to certain measures that the government has been taking to consolidate the fiscal situation and gradually reduce the deficit.

Mr. Kuroda, however, pointed out that while no strong signs of recovery had appeared as yet, the ADB was “reasonably sure” that the Indian economy would be recovering soon. Incidentally, the Manila-based lending agency is slated to come out with its latest projection on India’s GDP growth during the first week of April.

While the country’s economy is likely to slide to a 10-year low of about 5.70-5.80 per cent from a revised estimate of 6.2 per cent in 2011-12, a recovery is expected in 2013-14 following the various reform measures in place and in the pipeline and with investments picking up.

Earlier in the day, Mr. Kuroda called on Finance Minister P. Chidambaram to discuss issues with regard to the annual meeting of the ADB later this year with India in the chair. The 46th ADB annual meeting, the third such in India, is scheduled at India Expo Mart in Greater Noida from May 2-5.

Source: The Hindu