U.S. RELEASES OSPREY, OTHER ADVANCED MILITARY SYSTEMS TO ISRAEL

Defense Secretary Chuck Hagel, left, holds a joint news conference with Israeli Defense Minister Moshe Yaalon in Tel Aviv, Israel, April 22, 2013. DOD photo by Erin A. Kirk-Cuomo

FROM: U.S. DEPARTMENT OF DEFENSE,
Hagel, Yaalon Finalize New Israel Military Capabilities

By Cheryl Pellerin
American Forces Press Service

TEL AVIV, Israel, April 22, 2013 - In what Defense Secretary Chuck Hagel called "a significant step in U.S.-Israeli defense cooperation," he and his Israeli counterpart finalized an agreement today on a package of new defense capabilities the United States is offering Israel.

Hagel and Israeli Defense Minister Moshe Yaalon held a joint news conference at Israel's defense headquarters, known as the Kirya, following talks here that both men characterized as positive.

"Minister Yaalon and I agreed that the United States will make available to Israel a set of advanced new military capabilities, ... including antiradiation missiles and advanced radars for its fleet of fighter jets, KC-135 refueling aircraft, and most significantly, the V-22 Osprey, which the U.S. has not released to any other nation," Hagel said.

The new radar and antiradiation missiles, along with Israel's participation in the joint strike fighter program -- a single-seat, single-engine, fifth-generation fighter under development to perform ground attack, reconnaissance and air defense missions with stealth capability -- ensures that Israel will maintain air superiority for the next generation, Hagel said.

Introducing the V-22 into the Israeli air force, he added, will give that service long-range, high-speed maritime search-and rescue-capabilities to deal with a range of threats and contingencies.

"These decisions underscore that military-to-military cooperation between the U.S. and Israel is stronger than ever," the secretary said, "and that defense cooperation will only continue to deepen in the future."

In his remarks, Yaalon, appointed defense minister March 17, said the United States and Israel face common threats and challenges "in our tough neighborhood in the Middle East -- above all, from Iran." Iran threatens the security and stability of the Middle East and the entire world, he added.

"Iran threatens to wipe Israel off the map, it backs Hezbollah in Lebanon and Hamas in Gaza, and it is assisting the Syrian regime to kill tens of thousands of innocent civilians," the Israeli defense minister said. "The Iran regime is involved in Afghanistan, Iraq, Yemen, Sudan and more, and Iran is developing nuclear weapons."

Today's talks continue what Yaalon called an intimate dialogue between the United States and Israel on the best ways to meet such challenges.

"In every case, Israel prefers diplomatic solutions," he said, "though as President [Barack] Obama stated, Israel has a right to defend itself, by itself" against any adversary.

Addressing Hagel, Yaalon noted U.S. support for Israel. "We see your commitment in Iron Dome and other antimissile systems that save lives," he said. "We see your commitment in the joint strike fighter program and the presidential approval of other advanced capabilities such as the V-22 for Israel. We see your commitment in our joint military maneuvers and our extensive intelligence sharing -- all part of our comprehensive security cooperation and dialogue. We see your commitment in your determination to uphold Israel's qualitative military edge.

"We see it all, Mr. Secretary, and we are deeply grateful," he added.

Hagel said the United States and Israel share values, common interests and an unbreakable bond that grows stronger over time.

"These common interests include security for our citizens, a peaceful and stable Middle East, countering terrorism, and countering nonproliferation, particularly our efforts to prevent Iran from obtaining a nuclear weapon," he said.

The United States is committed to providing Israel with whatever support it needs to maintain military superiority over any state, coalition of states or nonstate actors, the secretary added.

"Despite fiscal pressures, President Obama has ensured that Israel receives an all-time high of $3.1 billion in foreign military financing this year," Hagel said. "Last month in Jerusalem, President Obama announced that the United States and Israel would begin work on a new multiyear memorandum of understanding."

The memorandum would extend security funding for Israel beyond 2017, when the current agreement expires, he noted.

DOD and Israel's Defense Ministry work together routinely to ensure that both forces have capabilities in place to deal with changing security environments, the secretary said.

The capabilities include major advances in cooperative rocket and missile defense efforts between the United States and Israel, including Iron Dome, a system that counters rockets, artillery and mortars; the Arrow, a family of anti-ballistic missiles; and David's Sling, an inside-the-atmosphere, two-stage weapon built to counter ballistic missiles, medium-range rockets, cruise missiles and other aircraft and weapons.

"Since its deployment, the Iron Dome system has saved many lives, and we are continuing to build on the program's success," Hagel said. "To date, the United States has provided more than $460 million to support [that] program, and we are requesting another $220 million in our fiscal year 2014 defense budget request for Israel to acquire additional Iron Dome batteries."

The secretary added that he and Obama are committed to a strong and secure Israel, and to deepening the historic security cooperation between the two nations.

Later today, Hagel will meet with Israeli President Shimon Peres, and tomorrow he will meet with Prime Minister Benjamin Netanyahu.

Today's visit was part of a six-day trip to the Middle East, Hagel's first as defense secretary. He will make stops in Jordan, Egypt, Saudi Arabia and the United Arab Emirates before returning to the United States on April 26.

REMARKS ON IMPLIMENTATION OF EUROPEAN PHASED ADAPTIVE APPROACH

FROM: U.S. DEPARTMENT OF STATE EUROPEAN

Implementation of the European Phased Adaptive Approach
Remarks
Frank A. Rose
Deputy Assistant Secretary, Bureau of Arms Control, Verification and Compliance
Polish National Defense University
Warsaw, Poland
April 18, 2013

Thank you so much for inviting me to join you today. At the State Department, I am responsible for overseeing a wide range of defense policy issues, including missile defense policy. In that capacity, it was my responsibility and privilege to negotiate the details of the Ballistic Missile Defense (BMD) agreements with Poland, Romania, and Turkey that will enable the United States to implement the European Phased Adaptive Approach (or EPAA), the U.S. contribution to NATO missile defense. Poland is a strong ally and valued friend of the United States. Our bilateral defense ties run deep and are growing -- our new Aviation Detachment and Poland's agreement to host an EPAA missile defense site are but two recent examples of our partnership.

Implementation of the European Phased Adaptive Approach

Since 2009, the United States Government has focused on carrying out the vision articulated by President Obama when he announced that the EPAA would "provide stronger, smarter, and swifter defenses of American forces and America's Allies," while relying on "capabilities that are proven and cost-effective."

As you know, we have made great progress in implementing the President’s vision in Europe.

EPAA Phase One gained its first operational elements in 2011 with the start of a sustained deployment of an Aegis BMD-capable multi-role ship to the Mediterranean and the deployment of an AN/TPY-2 radar in Turkey. With the declaration of Interim Operational Capability at the NATO Summit in Chicago, this radar transitioned to NATO operational control.

Demonstrating their support for both NATO and the EPAA, Spain agreed in 2011 to host four U.S. Aegis-capable ships at the existing naval facility at Rota. These ships will arrive in the 2014- 2015 timeframe, in time for EPAA Phase Two.

For Phase Two of the EPAA, we have an agreement with Romania that was ratified in December of 2011 to host a U.S. land-based SM-3 interceptor site beginning in the 2015 timeframe. This site, combined with BMD-capable ships in the Mediterranean, will enhance coverage of NATO from short- and medium-range ballistic missiles launched from the Middle East.

And finally there is Phase 3, which is centered on the first of the three host nations to ratify their hosting agreement – Poland. The Ballistic Missile Defense Agreement between the U.S. and Poland entered into force in September of 2011. This agreement places a land-based interceptor site, similar to Phase 2, in Redzikowo, and includes the SM-3 Block IIA interceptor. This EPAA Phase 3 site is on schedule and on budget for deployment in the 2018 timeframe. The interceptor site here in Poland will be key to the EPAA. Not only will it protect Poland itself, but when combined with the rest of the EPAA assets, Phase 3 will be able to protect all of NATO Europe against ballistic missile threats from the Middle East.

On March 15, Secretary Hagel announced changes to U.S. missile defense policy to strengthen U.S. homeland missile defenses due to the growing ballistic missile threat from Iran and North Korea. One of these policy changes is that the SM-3 IIB missile defense interceptor program - the core element of EPAA Phase 4 - is being restructured into a technology development program.

With the SM-3 IIB interceptor, Phase 4 would have provided an intercept capability against ICBMs launched at the U.S. homeland from the Middle East. But the SM-3 IIB program also experienced significant delays, in part due to the U.S. Congress underfunding this interceptor. So as you know, the SM-3 IIB interceptor will no longer be developed or procured. The United States will instead strengthen its homeland defense by procuring additional Ground Based Interceptors – GBIs- for deployment at our existing missile defense site in Fort Greely, Alaska.

As Secretary Hagel announced, we will increase the number of deployed GBIs from the current 30 to 44, providing a nearly 50 percent increase in our capability.

The other two steps that Secretary Hagel announced include:
Deploying, with the support of the Japanese Government, an additional AN/TPY-2 radar in Japan. This will provide improved early warning and tracking of any missile launched from North Korea at the United States and/or Japan; and
Conducting studies for a potential additional GBI site in the United States. While the Obama Administration has not made any decision on whether to proceed with an additional site, conducting these studies would shorten the timeline for construction should that decision be made.
Finally, let me emphasize that the U.S. commitment to Phases One through Three of the EPAA and NATO missile defense remains ironclad, including the planned sites in Poland and Romania. Like the Administration, the U.S. Congress has supported, and continues to support full funding for Phases 1 through 3.

These U.S. missile defense deployments to Europe will provide the necessary capabilities to provide ballistic missile defense coverage of all NATO European territory in the 2018 timeframe.

I know that some may believe that not fielding Phase 4 may weaken the Transatlantic connection of the EPAA. I would tell you that the connection is still strong. I would emphasize that Phases One through Three of the EPAA will continue to provide important contributions to the defense of the United States homeland and U.S. deployed forces in Europe. For example, the radar deployed in Turkey as part of EPAA can provide important early tracking data on any Iranian missile launches against the United States. The interceptor site to be deployed in Poland, as well as BMD-capable ships at sea, will also be key to protecting the U.S. radar at Fylingdales, which is important to the defense of the U.S. homeland.

Cooperation With NATO Allies

Beyond our bilateral cooperation, we have also worked with our NATO Allies, including Poland, to implement a NATO missile defense effort.

After thorough and steady progress within NATO, on May 20-21 of 2012, the NATO Heads of State and Government met in Chicago for a NATO Summit and announced that NATO had achieved an interim BMD capability. This means that the Alliance has an operationally meaningful, standing peacetime BMD capability. NATO also agreed on the BMD-related command and control procedures, designated the Supreme Allied Commander Europe as the commander for this mission, and announced an interoperable command and control capability.

To support this interim BMD capability, the United States has offered EPAA assets to the Alliance as our voluntary national contributions to the BMD mission. The AN/TPY-2 radar deployed in Turkey is under NATO operational control. In addition, U.S. BMD-capable Aegis ships in Europe are also now able to operate under NATO operational control when threat conditions warrant.

These decisions have created a framework for allies to contribute and optimize their own BMD assets for our collective self-defense, and the United States welcomes and encourages such contributions from Allies. NATO BMD will be more effective should Allies provide sensors and interceptors to complement the U.S. EPAA contributions. Several NATO Allies already possess land- and sea-based sensors that could potentially be linked into the system, as well as lower tier systems that can be integrated and used to provide point defense such as PATRIOT. It is important that the systems contributed by Allies be interoperable with NATO’s Active Layered Theater Ballistic Missile Defense – or ALTBMD – command and control capability.

Cooperation With the Russian Federation

At the same time as we are developing this missile defense cooperation with NATO, we also seek to work cooperatively with Russia. We remain convinced that missile defense cooperation between the United States and Russia (and between NATO and Russia) is in the national security interests of all countries involved. For that reason, missile defense cooperation with Russia remains a Presidential priority for this Administration.

In Chicago, the NATO Allies made a very clear statement of our intent regarding strategic stability and Russia’s strategic deterrent. NATO declared in the Chicago Summit Declaration that "…the NATO missile defense in Europe will not undermine strategic stability. NATO missile defense is not directed against Russia and will not undermine Russia’s strategic deterrence capabilities." Through transparency and cooperation with the United States and NATO, Russia would see firsthand that this system is designed for ballistic missile threats from outside the Euro-Atlantic area, and that NATO missile defense systems can neither negate nor undermine Russia’s strategic deterrent capabilities.

While we seek to develop ways to cooperate with Russia on missile defense, it is important to remember that in keeping with its collective security obligations, NATO alone bears responsibility for defending the Alliance from ballistic missile threats. This is why the United States and NATO cannot agree to Russia’s proposals for "sectoral" or "joint" missile defense architectures. Just as Russia must ensure the defense of Russian territory, NATO must ensure the defense of NATO territory. NATO cannot and will not outsource its Article 5 commitments. As ballistic missile threats continue to evolve, we cannot place limits or constraints on our ability to defend ourselves, our allies, and our partners. This includes any limitations on the operating areas of our BMD-capable multi-mission Aegis ships.

Cooperation With Poland

We can’t talk about BMD cooperation without talking about our cooperation right here with the Republic of Poland.

We also now have an enduring Aviation Detachment deployed in Lask, which supports the joint training of U.S. and Polish Air Forces. And I also have to mention our vibrant and longstanding cooperation with Poland on other efforts to combat the threat of WMD and their missile delivery systems. For example, former President Bush chose Warsaw as the site of his May 2003 public call to create a common global effort to stop WMD- and missile-related shipments to and from states of proliferation concern. Poland and the United States then worked closely to heed that call by establishing the Proliferation Security Initiative. Over the following decade, 100 other nations from every part of the world joined our two countries in the PSI to improve our common efforts to take action against WMD shipments. Next month, Acting Under Secretary Gottemoeller will have the great pleasure of leading the U.S. delegation to the PSI Tenth Anniversary meeting in Warsaw not only to mark the occasion, but to continue efforts to meet the call that President Obama made in the 2009 Prague speech to ensure the PSI is a durable international effort.

I commend my Polish colleagues for their leadership within NATO and domestically on defense modernization which will lead to new and valuable skill sets for NATO. As everyone knows, Poland is leading by example. Where many NATO countries are reducing their defense modernization, Poland is focusing on it – and the "it" that I follow most closely is the Polish efforts to upgrade its Integrated Air and Missile Defense System. This has been a topic of considerable discussion with my Polish counterparts. I expect it will be a topic of continued discussion. It is clear to me that the Government of Poland intends to embark upon a substantial effort that will provide for a greater national expertise which can contribute to NATO air and missile defense capabilities.

And Poland is not only working on defense modernization – it is also a participant in the U.S. Strategic Command’s NIMBLE TITAN multinational missile defense wargame. Polish military, Ministry of Defense and Ministry of Foreign Affairs officials are working closely with over 20 countries and NATO to collaboratively think through how regional and global coalitions might be able to innovate with equipment, tactics, techniques and procedures to provide the best and most agile defense. In a world where the threats and the technology to defend are constantly evolving, it is our responsibility to think through the problems to reach the best and most efficient solutions.

Conclusion
We are proud of how much we have already achieved by working with our allies and partners to counter the threat from ballistic missiles, but admittedly, there is still much to do – and we are looking forward to achieving higher levels of BMD cooperation and effectiveness.

I am very pleased to be here today, and I look forward to your questions.


Thank you.

PROGRESS ON PRESIDENT OBAMA'S SPACE EXPLORATION VISION VIDEO

FROM: NASA

NASA Shows Progress of President's Space Exploration Vision

On the third anniversary of President Obama's visit to NASA's Kennedy Space Center in Florida, where he set his space exploration vision for the future, news media representatives were given an opportunity to see up close the Orion spacecraft that could take astronauts on an asteroid sampling mission as early as 2021. Key leaders from across the agency shared progress being made on the spacecraft and infrastructure that will send humans to the asteroid, and eventually to Mars. Orion currently is being prepared in Kennedy's Operations and Checkout Building (O&C) for its first flight test, Exploration Flight Test (EFT)-1, in 2014.

CFTC CHAIRMAN GENSLER'S REMARKS ON BENCHMARK INTEREST RATES

FROM: U.S. COMMODITY FUTURES TRADING COMMISSION

Remarks of Chairman Gary Gensler at London City Week on Benchmark Interest Rates
April 22, 2013


Good afternoon. Thank you, Anthony, for that kind introduction. I’m honored to be joining you for City Week.

I’d like to talk about one of the most significant risks facing the capital markets today. That is the risk to market integrity as well as financial stability of the continued use of LIBOR, Euribor and similar benchmark interest rates.

Given their fundamental role in the capital markets and our economy, such benchmark rates must be based on facts, not fiction.

Coordinating with the FCA

The U.K. Financial Conduct Authority (FCA) (along with its predecessor the Financial Services Authority (FSA)) and Martin Wheatley have been valued partners of the U.S. Commodity Futures Trading Commission (CFTC) on this matter.

The CFTC initiated an investigation in 2008 related to the London Interbank Offered Rate (LIBOR). It is the reference rate for 70 percent of the U.S. futures market. It is also referenced by over half of the swaps market, which the CFTC was recently tasked to oversee.

The FCA has been instrumental in the CFTC’s investigations, leading to charges against Barclays and other banks for manipulative conduct regarding LIBOR and similar benchmarks.

Following the Barclays announcement, the international community asked Martin Wheatley and me to co-chair the International Organization of Securities Commissions (IOSCO) Task Force on Financial Market Benchmarks.

Last week, the task force published its second consultation paper outlining a set of international principles to enhance the integrity, reliability and oversight of benchmarks.

The IOSCO principles state that for benchmarks to be robust and reliable, among other things, they must have two essential elements: be anchored in observable transactions and supported by appropriate governance structures.

The IOSCO report further notes that in order to provide confidence that the price discovery system is reliable, benchmarks must be based on prices and rates formed by the competitive forces of supply and demand entered into at arm’s length between buyers and sellers in the market.

Unsecured, Interbank Market: Essentially Nonexistent

LIBOR, Euribor and similar interest rate benchmarks purport to represent the rate at which unsecured borrowing occurs between large banks.

The challenge we face, however, is that banks simply are not lending to each other as they once did. As Mervyn King, governor of the Bank of England, said in 2008 of LIBOR: "It is, in many ways, the rate at which banks do not lend to each other." He went on further to say: "[I]t is not a rate at which anyone is actually borrowing."

The lack of transactions in the unsecured, interbank lending market along with weak governance structures for related benchmarks undermines market integrity.

The dearth of transactions in this market is a result of many factors: the 2008 crisis, the continuing European debt crisis, the downgrading of large banks’ credit ratings, as well as central banks providing significant funding directly to banks.

There has been a significant structural shift in how financial market participants finance their balance sheets and trading positions. There is an increasing move from borrowing unsecured (without posting collateral) toward borrowings that are secured by posting collateral. In particular, this shift has occurred within the funding markets between banks.

In the aftermath of the financial crisis, for understandable reasons, banks have been hesitant to take on each other’s credit risk.

Recent changes to Basel capital rules further suggest that banks are unlikely to return to interbank lending on an unsecured basis.

Basel III includes a new asset correlation factor, which requires additional capital when a bank is exposed to another bank. This was included in the new standards to reduce financial system interconnectedness.

Basel III also includes a new requirement called the liquidity coverage ratio (LCR). Banks will have to hold a sufficient amount of high quality liquid assets to cover their projected net outflows over 30 days.

A number of major banks have indicated that this new LCR requirement alone would make it prohibitively expensive for banks to lend to each other in the interbank market for tenors greater than 30 days. Thus, it is unlikely that banks will return to the days when they would lend to each other for three months, six months or a year.

The shift away from banks funding each other in the unsecured market has led to a scarcity or outright absence of actual transactions underpinning LIBOR and other interest rate benchmarks.

Enforcement Actions

This situation – having benchmark rates that are not anchored in actual transactions – undermines market integrity and leaves the financial system with benchmarks that are prone to misconduct.

Further, significant incentives for misconduct exist when hundreds of trillions of dollars of financial instruments reference benchmarks based on essentially nonexistent markets.

Indeed, as law enforcement actions brought by the CFTC, the FCA and the U.S. Justice Department, among others, have shown, LIBOR and other benchmark rates have been readily and pervasively rigged.

Barclays, UBS and RBS paid fines of approximately $2.5 billion for manipulative conduct relating to these rates.

At each bank, the misconduct spanned many years.

At each bank it took place in offices in several cities around the globe.

At each bank it included numerous people – sometimes dozens, among them senior management.

Each case involved multiple benchmark rates and currencies. In one case, there were over 2,000 instances of misconduct during a six-year period.

And in each case, there was evidence of collusion with other banks.

In the UBS and RBS cases, one or more inter-dealer brokers painted false pictures to influence submissions of other banks, i.e., to spread the falsehoods more widely.

Barclays and UBS also were reporting falsely low borrowing rates in an effort to protect their reputations.

Thus we find ourselves in a situation where there are both the incentives and ability to manipulate a critical rate in our markets.

Market Data

Beyond these cases, there is a significant amount of publicly available market data that calls into question the integrity of LIBOR today.

Let’s take a look at what happened just in the last few weeks as the Cyprus crisis infected the Eurozone. Here is a view of one Eurozone bank’s one-year credit default swap (CDS) spread versus that same bank’s daily submissions to the U.S. dollar LIBOR panel (Slide 1).

The bank’s CDS spread, one market measure of its credit risk, widened dramatically. The bank, however, didn’t change its submission as to where it could borrow from other banks. Though CDS trade in a different market and are for a bank’s holding company, the disconnect, as shown in this slide, raises questions about the credibility of LIBOR.

In Slide 2, we look at the average of all five Eurozone banks that submit to LIBOR. The picture is similar.

Next, let’s turn to the volatility of three-month U.S. dollar LIBOR in comparison with the volatility of other short-term interest rates. LIBOR, the blue line, is far more stable than any other comparable rate. Other short-term rates have much higher volatility (Slide 3).

Also of note, is that the 18 banks submitting to U.S. dollar LIBOR collectively did not change their submissions on 85 percent of the 252 submission days in 2012. You can see in Slide 4 just how few times the banks actually changed their submissions over the course of last year.

In fact, some of the banks didn’t change their submissions for four to five straight months. This was during a period when there were a number of uncertainties in the market driven by elections, changing economic outlook and other events. And yet somehow these banks said they could still borrow at exactly the same rate for four to five months. Slide 5 represents the longest consecutive period last year that the submissions remained unchanged.

Taking another look at CDS spreads versus LIBOR submissions, this time over the last three years, highlights another query. As we see in Slides 6 and 7, during significant market upheavals in the second half of 2011, the market’s views of these two banks’ credit risk changed dramatically. Yet their LIBOR submissions moved only modestly.

While we’re done with slides today, two last points reflected in market data:

There is a well-known concept in finance called interest rate parity, basically that currency forward rates will align with interest rates in two different economies. Since the financial crisis, that has not been the case, whether looking at the dollar versus the euro, sterling or yen. Theory hasn’t been aligning with practice. The borrowing rate implied in the currency markets is quite different than LIBOR.

Lastly, why are the results of two leading interbank benchmark surveys – one done for LIBOR and the other for Euribor – so different when each asks about U.S, dollar borrowing? The same difference occurs in the surveys for euro borrowing. These rates are calculated on the basis of the banks’ answers to roughly the same question. For LIBOR, a bank is asked at what rate it thinks it can borrow, while for Euribor, a bank is asked at what rate it thinks other banks are able to borrow.

Promoting Market Integrity and Financial Stability

Whether we consider the broad structural shift away from unsecured, interbank lending; the recent enforcement actions; or questions that arise from current market data, I believe that LIBOR, Euribor and other similar interest rate benchmarks are unsustainable in the long run.

These benchmarks – referencing markets with insufficient transactions, particularly in longer tenors – undermine market integrity and threaten financial stability.

Market integrity

For capital and risk to be efficiently allocated within the economy, interest rate benchmarks should reflect actual price discovery anchored in observable transactions.

Without transactions in the underlying market, the situation is similar to trying to buy a house, when your estate agent can’t give you comparable transaction prices in the neighborhood – because no houses were sold in the neighborhood in years.

As IOSCO notes, a benchmark should derive its value from the competitive forces of buyers and sellers meeting in an underlying cash market.

Derivatives derive their value from an underlying cash market. Market integrity dictates that whether that underlying cash market is oil, corn or the rate at which banks are borrowing, it must be based on something that is real. It should be anchored in observable transactions.

Further, these rates were readily and pervasively rigged in the past, and incentives for and ability to rig it in the future remain.

When market integrity is compromised, this also undermines the public’s confidence in the financial system.

Financial stability

The financial system’s reliance on interest rate benchmarks, such as LIBOR and Euribor, leaves the system in a fragile state.

Further, continuing to support LIBOR and Euribor in the name of stability may have the opposite effect. Using benchmarks that threaten market integrity may create more instability in the long run.

Given the structural changes in the interbank market, a number of banks have withdrawn from Euribor and some other interest rate benchmarks. Though IOSCO’s task force recommends that users of benchmarks have robust fallback provisions in contracts, many contracts do not currently have such fallback provisions. Thus, there is a risk to financial stability absent a planned, smooth and orderly transition.

I believe to promote market integrity as well as financial stability, we must move forward in a coordinated global effort to identify alternative interest rate benchmarks anchored in observable transactions and plan a smooth and orderly transition from benchmarks referencing unsecured, interbank markets.

Moving Forward

There is no doubt there will be challenges to transitioning from these rates.

But the market does have experience with transitioning from benchmarks that have become obsolete in the past. When the euro was created, a number of interest rate benchmarks were discontinued. How many of you remember PIBOR, RIBOR, MIBOR and FIBOR? Transitions also have occurred for energy and shipping rate benchmarks.

Further Canadian dollar LIBOR and Australian dollar LIBOR will be discontinued this year, leading to necessary transitions in those markets.

The basic components of past transitions include: first, identifying a new and reliable benchmark, one that is anchored in transactions.

Market participants and regulators are currently considering alternative interest rate benchmarks anchored in observable transactions. For instance, the Bank of International Settlements’ (BIS) Economic Consultative Committee’s March report lists possible alternatives anchored in observable transactions: the overnight swaps rate (OIS) and short-term collateralized financing rates such as general collateral repo rates (GC repo).

Second, the new and existing benchmarks run in parallel for a period of time allowing market participants to see and compare the price or rate of the alternative benchmark versus the soon-to-be-discontinued benchmark. This period of the two benchmarks running in parallel has been used to facilitate a smooth transition.

Third, a date is announced well in advance of when the old or obsolete benchmark will be discontinued.

Conclusion

While ongoing international efforts targeting benchmarks have focused on governance principles, these efforts cannot address the central vulnerability of LIBOR, Euribor and similar interest rate benchmarks: the lack of transactions in the underlying market.

Given the known issues with these benchmarks, their scale and effect on market integrity, it is critical that international regulators work with market participants to promptly identify alternative interest rate benchmarks anchored in observable transactions with appropriate governance, as well as determine how to best smoothly transition to such alternatives.

Just as Canadian dollar LIBOR and Australian dollar LIBOR are being discontinued due to the lack of an underlying interbank market, U.S. dollar, sterling, yen and euro LIBOR face similar underlying market challenges. The scope, as we all know, is bigger.

But it’s best that we not fall prey to accepting that LIBOR or any benchmark is "too big to replace."

Just imagine if the quality and integrity of the drinking water across the globe had been compromised. Then, the official sector and the utilities react by addressing the problem in Australia and Canada, but not in England or the United States. They say that there are too many people relying on the current drinking water in those countries.

If this were to occur, how could the public be confident in continuing to drink this water?

I believe market participants and regulators around the globe do have the ability and the ingenuity to tackle the challenges of benchmark interest rates, even in the face of their scale, to restore integrity and promote financial stability.

U.S. Department of State Daily Press Briefing - April 22, 2013

Daily Press Briefing - April 22, 2013

Press Briefing | The White House

Press Briefing | The White House

SECRETARY OF DEFENSE HAGEL SAYS U.S. COMMITTED TO ISRAEL

FROM: U.S. DEFENSE DEPARTMENT
Hagel: United States Committed to Israel's Security
By Cheryl Pellerin
American Forces Press Service

ABOARD A MILITARY AIRCRAFT, April 21, 2013 - Israel is Defense Secretary Chuck Hagel's first stop during his inaugural trip to the Middle East this week, a visit he said will let the people of Israel know the United States is committed to their security.

The 6-day trip will take Hagel to Israel, Jordan, Saudi Arabia, Egypt and the United Arab Emirates to discuss common threats and interests in the region, and to finalize agreements that will boost a range of military capabilities for Israel, Saudi Arabia and the UAE.

"I'm going to Israel first because it is a nation that has had a very special relationship with the United States," Hagel said on his way to that nation during a briefing with reporters traveling with him.

"It is a nation today in a very dangerous, combustible region of the world, that in many ways finds itself isolated," he said, adding, "The other countries I'll be visiting are also allies of the United States, and the common threats that face [them and] Israel ... should be seen in a regional context."

Each nation has its own set of challenges, the secretary said, but overall the challenges are regional and include terrorism and the threat of nonstate actors who would bring down governments and impact societies.

"Those common threats certainly should build a set of common interests, with these countries working together," Hagel said, "and that's part of what I will be talking about as I visit each [nation].'

During a presidential trip in March to Israel and Jordan, Barack Obama delivered the same message, the secretary said, adding that during a visit to Turkey this weekend, Secretary of State John Kerry "will be talking about some of the same issues in a different kind of way, but essentially with the same focus of common interests."

As he spoke with reporters, Hagel extended his thoughts and prayers to victims of the Boston Marathon bombing and acknowledging the tireless work of law enforcement agencies in capturing one of the men suspected in the act of terrorism.

"I say this because we are on our way to a very troubled region ... but it reminds us that [no] region of the world is ... safe from these terrible acts," the secretary observed, adding, "If nothing else, it reminds us that all 7 billion of us are global citizens and many of us are confronted by the same kinds of threats and insecurities."

Among the region's most long-term threats is Iran, Hagel said.

"The Iranians must be prevented from developing the capacity to build a nuclear weapon and deliver it," he added. "The United States' policy has been very clear on this and everyone knows it."

Iran is also a state sponsor of terrorism, the secretary said, "[and] that in itself is a threat not just to the region but to our interests in the region and around the world. When you further expand that threat to the possibility of acquiring nuclear weapons," he added, the dimensions of the threat become pretty clear.

Hagel said he thinks Israel and the United States "see the threat of Iran exactly the same, as do many other countries," not just those in the Middle East, although the United States seeks more time for diplomacy and sanctions to work to stop Iran from pursuing nuclear capabilities.

"If you stop just for a moment and look at the U.N. sanctions, the international sanctions on Iran, I don't know of an international regime of sanctions that have been more effective and more unified and tougher than what's being applied to Iran," the secretary said.

The sanctions are hurting Iran significantly, he added, but if they don't work, "... I've said, the president's said, all the leaders of the last couple of administrations have said, that the military option is one option that must remain on the table ... but the military option I think most of us feel should be the last option."

In response to a question about whether Israel could decide to strike out alone against Iran's nuclear aspirations, Hagel replied that Israel is a sovereign nation and every sovereign nation has the right to defend itself.

"It is clear that Iran presents a threat in its nuclear program," the secretary said, "and Israel will make the decisions that Israel must make to protect itself and defend itself."

Certainly Israel has every right and responsibility to make their assessments, Hagel added, "but we're working very closely and will continue to work very closely with them."

NAVY UNDERWATER PHOTOGRAPHY TRAINING AND MV-22 OSPREY LANDING

 

 

FROM:  U.S. NAVY

Mass Communication Specialist 3rd Class Nicholas Tenorio, left, photographs Mass Communication Specialist 3rd Class Wyatt Huggett during underwater photography training off the coast of Guantanamo Bay, Cuba. Expeditionary Combat Camera's Underwater Photo Team conducts semi-annual training to hone its divers' specialized skill set and ensure valuable support of Department of Defense activities worldwide. U.S. Navy photo by Chief Mass Communication Specialist Shane Tuck (Released) 130417-N-IZ904-032

An MV-22 Osprey from Marine Aircraft Group (MAG) 26 lands on the flight deck of the multipurpose amphibious assault ship USS Bataan (LHD 5) during flight operations. MSG-26 is performing launches and recoveries from the flight deck in order to complete required qualifications. Bataan is underway conducting training operations and qualifications. U.S. Navy photo by Mass Communication Specialist 2nd Class Gary A Prill (Released) 130410-N-RB564-029

CFTC CHARGES ACCOUNTING FIRM WITH IMPROPERLY AUDITING REGISTERED FUTURES COMMISSION MERCHANT

FROM: COMMODITY FUTURES TRADING COMMISSION

April 18, 2013

CFTC Charges Accounting Firm Tunney & Associates, P.C. and Its Sole Owner Michael Tunney with Failing to Properly Audit a Registered Futures Commission Merchant

Washington, DC – The U.S. Commodity Futures Trading Commission (CFTC) today announced that it filed a Complaint against Tunney & Associates, P.C. (Tunney & Associates), an accounting firm with offices in Hammond, Indiana and Orland Park, Illinois, and Michael Tunney (Tunney), its sole owner and a certified public accountant (CPA) licensed in Illinois and Indiana, alleging violations of the CFTC’s Regulations related to conducting audits for The Linn Group, Inc. (TLG), a registered Futures Commission Merchant (FCM).

According to the Complaint, filed in the U.S. District Court for the Northern District of Illinois, Tunney & Associates served as TLG’s independent auditor and conducted TLG’s required year-end audits for 2007 through 2011. The Complaint alleges, however, that neither Tunney & Associates nor Tunney had any experience auditing FCMs or any entity that holds customer segregated accounts, and neither was qualified to conduct an FCM audit, and that Tunney had no understanding of the applicable Commodity Exchange Act or CFTC regulatory provisions prior to accepting any of the audit engagements. The Complaint states that Tunney & Associates and Tunney improperly relied on a non-employee, non-CPA, to perform all of the work on TLG’s 2007 through 2010 audits, and that Tunney conducted TLG’s 2011 audit on his own, despite the fact that he was not qualified to conduct an FCM audit.

The Complaint also alleges, among other things, that Tunney & Associates’ audits did not comport with Generally Accepted Auditing Standards (GAAS) or CFTC Regulations. For example, there was no planning for the auditing of TLG, and the audits failed to include appropriate tests of TLG’s accounting system, internal accounting controls, and procedures for safeguarding customer and firm assets.

TLG has entered into a settlement with the CFTC in connection with its failure to properly handle, monitor, and report customer funds it maintained as required by the Commodity Exchange Act (Act) and Regulations, and for supervision failures. As part of the settlement, TLG agreed to a $400,000 civil monetary penalty and retention of a consultant to review and improve TLG’s procedures as necessary to comply with the Act and Regulations TLG terminated the services of Tunney & Associates prior to entering into a settlement with the CFTC.

David Meister, the CFTC’s Director of Enforcement, stated, "Auditors are gatekeepers who perform a key role in a system designed to promote market integrity and protect market participants. An accountant who assumes the role of independent auditor for a CFTC registrant must be capable of satisfying his professional obligations. The audit function is meant to do more than earn the auditor a paycheck."

In the litigation, the CFTC seeks disgorgement of all benefits Tunney & Associates and Tunney received as a result of their conduct, civil monetary penalties, and permanent injunctions against further violations of the Commodity Exchange Act and Regulations, as charged.

The CFTC appreciates the assistance of the Division of Swap Dealer and Intermediary Oversight. The CFTC also appreciates the assistance of the National Futures Association.

The CFTC Division of Enforcement staff members responsible for this matter are Allison Passman, Joseph Patrick, Susan Gradman, Scott Williamson, Rosemary Hollinger, and Richard B. Wagner.

EPA ANNOUNCES PROPOSAL TO REDUCE TOXIC DISCHARGES INTO WATERWAYS BY POWER PLANTS

Lake Superior.  Credit:  Wikimedia.

FROM: U.S. ENVIRONMENTAL PROTECTION AGENCY

EPA Proposes to Reduce Toxic Pollutants Discharged into Waterways by Power Plants

WASHINGTON — In accordance with a consent decree and in line with requirements under the Clean Water Act, the U.S. Environmental Protection Agency (EPA) today will propose a range of options to help reduce dangerous pollutants, including mercury, arsenic, lead, and selenium that are released into America’s waterways by coal ash, air pollution control waste and other waste from steam electric power plants. Today’s proposal includes a variety of options for whether and how these different waste streams should be treated. EPA will take comment on all of these options, which it will use to help inform the most appropriate final standard.

Steam electric power plants currently account for more than half of all toxic pollutants discharged into streams, rivers and lakes from permitted industrial facilities in the United States. High exposure to these types of pollutants has been linked to neurological damage and cancer as well as damage to the circulatory system, kidneys and liver.Toxic heavy metals do not break down in the environment and can also contaminate sediment in waterways and impact aquatic life and wildlife, including large-scale die-offs of fish.

"America’s waterways are vital to the health and well-being of our communities," said Acting Administrator Bob Perciasepe. "Reducing the pollution of our waters through effective but flexible controls such as we are proposing today is a win-win for our public health and our economic vitality. We look forward to hearing from all stakeholders on the best way forward."

EPA has put a focus on ensuring any final rule would protect public health while being sensible and achievable, and in line with that goal, under every preferred option proposed by EPA today, more than half of America’s coal fired power plants would be in compliance without incurring any additional cost.

The proposal updates standards that have been in place since 1982, incorporating technology improvements in the steam electric power industry over the last three decades as required by the Clean Water Act. The proposed national standards are based on data collected from industry and provide flexibility in implementation through a phased-in approach and use of technologies already installed at a number of plants. Under the proposed approach, new requirements for existing power plants would be phased in between 2017 and 2022, and would leverage flexibilities as necessary.

Fewer than half of coal-fired power plants are estimated to incur costs under any of the proposed preferred options, because many power plants already have the technology and procedures in place to meet the proposed pollution control standards.

The four preferred options differ in the number of waste streams covered (such as fly ash handling systems, treatment of air pollution control waste and bottom ash), the size of the units controlled and the stringency of the treatment controls to be imposed. EPA estimates that the regulations would reduce pollutant discharges by 470 million to 2.62 billion pounds annually and reduce water use by 50 billion to 103 billion gallons per year.

EPA also announced its intention to align this Clean Water Act rule with a related rule for coal combustion residuals (CCRs, also known as "coal ash") proposed in 2010 under the Resource Conservation and Recovery Act. The two rules would apply to many of the same facilities and would work together to reduce pollution associated with coal ash and related wastes. EPA is seeking comment from industry and other stakeholders to ensure that both final rules are aligned to reduce pollution efficiently and minimize regulatory burdens.

There are approximately 1,200 steam electric power plants that generate electricity using nuclear fuel or fossil fuels such as coal, oil, and natural gas in the U.S. Approximately 500 of these power plants are coal fired units which are the primary source of the pollutants being addressed by the proposed regulation. Power plants that are smaller than 50 megawatts would not be impacted by these new standards, and the majority of coal-fired power plants would incur no costs under the proposed standards.

The public comment period on the proposed rule will be open for 60 days after publication in the Federal Register. The agency is under a consent decree to take final action by May 22, 2014.

New Drinking Water Advisory Communication Toolbox

New Drinking Water Advisory Communication Toolbox

ISAF NEWS FROM AFGHANISTAN FOR APRIL 22, 2013

 

U.S. Army Sgt. Nichole D. Sharp and her military working dog, Hatos, search a truck while assessing security in the new customs yard under construction near the Afghanistan-Pakistan border in the Spin Boldak district in Afghanistan's Kandahar province, April 8, 2013. Sharp, a military police officer, is assigned to the 3rd Infantry Division. U.S. Army photo by Staff Sgt. Shane Hamann 　

 

FROM: U.S. DEPARTMENT OF DEFENSE

Afghan, Coalition Forces Arrest Insurgents During Searches
Compiled from International Security Assistance Force Joint Command News Releases

WASHINGTON, April 22, 2013 - Combined Afghan and coalition security forces arrested seven insurgents yesterday during searches for Taliban leaders in two of Afghanistan's provinces, military officials reported.

The arrests took place in three separate operations:

-- In Kandahar province's Kandahar district, a combined force arrested an insurgent while searching for a senior Taliban leader who is believed to have operational control over a group of insurgents responsible for attacks against Afghan and coalition forces. He is believed to be a key insurgent facilitator in the area, procuring and distributing weapons and other military supplies.

-- Also in Kandahar's Kandahar district, a combined force arrested four insurgents while searching for a Taliban leader who is believed to manage a network of insurgents throughout the province while gathering intelligence to use against Afghan and coalition forces. He also has participated in executions of Afghan officials, assisted in obtaining weapons for insurgents, and had a direct association with Abdullah Wakil, the former Taliban leader for the province's Panjwai district, who was killed March 31 during a combined operation

-- A combined force in Nangarhar province's Khugyani district arrested three insurgents while searching for a Taliban leader who is believed to be responsible for assassinations of government officials, facilitating the movement of money and distributing weapons to insurgents and conducting attacks against Afghan and coalition forces.

In April 20 Afghanistan operations:

-- Feda Mohammad, a senior Islamic Movement of Uzbekistan leader, was killed during an operation in Balkh province's Balkh district. Also known as Omari, Mohammad had a long history of planning attacks against civilians and Afghan and coalition forces. Prior to Afghan New Year celebrations in March, he coordinated a failed attack against public gatherings, specifically targeting Balkh's governor and other government officials with suicide bombers. He also had extensive experience facilitating the movement of improvised explosive devices.

-- A combined force in Khost province's Matun district arrested a Haqqani network leader who is believed to be involved in planning and conducting attacks against Afghan and coalition forces. He has also performed reconnaissance operations for his cell. The security force also arrested two other insurgents.

In other news, Afghan and coalition security forces today confirmed the death of senior Taliban leader Mullah Hayatullah during an April 18 operation in Kandahar's Maiwand district. One of the top officials for the Taliban in the district, Hayatullah was responsible for organizing and planning attacks against Afghan and coalition forces. He also facilitated the movement of insurgent weapons and supplies and plotted to assassinate Afghans who support the local government and Afghan forces.

Aurores polaires

Aurores polaires

GOVERNMENT ANNOUNCES $475 MILLION FOR COMMUNITY COLLEGE/EMPLOYER TRAINING PARTNERSHIPS

FROM: U.S. DEPARTMENT OF EDUCATION
U.S. Departments of Education and Labor Announce Availability of $474.5 Million to Strengthen Training Partnerships Between Community Colleges and Employers

WASHINGTON – The U.S. Department of Education, in partnership with the U.S. Department of Labor, today announced the availability of $474.5 million to create and expand innovative partnerships between community colleges and businesses to educate and train workers with the skills employers need. This is the third round of funding since 2009 under the Trade Adjustment Assistance Community College and Career Training (TAACCCT) grant program, for a total of nearly $1.5 billion.

"Equipping our nation's students with the skills they need is one of the best investments we can make to keep our economy growing," said U.S. Secretary of Education Arne Duncan. "This third round of funding will build on the work of earlier grantees by strengthening partnerships between institutions and employers so students develop the skills and attain the credentials they need for jobs in high-need fields now and in the future."

Acting Secretary of Labor Seth Harris announced the new funding today at an event with Under Secretary of Education Martha Kanter at Contra Costa College training facility in Richmond, Calif. The college is part of the "Design-It Build-It Ship-It" consortium of 10 community colleges in San Francisco's East Bay area that was awarded $15 million in the second round of TAACCCT grants to support regional partnerships, build career pathways, and enhance industry engagement in the advanced manufacturing, logistics, and engineering industries.

"Building a well-educated workforce is critical to achieve President Obama's mission to grow the economy from the middle class out," said Acting Secretary Harris. "This new round of funding will expand our capacity to provide world-class job skills to thousands of workers around the country in occupations we know are growing now and will continue to grow in the future."

Contra Costa Community College received $600,000 as part of the consortia grant to serve as the regional lead for Advanced Automotive Technologies and to develop new degree programs and accelerated certificates in partnership with Richmond Workforce Investment Board and the San Pablo Economic Development Corporation.

Administered by the Department of Labor in close collaboration with the Department of Education, the TAACCCT program is one component of President Obama's plan to help every American have at least one year of post-secondary education and for America to have the highest proportion of college graduates in the world by 2020.

This latest round of funding will invest in innovative and evidence-based training models that include strong partnerships with local employers and employer organizations, including sector-based strategies. Strong partnerships and work-based training will help ensure that curricula and training are aligned with the practical skills and competencies industries seek from workers.

Funds will also encourage community colleges to better track data on the employment and earnings of students after they graduate as a tool to improve their programming and to create employment results scorecards that will help prospective students choose between training programs.

Finally, models funded this year will use advanced online and technology-based job training tools. Course materials developed with this funding will be available publicly through the Open Educational Resources initiative to users to modify, update and build on instructional content. Additionally, all grantees will be required to evaluate their programs to build knowledge on what strategies are most effective in helping students gain skills and succeed in the workplace.

STATEMENT FROM FDIC OFFICIALS ON "TOO BIG TO FAIL" BANKS

FROM: FEDERAL DEPOSIT INSURANCE CORPORATION

Statement of Federal Deposit Insurance Corporation by James R. Wigand, Director, Office Of Complex Financial Institutions And Richard J. Osterman, Jr., Acting General Counsel on Who Is Too Big To Fail? Examining the Application of Title I of the Dodd-Frank Act before the Subcommittee on Oversight and Investigations; Committee on Financial Services; U.S. House of Representatives; 2128 Rayburn House Office Building
April 16, 2013


Chairman McHenry, Ranking Member Green, and members of the Subcommittee, thank you for the opportunity to testify on behalf of the Federal Deposit Insurance Corporation (FDIC) on Sections 165 and 121 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act). Our testimony will focus on the FDIC's role and progress in implementing Section 165, including the resolution plan requirements and the requirements for stress testing by certain financial institutions.

Section 165 of the Dodd-Frank Act

Resolution Plans
Under the Dodd-Frank Act, bankruptcy is the preferred resolution framework in the event of a systemic financial company's failure. To make this prospect achievable, Title I of the Dodd-Frank Act requires that all large, systemic financial companies prepare resolution plans, or "living wills", to demonstrate how the company would be resolved in a rapid and orderly manner under the Bankruptcy Code in the event of the company's material financial distress or failure. This requirement enables both the firm and the firm's regulators to understand and address the parts of the business that could create systemic consequences in a bankruptcy.

The FDIC intends to make the living will process under Title I of the Dodd-Frank Act both timely and meaningful. The living will process is a necessary and significant tool in ensuring that large financial institutions can be resolved through the bankruptcy system.

The FDIC and the Federal Reserve Board issued a joint rule to implement Section 165(d) requirements for resolution plans – (the 165(d) Rule) – in November 2011. The 165(d) Rule requires systemically important financial institutions (SIFIs) -- bank holding companies with total consolidated assets of $50 billion or more, and nonbank financial companies that the Financial Stability Oversight Council (FSOC) determines could pose a threat to the financial stability of the United States -- to develop, maintain, and periodically submit resolution plans to regulators.

In addition to the resolution plan requirements under the Dodd-Frank Act, the FDIC issued a separate rule which requires all insured depository institutions (IDIs) with greater than $50 billion in assets to submit resolution plans to the FDIC for their orderly resolution under the Federal Deposit Insurance Act. The 165(d) Rule and the IDI resolution plan rule are designed to work in tandem by covering the full range of business lines, legal entities and capital-structure combinations within a large financial firm.

The 165(d) Rule establishes a schedule for staggered annual filings. The first group of filers -- bank holding companies and foreign banking organizations with $250 billion or more in non-bank assets ("first wave" filers) -- submitted their initial resolution plans on July 1, 2012. Financial companies with less than $250 billion, but more than $100 billion in non-bank assets ("second wave" filers), will file their initial plans by July 1, 2013, and all other bank holding companies – those with assets over $50 billion – ("third wave" filers) are scheduled to file by December 31, 2013. While the general expectation is that firms will file annually, regulators may require that a plan be updated on a more frequent schedule, and a firm must provide notice to regulators of any event that may have a material effect on its resolution plan.

Eleven firms comprised the first wave of filers. The nine firms that submitted plans on July 1, 2012, were Bank of America Corporation, Citigroup, JPMorgan Chase, Goldman Sachs, Morgan Stanley, Deutsche Bank, UBS, Credit Suisse, and Barclays. The two other first wave filers, Bank of New York Mellon Corporation and State Street Corporation, submitted plans on October 1, 2012. The second wave filers include Wells Fargo, BNP Paribas, HSBC, and RBS. The third wave filers include approximately 115 firms, the large majority being foreign financial companies conducting business in the U.S.

The 165(d) Rule sets out the information to be included in a firm's resolution plan. The key objectives laid out in the Rule for the initial resolution plans submitted by first wave filers are identifying each firm's critical operations and core business lines, mapping those operations and core business lines to each firm's material legal entities, and identifying the key obstacles to a rapid and orderly resolution in bankruptcy. With regard to key obstacles, these might include such areas as a firm's internal organizational structure, interconnections of the firm to other systemic financial companies, management information system limitations, default and termination provisions of certain types of financial contracts, cross-jurisdictional operations, and funding mechanisms.

The 165(d) Rule provides that smaller, less complex financial institutions subject to the filing requirements may be eligible to file a less detailed, tailored resolution plan, for which the information requirements generally are limited to the firm's nonbanking operations, and the interconnections between the nonbanking operations and its IDI operations.

Section 165(d) of the Dodd-Frank Act requires the FDIC and the Federal Reserve Board to review each resolution plan. If, as a result of their review, the FDIC and the Federal Reserve Board jointly determine that the resolution plan is not credible or would not facilitate an orderly resolution of the firm under the Bankruptcy Code, then the company must resubmit the plan with revisions, including, if necessary, proposed changes in business operations or corporate structure. If the company fails to resubmit a credible plan that would result in orderly resolution under the Bankruptcy Code, the FDIC and the Federal Reserve may jointly impose more stringent capital, leverage, or liquidity requirements; growth, activities, or operations restrictions; or, after two years and in consultation with the FSOC, divestiture requirements.

Federal Reserve Board and FDIC staff reviewed the first wave filers' plans for informational completeness to ensure that all information requirements of the Rule were addressed in the plans. The initial plan submissions for the first wave filers were created using an assumption of the individual firm's failure under "baseline" economic conditions as a starting point. Subsequent submissions are required to take into account "adverse" and "severely adverse" economic conditions.

The eleven firms that submitted initial plans in 2012 will be expected to revise and update their submissions in their subsequent 2013 versions, pursuant to guidance that the FDIC and the Federal Reserve Board will provide to these companies. Resolution plans submitted in 2013 will be subject to informational completeness reviews and reviews for creditability or resolvability under the Bankruptcy Code. Going forward, the FDIC and the Federal Reserve Board expect the revised plans to focus on key issues and obstacles to an orderly resolution in bankruptcy, including global cooperation and the risk of ring-fencing or other precipitous actions. To assess this potential risk, the firms will need to provide a jurisdiction-by-jurisdiction analysis of the actions each would need to take in a resolution, as well as the actions to be taken by host authorities, including supervisory and resolution authorities. Other key issues expected to be addressed in the plans include: the risk of multiple, competing insolvency proceedings; the continuity of critical operations -- particularly maintaining access to shared services and payment and clearing systems; the potential systemic consequences of counterparty actions; and global liquidity and funding with an emphasis on providing a detailed understanding of the firm's funding operations and cash flows.

Stress Testing
Section 165 of the Dodd-Frank Act requires the FDIC to issue regulations for FDIC-supervised banks with total consolidated assets of more than $10 billion to conduct annual stress tests. The banks must report their respective stress test results to the FDIC and the Federal Reserve Board and these results also are summarized in a public document. The FDIC views the stress tests as an important source of forward-looking analysis that will enhance the supervisory process for these institutions. Furthermore, these stress tests will support ongoing improvement in a bank's internal assessments of capital adequacy and overall capital planning.

The Dodd-Frank Act requires the FDIC to coordinate with the other supervisory agencies to issue regulations that are consistent and comparable. While each banking agency issued separate final rules with respect to their supervised entities, the final rules were nearly identical across the agencies. The FDIC finalized its rule on annual stress tests on October 15, 2012. Complementing this rulemaking, the FDIC also issued proposed reporting templates that were developed jointly with the other agencies. Lastly, the agencies are working closely on proposed guidance to ensure consistent treatment for all covered financial institutions under the final rule.

Certain insured institutions and bank holding companies with assets of $50 billion or more comprised the first set of companies to conduct stress tests, which were completed in March 2013. Using September 30, 2012 financial data, institutions developed financial projections under defined stress scenarios provided by the agencies in November 2012. Each company publicly disclosed the results of their stress tests on or before March 31st of this year.

Institutions with assets greater than $10 billion, but less than $50 billion, and larger institutions that have not had previously conducted stress tests, will conduct their first round of stress tests later this fall.

Section 121 of the Dodd-Frank Act

Section 121 authorizes the Federal Reserve Board, with the concurrence of two-thirds of the voting members of the Financial Stability Oversight Council (FSOC), to take various actions with respect to a bank holding company with assets of $50 billion or more or a nonbank financial company supervised by the Federal Reserve Board, if it is determined that company poses a grave threat to the financial stability of the United States. Section 121 also grants the company, upon its request, the opportunity to request a written or oral hearing before the Federal Reserve Board to contest proposed actions.

As a voting member of the FSOC, the FDIC would participate in any discussions involving findings made by the Federal Reserve Board under this section and would carefully weigh the case and its merit in exercising our FSOC vote. To date, the FSOC has not heard any matters involving the use of this "grave threat" authority.

Conclusion
The FDIC has made significant progress in the implementation of Section 165 of the Dodd-Frank Act. Our goal is to ensure that firms that could pose a systemic risk to the financial system develop and maintain resolution plans that identify each firm's critical operations and core business lines, map those operations and core business lines to each firm's material legal entities, and identify and address the key obstacles to a rapid and orderly resolution in bankruptcy. Ensuring that any institution, regardless of size or complexity, can be effectively resolved through the bankruptcy process will contribute to the stability of our financial system and will avoid many of the difficult choices regulators faced in dealing with systemic institutions during the last crisis.

CDC SAYS TWO FOODBORNE GERM CAUSED INFECTIONS INCREASED IN 2012

FROM: CENTERS FOR DISEASE CONTROL AND PREVENTION

Infections from some foodborne germs increased, while others remained unchanged in 2012
The nation’s annual food safety report card is out and it shows that 2012 rates of infections from two germs spread commonly through food have increased significantly when compared to a baseline period of 2006-2008, while rates of most others have not changed during the same period. The data are part of the Foodborne Diseases Active Surveillance Network (FoodNet) report released today by the Centers for Disease Control and Prevention (CDC). Infections from campylobacter -- which is linked to many foods, including poultry, raw milk and produce – has risen up to 14 percent in 2012 compared to 2006-2008. They were at their highest level since 2000. Vibrio infections as a whole were up 43 percent when compared with the rates observed in 2006-2008. Vibrio vulnificus, the most severe strain, has not increased. Foodborne vibrio infections are most often associated with eating raw shellfish.

"The U.S. food supply remains one of the safest in the world," said CDC Director Tom Frieden, M.D., M.P.H. "However, some foodborne diseases continue to pose a challenge. We have the ability, through investments in emerging technologies, to identify outbreaks even more quickly and implement interventions even faster to protect people from the dangers posed by contaminated food."

While progress had been made in the past few years in reducing infections from a dangerous type of E. coli, Shiga toxin-producing E. coli (STEC) O157, rates in 2012 went back up. Incidence of STEC O157 infection had decreased to 0.95 per 100,000 population in 2010, but last year went back up to 1.12 per 100,000 population. FoodNet, a collaboration among CDC, ten state health departments, the U.S. Department of Agriculture’s Food Safety and Inspection Service (FSIS), and the U.S. Food and Drug Administration (FDA), tracks whether selected infections are increasing or decreasing. Overall in 2012, FoodNet’s 10 sites reported 19,531 illnesses, 4,563 hospitalizations and 68 deaths from nine germs commonly spread through foods.

Campylobacter is associated with eating raw or undercooked poultry, raw milk dairy products, contaminated produce and contaminated water. It is also acquired through contact with infected animals. Campylobacter usually causes diarrhea, stomach pain and fever that resolve in about a week. Vibrio lives naturally in sea water and foodborne vibrio infection is most often linked to eating raw oysters. It is rare, but can cause serious, life-threatening infection, especially in people with liver disease.

In 2011, FSIS implemented new and revised industry performance standards for campylobacter and salmonella, respectively, to decrease the presence of these pathogens in broiler chickens and turkeys.

"The performance standards FSIS implemented are an important consumer protection measure," said USDA Under Secretary for Food Safety Elisabeth Hagen, M.D. "These standards are at the core of USDA’s mission. While tough, they are achievable and a critical tool in our effort to drive down illnesses from these pathogens in Americans each year."

FDA is working closely with its federal and state partners to better understand the root causes of the increase in Vibrio. In addition, the Agency is implementing the Food Safety Modernization Act.

"New prevention-based rules under the Food Safety Modernization Act will help to reduce foodborne illness in general and new enforcement authorities allow us to take action to keep harmful foods out of the marketplace," said Michael Taylor, Deputy Commissioner for Foods and Veterinary Medicine at FDA.

People who want to reduce their risk of foodborne illness should assume raw chicken and other meat carry bacteria that can cause illness, and should not allow these foods to cross-contaminate surfaces and other foods. People should also cook chicken and other meat well, avoid consuming unpasteurized milk and unpasteurized soft cheeses. It is always best to cook seafood thoroughly. People at greater risk for foodborne illness with the most severe outcomes, such as pregnant women and people with weakened immune systems, should not eat raw or partially cooked seafood, including oysters that have been treated after harvest.

About FoodNet
FoodNet collects information to track rates and determine trends in laboratory-confirmed illnesses caused by nine pathogens transmitted commonly by food: campylobacter, cryptosporidium, cyclospora, listeria, salmonella, STEC O157 and non-O157, shigella, vibrio and yersinia. Annual data are compared with data from a recent period (2006-2008) and with data from the first years of surveillance (1996-1998) to measure progress. FoodNet is a collaboration among CDC, ten state health departments, the USDA’s Food Safety and Inspection Service, and the FDA. FoodNet covers 48 million people, encompassing about 15 percent of the American population. The sites are the states of Connecticut, Georgia, Maryland, Minnesota, New Mexico, Oregon, and Tennessee, and selected counties in California, Colorado, and New York.

SUPERNOVA REMNANT SN 1006



Credits: NASA/CXC/Middlebury College/F.Winklerch

FROM: NASA

This year, astronomers around the world have been celebrating the 50th anniversary of X-ray astronomy. Few objects better illustrate the progress of the field in the past half-century than the supernova remnant known as SN 1006.

When the object we now call SN 1006 first appeared on May 1, 1006 A.D., it was far brighter than Venus and visible during the daytime for weeks. Astronomers in China, Japan, Europe, and the Arab world all documented this spectacular sight. With the advent of the Space Age in the 1960s, scientists were able to launch instruments and detectors above Earth's atmosphere to observe the universe in wavelengths that are blocked from the ground, including X-rays. SN 1006 was one of the faintest X-ray sources detected by the first generation of X-ray satellites.

A new image of SN 1006 from NASA's Chandra X-ray Observatory reveals this supernova remnant in exquisite detail. By overlapping ten different pointings of Chandra's field-of-view, astronomers have stitched together a cosmic tapestry of the debris field that was created when a white dwarf star exploded, sending its material hurtling into space. In this new Chandra image, low, medium, and higher-energy X-rays are colored red, green, and blue respectively.

The new Chandra image provides new insight into the nature of SN 1006, which is the remnant of a so-called Type Ia supernova. This class of supernova is caused when a white dwarf pulls too much mass from a companion star and explodes, or when two white dwarfs merge and explode. Understanding Type Ia supernovas is especially important because astronomers use observations of these explosions in distant galaxies as mileposts to mark the expansion of the universe.

The new SN 1006 image represents the most spatially detailed map yet of the material ejected during a Type Ia supernova. By examining the different elements in the debris field -- such as silicon, oxygen, and magnesium -- the researchers may be able to piece together how the star looked before it exploded and the order that the layers of the star were ejected, and constrain theoretical models for the explosion.

Scientists are also able to study just how fast specific knots of material are moving away from the original explosion. The fastest knots are moving outward at almost eleven million miles per hour, while those in other areas are moving at a more leisurely seven million miles per hour. SN 1006 is located about 7,000 light years from Earth. The new Chandra image of SN 1006 contains over eight days worth of observing time by the telescope. These results were presented at a meeting of High Energy Astrophysics Division of the American Astronomical Society in Monterey, CA.

NASA's Marshall Space Flight Center in Huntsville, Ala., manages the Chandra program for NASA's Science Mission Directorate in Washington. The Smithsonian Astrophysical Observatory controls Chandra's science and flight operations from Cambridge, Mass.

DOJ SETTLES WITH CHILDREN'S CENTER OVER ALLEGED AMERICANS WITH DISABILITIES ACT VIOLATIONS

FROM: U.S. DEPARTMENT OF JUSTICE
Wednesday, April 17, 2013
Justice Department Settles with Apple Tree Children’s Center in Norwalk, Iowa

The Justice Department announced today that it reached a settlement with Apple Tree Children’s Center of Norwalk, Iowa, to remedy alleged violations of the Americans with Disabilities Act (ADA). The agreement resolves allegations that Apple Tree Children’s Center failed to ensure that children with disabilities, including children with Down syndrome, have a full and equal opportunity to participate in and benefit from its private pre-school programs.

Under the settlement agreement, Apple Tree Children’s Center will pay $2,500 to the child’s parents and will make reasonable modifications in policies, practices and procedures to ensure that its programs and services are accessible to children with disabilities. Apple Tree will also provide training on its obligations under Title III of the ADA to all staff who participate in the admissions process, enrollment decisions and consideration of requests for reasonable modifications of any of its policies, practices or procedures. In addition, Apple Tree will designate a staff member as its ADA compliance officer to ensure its compliance with Title III of the ADA and to review proposed decisions to exclude children with disabilities from enrollment or proposed denials of any requested reasonable modifications.

"Children with disabilities, including those with Down syndrome, have the right to full and equal participation in pre-school educational programs. The department is committed to upholding civil rights for all people with disabilities," said Eve Hill, Senior Counselor to the Assistant Attorney General for the Civil Rights Division.

The ADA requires that public accommodations, including pre-school programs, provide children with disabilities, including those with Down syndrome, full and equal enjoyment of the public accommodation’s goods, services and facilities.

INFOMERCIAL "TEACH ME TO TRADE" SALESWOMAN SETTLES FRAUD CHARGES WITH SEC

FROM: U.S. SECURITIES AND EXCHANGE COMMISSION

Former "Teach Me to Trade" Saleswoman and Infomercial Personality Linda (Knudsen) Woolf Agrees to Settle Securities Fraud Charges and Pay a $225,000 Penalty

The Securities and Exchange Commission announced that on April 16, 2013 the United States District Court for the Eastern District of Virginia entered settled final judgments against Linda (Knudsen) Woolf and Hands On Capital, Inc. Securities and Exchange Commission v. Linda Woolf, Hands On Capital, Inc., et al, Civil Action No. 1:08cv235 (E.D.Va. filed March 11, 2008). The final judgments resolve the Commission’s case against Woolf and Hands On Capital.

Woolf sold securities trading products and services such as classes, mentoring, and software called "Teach Me to Trade" to investors who wanted to learn how to trade securities. The Commission’s complaint alleges that Woolf told investors at Teach Me to Trade workshops that she had purchased mentoring, classes and software to learn to trade and had quickly turned profits by trading securities using Teach Me to Trade methods. The Commission alleges that Woolf’s tales of making money by trading were untrue; she was not a successful securities trader. Woolf sold the products and services pursuant to an independent contractor agreement between Hands On Capital and Teach Me to Trade

Under the terms of the settlement, Woolf (who filed for bankruptcy while this action was pending) agreed to pay a civil penalty of $225,000. Without admitting or denying the Commission’s allegations, Woolf and Hands On Capital also consented to the entry of final judgments permanently enjoining them from future violations of Section 10(b) of the Securities Exchange Act of 1934. Additionally, the final judgments will permanently enjoin Woolf and Hands On Capital from receiving compensation for participating in the development, presentation, promotion, marketing, or sale of any classes, workshops, or seminars (and from receiving compensation for any sales of connected products or services) given to actual or prospective securities investors concerning securities trading.

THE TASK FORCE THAT WORKS FOR TRANSITION IN AFGHANISTAN

FROM: U.S. DEPARTMENT OF DEFENSE

Task Force Works Toward Successful Transition in Afghanistan
By Donna Miles
American Forces Press Service

WASHINGTON, April 19, 2013 - With an eye toward 2014 and lessons learned from the drawdown in Iraq, a new task force in Afghanistan is working to ensure a smooth transition of responsibilities that will set the Afghan government and security forces up for future success, the task force commander reported.

The NATO-Afghanistan Transformation Task Force stood up in January as part of the International Security Assistance Force staff, Air Force Maj. Gen. Michael J. Kingsley told American Forces Press Service during a telephone interview from the Afghan capital of Kabul.

Its goal, he explained, is to ensure the well-coordinated transfer or termination of hundreds of tasks being carried out by NATO or U.S. Forces Afghanistan. This includes about 20 tasks identified for transfer to ministries within the Afghan government by December 2014.

Marine Corps Gen. John R. Allen, who recently retired as the ISAF and U.S. Forces Afghanistan commander, recognized that the transition process in Iraq had started too late, Kingsley said. This overwhelmed both Iraqi government and U.S. interagency capacities, a problem exacerbated when failure to reach a bilateral security agreement speeded up the drawdown timetable.

"This task force was born from the lessons from Iraq," Kingsley said. "General Allen knew the importance of getting ahead of this game to understand what tasks needed to be transferred to which agency, and the need to start that process early."

Building on groundwork laid by a U.S.-headed Interagency Operational Planning Team, the NATTF includes staff from eight ISAF nations and across the interagency spectrum.

One of its first missions was to evaluate 977 tasks ISAF and U.S. forces were carrying out and identify which could be eliminated or had overlap. Based on guidance from the North Atlantic Council about what specific roles NATO will and won't play in Afghanistan in 2015 and beyond, the task force then prioritized what they deemed the 371 tasks critical for transition, Kingsley said.

It's an exercise that's never been done, he acknowledged, noting that it's laying groundwork that can be applied to future missions around the world.

Top priority through the team's paring-down process went to tasks that, if not successfully transferred, would have a negative impact on the success of the entire Afghanistan campaign, Kingsley said. This includes capabilities required for the Afghanistan government's long-term viability, many that need to be built incrementally.

"What we are dealing with is infrastructure and civil-military tasks that have a pretty large consequence to the success of this country," Kingsley said, pointing to aviation and telecommunications as examples.

Seven members of the task force team are dedicated exclusively to the transfer of airport navigational aids and control of civilian airspace and other aviation assets to Afghanistan's Ministry of Transportation and Civil Aviation.

It's a complex issue, Kingsley explained, involving not just the transfer of assets and infrastructure, but also the development of laws, policies and expertise to run the aviation enterprise. Another part of the equation is getting Afghanistan's three airlines, all now blacklisted by the European Union, up to safety and credibility standards for accreditation.

"All of that has to be developed by the Afghans, because right now they have almost zero capability," Kingsley said. "But aviation transition is vital, because in a landlocked country like this, it is a primary means of commerce."

Meanwhile, a U.S. team is helping the Afghans develop a fiber-optic network around Afghanistan. "The potential for their income revenue is amazing," Kingsley said. "It could reach a potential $1.5 billion per year, if we can successfully transfer that task to the Afghans."

While helping the Afghans build capacity in these and other vital areas, Kingsley acknowledged that it's not likely to be completed and fully operational by December 2014. "So the second part of what we are doing is to enable them to contract that capability to bridge the gap until they gain the capacity," he said.

The task force also is working with the Afghans to ensure a smooth transfer of tasks related to the NATO and U.S. mission in Afghanistan to build up the Afghan national security forces. This covers the gamut, Kingsley said, from medical evacuation and logistics capabilities, to the ability to conduct operations, intelligence and security and provide mobility.

Throughout the process, Kingsley called communication -- across the international community, the interagency and with Afghanistan government leaders -- a vital part of the effort. That helps lay out a timetable for what needs to be done, and when, and to identify shortfalls early on so they don't become surprises later in the drawdown process, Kingsley said.

The carefully planned process not only builds Afghan capacity, he said, but also enables Afghanistan to step up and demonstrate its sovereignty. That, he said, helps allay concern in Afghanistan and among the international community about the country's post-2014 future, he said.

"To me, the biggest challenge is ensuring that [the Afghanistan government] and the Afghans understand and are able to accomplish the tasks that we are going to transfer to them," Kingsley said. "Through this process, we want to ensure they are set up for success."

The successful transfer of civil-military tasks is the next logistical step in the strategic partnership the United States and Afghanistan are building for the future, he said.

"This is big part of building that long-term strategic partnership," Kingsley said.