NYT > Home Page: House Votes to Extend Debt Limit to May, Averting Fight

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House Votes to Extend Debt Limit to May, Averting Fight
Jan 23rd 2013, 18:40

WASHINGTON — Avoiding an economic showdown with President Obama, the House on Wednesday passed legislation to suspend the nation's statutory borrowing limit for three months, without including the dollar-for-dollar spending cuts that Republicans once insisted would have to be part of any debt limit bill.

The measure, however, did include a provision that docks the pay of lawmakers if one of the chambers of Congress fails to pass a budget blueprint by April 15. That provision provided House Republicans with a rationale for giving in on the debt ceiling, at least temporarily.

"It's real simple: no budget, no pay," Speaker John A. Boehner of Ohio said before the measure passed by 285 to 144. Eighty-six Democrats joined Republicans to make up for the 33 Republican defections.

Representative Pete Sessions, Republican of Texas, said the phrase went back to Jamestown in 1608, when Capt. John Smith established the "no work, no food" rule for the embattled colonists. Republicans have sought for months to score political points over the Senate's failure to pass a formal budget plan for more than three years.

The debt ceiling legislation — mindful of constitutional hurdles imposed by the 27th Amendment on Congressional pay — would simply impound lawmaker salaries until a budget is passed or the 113th Congress ends, whichever comes first. And it would not require the House and the Senate to come to a compromise on the two spending and tax blueprints, which are likely to be very different. That will be the really difficult task.

"The good news is that our Republican colleagues finally recognized that America must pay its bill and meet its financial obligations without conditions," said Representative Chris Van Hollen, Democrat of Maryland. "The bad news is they only want to do it for three months."

The decision by House Democrats to oppose a measure they called gimmickry forced many Republicans to vote to do something most said they would never do: lift the debt ceiling. Senate Democratic leaders shrugged off the dictate and claimed victory.

"The president stared down the Republicans. They blinked," said Senator Charles E. Schumer, Democrat of New York.

Senator Harry Reid of Nevada, the majority leader, said he would take up and pass the House bill without changes, possibly by unanimous consent, then move quickly on a budget plan for the first time since 2009 to contrast Democratic priorities with the plan Representative Paul D. Ryan of Wisconsin plans to move through his Budget Committee.

"Democrats are eager to contrast our pro-growth, pro-middle-class budget priorities with the House Republicans' Ryan budget that would end Medicare as we know it, gut investments in jobs and programs middle-class families depend on, and cut taxes for the wealthiest Americans and biggest corporations," said Senator Patty Murray of Washington, the Senate Budget Committee chairwoman. "We know that when our priorities are laid out next to Republicans', the public stands with us."

House Republicans appeared eager for that fight. For two years, the House has passed detailed but nonbinding budget plans that would cut domestic programs to levels not seen since World War II, enact changes to Medicare that would partly privatize the program by offering older people fixed subsidies to buy private health insurance, and mandate a much-simplified tax code. Democrats have opposed those budgets while demanding a "balanced approach" to deficit reduction.

"We have a budget that's described as draconian, that decimates this program or that. They have a phrase, 'balanced approach,'" said Representative Trey Gowdy, Republican of South Carolina. "I'm tried of debating against a phrase."

House Republicans say punting the debt ceiling to May 18 is not so much a retreat as a "reordering" of the coming budget showdowns. House Republicans now take for granted that the first deadline, March 1, will come and go, and $110 billion in across-the-board spending cuts to defense and domestic programs will go into force.

The next real showdown will come by March 27, when the stopgap measure financing the government expires. Republicans have made clear that they are willing to let the government shut down at that time to force deep spending cuts or changes to Medicare and Social Security that would bring down deficits in the long run.

"We know with certainty that a debt crisis is coming to America. It's not a question of if. It's a question of when," Mr. Ryan said. "And if there is a debt crisis, those who get hurt the worst are the ones who need government the most, our seniors, the poor."

Such continuing brinkmanship brought a rebuke from Ms. Murray, who said Republicans were trying to have it both ways, forcing Senate Democrats to move forward in an orderly way with a budget plan by mid-April, but threatening the next budget crisis weeks before that.

The pay provision brought its own protests. Representative Jerrold Nadler, Democrat of New York, called it "institutionalized bribery," since it effectively says, do what Republicans want or do not get paid. That was why the nation passed the 27th Amendment, which says Congressional pay cannot be varied within a single Congress.

But the "no budget, no pay" mantra had bipartisan appeal. Senators, including Joe Manchin III, Democrat of West Virginia, introduced their own version on Wednesday.

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NYT > Home Page: DealBook | The Trade: Financial Crisis Suit Suggests Bad Behavior at Morgan Stanley

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DealBook | The Trade: Financial Crisis Suit Suggests Bad Behavior at Morgan Stanley
Jan 23rd 2013, 17:48

On March 16, 2007, Morgan Stanley employees working on one of the toxic assets that helped blow up the world economy discussed what to name it. Among the team members' suggestions: "Subprime Meltdown," "Hitman," "Nuclear Holocaust" and "Mike Tyson's Punchout," as well a simple yet direct reference to a bag of excrement.

Ha ha. Those hilarious investment bankers.

Then they gave it its real name and sold it to a Chinese bank.

We are never going to have a full understanding of what bad behavior bankers conducted in the years leading up to the financial crisis. The Justice Department and the Securities and Exchange Commission have failed to hold big wrongdoers to account.

We are left with what scraps we can get from those private lawsuits lucky enough to get over the high hurdles for document discovery. A case brought against Morgan Stanley by a Taiwanese bank in a New York State Supreme Court in Manhattan has cleared that bar.

The results are explosive. Hundreds of pages of internal Morgan Stanley documents, released publicly last week, shed much new light on what bankers knew at the height of the housing bubble and what they did with that secret knowledge.

The lawsuit concerns a $500 million collateralized debt obligation called Stack 2006-1, created in the first half of 2006. Collections of mortgage-backed securities, C.D.O.'s were at the heart of the financial crisis.

But the documents suggest a pattern of behavior larger than this one deal: people across the bank understood that the American housing market was in trouble. They took advantage of that knowledge to create and then bet against securities and then also to unload garbage investments on unsuspecting buyers.

Morgan Stanley doesn't see the narrative as the plaintiffs do. The firm is fighting the lawsuit, contending that the buyers were sophisticated clients and could have known what was going on in the subprime market. The C.D.O. documents disclosed, albeit obliquely, that Morgan Stanley might bet against the securities, a strategy known as shorting. The firm did not pick the assets going into the deal (though it was able to veto any assets). And any shorting of the deal was part of a larger array of trades, both long and short. Indeed, Morgan Stanley owned a big piece of Stack, in addition to its short bet.

Regarding the profane naming contest, Morgan Stanley said in a statement: "While the e-mail in question contains inappropriate language and reflects a poor attempt at humor, the Morgan Stanley employee who wrote it was responsible for documenting transactions. It was not his job or within his skill set to assess the state of the market or the credit quality of the transaction being discussed."

Philip Blumberg, the Morgan Stanley lawyer who composed most of the names, meet the underside of a bus, courtesy of your employer.

Another Morgan Stanley employee sent an e-mail that same morning, suggesting that the deal be called "Hitman." This might have been an attempt to manage up, because "Hitman" was the nickname of his boss, Jonathan Horowitz, who helped head the part of the group that oversaw mortgage-backed C.D.O.'s. Mr. Horowitz replied, "I like it."

Both Mr. Blumberg and Mr. Horowitz, now at JPMorgan, declined to comment through representatives at their banks.

In February 2006, Morgan Stanley began putting together the Stack C.D.O. According to an internal presentation, Stack "represents attractive business for Morgan Stanley."

Why? In addition to fees, another bullet point listed: "Ability to short up to $325MM of credits into the C.D.O." In other words, Morgan Stanley could — and did — sell assets to the Stack C.D.O., intending to profit if the securities backed by those assets declined. The bank put on a $170 million bet against Stack, even as it was selling it.

In the end, of the $500 million of assets backing the deal, $415 million ended up worthless.

"While investors and taxpayers all over the world continue to choke on Wall Street's toxic subprime products, to this day not a single major Wall Street executive has been held accountable for misconduct relating to those products," said Jason C. Davis, a lawyer at Robbins Geller who is representing the plaintiff in the lawsuit. "They are generally untouchable, but we are pleased that the court in this case is ordering Morgan Stanley to turn over damning evidence, so that the jury will get to see what Morgan Stanley really knew about the troubled nature of its supposedly 'higher-than-AAA' quality product."

Why might Morgan Stanley have bet against the deal? Did its traders develop a brilliant thesis by assessing the fundamentals of the housing market through careful analysis of the public data? The documents suggest something more troubling: bankers found out that the housing market was diseased from their colleagues down the hall.

Bankers were getting information from fellow employees conducting and receiving private assessments of the quality of the mortgages that the bank would purchase to back securities. These reports weren't available to the public. It would be crucial information for trading in securities backed by those kinds of mortgages.

In one e-mail from Oct. 21, 2005, a Morgan Stanley employee warns a banker that the mortgages Morgan Stanley is buying from loan originators are troubled. "The real issue is that the loan requests do not make sense," he writes. As an example, he cites "a borrower that makes $12K a month as an operation manger (sic) of an unknown company — after research on my part I reveal it is a tarot reading house. Compound these issues with the fact that we are seeing what I would call a lot of this type of profile."

In another e-mail from March 17, 2006, another Morgan Stanley employee writes about a "deteriorating appraisal quality that is very flagrant."

Two of the employees who received those e-mails joined an internal hedge fund, headed by Howard Hubler, that was formed only the following month, in April 2006. As recounted in Michael Lewis's "The Big Short," Mr. Hubler infamously bet against the subprime market on Morgan Stanley's behalf, a fact that Morgan Stanley's chief financial officer conceded in late 2007. Mr. Hubler's group was supposed to be separate from the rest of Morgan Stanley, but the two bankers continued to receive similar information about the underlying market, according to the person briefed on the matter.

At no point did they receive material, nonpublic information, a Morgan Stanley spokesman says.

I struggle to see how the private assessments that the subprime market was imploding were immaterial.

Another of Morgan Stanley's main defenses is that it couldn't have thought the investment it sold to the Taiwanese was terrible because it, too, lost money on securities backed by subprime mortgages. As the Morgan Stanley spokesman put it, "This deal must be viewed in the context of a significant write-down for Morgan Stanley in 2007, when the firm recorded huge losses in its public securities filings related to other subprime C.D.O. positions."

This is a common refrain offered by big banks like Citigroup, Merrill Lynch and Bear Stearns to absolve them of any responsibility.

But does losing money wipe away sin?

Yes, Mr. Hubler made his bets in what turned out to be a deeply disastrous way. As part of a complex array of trades, he bet against the middle slices of subprime mortgage C.D.O.'s. He bought the supposedly safe top parts. The income from the top slices helped offset the cost of betting against the middle slices. But when the market collapsed, the top slices — called "super senior" because they were supposedly safer than Triple A — didn't hold their value, losing billions for Mr. Hubler and Morgan Stanley. Mr. Hubler did not respond to requests for comment.

So Morgan Stanley lost a great deal of money.

But let's review what the documents suggest is the big picture.

In the fall of 2005, bank employees share nonpublic assessments of how the subprime market is a house of tarot cards.

In February 2006, the bank begins creating Stack in part so that it can bet against it.

In April 2006, the bank creates its own internal hedge fund, led by Mr. Hubler, who shorts the subprime market. Among the traders in this internal shop are people who helped create Stack and other deals like it, and at least two employees who had access to the private due diligence reports.

Mr. Hubler's group had no investment position in Stack, according to a person briefed on the matter, but it sure looks as if the bank saw what was coming and tried to position itself for a subprime market collapse.

Finally, by early 2007, the bank appears to realize that the subprime market is cratering even worse that it expects. Even the supposedly safe pieces of C.D.O.'s that it owns, including its piece of Stack, are facing losses. So Morgan Stanley bankers set to scouring the world to peddle as a safe and sound investment what its own employees are internally deriding.

Morgan Stanley declined to comment on whether it made money on its Stack investments over all. But it looks to have turned out well for the bank. In Stack, it managed to fob off a nuclear bomb to the Taiwanese bank.

Unfortunately for Morgan Stanley, it had so many other pieces of C.D.O.'s, so many nuclear warheads, that it couldn't find nearly enough suckers around the world to buy them all.

And so when the real collapse came, Morgan Stanley was left with billions of dollars in losses.

That hardly seems exculpatory.


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NYT > Home Page: Philharmonic Announces NY Phil Biennial for 2014

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Philharmonic Announces NY Phil Biennial for 2014
Jan 23rd 2013, 17:00

Canals don't run by Lincoln Center, and you would be hard-pressed to find a beach near Broadway, but the New York Philharmonic has notions to do for classical music what the Venice Biennale and Art Basel Miami Beach have done for art.

The orchestra is calling it the NY Phil Biennial.

Disclosed on Wednesday as part of the orchestra's announcement of 2013-14 programing, the biennial will be a 10-day festival that Philharmonic officials describe as a "veritable playground of new and recent music from around the world."

The project extends the orchestra's efforts to program more contemporary music and seize some sort of initiative in the search for more relevance and newer audiences. Under its music director, Alan Gilbert, the Philharmonic has already established a modest new-music series in smaller concert halls and has installed composers and artists in residence.

The 2014 festival will run from May 29 to June 7 and include two programs by the orchestra, several programs of chamber music by Philharmonic musicians and performances by the Orchestra of St. Luke's and Juilliard School musicians. The organizers hope to add symposiums and other public events.

The Philharmonic said it had reached agreements with several New York institutions to collaborate on paying for, planning or serving as host for the concerts, including the 92nd Street Y, Lincoln Center, the Metropolitan Museum of Art, Juilliard and the Special Music School at the Kaufman Center. While plans remain vague, as many as three events a day could be on the agenda, Mr. Gilbert said in an interview.

Orchestra officials acknowledged that the NY Phil Biennial may not attract the tens of thousands of visitors who pour into the art fairs in both Basel and Miami Beach or produce the vast display of culture in the pavilions of Venice.

"It's obviously not going to be exhaustive," Mr. Gilbert said. "It's obviously not going to go over every point of view." But for a "contained period of time," he added, audience members can "get a glimpse of what we feel has been exciting in the recent past."

The goal is to present works that have never been performed, or at least never in New York (which for some people amounts to the same thing).

"We want it to be a reaction to, and a reflection of, exciting composition that is happening around the world," Mr. Gilbert said. The orchestra chose the word "biennial," he said, to imply that the festival was permanent and to convey the feel of a broad international survey. "We want to provide for music a nexus and rallying point that the great biennials in the art world have become," Mr. Gilbert said.

Details are scarce because programmers want to have the flexibility of making last-minute decisions, Mr. Gilbert added, although they may have been too busy planning the orchestra's season, which opens on Sept. 25 with a gala concert featuring Osvaldo Golijov's "Azul" for cello and orchestra and an arrangement of Astor Piazzolla's "Serie del Ángel," with Yo-Yo Ma as soloist.

Other highlights of the season include performances of all five Beethoven piano concertos, with Yefim Bronfman as soloist; a number of works by Christopher Rouse, the Philharmonic's composer in residence; performances featuring Glenn Dicterow, the concertmaster, who will be in his last season; an Asian tour; a program of music and clips from Pixar movies; and a showing of Stanley Kubrick's "2001: A Space Odyssey" with the orchestra playing the film score live.

The "2001" performance will be a rare case in which the Philharmonic's lack of playing is being cast as a virtue. Silence is a key part of the movie, so the orchestra will stay onstage the whole time, the Philharmonic said, "highlighting Kubrick's strategic and eloquent use of both music and silence in storytelling."

The orchestra will dedicate two of its subscription concerts to the biennial, said Ed Yim, the vice president for artistic planning. The first will be a collaboration with the Juilliard Orchestra, works to be determined. The second will be the first performances of Mr. Rouse's Symphony No. 4, a Philharmonic commission.

The orchestra is expanding its new-music series, Contact!, to include three concerts at the 92nd Street Y's TriBeCa performance space, Mr. Yim said. One of those TriBeCa concerts will be included under the biennial umbrella.

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NYT > Home Page: Man Charged in Shooting at College in Houston

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Man Charged in Shooting at College in Houston
Jan 23rd 2013, 15:13

HOUSTON — A man was charged late Tuesday in a shooting at a community college here that left four people hospitalized and touched off fears that the campus had been the site of another mass shooting.

The man, Carlton Berry, 22, was charged with aggravated assault but remained hospitalized for injuries sustained in the shooting.

A dispute between Mr. Berry and another man on Tuesday led to the shooting at Lone Star College's North Harris campus, the authorities said. At least one of the men may have been a student or a former student at the college. Both were detained by the authorities.

Three people were wounded by gunfire, including the two men in the altercation and a maintenance worker who was shot in the leg. A fourth person, who was not shot, was taken to a hospital with medical problems.

School officials said the campus would reopen on Wednesday morning on a normal schedule.

On Tuesday, Joshua Flores, a senior, was standing outside the cafeteria with friends when they heard gunshots. "We thought it was fireworks, so we didn't go anywhere," said Mr. Flores, 21. "And then a bunch of people came running our way, yelling: 'The guy has a gun! Run! Run!' "

The college, which has 19,000 students, was evacuated, and Houston police officers and Harris County sheriff's deputies spent hours clearing the buildings and deeming them safe.

Officials with the Sheriff's Office said they received the first call at 12:19 p.m. They said they did not know what the dispute was about. One of the men in the altercation had student identification, but officials had not confirmed that he was enrolled at the college.

An official with the Sheriff's Office, Maj. Armando Tello, said there appeared to be only one gun involved. Major Tello was the acting sheriff because Sheriff Adrian Garcia was out of town.

The shooting shocked students, faculty members and administrators at the 200-acre campus. The school is in northern Harris County and about 30 minutes from downtown. It is so close to George Bush Intercontinental Airport that college officials said one can often look up and wave at the passengers.

Students said they did not realize that the shots were actually gunfire. Because the shooting occurred outdoors — in a center courtyard near the library and academic buildings, officials said — many heard the sounds. One student sitting at a table on the third floor of the library thought it was a book cart toppling.

"Later we heard people screaming, and we knew it was gunshots," said the student, Jonathan Moreno, 19, a freshman.

Mr. Moreno hid with other students in a back room on the third floor of the library in the moments after the shooting. "It was a scary thing," he said. "Some people were panicking. Some lady was about to have like an asthma attack. There were some people crying."

Other students sat or crouched in classrooms in buildings with the lights turned off. Some fled classrooms and buildings so quickly that they left their belongings behind and planned on returning late Tuesday night to retrieve them.

Richard Carpenter, the chancellor for the Lone Star College System, said the North Harris campus, the system's first, was celebrating its 40th anniversary this year. "In 40 years, this is the first kind of incident like this we've ever had," Mr. Carpenter said. "The campus will be reopening tomorrow. It has been safe for 40 years. We think it's still safe."

One freshman, Whikeitha Thomas, 21, had been in math class for about 15 minutes when he heard loud bangs. "A teacher came in," Mr. Thomas said. "She said: 'There's been a shooting on campus. Lock the doors. Turn off the lights.' "

Mr. Thomas and his classmates hid in the classroom. In those tense moments, one of the students, a 23-year-old woman, collapsed. Mr. Thomas and another student gave the woman CPR inside the classroom and called 911. "The lights were off at first until she passed out," Mr. Thomas said. "When she passed out, they turned the lights back on so I could perform CPR."

As Mr. Thomas was trying to revive the woman, she told him that she was more frightened than the others. She said she had survived the Virginia Tech shooting. "She said, 'I went through this already at Virginia Tech, and I just don't like this feeling.' "

Manny Fernandez reported from Houston, and Emma G. Fitzsimmons from New York.

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NYT > Home Page: I.M.F. Forecast: Global Economic Growth Modest at Best

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I.M.F. Forecast: Global Economic Growth Modest at Best
Jan 23rd 2013, 15:01

WASHINGTON — The International Monetary Fund said on Wednesday that it continued to expect a modest upturn in global growth in 2013, with fewer risks of policy mistakes and less financial stress.

The fund cautioned, however, that growth is hardly expected to snap back to pre-crisis levels in the coming years. Over all, the fund sees global growth of 3.5 percent in 2013 and 4.1 percent in 2014, up from 3.2 percent in 2012. In the years just before the global downturn, annual economic growth was 4.5 to 5.5 percent.

"If crisis risks do not materialize and financial conditions continue to improve, global growth could be stronger than projected," the Washington-based fund said in its economic report. "However, downside risks remain significant, including renewed setbacks in the euro area and risks of excessive near-term fiscal consolidation in the United States. Policy action must urgently address these risks."

The International Monetary Fund updates its economic projections three times a year in its World Economic Outlook report. This time, it whittled down many of the forecasts for 2013 that it had made in October, knocking 0.1 percentage point from its United States growth forecast, 0.3 percentage point from the euro area and 0.4 percentage point from the newly industrialized Asian economies, like Singapore and South Korea.

The fund said it downgraded its estimate of European growth from October despite "progress in national adjustment and a strengthened European Union-wide policy response to the euro area crisis." It said that there might be "delays" as lower sovereign-bond yields and reduced financial stress eventually translate into improved private-sector borrowing conditions. It added that uncertainty about the ultimate resolution of the long-simmering European debt crisis remains high.

Slow growth in advanced economies, including the United States, Germany and Japan, will continue to weigh on growth in emerging economies, it said.

For Washington, the "priority is to avoid excessive fiscal consolidation in the short term, promptly raise the debt ceiling and agree on a credible medium-term consolidation plan," the fund's economists said. Christine Lagarde, managing director, and other fund officials have repeatedly warned politicians in Washington not to embark on too stringent an austerity program, for the good of the world economy as well as the United States. The fund planned a news conference in Washington to discuss the forecasts Wednesday.

This month, its sister institution, the World Bank, released a rosier economic analysis. It foresees global growth of just 2.4 percent in 2013. But it said that emerging economies could worry less about downside risks from advanced economies and start focusing on domestic economic issues, like labor-market or regulatory reforms.

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NYT > Home Page: Testifying on Benghazi, Clinton Cites New Security Steps

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Testifying on Benghazi, Clinton Cites New Security Steps
Jan 23rd 2013, 14:24

WASHINGTON — In long-awaited testimony, Secretary of State Hillary Rodham Clinton on Wednesday asserted that she had moved quickly to improve the security of American diplomats after the September attack in Benghazi, Libya, that killed four Americans and prompted a scathing review of State Department procedures.

Secretary of State Hillary Rodham Clinton appeared before the Senate Foreign Relations Committee on Wednesday.

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"As I have said many times since Sept. 11, I take responsibility," Mrs. Clinton said in a prepared statement. "Nobody is more committed to getting this right. I am determined to leave the State Department and our country safer, stronger and more secure."

Appearing before the Senate Foreign Relations Committee in the morning, Mrs. Clinton choked up as she recounted the grim moment in September when she and President Obama received the bodies of the four Americans killed in the Benghazi attack at Joint Base Andrews, outside Washington.

"I stood next to President Obama as the Marines carried those flag-draped caskets off the plane at Andrews," she said. "I put my arms around the mothers and fathers, sisters and brothers, sons and daughters."

Mrs. Clinton asserted that she was never made aware of the security requests from Benghazi by Ambassador J. Christopher Stevens and his subordinates. "I did not see these requests," she said. "They did not come to me. I did not approve them. I did not deny them."

"These requests do not normally come to the secretary of state," she added. "They are handled by security professionals in the department."

She insisted that the measures she was taking would ensure that requests received high-level attention in the future.

The day of testimony — Mrs. Clinton was to appear before the House Foreign Affairs Committee in the afternoon — has major political implications for the departing secretary of state, who has been mentioned as a possible presidential candidate in 2016.

Mrs. Clinton was to have testified in December, but her appearance was delayed by illness and then a concussion, which led to her brief hospitalization. Republicans have been insistent that Mrs. Clinton needed to testify about her own role before leaving her State Department post, and she readily agreed.

Mrs. Clinton first publicly took responsibility for the September attack in an Oct. 15 interview with television reporters. Since then, however, she has committed herself to putting in place all of the recommendations of the independent review that was led by Thomas R. Pickering, the former American ambassador, and Mike Mullen, the retired admiral who served as the chairman of the Joint Chiefs of Staff.

In her prepared testimony, Mrs. Clinton sought to put the events in Benghazi in a broader regional context, noting the presence of a Qaeda-affiliated group in northern Mali.

"Benghazi didn't happen in a vacuum," she said. "The Arab revolutions have scrambled power dynamics and shattered security forces across the region. And instability in Mali has created an expanding safe haven for terrorists who look to extend their influence and plot further attacks of the kind we saw just last week in Algeria."

She asserted that headway was being made on putting in place the panel's recommendations, repeating themes that had been made to Congress by senior State Department officials last month.

"And, as I pledged in my letter to you last month, implementation has now begun on all 29 recommendations," Mrs. Clinton said. "Our task force started by translating the recommendations into 64 specific action items. All of these action items were assigned to specific bureaus and offices, with clear timelines for completion. Fully 85 percent are on track to be completed by the end of March, with a number completed already."

Mrs. Clinton sought to avoid the controversy over whether the attack was the work of terrorists that dogged Susan E. Rice, the United States ambassador to the United Nations, who was Mr. Obama's initial preference to serve as Mrs. Clinton's successor. She suggested that she was inclined to see the attack as a terrorist act from the start.

"The very next morning, I told the American people that heavily armed militants assaulted our compound and vowed to bring them to justice. And I stood with President Obama as he spoke of 'an act of terror,'" she said.

The Senate Foreign Relations Committee is still led by Senator John Kerry, the Massachusetts Democrat, whose confirmation hearing as secretary of state is Thursday. Mr. Kerry is not leading the Wednesday hearing to avoid the perception of a conflict of interest. The hearing is being led by Senator Robert Menendez, the New Jersey Democrat, who is the incoming chairman. Mr. Kerry was not present as the hearing began.

"In all these diplomatic engagements, and in near-constant contacts at every level, we have focused on targeting Al Qaeda's syndicate of terror – closing safe havens, cutting off finances, countering extremist ideology, and slowing the flow of new recruits," Mrs. Clinton said. "We continue to hunt the terrorists responsible for the attacks in Benghazi and are determined to bring them to justice. And we're also using all our diplomatic and economic tools to support the emerging democracies of the region, including Libya, to strengthen security forces and provide a path away from extremism."

Eric Schmitt contributed reporting.

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NYT > Home Page: The Lede Blog: Live Updates: Clinton Testifies on Benghazi Attacks

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The Lede Blog: Live Updates: Clinton Testifies on Benghazi Attacks
Jan 23rd 2013, 15:09

Visit NBCNews.com for breaking news, world news, and news about the economy

The Lede is following Secretary of State Hillary Rodham Clinton's testimony before the Senate Foreign Relations Committee about the Sept. 11, 2012, attacks on the American Consulate in the eastern city of Benghazi, Libya, that killed Ambassador Chris Stevens and three other Americans.

Mrs. Clinton had been scheduled to testify before Congress last month, but an illness, a concussion and a blood clot near her brain forced her to postpone her appearance.

As our colleagues Michael R. Gordon and Eric Schmitt reported, four State Department officials were removed from their posts on last month after an independent panel criticized the "grossly inadequate" security at a diplomatic compound in Benghazi.

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