Winnipeg Free Press

Winnipeg Free Press (Newspaper) - June 26, 2012, Winnipeg, Manitoba C M Y K PAGE A10 EDITORIALS WINNIPEG FREE PRESS, TUESDAY, JUNE 26, 2012 Freedom of Trade Liberty of Religion Equality of Civil Rights A 10 COMMENT EDITOR: Gerald Flood 697- 7269 gerald. flood@ freepress. mb. ca winnipegfreepress. com EDITORIAL M OODY'S Investors Service last week poured cold water on Canadians' comfortable assumptions about the soundness of their banks. After a close look at the ways the world's 15 largest banks make their money, Moody's downgraded all of them. Royal Bank of Canada, the only Canadian bank large enough to come into the review, was knocked down two notches to Aa3, putting it at the same relatively high level as New York- based JP Morgan. The problem is some of the largest banks have been relying more and more on trading in the market to make their money, and this has become an extremely dangerous game. The core business of retail banks is to take small deposits from customers at low interest and lend the funds out to borrowers at higher interest, making a profit on the difference. This is a reasonably stable and predictable business. Trading in the market, by contrast, can produce spectacular profits and spectacular losses. Jamie Dimon, chief executive of JP Morgan, announced on May 9 his bank had incurred US$ 2 billion of losses in a sequence of trades by its London office. A hedging strategy, conceived to prevent losses, instead produced rapidly growing losses, to the great surprise of the bank. That misstep by an extremely large and sophisticated bank caught the attention of Moody's and led to last week's downgrades. Banks eventually report a great deal of what they do. There is, however, a large shadow- banking sector whose activities are only partly known. The 1998 collapse of the New York hedge fund Long- Term Capital Management, whose bankers might have been destroyed by the failure of their largest customer, showed a private club of investors could, like the largest banks, get too big to fail. The Federal Reserve Bank of New York organized a bailout of LTCM by a consortium of banks. Because they do not offer shares or units or anything else to the public, these private funds need not tell anyone what they have, what they do and what risks they are taking. The shadow- banking sector has probably grown since 1998 and the imponderable risks to hedge funds and their bankers have grown accordingly. Finance Minister Jim Flaherty rightly echoes Canadian pride that Canada's banks are among the soundest in the world. Moody's has added, however, that the largest of them is not as sound as it used to be. The lure of large profits from risky business is hard to resist, especially for firms that know they will be bailed out from any catastrophic miscalculation. C ANADA'S military effort in Kandahar has been heavily criticized and seriously misrepresented in a new book by a reporter and associate editor from the Washington Post who also wrote the highly regarded Imperial Life in the Emerald City about the U. S. war in Iraq. Rajiv Chandrasekaran's Little America: The War Within the War for Afghanistan asks a reasonable question: whether the U. S. should have surged troops into Kandahar or neighbouring Helmand province. The author is considered a heavyweight around Washington and his earlier book inspired the film Green Zone starring Matt Damon. But Chandrasekaran reveals a misunderstanding of the history of the Canadian and American deployments in Kandahar and is apparently unaware of the many attempts the overmatched Canadian task force there and political leaders in Ottawa made to get the U. S. and other NATO allies to join them in the fight. Citing an influential American outside adviser, Chandrasekaran says Canada was wrong to not put combat troops in Kandahar City and complains that its troops were " focused on reconstruction activities, not providing security or gathering intelligence." According to a secondhand account of what an American two- star general had told someone else, Chandrasekaran wrote that the U. S. was loath to push the idea that more Canadians should have been sent to Kandahar City because, as Chandrasekaran writes, he did not want to " dictate to the Canadians where to place their forces." In fact, the Canadians did exactly what NATO had asked them to do in Kandahar City. This was to do what the Americans had done there before them. Acceding to requests from Brussels and Washington, Canadian reconstruction troops and civilians took over what had been a U. S.- led Provincial Reconstruction Base in the fall of 2005 when those Americans were withdrawn as the U. S. ramped up the war in Iraq. The truth is Washington had been so unconcerned about Kandahar City that between early 2002 and late 2005 - as the Taliban regained strength and began to cause serious security problems - it had never sent combat troops into Kandahar City, either. Nor did the U. S. establish a meaningful intelligence capability there. What the Americans did in exiting Kandahar was leave Canada with a mess of Washington's making in a place that was fast becoming the epicentre of the insurgency. Given this ugly backdrop, and the fact that the U. S. has vastly superior intelligence- gathering capabilities when compared with those of Canada, it is disingenuous to argue it was Canada's and not the U. S.' s strategy in Kandahar City that was faulty. The main point Chandrasekaran made in an excerpt from his book, which ran in the Washington Post over the weekend, was that Kandahar, not Helmand was the key battleground so, since Canada was responsible for Kandahar, it should have gone into Kandahar City in a big way. It is certainly arguable that Kandahar was more important militarily than Helmand, although opium from the latter was what provided vital financing to the Taliban. But if Kandahar was more important, why did the U. S., with several hundred thousand more combat troops than Canada, hand off this crucial assignment almost entirely to its northern neighbours? Chandrasekaran also disses Canada for only having 600 combat troops to cover Zhari, Panjwai and Arghandab. In fact, the true number of Canadians operating " outside the wire" was nearly double that figure. Nevertheless, as every Canadian and American commander I spoke to during the years I spent in Kandahar between 2002 and 2011 - and I spoke to several of the people whom Chandrasekaran interviews - that was never nearly enough troops to gain the upper hand. It meant all Canada could do was rush around putting out fires until the ( U. S.) cavalry finally arrived. And this is what the Canadians " heroically" did, according to many U. S. colonels and generals to whom I have spoken. Overlooked in Chandrasekaran's argument that Canada should have committed more combat troops to Kandahar was it was never possible for Canada to send more troops there. As former U. S. secretary of defence Donald Rumsfeld might have said, " That was a known known." After decades of budget cuts, Canada could only sustain about one brigade of 3,000 or 4,000 troops in the field at one time. Canada took responsibility for the most vital districts in the Taliban heartland - as well as the rest of Kandahar - in 2006 after Washington, with scores of regiments, decided it had exactly ZERO conventional combat troops available to fight there. Other than a limited number of American, British and Canadian Special Forces soldiers, the only combat troops in the province when a battalion of the Princess Patricia's Canadian Light Infantry arrived from Edmonton early that spring were a handful of French air force commandos tucked up in mountains north of Spin Boldak near the Pakistan border. Chandrasekaran asserts one of the reasons the U. S. surge began with the marines going to Helmand rather than to Kandahar, where he says they were more badly needed, was because the U. S. did not want to hurt Canadian feelings while the British in Helmand were more open to a partnership. It is true that a super- strength brigade of U. S. marines, under the command of Toronto- born and raised Brig.- Gen. Larry Nicholson, was sent to Helmand where it did an excellent job of taking on the Taliban in places where the similarly overstretched British troops had grave problems. But the idea that Canada sought to keep control of the most important areas around Kandahar City and had somehow kept the Americans out of the city and province is dead wrong. The independent blue- ribbon Manley report to Parliament in 2008 - which the Harper government and the Liberal opposition accepted in its entirety - demanded that Canada should leave Afghanistan altogether if the U. S. or other NATO partners did not urgently send troops to help them out. It was in response to Manley's noholds- barred account of the weaknesses of the Canadian mission and a direct request to NATO and to Washington that the U. S. finally began to surge troops into Kandahar starting in 2009 with a single infantry battalion that went to Zhari where it operated under Canadian command. When U. S. President Barack Obama finally ordered the full surge in December 2009, half a dozen U. S. combat units and an intelligence regiment headed for Kandahar and, at long last, Kandahar City. In a relatively short time, these Americans and the Canadians, now with the much smaller, more manageable combat zone they had long sought, quickly turned the security situation around. There had been foot- dragging by Brig.- Gen. Dan M�nard in 2010 about when to hand over formal control of parts of Kandahar to U. S. forces. But this bit of theatre disappeared quickly when M�nard was abruptly replaced by then- brigadiergeneral Jon Vance. Within a few days of returning to Kandahar for his second tour in late May of that year, Vance sat down at the Provincial Reconstruction Base in Kandahar City with a group of American combat colonels and told them by July 4. the U. S. would have total responsibility for and command of the city. In fact, it was on July 1, Canada Day, and not Independence Day, that the Americans finally resumed responsibility for a battle space they should never have never left and, for the first time committed large numbers of combat troops to tackle the Taliban there. So, why is Canada somehow to blame for the very late arrival of U. S. combat forces in Kandahar City and Kandahar province? Sure, Canada made mistakes. It overreached. It lacked helicopters of its own early on. As was widely known, it never had the means to deploy enough combat troops to defeat the Taliban there. But it was Washington that pressed Ottawa to go to Kandahar because it didn't want its ground troops there. Except for fighter jets, the Canadian Forces went over with everything it had. More than 150 Canadians died fighting the Taliban in Kandahar at a time the U. S. was pursuing grander ambitions in Iraq. Strategic errors about how and where to fight the Afghan war were made, but they were made at Washington's behest, not Ottawa's. MATTHEW FISHER Canada's Afghan effort unfairly dissed Moody's finds RBC wanting M OHAMMED Morsi became Egypt's first democratically elected president on the Sunday after military rulers allowed the election commission to confirm the results of the June 16 ballot. To be sure it was a moment to celebrate. But exactly what to celebrate? The declaration of Mr. Morsi's victory came after intense negotiations with the Supreme Council of the Armed Forces, the de facto rulers of Egypt, and after he renounced his membership in the Muslim Brotherhood, declaring he wanted to govern for all Egyptians. Also, he is the declared president of what? The military dismissed the parliament before Mr. Morsi's victory and has not said what, if any, power it might share. As awkward as all of these cat- and- mouse moves surely are to democrats, however, they might yet prove the most practical way forward. It was unrealistic that Egypt would go from tyranny to functioning democracy overnight. But it is moving in the right direction, if only haltingly and by baby steps. It is no small thing that there has been no significant conflict since the parliamentary election and that Mr. Morsi is the first democratically elected president of Egypt. Keeping a lid on rising expectations is prudent - Mr. Morsi simply cannot produce quickly what he promised in the elections - and negotiation is producing results. Patience will serve Egyptians well. Patience, Egypt MATTHEW FISHER / POSTMEDIA NEWS ARCHIVES Brig.- Gen. Jon Vance talks with the Kandahar police chief about creating a checkpoint in June 2010. 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