Morning Must Reads

Writer Stephen Labaton observes that rather than the aloof approach taken by chairmen past, Bernanke is part of the internal lobbying within the administration and has a powerful ally in Treasury Secretary Tim Geithner.

But as Bernanke and his proxies make the argument that the Fed can be not just the chief regulator for too-big-to-fail institutions but also a consumer-lending watchdog and not compromise its intended role of currency custodian, some have their doubts.

“Vincent R. Reinhart, a resident scholar at the American Enterprise Institute and former director of the Fed’s division of monetary affairs, said that policy makers needed to be concerned about mission creep… ‘What is the ideal governor of the Fed supposed to be, someone who understands monetary policy, systemic risk, bank regulation, consumer affairs and Congressional relations? You are reaching the point where the agency is being spread pretty thin.’”
 
Wall Street Journal – States Given Leeway in Tallying Jobs from Stimulus
 
How do you “save or create” 3.5 million jobs? Let the states who report the job numbers from the Obama stimulus make up their own results.

Writer Louise Radnofsky explains that after states complained about having to estimate the number of stimulus jobs “created or saved” by stimulus projects, the Obama administration relented and allowed labor statisticians to so simple head counts.

It matters, because as the administration battles the growing perception that the budget-busting stimulus was a flop, interim numbers will be a tool to fend off detractors. But with the vanilla headcounts, it may cut into the next round of saving and creating.
Not that there aren’t still some chances to pump up the stimulus numbers.

“Craig Jennings, a senior policy analyst at the nonpartisan OMB Watch, also said the new guidance could allow state officials to use their own definition for the number of hours in a ‘full-time equivalent’ job, thus making it possible to credit stimulus projects for more employment.

OMB officials said the method was the easiest and quickest way for recipients to give the required information, and that making the reports publicly available allowed anyone to question them.”
 
Financial Times – Citigroup revamps pay structure
 
As one of the biggest bailout recipients, Citigroups pending move to give big raises but cut the bonuses of employees is sure to cause serious political fallout.

Writer Francesco Guerrera explains that the first test for the Obama administration’s Pay Czar Kenneth Feinberg will be deciding whether the move properly reflects the spirit of White House desire to see compensation that doesn’t excessively encourage risk taking. The next test will be whether congressmen can resist the urge to lambaste a bailed out bank for giving 50 percent raises while it’s still on taxpayer life support.

“Citi on Tuesday said that the changes in the pay structure would not result in higher total compensation for bankers, adding that the overhaul was aimed at adjusting the balance between salaries, which are fixed, and bonuses, which vary from year to year and have long accounted for the bulk of Wall Street pay.

Citi, which has been repeatedly bailed out by the US authorities and is about to sell a 34 per cent stake to the government, declined to comment further but people close to the situation said the company had discussed the changes with the government.”
 
 
Wall Street Journal – Big Oil Ready for Big Gamble in Iraq

In six days, the U.S. is supposed to withdraw our forces from Iraq’s cities – a huge step in ending combat operations there.  But the even bigger moment next week may be the auctioning of the nation’s lush oil leases

Writer Gina Chon skillfully blends a story about Iraq’s oil industry with the story of Oil Minister Hussain al-Shahristani, a nuclear scientist who survived Saddam’s torture chambers and now is running what seems to be a squeaky-clean oil-lease auction.
The success of the country, it is clear, depends on the investment of Western oil companies and Iraq’s ability to not devolve into a petro-fueled kleptocracy.

“Mr. Shahristani’s oil deals are crucial to this war-torn country’s economy. Iraq is thought to have one of the world’s largest supplies of crude oil, with 115 billion barrels in proven reserves. But foreign know-how is key to its plans to boost oil output to four million barrels a day within four to five years, from 2.4 million barrels currently.

Despite security risks, Western oil companies are clamoring to get in. Iraq is still relatively unexplored, offering big companies a potentially easy-to-tap source of growth. Some are touting Iraq as the most important opening of petroleum fields since the discovery in 2000 of the giant Kashagan field in the Caspian Sea.

Some 120 companies expressed interest in bidding for the contracts at the June 29 and 30 auction, according to the oil ministry. Thirty-five companies qualified to bid, including Exxon Mobil Corp., Royal Dutch Shell, Italy’s Eni, SpA, Russia’s Lukoil and China Petroleum & Chemical Corp., or Sinopec. The six oil fields at stake are believed to hold reserves of more than 43 billion barrels. Foreigners won’t get the most prized piece of the action — ownership stakes in the reserves — but will be paid fees for ramping up output.”
 
Washington Post — U.S. to return Ambassador to Syria After 4-Year Absence

The president expressed his outrage at the repression of Iranian election protests but said administration policy would no change unless the Mullahs of Iran forced his hand.

But one change that happened overnight was the re-establishment of diplomatic relations with the Baathist demi-dictator in Damascus.
The Bush administration cut off the Assad regime after the assassination of a Lebanese reformer whose drive to end Syrian military dominance of his country threatened President Assad’s military posture against Israel – just the last in a series of thuggish moves by the regime, including providing safe haven for terrorists operating in Iraq and helping prop up Saddam Hussein.

But many Democrats have argued that by freezing the Syrians out, the U.S. was driving Assad deeper into the arms of Iran. We remember Speaker Pelosi’s famous trip to Damascus and declarations of American affection despite the Bush administration’s meanness.

Writer Scott Wilson indicates that the move to normalize relations with Syria seems to have been in the works, but the timing may reflect an effort to isolate – kind of – Iran.

Or it may just be another way to apply pressure on Israel.

“Finally, Assad is central to resolving the Arab-Israeli conflict. Israel has occupied the Syrian Golan Heights since the 1967 Middle East war, territory Assad has demanded in return for peace with the Jewish state. Hamas and Islamic Jihad — armed Palestinian movements that do not recognize Israel’s right to exist — maintain political offices in Damascus.

‘We’re determined to engage in a comprehensive way in the region,’ the official said. ‘This is an important step we are taking as part of that strategy.’”