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In written testimony obtained by Reuters for a U.S. congressional hearing on Thursday, Eric Kolchinsky said the firm’s credit policy group is weak and short staffed, and its analysts are “bullied” by managers who override their decisions to generate revenue.

Kolchinsky said he was suspended by Moody’s because of a warning he sent the New York-based company’s compliance group about what he believed to be a securities violation.

In a statement, Moody’s said it “takes seriously all allegations of potential impropriety” and has a strict non-retaliation policy for employees who raise complaints.

Congress and regulators are cracking down on the ratings industry, blamed for exacerbating the financial crisis by assigning top ratings to mortgage-linked securities that later crumbled as home prices fell.

Kolchinsky said Moody’s methodologies for rating complex products are inadequate and do not realistically reflect the risk of the underlying securities.

Moody’s shares slid 8.4 percent on Wednesday, closing down $1.87 at $20.49. In contrast, shares of McGraw-Hill Cos, which owns Moody’s main rival Standard & Poor’s, fell just 1.7 percent.

Warren Buffett’s Berkshire Hathaway Inc is Moody’s largest shareholder, but has been reducing its stake over the last couple of months.

CONCERNS RAISED LONG AGO

Kolchinsky first raised concerns about the methodology for rating complex structured debt in 2007, according to a source familiar with the events and a memo Kolchinsky sent to Moody’s chief compliance officer.

Moody’s changed its methodology for rating collateralized loan obligations late in 2008, but nevertheless continued to affirm investment-grade ratings it knew would later be downgraded deep into “junk” status under the new methodology, said the source familiar with the memo.

As a result, Kolchinsky said Moody’s assigned some ratings that did not reflect all the information it had, the source said.

Kolchinsky also accused Moody’s of knowingly issuing a rating that was wrong, said the source.

He sent a 14-page memo to Moody’s chief compliance officer in 2009 about the particular methodology and rating but felt that his concerns were not taken seriously.

That memo has been submitted to the House Oversight and Government Reform Committee where Kolchinsky will be testifying on Thursday, the source said.

Four people were arrested and $5 million in U.S. and Mexican currency was seized during the raid Monday in the industrial city of Monterrey, according to an army statement. Soldiers, acting on an anonymous tip, also seized drugs, money counting machines, cell phones and five vehicles.

Monterrey and the surrounding state of Nuevo Leon, which borders Texas, have been a focus of the federal government’s crackdown on police corruption.

The cash and seized items were displayed at military barracks north of the city, with dozens of white envelopes containing some of the cash arranged in rows on a table.

Envelopes at the front of the rows had yellow post-it notes with the names of police precincts in Monterrey and other municipal forces in Nuevo Leon state. One was labeled “press.”

Army officials refused to say more about what the money was intended for, declining to comment beyond the statement.

In June, nearly 80 police officers suspected of working with drug smugglers were arrested in 18 towns across Nuevo Leon after soldiers found lists of police names in the possession of traffickers.

Since then, Monterrey police have been banned from sitting in parked cars or using cell phones while on duty because of concerns they may be acting as lookouts for gangs. Police in Mexico’s third-largest city have also been prohibited from setting up sobriety checkpoints because they allegedly used them to extort motorists.

The resort city of Cancun, meanwhile, fired 30 police officers in an effort to clean up the image of another force long plagued by corruption. Cancun Mayor Gregorio Sanchez said the city government “had lost confidence” in the work of the officers and some of them may have been working for criminal gangs.

The purge came a week after eight former top police and prosecution officials in Quintana Roo state, where Cancun is located, were ordered to stand trial on charges of aiding drug cartels.

Earlier this year, the Cancun police chief was arrested on suspicion of involvement in the assassination of an army brigadier general hired to root out corruption in the city.

Think military and you think macho, not meditation, but that’s about to change now that the Army intends to train its 1.1 million soldiers in the art of mental toughness. The Defense Department hopes that giving soldiers tools to fend off mental stress will toughen its troops at war and at home. It’s the first time mental combat is being mandated on a large scale, but a few thousand soldiers who have participated in a voluntary program called Warrior Mind Training have already gotten a taste of how strengthening the mind is way different — dare we say harder? — than pounding out the push-ups.

Warrior Mind Training is the brainchild of Ernst and two friends, who were teaching meditation and mind-training in California. In 2005, a Marine attended a class in San Diego and suggested expanding onto military bases. Ernst and her colleagues researched the military mindset, consulting with veterans who had practiced meditation on the battlefield and back home. She also delved into the science behind mind training to analyze how meditation tactics could help treat — and maybe even help prevent — post-traumatic stress disorder.

Rooted in the ancient Samurai code of self-discipline, Warrior Mind Training draws on the image of the mythic Japanese fighter, an elite swordsman who honed his battle skills along with his mental precision. The premise? Razor-sharp attention plus razor-sharp marksmanship equals fearsome warrior.

The Samurai image was selected after careful deliberation; it was certifiably anti-sissy. “We took a long time to decide how we were going to package this,” says Ernst, who moved to North Carolina in 2006 and teaches classes at Fort Bragg as well as Camp Lejeune, a Marine base near the coast. “There are a lot of ways you could describe the benefits of doing mind training and meditation. Maybe from a civilian approach we would emphasize cultivating happiness or peace. But that’s not generally what a young soldier is interested in. They want to become the best warrior they can be.”

The benefits of Warrior Mind Training, students have told instructors, are impressive: better aim on the shooting range, higher test scores, enhanced ability to handle combat stress and slip back into life at home. No comprehensive studies have been done, though a poll of 25 participants showed 70% said they felt better able to handle stressful situations and 65% had improved self-control.

The results were intriguing enough that Warrior Mind Training has been selected to participate in a University of Pittsburgh study on sleep disruption and fatigue in service members that will kick off early next year.

For now, success is measured anecdotally.

On patrol in Iraq two years ago, John Way would notice his mind straying. “Maybe I should be watching some guy over there and instead I’m thinking, ‘I’m hungry. Where’s my next Twinkie?'”

The Treasury’s $700 billion bank-investment program represents a fraction of all federal support to resuscitate the U.S. financial system, including $6.8 trillion in aid offered by the Federal Reserve, Barofsky said in a report released today.

“TARP has evolved into a program of unprecedented scope, scale and complexity,” Barofsky said in testimony prepared for a hearing tomorrow before the House Committee on Oversight and Government Reform.

Treasury spokesman Andrew Williams said the U.S. has spent less than $2 trillion so far and that Barofsky’s estimates are flawed because they don’t take into account assets that back those programs or fees charged to recoup some costs shouldered by taxpayers.

“These estimates of potential exposures do not provide a useful framework for evaluating the potential cost of these programs,” Williams said. “This estimate includes programs at their hypothetical maximum size, and it was never likely that the programs would be maxed out at the same time.”

Barofsky’s estimates include $2.3 trillion in programs offered by the Federal Deposit Insurance Corp., $7.4 trillion in TARP and other aid from the Treasury and $7.2 trillion in federal money for Fannie Mae, Freddie Mac, credit unions, Veterans Affairs and other federal programs.

Treasury’s Comment

Williams said the programs include escalating fee structures designed to make them “increasingly unattractive as financial markets normalize.” Dependence on these federal programs has begun to decline, as shown by $70 billion in TARP capital investments that has already been repaid, Williams said.

Barofsky offered criticism in a separate quarterly report of Treasury’s implementation of TARP, saying the department has “repeatedly failed to adopt recommendations” needed to provide transparency and fulfill the administration’s goal to implement TARP “with the highest degree of accountability.”

During the mission, dubbed Operation Steel Kickoff, the Guardsmen will fall under the direction of the U.S. Secret Service and will support local, state and federal agencies. Guard members will serve as a regional response force, augment law-enforcement personnel, provide crowd and traffic control, and help with security.

“Everybody is excited and honored to participate in such a global event,” said Lt. Col. Dale Waltman of Cornwall.

Waltman, who works full-time at Fort Indiantown Gap, is the commander of 1st Battalion, 107th Field Artillery Regiment from New Castle, Lawrence County. For the G-20 Summit, he is commander of Task Force Security, comprising more than 600 Pennsylvania National Guardsmen.

Waltman arrived in New Castle on Sept. 16 to begin assembling the task force, then moved into Pittsburgh on Sunday. Since then, the soldiers and airmen of the task force have been training on a variety of different tasks, he said.

“We just reviewed some basic communication skills, and we worked on some specific equipment skills so everybody has that common knowledge,” he said.

The Guardsmen have also completed civil-disturbance and crowd-control training in anticipation of the thousands of protesters who are expected for the summit.

“We’re not anticipating that nothing is going to happen,” Waltman said. “We’ve been briefed on the possibility that there will be some protesters coming into the city, but they haven’t given us a specific number.”

Also in Pittsburgh for the summit are several members of the Fort Indiantown Gap public-affairs office. Capt. Jay Ostrich of Cornwall said the public-affairs specialists’ primary mission is to do news features on the Guardsmen taking part in the mission.

“Basically what we’re doing is helping to tell the Guard story here,” he said.

Ostrich said the public-affairs specialists could also be called to help with crowd control if needed. If that were to happen, he said, he is confident they would be able to meet any contingency.

“We’ve been side by side with the soldiers as they did their training,” Ostrich said. “We’re well prepared to defend ourselves as well, but hopefully the need doesn’t arise.”

The G-20 is a group of finance ministers and central bank governors from 20 economies: 19 of the world’s largest national economies, plus the European Union.

This week’s summit was originally planned for New York City but was changed to Pittsburgh in May. Pittsburgh was selected by the Obama administration to highlight the city’s economic recovery after the collapse of its manufacturing sector in the latter half of the 20th century.

“AIG’s ability to restructure its business and repay the government is unclear at this time,” the Government Accountability Office said in a new report released Monday.

As of the start of September, the company’s outstanding balance of taxpayer aid was $120 billion.

It was a year ago this month that AIG received the first chunk of a government bailout that has since grown to $182 billion. The federal money, noted the GAO, has since helped stabilize the insurance giant, which this year posted a $1.8 billion second-quarter profit, its first profit since 2007.

Frankly, I wouldn’t bet on Us either. In eight years, American troops have worn out their welcome. Their very presence now incites opposition, but that’s another story. It’s Them — the Afghans — I want to talk about.

Afghans are Afghans. They have their own history, their own culture, their own habitual ways of thinking and behaving, all complicated by a modern experience of decades of war, displacement, abject poverty and incessant meddling by foreign governments near and far — of which the United States has been the most powerful and persistent. Afghans do not think or act like Americans. Yet Americans in power refuse to grasp that inconvenient point.

…

American military planners and policymakers already proceed as if, with sufficient training, Afghans can be transformed into scale-model, wind-up American Marines. That is not going to happen. Not now. Not ever. No matter how many of our leaders concur that it must happen — and ever faster.

…

In a country where 40 percent of men are unemployed, joining the ANA for 10 weeks is the best game in town. It relieves the poverty of many families every time the man of the family goes back to basic training, but it’s a needlessly complicated way to unintentionally deliver such minimal humanitarian aid. Some of these circulating soldiers are aging former mujahidin — the Islamist fundamentalists the U.S. once paid to fight the Soviets — and many are undoubtedly Taliban.

The Chicago Department of Public Health says there’s no sign anyone else was exposed to the bacteria.

The tragic irony is that Professor Casadaban had been trying to develop a vaccine so that thousands of people around the world wouldn’t die a painful, ugly death from a bacterial infection related to the plague. But it was that bacterium that appears to have killed him.

“We really thought he was so strong, we didn’t see this coming at all,” said Leigh Casadaban, daughter.

Not only did they not see it coming, but sisters Leigh and Brooke Casadaban say their father never knew what killed him.

“It was just so much of a shock, even the time he was in the ER, from the moment he got accepted to the time he passed away. We had no idea, we didn’t even get to say goodbye to him,” said Brooke Casadaban.

Malcom Casadaban was a professor of molecular genetics at the University of Chicago for 30 years.

For the past eight years, his daughters say, he’d been working with a strain of bacteria called yersinia pestis, trying to develop a stronger vaccine for the plague, once the world’s worst health scourge.

The weakened strain he was using, however, isn’t supposed to make healthy people sick.

And that is the big mystery now for investigators with the Centers for Disease Control and the state and city public health departments who’ve been looking for clues at the U. of C. labs.

“Was it a change in the organism, something about the person infected that made him uniquely susceptible? We don’t really know the answers yet,” said John Easton, University of Chicago Medical Center.

“It was hurtful because we remember our father as very healthy. He rode his bike to work, never smoked, never drank,” said Brooke Casadaban.

Brooke and Leigh Casadaban say they’re not satisfied with the answers they’ve been given so far.

How did their father, who had flu-like symptoms, enter the hospital a week ago Sunday morning and die 12 hours later with no one suspecting that it could be related to the plague?

Leigh, who is following in her father’s footsteps, now attends her father’s alma mater Massachusetts Institute of Technology, says it may be up to her to solve this.

“I plan to go to the lab to read his papers and notes and go and really understand what he was trying to do,” said Leigh Casadaban.

It’s also been wreaking havoc, disrupting transport and placing health authorities on alert for widespread respiratory illness.