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'Nothing Could Be Further From the Truth'

As Washington awaits the release of the highly classified probe into the CIA's torture program, John Brennan's integrity is being questioned just when the agency needs it most.

John Brennan's week has gone from bad to worse. The CIA director was already bracing for the imminent release of a 600-page Senate report that, as the world already knows, accuses the CIA of torturing suspected terrorists and misleading Congress about it. Then Brennan was forced to apologize for CIA employees who spied on the very Senate staff investigating his agency -- an allegation he emphatically denied for months -- following a scathing report by the agency's own inspector general.

Brennan's credibility is now at a moment of supreme crisis. At stake is his reputation not only with his congressional overseers, but with a public that is about to read, in vivid detail, how the CIA brutally interrogated detainees, failed to gather any useful intelligence that could stop a terrorist attack in doing so, and then tried to cover up its actions.

Brennan has a thorny, two-pronged problem. First, he'll have to defend his agency against the inevitable onslaught of criticism that will accompany the torture report's release, which could be next week. Second, he must explain his dismissal of the accusations of his chief overseer, Senate Intelligence Committee Chairwoman Dianne Feinstein (D-Calif.), who in a blistering floor speech in March accused the CIA of running roughshod over the Constitution by monitoring her staff's computers and removing documents that they were entitled to read.

Responding to Feinstein then, Brennan all but said it would be crazy to think the CIA would so foolishly undermine the most aggressive and politically charged investigation into the agency's counterterrorism programs. "Nothing could be further from the truth," Brennan said at the Council on Foreign Relations in Washington on March 11, just a few hours after Feinstein blasted the agency. "I mean, we wouldn't do that. I mean, that's just beyond the scope of reason in terms of what we would do."

Not so much. On Thursday, July 31, Feinstein said that Brennan apologized to her this week for the CIA employees' actions, as described in the inspector general's report. "These are positive first steps," Feinstein said in a statement, without noting whether she accepted Brennan's apology. The veteran lawmaker added that she expects a declassified version of the inspector general's report "will be made available to the public shortly." Perhaps just in time to accompany the Senate's torture report.

It's a bad day for any senior administration official who has to walk back an emphatic public pronouncement and then prostrate himself before lawmakers. But Brennan is no ordinary official. He is arguably President Barack Obama's most trusted national security advisor and the head of the most powerful institution in the U.S. intelligence community. Brennan helps decide who lives and dies in drone strikes. He oversees a clandestine network of spies around the world.

But he also has his own tortured history with the interrogation program. He withdrew his name for consideration to lead the CIA in 2008 amid questions about how directly involved he was in the interrogation of suspected terrorists. In April of this year, after the Senate Intelligence Committee voted to declassify its findings, Brennan convened a meeting at CIA headquarters of former agency directors and officials who worked on the program to plan a "counterattack," the New York Times reported. Former CIA Director George Tenet, to whom Brennan owes much of his success rising up the career ladder at the spy agency, led the discussion. Word of the secret strategy session only gave more ammunition to Brennan's and the CIA's critics, who have long accused the agency of covering up its top officials' involvement in the brutal treatment of detainees.

"While former CIA officials may be working to hide their own past wrongs, there's no reason Brennan or any other current CIA official should help facilitate the defense of the indefensible," Christopher Anders, the senior legislative counsel at the American Civil Liberties Union, told the Times.

The CIA inspector general's report won't be the last word about the agency's interference with Congress, where Brennan's support among Democratic lawmakers appeared to be in jeopardy Thursday.

"I am concerned about the director's apparent inability to find any flaws in the agency he leads," Sen. Mark Udall (D-Colo.), a member of the Intelligence Committee, said in a statement. "Earlier this year he referred to the chairman's and my publicly stated concerns about the CIA search [of staff computers] as 'spurious allegations that are wholly unsupported by facts' and urged us to 'refrain from outbursts.' Brennan needs to account for these statements." Udall also said the administration should appoint an independent counsel "to look into what I believe could be the violation of multiple provisions of the Constitution as well as federal criminal statutes" -- and an executive order that governs intelligence activities.

Sen. Ron Wyden (D-Ore.), another Intelligence Committee member, called on Brennan to publicly apologize for the CIA's actions. "The CIA Inspector General has confirmed what Senators have been saying all along: The CIA conducted an unauthorized search of Senate files, and attempted to have Senate staff prosecuted for doing their jobs," Wyden said. "Director Brennan's claims to the contrary were simply not true."

The CIA didn't immediately respond to questions about whether Brennan planned to say anything about the latest uproar. An agency spokesperson told the Guardian that Brennan has no plans to resign.

In an earlier statement sent to reporters, Brennan's chief spokesperson, Dean Boyd, said that the CIA director "is committed to correcting any shortcomings related to this matter" and that he is convening an accountability board -- an internal CIA disciplinary proceeding -- chaired by former Sen. Evan Bayh (D-Ind.), who served on the Intelligence Committee.

That may help determine why the CIA gave Congress and the public assurances that proved false. But it does little to help Brennan and his agency as they prepare, yet again, to defend themselves from allegations of torture and lying. The CIA director's integrity is now on the line, just when the agency needs it the most.

Photo by Brendan Smialowski / Getty Images News

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Argentina Lets Default Clock Run Out

But even a default won't stop this soap opera.

 

This story has been updated. 

Argentina missed a midnight deadline to either reach a deal with its creditors or begin paying them off. The country did neither, marking the eighth default in its history, but the story doesn't end here.

"Anybody who's hoping for closure when this negotiation ends [Wednesday night] will be disappointed," said Barbara Kotschwar, an economist who studies Latin America at the Peterson Institute for International Economics. "Even if we have a default, this isn't over."

Argentina got to this point because it won't pay the creditors that President Cristina Fernández de Kirchner has accused of extorting her country. In June, the U.S. Supreme Court refused to hear Argentina's last appeal, compelling it to comply with a federal court order to pay the so-called "holdout" bondholders at least $1.33 billion. The holdouts are creditors who refused to accept lesser payments after Argentina's 2001 default. Argentina has argued that it can't afford to pay them and the 92 percent of creditors who previously agreed to exchange their bonds for cents on the dollar.

The financial press has rapaciously followed the cat-and-mouse game between Kirchner and hedge fund NML Capital for decades. Investors have tracked every twist of the intrigue as the bondholders have pursued Argentina's assets from Buenos Aires to New York to Ghana. The raciest story in sovereign debt, for sure.

And the hours leading up to the July 30 midnight deadline haven't disappointed. Although default was still widely expected Wednesday afternoon, the story line was filled with impromptu plot developments. In the morning, Argentina's banking association, Adeba, reportedly was putting together a deal to buy the hedge funds' bonds, according to the Wall Street Journal. By midday, Reuters reported that Argentine Economy Minister Axel Kicillof was spotted entering the court-appointed mediator's office to try to strike an eleventh-hour deal. With every new development, Argentina's investors saw hopes of averting default, and bonds bounced to new highs. Then, late Wednesday afternoon, ratings firms Standard & Poor's cut Argentina's rating to "selective default" as talks continued.

But no matter what happens, Argentines will have to deal with the consequences, which for Kirchner's government may feel a little like the movie Groundhog Day. This default is inexorably tied to one in 2001 when the country stopped paying on $95 billion worth of bonds. Shocked Argentines stampeded to their banks only to learn that the government limited how much they could withdrawal. Then they watched with dismay as the peso's value plummeted and their savings dwindled.

Luckily for Argentines, this time is not expected to be so bleak.

"Default is not as bad as it sounds for anybody who lived through the 1980s and 1990s and early 2000s," said Kotschwar. "It's not ideal, but it wouldn't be as devastating."

Economists are even more blasé about what effect another default would have on the international economy, partly because it has been a long time coming. Default has been a strong possibility since the Supreme Court ruled against Argentina in June, effectively putting an end to the country's legal options.

"This is the slowest-motion train wreck ever," said Anna Gelpern, a Georgetown University law professor and expert on debt contracts. "If you didn't see it coming, you've been living in a deep dark hole."

If Argentina defaults, bond values will likely fall, perhaps by as much as half, but probably not drop all the way to zero. That means they can be resold, and new bondholders will want to get paid. If Argentina wants to rejoin the international capital markets, it will have to find a settlement with those new creditors.

In 2001, the value of Argentina's bonds fell to 30 percent of their original value. So-called "venture funds" thought that sounded like a pretty good deal, bought up the bonds, and then launched a protracted legal battle to make the Argentine government pay them the bonds' full value, bringing the saga to this cliffhanger moment. Argentina could be back here in six to nine months, some observers say.

This lack of progress makes economists cry for Argentina. It has so much potential, they say; it has vast natural resources. But somehow, it can't seem to get ahead.

"In the mid-1800s, Argentine GDP per capita was the same as the U.S. or Canada, but since then, it has consistently gone down," said Kotschwar.

The country's willingness to renege on its debts -- the pending default would be Argentina's eighth -- could scare off the foreign investors it needs to help develop its economy. Investors have flocked to Argentina nonetheless because of its abundant oil and gas resources, but some worry politics will now get in the way.

"The economics are boring. It's so easy to figure out how to settle this. It's the politics" that are the problem, said Robert Kahn, a senior fellow at the Council on Foreign Relations.

And default could even have a political upside, he said.

"After a default, they can blame their troubles on those nasty international markets and U.S. courts, when in fact these problems are all self-generated," Kahn said.

Photo by LEO RAMIREZ/AFP/Getty Images