German software developer SAP, product vendor Carahsoft Technology and other companies are being investigated by US authorities for a decade-long ‘conspiracy to overcharge government agencies’.

Since at least 2022, Justice Department lawyers have been investigating whether SAP, the giant maker of accounting, human resources, supply chain and other business software used worldwide, illegally conspired with Carahsoft to fix prices on sales to the US military and other parts of the government, Bloomberg reported, citing federal court records in Baltimore.

The investigation, which has not been made public, poses a legal risk to the leading technology supplier to the US government and Germany’s most valuable company.

The investigation also extends to powerful software vendor Carahsoft, whose offices in Virginia were raided by FBI agents and military investigators on Tuesday.

Company spokeswoman Mary Lange described the raid as ‘an investigation into a company with which Carahsoft has done business in the past’. It is not clear whether the search is related to the SAP investigation. Lange and other Carahsoft representatives declined to answer detailed questions.

According to court records, the long-running investigation focuses on companies that may have rigged the market for more than $2 billion in SAP technology purchased by the US government since 2014.

Records show that prosecutors are also investigating the role of other software vendors and a unit of Accenture, a giant management and technology consulting firm. Many investigations have ended without formal charges.

Accenture spokesman Peter Soh said the subsidiary, Accenture Federal Services LLC, ‘has responded to an administrative subpoena and is cooperating with the Department of Justice’.

The Justice Department classifies bid-rigging as a form of fraud that involves an agreement between competitors on who will be the winning bidder.

It is unclear exactly when prosecutors began investigating the relationship between Walldorf, Germany-based SAP and Reston, Virginia-based Carahsoft.

But in June 2022, prosecutors sent Carahsoft a request to turn over documents and provide information about possible violations of the False Claims Act.

An analysis of official data by the Financial Times (FT) has revealed that US banks have benefited to the tune of $1 trillion from the Fed’s two and a half years of high interest rates.

An analysis of data from the Federal Deposit Insurance Corporation (FDIC) showed that lenders earned higher returns on their deposits with the Fed, but kept interest rates lower for many savers.

The support provided to more than 4,000 US banks helped boost profit margins. While rates on some savings accounts were raised in line with the Fed’s target of more than 5%, the vast majority of depositors, especially those at the largest banks such as JPMorgan Chase and Bank of America, received much less.

At the end of the second quarter, the average US bank was paying depositors just 2.2 per cent a year, according to regulatory data, which includes accounts that pay no interest at all. That is higher than the 0.2 per cent they paid two years ago, but much lower than the 5.5 per cent Fed overnight rate that banks can charge.

According to the data, the annual cost of holding deposits at JPMorgan and Bank of America is 1.5 per cent and 1.7 per cent respectively. The FT calculates that these lower payments to depositors have meant $1.1 trillion in excess interest income for the banks.

Banks cut deposit rates before Fed

When the Federal Reserve cut its key interest rate by half a percentage point this week, some US banks rushed to pass the cuts on to depositors to boost profits.

Hours before the Fed’s rate cut last Wednesday, Citi told employees at its bank, which typically offers preferential rates to wealthy clients, that if the US central bank cut rates by half a percentage point, the bank would also cut its rate on accounts paying 5 per cent or more, according to a person familiar with the matter.

JPMorgan also said savings rates for clients with $10 million or more in cash would be cut by 50 basis points and that future cuts would be in line with the Fed’s actions.

Chris McGratty, head of US bank research at KBW, said banks would ‘absolutely’ be able to cut deposit costs as a result of the Fed’s rate cut, adding: ‘I think the level of aggressiveness will vary from bank to bank.

JPMorgan said it aims to ‘offer a fair and competitive rate’. Citi and Bank of America declined to comment.

Flight from small and medium-sized banks favours the big ones

Banks seem to be slow to raise the interest rates they offer on deposits and savings accounts, and fast to cut them.

When the Fed began tightening monetary policy in March 2022, many analysts predicted that competition from new financial technology companies and the increasing ease with which consumers carry cash would force banks to give depositors a greater share of higher rates.

But the FT’s calculations show that banks have been able to retain most of the gains, albeit slightly less than in previous Fed tightening cycles.

The collapse of some banks, including Silicon Valley Bank in early 2023, forced many mid-sized and smaller banks to raise rates to prevent depositors from fleeing. Larger banks saw an increase in cash flow during the flight of depositors from these small and mid-sized banks, allowing them to postpone the need to adjust to higher interest rates.

According to FT calculations based on the latest available data, US banks received about two-thirds of the revenue from the Fed’s higher rates from March 2022 to the middle of this year.

Banks paid out about $600bn in interest to depositors. In the period from early 2016 to early 2019, when the Fed last raised rates, US banks earned 77 percent of the revenue.

Crises often define presidential legacies. Jimmy Carter had the Iran hostage crisis, Bill Clinton the Balkans, George W. Bush the September 11 terror attacks, and Donald Trump the pandemic. Across decades, Americans may easily forget Afghanistan, given its small size and relative isolation. Still, the country has nevertheless played an outsized role in shaping American presidential legacies, both before and after the United States’ two-decade direct military involvement in the country.

A Look Into the Past: America and Afghanistan

Carter had to react to the Soviet invasion of Afghanistan less than two months after Iranian students seized the U.S. Embassy in Tehran. Fearing that events in Afghanistan would reinforce the growing perception that he was weak and America humiliated, Carter responded by boycotting the 1980 Moscow Olympics.

President Ronald Reagan’s willingness to arm the Mujahedeen ultimately allowed him to celebrate a second-term victory much needed after the Iran-Contra Affair tarnished his legacy.

President George H.W. Bush appointed Peter Tomsen to be ambassador to Afghanistan, but he did not send him after the country descended into civil war. Bush may have considered that neglect prudent, but history does not treat the American withdrawal from Afghan affairs kindly. While the Mujahedin were not the Taliban, both Reagan and Bush now face criticism for unleashing Islamists, deferring Afghanistan’s future to Pakistan and Saudi Arabia, and being oblivious to or ignoring the consequences of their decisions.

Clinton continued to neglect the country; he believed that he could contain the growing Al Qaeda threat emerging from Afghanistan with an “over-the-horizon” counterterrorism mission best represented by one-off missile strikes on Al Qaeda camps and Taliban facilities in Afghanistan and Sudan following the August 1998 Al Qaeda attacks in Kenya and Tanzania.

9/11 and Afghanistan

The September 11, 2001 terror attacks returned Afghanistan to the forefront of American policy attention, where it would remain for the next 20 years. Each of the four presidents who oversaw U.S. policy made significant blunders. President George W. Bush’s decision to invade Iraq created a distraction that hampered and politicized the war effort.

President Barack Obama leveraged his successful killing of Osama Bin Laden into an excuse to seek closure to the war on terror, failing to recognize that the scourge of extremism in Afghanistan extended beyond a single man. He followed his June 4, 2009, Cairo “New Beginning” speech and pledge to close the Guantanamo Bay prison with secret negotiations that led to the Doha process. Secretary of State Hillary Clinton’s quip, “You don’t make peace with your friends. You have to be willing to engage with your enemies,” reflected an unwillingness to consider how engagement and financial incentives could actually empower the Taliban.

Donald Trump was little better. Ending “the forever war” became a mantra. National Security Adviser H.R. McMaster unsuccessfully tried to tame Trump’s urge to cut and run. Trump appointed Zalmay Khalilzad as special envoy to find a way to withdraw U.S. forces from Afghanistan.

A Turning Point: Joe Biden and Afghanistan

Following his decision to curtail his re-election bid, Biden released a statement highlighting his achievements; he did not mention Afghanistan despite his earlier self-praise about ending America’s longest war.

While it is easy with the benefit hindsight to criticize his predecessors’ approach to Afghanistan, how does Biden compare?

Biden harbored a decades-long disdain for Afghanistan. During a lunch President Hamid Karzai hosted for visiting U.S. senators, then-Senator Biden dismissed Karzai’s assessment of the role of Pakistan in providing sanctuary to the Taliban by boasting, “Pakistan is 50 times more important than Afghanistan to the United States.” Biden left the lunch angrily and abruptly. As vice president, Biden criticized the U.S. mission in Afghanistan. He not only opposed Obama’s troop surge, but he also considered resigning in protest. Upon rising to the presidency, Biden promised to undo almost all of Trump’s agenda but maintained the flawed Doha deal.  Unlike the previous presidents who recognized sacrifices Afghans made on behalf of their own and American security, Biden has repeatedly criticized Afghanistan and its people, declaring, “Afghanistan is not predisposed to unity.”  He was shameless in his inconsistency. In 2001, for example, he voted for the U.S. military intervention but two decades later said he was against “that war in Afghanistan from the very beginning.” Biden then elevated the Taliban as U.S. security partner, by selectively ignoring almost everything the Taliban did or said.

The Afghanistan of 2024

Before the Soviet invasion, Afghanistan was a poor but relatively peaceful, developing nation. The U.S. intervention allowed Afghanistan to resume its trajectory as a developing, modern polity. Millions of Afghan girls and women enrolled and matriculated at schools and universities, rose to public office, served in the military or opened private business. Today, under Taliban control, Afghanistan is a living hell and has once again become a global terror hub.

As the 2024 campaign continues, previous U.S. missteps in Afghanistan and a refusal to acknowledge their own mistakes have deterred both presidential candidates from articulating their own Afghan strategy. This is unfortunate. As with other totalitarian regimes, the Taliban’s rein of terror, misogyny and oppression will give rise to liberation and resistance movements. The new US strategy must be to empower democratic groups, and both women and human rights defenders.

Only a democratic Afghanistan can align Afghans’ needs for a responsible government with the broader demand for a terrorism-free Afghanistan.

The author is Dr. Davood Moradian. He is the founder and the first director-general of the Afghan Institute for Strategic Studies (AISS). He earned a doctorate degree from University of St Andrews (Scotland). His doctorate thesis was on the conception of punishment in ancient Greece, Islam and International Justice.