The Pentagon has acknowledged for the first time Afghan civilians were killed by US bombs earlier this week. The toll from Monday’s bombing in Farah province remains unknown, with estimates topping 100 civilians, including many women and children. On Thursday, a Pentagon official admitted to the New York Times initial US claims of Taliban grenades causing the deaths were “thinly sourced.” Local residents have said the damage was far too extensive for any Taliban weapon to cause. On Thursday, hundreds of Farah residents protested outside the provincial governor’s office demanding the withdrawal of all foreign troops. Three demonstrators were wounded after Afghan police officers opened fire.

The House Appropriations Committee, meanwhile, has approved a nearly $97 billion spending bill funding the occupation of Iraq and Afghanistan. The measure was stripped of a more than $80 million Obama administration request to close the US prison camp at Guantanamo Bay, Cuba. For the first time, the cost of occupying Afghanistan will surpass the total spent on occupying Iraq next year. In addition to more than half a trillion dollars for the Pentagon, the Obama administration is seeking $65 billion for occupying Afghanistan, compared to $61 billion for Iraq.

In Pakistan, the UN is estimating some half a million civilians have now fled clashes between government forces and Taliban fighters in Swat Valley. Both sides have declared an end to the three-month truce that allowed the Taliban to impose Islamic law. On Thursday, Pakistani Prime Minister Yousaf Raza Gilani announced a major offensive against Taliban fighters.

Pakistani Prime Minister Yousaf Raza Gilani: “After due deliberations and consultations with all concerned, the government has decided to take the following actions. In order to restore honor and dignity of our homeland and to protect the people, the armed forces have been called in to eliminate the militants and terrorists.”

Aid officials say the escalated fighting could bring about a major humanitarian crisis in Swat Valley.

A former US soldier has been convicted for the 2006 rape and murder of an Iraqi teenager and the killing of her family. On Thursday, a federal jury found Steven Green guilty on all seventeen counts. Prosecutors say Green was the ringleader in raping and killing fourteen-year-old Abeer Kassem Hamza al-Janabi and killing her parents and five-year-old sister. Three soldiers have already been sentenced to life in prison in the case.

In Iraq, the Baghdad contract of the private military firm once known as Blackwater has officially expired. The company, now calling itself Xe, will continue to work elsewhere in Iraq. The firm Triple Canopy is taking over for Blackwater in Baghdad and is widely expected to rehire many of its guards. The Iraqi government refused to renew Blackwater’s license following the 2007 mass killing of seventeen Iraqis in Baghdad’s Nisoor Square. Five Blackwater guards face charges for the attack. In a new development in that case, two government informants are claiming Blackwater operatives gave their weapons to another contractor now charged with smuggling them out of Iraq. The informants say the Blackwater guards wanted to get rid of the weapons before they were investigated for the Nisoor massacre.

The Federal Reserve has determined the nation’s top banks could lose nearly $600 billion by the end of next year. The warning came out of the government’s stress test assessing the banks’ viability. The Fed has ordered ten banks to raise a combined $74.6 billion in capital to protect themselves against collapse. Of all the banks, the government says only GMAC, the financial arm of General Motors, is likely to need additional taxpayer aid.

President Obama has unveiled a budget plan that would save $17 billion by cutting some 121 programs. Obama called the cuts a necessary step to avoid leaving crippling debt to future generations.

President Obama: “We can no longer afford to spend as if deficits don’t matter and waste is not our problem. We can no longer afford to leave the hard choices for the next budget, the next administration or the next generation. We will also continue to look for ways we can save taxpayer money. And I know there are many in both parties in Congress committed to cutting spending and eager to work with us.”

The Obama budget includes a four percent increase in military spending. The Pentagon would also see more cuts than any other department, totaling $8.8 billion from fourteen programs.

Health advocates are criticizing a budget item that would reverse an Obama campaign pledge to combat the spread of HIV and AIDS by lifting the federal ban on needle exchange programs. The Obama budget includes language that bans any federal spending on needle exchange.

The chair of the New York Federal Reserve has resigned amidst scrutiny over his financial ties to the bailed-out firm Goldman Sachs. Earlier this week, the Wall Street Journal revealed Stephen Friedman was given a waiver to hold shares in Goldman Sachs even after it became a regulated bank-holding firm. A former Goldman Sachs executive, Friedman was also found to have bought the shares even before he was granted the legal waiver. The shares are now estimated to be worth more than $2 million.

Newly released documents show House Speaker Nancy Pelosi was briefed on the Bush administration’s torture of foreign prisoners in September 2002. The disclosure apparently contradicts Pelosi’s claim she was never given details on what techniques were used. Intelligence records show Pelosi and then-House Intelligence Committee chair Porter Goss were briefed on the interrogation of suspected al-Qaeda operative Abu Zubaydah, who was waterboarded eighty-three times. Pelosi says she was never told the waterboarding was used.

The group Physicians for Human Rights is calling for an independent investigation of the role of the American Psychological Association in the US torture of foreign prisoners. The APA has come under wide scrutiny for allowing psychologists to oversee abusive and coercive interrogations of prisoners at Guantánamo and secret CIA black sites. Physician for Human Rights says newly released documents show the APA’s ethics task force altered its policy to conform with Pentagon guidelines on interrogations.

In Burma, the military junta has detained a US citizen who apparently swam across a lake to reach the home of the confined pro-democracy leader Aung San Suu Kyi. The junta says John William Yeattaw spent two days in Suu Kyi’s home before he was captured as he made his way out. Suu Kyi has spent thirteen of the last nineteen years under house arrest.

In Peru, the jailed American activist Lori Berenson has given birth to a baby boy. Berenson has spent nearly fourteen years in prison after hooded Peruvian military judges convicted her of collaborating with the rebel group MRTA. She’s eligible for conditional release in November 2010.

Obama administration officials were in Syria Thursday for meetings with Syria’s foreign minister. Jeffrey Feltman of the State Department said the US is seeking to forge new diplomatic ties with Syria.

Jeffrey Feltman: “We came here today as part of President Obama’s commitment to use diplomacy, to use dialogue, in order to try to see where we can move forward, where our interests overlap, and to see where we can try to work together to bridge the differences.”

In Washington, DC, six Puerto Rican activists were arrested Wednesday for staging a pro-independence demonstration inside the House. The group held up signs in the visitors’ area overlooking the House floor.

A new report says more than 17 percent of children younger than five are at risk of hunger in the United States. According to Feeding America, the figure means 3.5 million children could suffer cognitive and developmental damage resulting from not being properly fed.

Here in New York, a group of protesters rallied outside Governor David Paterson’s midtown office Thursday to protest the treatment of mentally ill prisoners. Last week, Rikers Island prisoner Clarence Mobley died after a physical altercation with prison guards. He had been awaiting psychiatric evaluation. The group Rights for Imprisoned People with Psychiatric Disabilities has likened the treatment of mentally ill prisoners to torture that has driven some to suicide and declining mental health.

And in campus news, the embattled New School president Bob Kerrey has announced he’ll step down when his contract expires in 2011. Kerrey has been the target of a series of student protests on issues ranging from his alleged involvement in war crimes as a soldier in Vietnam, his record as a Democratic senator, and his running of the New School. Kerrey received a no-confidence vote from the New School faculty last year.