September 2009

Robert Reich: The Public Option Lives On

September 28, 2009

Tuesday is a critical day in the saga of the public option. Democrats Charles Schumer (New York) and Jay Rockefeller (West Virginia) are introducing an amendment to include the public option in the bill to be reported out by the Senate Finance Committee — the committee anointed by the White House as its favored vehicle for getting health care reform. Before you read another word, call and email the Senate offices of Democrats Max Baucus (Montana), Tom Carper (Delaware), Robert Menendez (New Jersey), Kent Conrad (North Dakota), and Ben Nelson (Florida) — telling them you want them to vote in favor of the public option amendment. And get everyone you know in these states to do the same. Hell, you might as well phone and email Republican Olympia Snowe (Maine) and make the same pitch. Background: Every dollar squeezed out of Big Pharma and Big Insurance is a dollar less that you’ll have to pay either in healthcare costs or in taxes to cover healthcare costs. The two most direct ways to squeeze future profits are allowing Medicare to use its huge bargaining leverage to negotiate lower drug prices, and creating a public insurance option to compete with private insurers and also use its bargaining clout to get lower prices and thereby push private insurers to offer lower rates. But last January, the White House made a Faustian bargain with Big Pharma and Big Insurance, essentially scuttling both of these profit-squeezing mechanisms in return for these industries’ agreement not to oppose healthcare legislation with platoons of lobbyists and millions of dollars of TV ads, and Pharma’s willingness to cut drug prices by some $80 billion over the next ten years. The White House promised these industries they’d come out way ahead — getting tens of millions of new customers who’d be buying private health insurance policies and thereby paying for an almost endless supply of new drugs. Healthcare reform would be, in short, a bonanza. Big Pharma and Big Insurance have so far delivered on their side of the deal. In fact, Big Pharma has shelled out $120 million in advertisements in favor of reform. Now the White House is delivering on its side. Last Thursday, for example, the Senate Finance Committee rejected Ben Nelson’s amendment to require Big Pharma to give some $160 billion in discounts to Medicare — thereby reducing the bonanza Pharma would reap from the healthcare bill. Not surprisingly, all Republicans voted against the amendment. But it was defeated only because Dems Baucus, Carper, and Menendez voted with the Republicans. Carper later explained to the New York Times why he voted with the Republicans. The amendment, he said, would “undermine our ability to pass” health care reform, because the White House had made a deal with Big Pharma by which the industry wouldn’t oppose healthcare reform — and White House officials had told him “a deal is a deal.” The Times described the vote as a “big victory” for the White House. Schumer voted for the amendment. He said he was “not at the table” when the White House and Big Pharma made their deal so didn’t feel bound by it. But even if he had been at the table, he wouldn’t be bound. No member of the Senate is bound to a deal made between industry and the White House. Congress is a separate branch of government. Big Pharma and big insurance hate the public insurance option even more than they hate big Medicare discounts. And although the President has sounded as if he would welcome it, political operatives in the White House have quietly reassured the industries that it won’t be included in the final bill. At most, the bill would allow the formation of non-profit “cooperatives” that wouldn’t have the scale or authority to squeeze the profits of private industry, or a “trigger” that would allow states to form public insurance options eventually if certain goals for cost savings and coverage weren’t met. But the public option lives on, nonetheless. It’s still in the Senate Health, Education, Labor, and Pension bill. It still headlines the House bills, and Speaker Nancy Pelosi says she’s still committed to it. The latest Times/CBS poll shows 65 percent of the public in favor of it. Now, Schumer and Rockefeller are introducing a public option amendment in the Senate Finance Committee. Carper, Menendez, Baucus, and other Dems on the Committee should vote for it, or be forced to pay a price if they don’t. Cross-posted from Robert Reich’s Blog.

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Mom Goes Blind So Her Daughters Can See (VIDEO)

September 28, 2009

As part of the Huffington Post’s efforts to bear witness to the effects of the current economic environment on ordinary Americans, we’re rounding up some of the most compelling stories reported by local news organizations around the country. Monique Zimmerman-Stein has been nearly blind for the last two years from Stickler syndrome, a rare genetic disorder. She recently decided to forego her own treatment to save funds to treat her two daughters , who also suffer from the condition, reports Lane DeGregory of the St. Petersburg Times. The family is covered under husband Gary’s Blue Cross/Blue Shield plan, but that coverage only pays for 80 percent of medical expenses. She will no longer get treatment to preserve that last slice of light. The injections that might help cost $380 after insurance, and she needs one every six weeks. She could be spending that money on her daughters’ care. If forgoing treatment might help them see, she said, “That’s a choice any mom would make.” The expensive care has already forced the family out of their home, which was foreclosed, and forced them to sell their furniture and to cash in their life insurance. Tampabay.com put together an excellent video to accompany the story: ****** A family fallen on hard times after their 12-year-old daughter was diagnosed with a brainstem tumor has been served foreclosure papers , reports Elizabeth Prann of local NBC affiliate WJHG. Amber Howard underwent surgery that could only remove part of the tumor. Her father, Neil, is the only member of the family who is able to work. Amber’s weak immune system requires home-schooling. But the Howards don’t let the situation keep them down. The Howard family is fascinatingly optimistic, each one picking up the other when he or she is down. “When she has a good day, that’s when we charge our batteries!” And if it’s one thing none of them is lost is hope. Amber is living proof. “She said to me, God came to me mom. He told me, it’s not my time. But I said, you can’t remember Amber, you were asleep. She said no Mom, I remember! He came over, God came over and he talked to me, he said everything would be OK, it’s just not my time,” Shawn said. ****** Kenneth Hoagland, of Nashville, Tenn., was put in jail for getting a cold , reports Janell Ross of the Tennessean. Hoagland, previously bankrupted by a week-long stay in a hospital for his diabetes, was on a health insurance waiting period for a new job when what started as a cold landed him in a hospital for two days with a $1,200 tab. He could not pay, was afraid to miss work to show up in court, and was arrested on what’s known as a “body attachment.” “They fingerprinted me, took my picture and asked some questions about my medical history,” he said. “When the guy who tested (my blood sugar) asked me why I was there and I told him … he said, ‘I didn’t know we did that in this country.’ I told him, ‘Until now, I didn’t either.’ ” The Tennessean reports that “Hoagland, 36, is one of the hundreds of thousands of Americans — insured and uninsured — facing collection suits, wage garnishments and, more rarely, trips to jail because of medical debt.” HuffPost readers: Seen a good local story? Heard about a heroic judge, neighbor, or doctor helping people stay in their homes? Tell us about it! Email jmhattem@gmail.com .

Read the full article →

Mom Goes Blind So Her Daughters Can See (VIDEO)

September 28, 2009

As part of the Huffington Post’s efforts to bear witness to the effects of the current economic environment on ordinary Americans, we’re rounding up some of the most compelling stories reported by local news organizations around the country. Monique Zimmerman-Stein has been nearly blind for the last two years from Stickler syndrome, a rare genetic disorder. She recently decided to forego her own treatment to save funds to treat her two daughters , who also suffer from the condition, reports Lane DeGregory of the St. Petersburg Times. The family is covered under husband Gary’s Blue Cross/Blue Shield plan, but that coverage only pays for 80 percent of medical expenses. She will no longer get treatment to preserve that last slice of light. The injections that might help cost $380 after insurance, and she needs one every six weeks. She could be spending that money on her daughters’ care. If forgoing treatment might help them see, she said, “That’s a choice any mom would make.” The expensive care has already forced the family out of their home, which was foreclosed, and forced them to sell their furniture and to cash in their life insurance. Tampabay.com put together an excellent video to accompany the story: ****** A family fallen on hard times after their 12-year-old daughter was diagnosed with a brainstem tumor has been served foreclosure papers , reports Elizabeth Prann of local NBC affiliate WJHG. Amber Howard underwent surgery that could only remove part of the tumor. Her father, Neil, is the only member of the family who is able to work. Amber’s weak immune system requires home-schooling. But the Howards don’t let the situation keep them down. The Howard family is fascinatingly optimistic, each one picking up the other when he or she is down. “When she has a good day, that’s when we charge our batteries!” And if it’s one thing none of them is lost is hope. Amber is living proof. “She said to me, God came to me mom. He told me, it’s not my time. But I said, you can’t remember Amber, you were asleep. She said no Mom, I remember! He came over, God came over and he talked to me, he said everything would be OK, it’s just not my time,” Shawn said. ****** Kenneth Hoagland, of Nashville, Tenn., was put in jail for getting a cold , reports Janell Ross of the Tennessean. Hoagland, previously bankrupted by a week-long stay in a hospital for his diabetes, was on a health insurance waiting period for a new job when what started as a cold landed him in a hospital for two days with a $1,200 tab. He could not pay, was afraid to miss work to show up in court, and was arrested on what’s known as a “body attachment.” “They fingerprinted me, took my picture and asked some questions about my medical history,” he said. “When the guy who tested (my blood sugar) asked me why I was there and I told him … he said, ‘I didn’t know we did that in this country.’ I told him, ‘Until now, I didn’t either.’ ” The Tennessean reports that “Hoagland, 36, is one of the hundreds of thousands of Americans — insured and uninsured — facing collection suits, wage garnishments and, more rarely, trips to jail because of medical debt.” HuffPost readers: Seen a good local story? Heard about a heroic judge, neighbor, or doctor helping people stay in their homes? Tell us about it! Email jmhattem@gmail.com .

Read the full article →

Greenspan Backs Key Obama Wall Street Reform Effort

September 28, 2009

A keystone of Obama’s Wall Street reform agenda is getting support from the unlikeliest of corners. Alan Greenspan, an acolyte of Ayn Rand and extreme free-marketeer, is backing one of the most far-reaching elements of the financial overhaul: the Consumer Financial Protection Agency. Greenspan told the Washington Post that pushing for the CFPA was “probably the right decision.” Given the former Fed chairman’s penchant for obliquity, the straight-forward endorsement takes on greater weight. Wall Street and community bankers argue that the proposed agency will restrict financial innovation and otherwise inhibit economic growth. Those are the types of arguments that Greenspan was prone to make during his tenure as chairman, but the financial crisis has persuaded Greenspan that the “intellectual edifice” buttressing radical free-market ideology has, in his words, “collapsed.” Rep. Brad Miller (D-N.C.), the lead backer of the CFPA in the House Financial Services Committee, recalled the Greenspan opposed consumer protections while he was chairman. “It’s a dramatic turnaround from his public position and even more so, apparently, from what he was privately pushing within the deliberations at the Fed,” he told HuffPost. Greenspan has acknowledged that the collapse has led to a crisis of faith. “I made a mistake in presuming that the self-interests of organizations, specifically banks and others, were such as that they were best capable of protecting their own shareholders and their equity in the firms,” Greenspan said at a House hearing last October under questioning from Rep. Henry Waxman (D-Calif.). “In other words,” said Waxman, moving in for the kill, “you found that your view of the world, your ideology, was not right, it was not working.” “Absolutely, precisely,” said Greenspan. “You know, that’s precisely the reason I was shocked, because I have been going for 40 years or more with very considerable evidence that it was working exceptionally well.” It’s one thing to reject a failed ideology, but another altogether to embrace the kind of regulation represented by the CFPA. “He has already said that he erred in assuming that the market would take care of things–the Ayn Rand point of view–but this seems to go farther than he’s gone before in calling for a new agency to protect consumers from financial products,” said Miller. Greenspan told the Post that the Fed has enough responsibilities to manage and that consumer protection would be too much. Miller noted that Greenspan’s position is “diametrically opposite of what leadership at the Fed are saying now.” Top Fed officials are pushing to make consumer protection a core Fed responsibility. But Democrats passed a law in 1994 requiring the Fed to adopt rules protecting financial consumers. When the GOP took over Congress in 1995, the Fed decided not to act. It didn’t write the rules until Democrats retook Congress in 2007 and began work on a new set of laws. “The damage was already done,” noted Miller. The CFPA would gauge the safety of financial products and be given broad powers to require understandable explanations of the terms of financial instruments and otherwise restrict behavior that now goes on unmolested. It was first proposed by Harvard Prof. Elizabeth Warren, the head of the congressional panel overseeing the financial bailout. It is fiercely opposed by the banking lobby. Financial Services Committee Chairman Barney Frank (D-Mass.) earlier postponed a vote on the agency until after the August recess. The banking lobby’s stiff resistance made it difficult for the chairman to be sure he had enough votes to pass it. The vote is now expected in October. Last week, Frank issued a memo to committee members outlining proposed changes to the original package, which had been blasted by the Chamber of Commerce for over-reaching and going so far as to regulate butchers who give meat on credit. The original bill would have required financial institutions to offer standard, “plain vanilla” financial products meeting certain basic guidelines for transparency and safety. That requirement has been dropped, according to the memo, which was obtained by HuffPost. Some consumer advocates expressed alarm at the proposed changes, but others following it closely say that the changes are largely technical and that the real fight is yet to come. The memo: To: Democratic Members, Committee on Financial Services From: Barney Frank, Chairman Subject: Discussion Draft of Consumer Financial Protection Agency Bill Date: September 22, 2009 I will soon be releasing an initial revised discussion draft of the Consumer Financial Protection Agency (CFPA) bill, intended to be responsive to the primary concerns Members have expressed to date. I invite all Members to contact me about any concerns regarding the execution of these changes or other concerns with the CFPA provisions. Any Members who would like to sponsor any of the changes identified below should contact me or Jim Segel on my staff. The discussion draft will make several key changes to the Obama Administration’s draft legislation to make clear that CFPA will not disrupt merchants, retailers and other nonfinancial businesses or subject banks and other depository institutions to needless additional regulatory burdens and costs. At the same time, CFPA will have a mandate to set strong rules that all financial institutions–both banks and nonbanks–will have to follow when providing financial products and services to consumers to create a level playing field and remove the current competitive disadvantage that adversely impacts traditional banks and thrifts. We will make the following key changes: Nonfinancial Businesses Exempt. Merchants, retailers and other nonfinancial businesses will be excluded from the regulation and oversight of CFPA. That means that merchants and retailers can continue to give their customers tabs and layaway plans without becoming subject to a new layer of regulation. Also, doctors and other businesses that bill their customers after a service is provided, including telephone, cable, and internet providers, will be excluded. Credit and other financial activities of nonfinancial business will continue to be subject to the Truth in Lending Act and other consumer statutes as they are today. The Federal Trade Commission will continue its longstanding role of providing oversight for these activities. Other Exemptions. In addition to providing clear exclusions for securities, commodities, investment and general insurance products (other than financial planners), the following other businesses will not be subject to CFPA regulation for acting in their traditional capacities: Accountants and other businesses that perform tax preparation services, Real estate brokers and agents; Lawyers; Auto dealers; Telecom, cable and other communications providers; Consumer reporting agencies; Providers of IRAs, 401(k) plans, 529 plans and pension plans; and Service providers that provide strictly ministerial and support services to financial institutions. No “Plain Vanilla” Requirement. Financial institutions will not be required to offer plain vanilla products and services and CFPA will not have authority to approve or change business plans. No “Reasonableness” Standard. CFPA will not be able to mandate “reasonableness” standards that would place financial institutions in the untenable position of having to assess whether consumers comprehend the products and services they are being offered. Instead, CFPA will be mandated to improve the current disclosure regime with an emphasis on clarity, simplicity, conciseness, and reduction of regulatory burden. Simultaneous and Coordinated Exams. Depository institutions will have simultaneous federal safety and soundness and consumer compliance examinations (unless they request exams at different times). Whatever they choose, the banking agencies and CFPA will have to coordinate and consult one another on the timing, scope and results of exams to ensure a minimum regulatory burden. Dispute Mechanism. Depository institutions that receive contradictory or conflicting supervisory determinations or directives from CFPA and their prudential supervisors will be able to appeal the decisions to a disinterested governing panel and receive a quick and definitive answer. Registration and Supervision of Nonbanks. o All nonbank financial institutions that provide consumer financial products and services will be required to register with CFPA; and o Nonbanks will be subject to a level of supervision and scrutiny that is no less burdensome or comprehensive than that governing traditional banks and thrifts and that will fully reflect the risks posed by these previously unregulated entities. – Assessments on Nonbanks. Nonbanks will be subject to assessments and the legislation will make explicit that neither small nor large banks will pay for the examination and supervision of nonbanks. – Federal Reserve Payments. To ensure adequate funding of CFPA without placing additional burden on financial institutions, the Federal Reserve will fund CFPA at a level that reflects amounts the banking agencies currently pay for consumer compliance. – Agency Structure. CFPA will be run by a single Director, who will be advised by a Consumer Financial Protection Oversight Board, which is made up of the Federal banking agencies, NCUA, FTC and HUD and the Chairman of the State Liaison Committee of the FFIEC. In addition, CFPA will have an Office of Fair Lending and Equal Opportunity to ensure that the agency has adequate resources to address fair lending and civil rights laws under its jurisdiction. We also will clarify that financial literacy will be an important part of the new agency’s mission.

Read the full article →

Greenspan Backs Key Obama Wall Street Reform Effort

September 28, 2009

A keystone of Obama’s Wall Street reform agenda is getting support from the unlikeliest of corners. Alan Greenspan, an acolyte of Ayn Rand and extreme free-marketeer, is backing one of the most far-reaching elements of the financial overhaul: the Consumer Financial Protection Agency. Greenspan told the Washington Post that pushing for the CFPA was “probably the right decision.” Given the former Fed chairman’s penchant for obliquity, the straight-forward endorsement takes on greater weight. Wall Street and community bankers argue that the proposed agency will restrict financial innovation and otherwise inhibit economic growth. Those are the types of arguments that Greenspan was prone to make during his tenure as chairman, but the financial crisis has persuaded Greenspan that the “intellectual edifice” buttressing radical free-market ideology has, in his words, “collapsed.” Rep. Brad Miller (D-N.C.), the lead backer of the CFPA in the House Financial Services Committee, recalled the Greenspan opposed consumer protections while he was chairman. “It’s a dramatic turnaround from his public position and even more so, apparently, from what he was privately pushing within the deliberations at the Fed,” he told HuffPost. Greenspan has acknowledged that the collapse has led to a crisis of faith. “I made a mistake in presuming that the self-interests of organizations, specifically banks and others, were such as that they were best capable of protecting their own shareholders and their equity in the firms,” Greenspan said at a House hearing last October under questioning from Rep. Henry Waxman (D-Calif.). “In other words,” said Waxman, moving in for the kill, “you found that your view of the world, your ideology, was not right, it was not working.” “Absolutely, precisely,” said Greenspan. “You know, that’s precisely the reason I was shocked, because I have been going for 40 years or more with very considerable evidence that it was working exceptionally well.” It’s one thing to reject a failed ideology, but another altogether to embrace the kind of regulation represented by the CFPA. “He has already said that he erred in assuming that the market would take care of things–the Ayn Rand point of view–but this seems to go farther than he’s gone before in calling for a new agency to protect consumers from financial products,” said Miller. Greenspan told the Post that the Fed has enough responsibilities to manage and that consumer protection would be too much. Miller noted that Greenspan’s position is “diametrically opposite of what leadership at the Fed are saying now.” Top Fed officials are pushing to make consumer protection a core Fed responsibility. But Democrats passed a law in 1994 requiring the Fed to adopt rules protecting financial consumers. When the GOP took over Congress in 1995, the Fed decided not to act. It didn’t write the rules until Democrats retook Congress in 2007 and began work on a new set of laws. “The damage was already done,” noted Miller. The CFPA would gauge the safety of financial products and be given broad powers to require understandable explanations of the terms of financial instruments and otherwise restrict behavior that now goes on unmolested. It was first proposed by Harvard Prof. Elizabeth Warren, the head of the congressional panel overseeing the financial bailout. It is fiercely opposed by the banking lobby. Financial Services Committee Chairman Barney Frank (D-Mass.) earlier postponed a vote on the agency until after the August recess. The banking lobby’s stiff resistance made it difficult for the chairman to be sure he had enough votes to pass it. The vote is now expected in October. Last week, Frank issued a memo to committee members outlining proposed changes to the original package, which had been blasted by the Chamber of Commerce for over-reaching and going so far as to regulate butchers who give meat on credit. The original bill would have required financial institutions to offer standard, “plain vanilla” financial products meeting certain basic guidelines for transparency and safety. That requirement has been dropped, according to the memo, which was obtained by HuffPost. Some consumer advocates expressed alarm at the proposed changes, but others following it closely say that the changes are largely technical and that the real fight is yet to come. The memo: To: Democratic Members, Committee on Financial Services From: Barney Frank, Chairman Subject: Discussion Draft of Consumer Financial Protection Agency Bill Date: September 22, 2009 I will soon be releasing an initial revised discussion draft of the Consumer Financial Protection Agency (CFPA) bill, intended to be responsive to the primary concerns Members have expressed to date. I invite all Members to contact me about any concerns regarding the execution of these changes or other concerns with the CFPA provisions. Any Members who would like to sponsor any of the changes identified below should contact me or Jim Segel on my staff. The discussion draft will make several key changes to the Obama Administration’s draft legislation to make clear that CFPA will not disrupt merchants, retailers and other nonfinancial businesses or subject banks and other depository institutions to needless additional regulatory burdens and costs. At the same time, CFPA will have a mandate to set strong rules that all financial institutions–both banks and nonbanks–will have to follow when providing financial products and services to consumers to create a level playing field and remove the current competitive disadvantage that adversely impacts traditional banks and thrifts. We will make the following key changes: Nonfinancial Businesses Exempt. Merchants, retailers and other nonfinancial businesses will be excluded from the regulation and oversight of CFPA. That means that merchants and retailers can continue to give their customers tabs and layaway plans without becoming subject to a new layer of regulation. Also, doctors and other businesses that bill their customers after a service is provided, including telephone, cable, and internet providers, will be excluded. Credit and other financial activities of nonfinancial business will continue to be subject to the Truth in Lending Act and other consumer statutes as they are today. The Federal Trade Commission will continue its longstanding role of providing oversight for these activities. Other Exemptions. In addition to providing clear exclusions for securities, commodities, investment and general insurance products (other than financial planners), the following other businesses will not be subject to CFPA regulation for acting in their traditional capacities: Accountants and other businesses that perform tax preparation services, Real estate brokers and agents; Lawyers; Auto dealers; Telecom, cable and other communications providers; Consumer reporting agencies; Providers of IRAs, 401(k) plans, 529 plans and pension plans; and Service providers that provide strictly ministerial and support services to financial institutions. No “Plain Vanilla” Requirement. Financial institutions will not be required to offer plain vanilla products and services and CFPA will not have authority to approve or change business plans. No “Reasonableness” Standard. CFPA will not be able to mandate “reasonableness” standards that would place financial institutions in the untenable position of having to assess whether consumers comprehend the products and services they are being offered. Instead, CFPA will be mandated to improve the current disclosure regime with an emphasis on clarity, simplicity, conciseness, and reduction of regulatory burden. Simultaneous and Coordinated Exams. Depository institutions will have simultaneous federal safety and soundness and consumer compliance examinations (unless they request exams at different times). Whatever they choose, the banking agencies and CFPA will have to coordinate and consult one another on the timing, scope and results of exams to ensure a minimum regulatory burden. Dispute Mechanism. Depository institutions that receive contradictory or conflicting supervisory determinations or directives from CFPA and their prudential supervisors will be able to appeal the decisions to a disinterested governing panel and receive a quick and definitive answer. Registration and Supervision of Nonbanks. o All nonbank financial institutions that provide consumer financial products and services will be required to register with CFPA; and o Nonbanks will be subject to a level of supervision and scrutiny that is no less burdensome or comprehensive than that governing traditional banks and thrifts and that will fully reflect the risks posed by these previously unregulated entities. – Assessments on Nonbanks. Nonbanks will be subject to assessments and the legislation will make explicit that neither small nor large banks will pay for the examination and supervision of nonbanks. – Federal Reserve Payments. To ensure adequate funding of CFPA without placing additional burden on financial institutions, the Federal Reserve will fund CFPA at a level that reflects amounts the banking agencies currently pay for consumer compliance. – Agency Structure. CFPA will be run by a single Director, who will be advised by a Consumer Financial Protection Oversight Board, which is made up of the Federal banking agencies, NCUA, FTC and HUD and the Chairman of the State Liaison Committee of the FFIEC. In addition, CFPA will have an Office of Fair Lending and Equal Opportunity to ensure that the agency has adequate resources to address fair lending and civil rights laws under its jurisdiction. We also will clarify that financial literacy will be an important part of the new agency’s mission.

Read the full article →

Jose A. Garcia: Debt for a Diploma

September 28, 2009

It has been six months since Federal Reserve Chairman Ben Bernanke stated that “we’ll see the recession coming to an end probably this year” in an interview on CBS’ 60 Minutes . With the end of 2009 approaching, it remains to be seen: for whom? Certainly not for Americans 25 and younger who are experiencing an unprecedented 18.5 percent unemployment rate, thereby branding this generation with the dubious honor of shouldering the burden of decades of economic laissez-faire policies that began before some of them were even born. The last quarter century in the U.S. has seen the cost of living rise faster than income, pushing more Americans to rely on credit. A 2008 survey by Demos, The Plastic Safety Net , of low and middle income Americans found that young people under 35 years-old carried an average of $9,111 in credit card debt and more than half of these households used their credit cards to pay for basic living expenses last year because they did not have enough savings. Even the means for acquiring better paying jobs — post secondary education — has become costlier. As a result, many young Americans enter adulthood with massive amounts of debt, jeopardizing their ability to achieve financial security and growth. Unlike a generation before, young families are carrying far more debt at a younger age. According to the Survey of Consumer Finance , the average debt for families 35 years old and younger in 1989 was $50,000. By 2007, the average debt carried by the same age group doubled to an astounding $100,000. To say debt is the result of poor choices and frivolous spending fails to capture the reality of the economic state of young people today. At a time when the necessity for a college degree has become universal, costs have risen dramatically, forcing young Americans to take on greater levels of debt to fund their post-secondary education. From 1982 to 2007, college tuition and fees increased by 429 percent as financial aid shifted from grant-based aid toward loans. And according to a recent College Board report , about 60 percent of 2007 college graduates had student debt, each taking out an average of $22,700 in loans. The recession has certainly not helped. Recent data from the U.S. Education Department shows that the 2008-9 academic year saw a 25 percent increase in the total of student-loan disbursements to $75.1 billion, making it the largest increase in recent memory. These onerous levels of debt have dire implications for the financial mobility of young households. In a 2006 survey of college graduates under 35, more than a third of college graduates say it will take them more than 10 years to pay off their household’s education-related debt. And add to that the burden of credit card debt. As young families dedicate an increasing amount of their income and limited assets to paying off debt, they must often delay “rites of passage” such as starting a family or purchasing a home. The end of the recession Mr. Bernanke heralds for 2009 and “leading the way to recovery in 2010″ will still leave young Americans in economic limbo. Demos’ A Better Deal Conference , slated for October 15th and 16th in Washington DC, will focus on the economic reality of young people today and what steps are needed to ensure their economic security tomorrow. Until policies focus on them, we are leaving the future of our country to the mercy of the invisible hand.

Read the full article →

Jose A. Garcia: Debt for a Diploma

September 28, 2009

It has been six months since Federal Reserve Chairman Ben Bernanke stated that “we’ll see the recession coming to an end probably this year” in an interview on CBS’ 60 Minutes . With the end of 2009 approaching, it remains to be seen: for whom? Certainly not for Americans 25 and younger who are experiencing an unprecedented 18.5 percent unemployment rate, thereby branding this generation with the dubious honor of shouldering the burden of decades of economic laissez-faire policies that began before some of them were even born. The last quarter century in the U.S. has seen the cost of living rise faster than income, pushing more Americans to rely on credit. A 2008 survey by Demos, The Plastic Safety Net , of low and middle income Americans found that young people under 35 years-old carried an average of $9,111 in credit card debt and more than half of these households used their credit cards to pay for basic living expenses last year because they did not have enough savings. Even the means for acquiring better paying jobs — post secondary education — has become costlier. As a result, many young Americans enter adulthood with massive amounts of debt, jeopardizing their ability to achieve financial security and growth. Unlike a generation before, young families are carrying far more debt at a younger age. According to the Survey of Consumer Finance , the average debt for families 35 years old and younger in 1989 was $50,000. By 2007, the average debt carried by the same age group doubled to an astounding $100,000. To say debt is the result of poor choices and frivolous spending fails to capture the reality of the economic state of young people today. At a time when the necessity for a college degree has become universal, costs have risen dramatically, forcing young Americans to take on greater levels of debt to fund their post-secondary education. From 1982 to 2007, college tuition and fees increased by 429 percent as financial aid shifted from grant-based aid toward loans. And according to a recent College Board report , about 60 percent of 2007 college graduates had student debt, each taking out an average of $22,700 in loans. The recession has certainly not helped. Recent data from the U.S. Education Department shows that the 2008-9 academic year saw a 25 percent increase in the total of student-loan disbursements to $75.1 billion, making it the largest increase in recent memory. These onerous levels of debt have dire implications for the financial mobility of young households. In a 2006 survey of college graduates under 35, more than a third of college graduates say it will take them more than 10 years to pay off their household’s education-related debt. And add to that the burden of credit card debt. As young families dedicate an increasing amount of their income and limited assets to paying off debt, they must often delay “rites of passage” such as starting a family or purchasing a home. The end of the recession Mr. Bernanke heralds for 2009 and “leading the way to recovery in 2010″ will still leave young Americans in economic limbo. Demos’ A Better Deal Conference , slated for October 15th and 16th in Washington DC, will focus on the economic reality of young people today and what steps are needed to ensure their economic security tomorrow. Until policies focus on them, we are leaving the future of our country to the mercy of the invisible hand.

Read the full article →

Karthika Muthukumaraswamy: Why Press 5 for Customer Service When You Can Twitter?

September 28, 2009

A few weeks ago, while having issues with my cable service, Comcast became my rightful target for a string of disapproving tweets. They didn’t go unnoticed. ” @ComcastBill ” responded to my complaints, and asked if there was any way he could help. I did not seek his advice or counsel, but a survey around the blogosphere vouches for his legitimacy. ComcastBill’s offer of help came on the heels of another from one of my Facebook acquaintances, also an employee of Comcast. Social media portals are changing the ways in which companies are doing business, thanks to one-on-one interactions between consumers and employees, either within or outside the professional sphere. There is no denying that big corporations, including the telecommunications giant, are successfully using Twitter to respond to customer concerns and grievances. Gone are the days of merely using Internet monitoring and public surveys to find out what consumers want. Today, all retailers have to do is “listen” to conversations on social networks. That social media are catching on in the business world is clear from Business Week ‘s recent list of 50 CEOs on Twitter , from Virgin Atlantic’s garrulous Richard Branson to the very influential Kevin Rose, founder of Digg. It is not merely about having a presence on social media, however. Some companies use Twitter to simply send out a deluge of messages about products and services . Launching a Twitter page and letting the technology fend for itself is not what social media is about. Companies have to invest time, resources and personnel in order to do social networking right . As Soren Gordhamer writes in this post on Mashable , businesses would do well to start embracing Twitter to increase accessibility and add a personal touch to their consumer interactions. And it works both ways. Customers can spread the word about both their good and bad experiences to hundreds of followers in an instant. This further emphasizes the need for corporations to address issues in real time. Little wonder, then, that some CEOs are surveying the Twittersphere, and directly responding to people’s tweets about their company’s products. Tony Hsieh, CEO of Zappos, which was recently acquired by Amazon , is a great example of this, known as he is to personally respond to tweets from his over 1 million followers. This is also a great way for smaller companies to establish their brands. That’s how Loic Le Meur, CEO of software startup Seesmic, reinforces his commitment to consumer interaction. The important thing about Twitter use by these CEOs is that it is clear they are not just tweeting to push their products or applaud their companies. Their tweets about consumer goods come interspersed with those about the wines they like and the television shows they watch. Why do I care if Tony Hsieh plans to run 12 miles today? Quite simply, personal touch. This merely shows the human face behind the company, and increases trust and authenticity. It would be appropriate here to make a distinction between “prosumer tweeters,” such as Hsieh, who tweet as individuals on behalf of a company, and brand tweeters, such as Comcast, whose employees predominantly use Twitter as a channel to serve customers. Regardless of the purpose, interactivity is paramount. While Dell is best known to have promoted its sales on Twitter and amassed $3 million in revenue in the process, its Twitter page is mostly filled with @replies to customer questions. It also seeks suggestions and ideas for new products. Another important aspect is content. Content in a 140-character tweet, you ask? Some of the most successful businesses on social media post tweets linking to material (preferably on their own Web sites) that their follower base would find interesting. A classic example is Whole Foods, which links to informative articles about healthy eating and organic lifestyles through its Twitter page. Twitter is also a great channel to transmit real-time information that might affect customers, especially in the case of companies that provide services. For instance, Comcast used Twitter to communicate news of a power outage that had caused loss of transmission during a Stanley Cup playoff game in April. While many businesses allocate specific PR personnel to manage their Twitter pages, the most successful tweeting companies, notably Zappos, have a freewheeling approach to social networking . Employees are allowed to tweet under the company’s umbrella, and there are no set guidelines, which really is in keeping with the general philosophy of social media. This distributed nature of online communication also means that bad news about a company is going to circulate as quickly as good news, as Starbucks found recently, when its Twitter ad campaign was seized by film director Robert Greenwald to spread word about the company’s own anti-labor practices. However, as with everything else Web 2.0, transparency and authenticity win out in the end. Organizations that are opening up their businesses to social networks are doing better and better with customers. This is more important now than it has been in the past, as people place higher priorities on customer service when purse strings are tighter. Social media portals allow endless channels of communication. As long as businesses can find creative ways to use them, the possibilities, too, are endless.

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Banks Still Trading In Risky Derivatives

September 28, 2009

Derivatives is one of the dirty words of the financial crisis. Though these often risky bets were blamed by many for helping fuel the credit crunch and the downfall of Lehman Brothers and AIG, it seems that Wall Street has yet to learn its lesson. U.S. commercial banks earned $5.2 billion trading derivatives in the second quarter of 2009, a 225 percent increase from the same period last year, according to the Treasury Department. More than 1,100 banks now trade in derivatives, a 14 percent increase from last year. Four banks control the market: JPMorgan Chase, Goldman Sachs, Bank of America, and Citibank account for 94 percent of the total derivatives reported to be held by U.S. commercial banks, according to national bank regulator the Office of the Comptroller of the Currency. The credit risk posed by derivatives in the banking system now stands at $555 billion, a 37 percent increase from 2008. “By any standard these [credit] exposures remain very high,” Kathryn E. Dick, the OCC’s deputy comptroller for credit and market risk, said in a statement . The complex financial instruments, which take the form of futures, forwards options and swaps, derive their value from an underlying investment or commodity such as currency rates, oil futures or interest rates. They are designed to reduce the risk of loss for one party from the underlying asset. Trading in an unregulated $600 trillion market, they were partly blamed for igniting the financial crisis a year ago. The New York Times reported earlier this month: Derivatives drove the boom before 2008 by encouraging banks to make loans without adequate reserves. They also worsened the panic last fall because they inherently tie institutions together. Investors worried that the collapse of one bank would lead to big losses at others. The Obama administration has included oversight of derivatives as part of its overhaul of financial regulations. Wall Street is fighting back and seems to have returned to its much-criticized practices, . Last Thursday former Fed chairman Paul Volcker, who now heads the White House Economic Recovery Advisory Board, warned lawmakers about the danger lurking behind such “financial weapons of mass destruction,” using a term coined by famed investor Warren Buffett . Testifying on Capitol Hill, Volcker discussed how “opaque trading in complex derivatives [have] become so large relative to underlying assets” and how “more and more complex financial instruments limit the transparency of markets,” he said. “As a general matter, I would exclude from commercial banking institutions, which are potential beneficiaries of official (i.e., taxpayer) financial support, certain risky activities entirely suitable for our capital markets,” he added. But the OCC argues that derivatives trading is not inherently risky, explaining that banks are trading these instruments every minute of every day with institutions more credit-worthy than a typical borrower. “The system has always worked on derivatives,” said Kevin M. Mukri , an OCC spokesman. “You have higher-quality counterparties — higher quality than in any other line of business.” Furthermore, “the purpose of derivative trading to to mitigate risk — not increase risk,” he said. “Without derivatives it would be a very hectic marketplace.” Yet some well-respected investment banks seem to be exposed to significant risk judging by their credit exposure from derivatives contracts. Goldman Sachs, formerly a pure investment bank, is now a bank-holding company regulated by the Federal Reserve. It owns Goldman Sachs Bank, an FDIC-insured depository. The bank has about $20 billion in total risk-based capital — in short, the money it has to cover creditors in case they go belly-up. But the bank has about $186 billion in total credit exposure from its derivatives contracts. Much of that $186 billion could be backed up by collateral — banks with at least $100 billion in assets held a combination of cash, bonds and securities against 63 percent of their total net credit exposure as of June 30. But the OCC doesn’t break that down by institution, and Goldman Sachs doesn’t disclose it either. Nonetheless, the bank’s exposure to derivatives losses is about nine times the amount of capital it has set aside. “It’s extraordinary for a commercial bank,” says Dean Baker , co-director of the Center for Economic and Policy Research , a Washington D.C.-based think tank. “And it really gets down to the central point with Glass-Steagall — what’s the separation here between government-insured deposits and speculative investment banking activity? You’d be very hard pressed to find out with Goldman right now.” Glass-Steagall, a Depression-era banking law that prohibited commercial banks from engaging in the investment business, was essentially repealed in 1999. Some economists have pointed to the repeal as the central cause behind the financial crisis. Goldman Sachs announced that it would become a bank holding company last September, less than a week after Lehman Brothers declared bankruptcy. Coming under the Federal Reserve’s protective umbrella gave the firm “access to permanent liquidity and funding,” Lloyd C. Blankfein, Chairman and CEO of Goldman Sachs, said at the time. Baker says that now that the firm is a bank holding company, the bank’s exposure to losses from derivatives contracts (compared to available capital) poses particular problems. Now, “the public is on the hook for that. If they run into trouble they could go to the Fed and borrow at the discount window [and] they have access to the FDIC’s special lending [program],” he explains. Goldman Sachs had issued about $25 billion in FDIC-backed debt as of June, according to regulatory filings . “You’re having the protections for what’s supposed to be relatively boring commercial banking applied to risky investment banking. It’s a real serious problem,” Baker says. Last October Goldman received a $10 billion taxpayer bailout, which it repaid in June. The federal government earned $1.4 billion on its investment. JPMorgan Chase has about three times the amount of their capital exposed in derivatives deals; Citibank about double. For comparison’s sake, if all commercial and industrial loans held by U.S. banks went bust (like zero) the banking system has just enough capital set aside to cover those losses. Not all banks are so heavily invested in derivatives. PNC’s exposure (relative to capital) is at 28 percent, and U.S. Bank, the country’s sixth-largest by deposits, comes in at seven percent. “It’s tough to think of the world without derivatives,” Mukri said “And it’s not a pleasant world either.”

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Start-Ups: Business Creating Takes Sharp Drop During Recession

September 28, 2009

New companies will be crucial to the strength of any economic recovery. Businesses in their first 90 days of life accounted for 14% of hiring in the U.S. between 1993 and 2008, according to the Bureau of Labor Statistics. But this recession is taking a particularly heavy toll on business creation, as sources of small-business funding dry up and would-be entrepreneurs become more risk-averse

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Dean Baker: Progressives and the Budget Deficit

September 28, 2009

The budget situation today looks hugely worse than it did two years ago. The reason for the deterioration is not that the country has suddenly embarked on a massive new round of social spending, undertaken another major military adventure or even emptied the coffers through tax breaks. The reason that the deficit situation looks hugely worse than it did two years ago is that the $8 trillion housing bubble that had been driving the economy finally collapsed and threw the country into the worst downturn since the Great Depression. The tragedy in this story is that the collapse of the bubble and its devastating consequences were entirely predictable. Had policymakers recognized the housing bubble and its dangers, they could have easily taken measures to avert this disaster, preventing the surge in unemployment, the flood of foreclosures and the huge budget deficits that characterize this downturn. Unfortunately, the sociology of the economics profession and economic policymaking is structured so that the voices of those who raised concerns about the housing bubble were largely excluded from public debate. Federal Reserve Board Chairman Alan Greenspan and other leading lights of the economics profession insisted that everything was fine. As a result, nearly all the properly credentialed “experts” marched in lockstep behind their leaders, also insisting that everything was fine. Remarkably, even after this collapse, nothing has changed in the structure of debates over economic policy. Nearly every day of the week an organization in Washington sponsors a policy session on the budget deficit or other some other important economic topic and every last “expert” is among that distinguished group that somehow could not see an $8 trillion housing bubble. This would be like hosting a session on the future of US military involvement in Iraq in which every participant had confidently predicted in 2003 that the United States would cakewalk to an easy victory. Even the Republicans wouldn’t be foolish enough to host a panel like this. Yet, there seems to be a bipartisan consensus that completely missing the biggest economic calamity in almost 80 years doesn’t call into question your competence as an economic analyst. This should scare people. There is no reason to believe that people who were incapable if independent analysis before the bubble collapsed are now capable of thinking for themselves. In other words, the vast majority of the so-called experts who pontificate on economic policy are still people who are more accustomed to deferring to authority than doing their own analysis. This means that a great deal of silliness is likely to be perpetuated, just as was the case before the housing bubble collapsed. The basic story on the budget deficit is very simple: We need badly need large budget deficits in the short term. They are the only force that can sustain demand in the economy after the collapse of housing construction and the loss of the consumption that had been supported by $8 trillion in illusory housing bubble wealth. In the longer term, we will need to reduce our trade deficit to replace this demand, but this can only be brought about by a reduction in the value of the dollar against the currencies of our trading partners. If our budget experts had been capable of independent thinking before the crash, they would have pointed out the over-valued dollar as a main cause of imbalances in the US economy. Unfortunately, most of them are still incapable of recognizing the obvious. The other big oversight that the budget experts commit is the failure to recognize the positive role that moderate rates of inflation can play in our economic recovery. Sustained inflation in the range of 3 to 4 percent will be the quickest way to rebuild the balance sheets of households who saw most or all of their wealth disappear with the bursting of the bubble. Modest inflation will also help to erode the debt burden the government was forced to take on due to the housing crash. For those old enough to remember, inflation was also a major factor in reducing the burden of the huge debt that the country incurred as a result of World War II. Of course in the long term, if we don’t fix health care then the deficits will be unbearable, but this calls for discussions of health care, not budget deficits. If we don’t fix health care, the economy will be wrecked regardless of what we do with the budget. But, we won’t get a more serious discussion of these issues until we have budget experts who actually form independent assessments of the economy. As it stands, the debate is dominated by a follow-the-leader crew who could not see an $8 trillion housing bubble.

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GreenJobInterview.com Names New CEO to Lead Continued Growth

September 28, 2009

NEWPORT BEACH, CA–(Marketwire – September 28, 2009) – GreenJobInterview.com, the leader in live virtual interviews, announces the addition of Theo Rokos as Chief Executive Officer. Rokos arrives at GreenJobInterview.com with nearly a decade of executive-level management experience in the financial services and business data industries. He joins the company from The Royal Bank of Scotland (RBS), where he was Senior Vice President. “I’m very excited about the opportunity to help take GreenJobInterview.com to the next level,” Rokos said. “In less than a year, they have experienced tremendous growth not only in the number of clients, but also in those companies’ adoption and increased usage of live virtual interviews as a best practice within their hiring process. Many large organizations have quickly recognized the time- and cost-saving benefits of conducting face-to-face interviews virtually, and being involved in this innovative trend is something I look forward to optimistical

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GreenJobInterview.com Names New CEO to Lead Continued Growth

September 28, 2009

NEWPORT BEACH, CA–(Marketwire – September 28, 2009) – GreenJobInterview.com, the leader in live virtual interviews, announces the addition of Theo Rokos as Chief Executive Officer. Rokos arrives at GreenJobInterview.com with nearly a decade of executive-level management experience in the financial services and business data industries. He joins the company from The Royal Bank of Scotland (RBS), where he was Senior Vice President. “I’m very excited about the opportunity to help take GreenJobInterview.com to the next level,” Rokos said. “In less than a year, they have experienced tremendous growth not only in the number of clients, but also in those companies’ adoption and increased usage of live virtual interviews as a best practice within their hiring process. Many large organizations have quickly recognized the time- and cost-saving benefits of conducting face-to-face interviews virtually, and being involved in this innovative trend is something I look forward to optimistical

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Workday Plans for Accelerated Growth; Expands Management Team

September 28, 2009

Mike Stankey, Former PeopleSoft Executive, Named President and Chief Operating Officer

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Apptio Recruits HP Execs on Heels of $14 Million in Funding

September 28, 2009

Larry Blasko Joins as VP of Sales and Michel Feaster Takes the Helm as VP of Products

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Kumatsu wins $224m order in Indonesia

September 28, 2009

Kumatsu wins $224m order in Indonesia

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ANZ (ASX:ANZ) Entered Chinese Rural Market

September 28, 2009

ANZ (ASX:ANZ) Entered Chinese Rural Market

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Australian Market Report of September 28: Poor Lead From US Losing Streak

September 28, 2009

Australian Market Report of September 28: Poor Lead From US Losing Streak

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Rex Minerals Limited (ASX:RXM) Updates On Results From Recent Drilling And Geophysical Programs At The Mt Carrington Project

September 28, 2009

Rex Minerals Limited (ASX:RXM) Updates On Results From Recent Drilling And Geophysical Programs At The Mt Carrington Project

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Marion Energy Limited (ASX:MAE) Updates On Operational Strategy At Clear Creek Gas Projects, Utah

September 28, 2009

Marion Energy Limited (ASX:MAE) Updates On Operational Strategy At Clear Creek Gas Projects, Utah

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Universal Resources Limited (ASX:URL) And Vulcan Resources (ASX:VCN) Merge To Create Significant Copper-Focussed Global Development Company

September 28, 2009

Universal Resources Limited (ASX:URL) And Vulcan Resources (ASX:VCN) Merge To Create Significant Copper-Focussed Global Development Company

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AuDAX Resources Limited (ASX:ADX) Signs Production Sharing Contract (PSC) With Tunisian Government For The Chorbane Permit

September 28, 2009

AuDAX Resources Limited (ASX:ADX) Signs Production Sharing Contract (PSC) With Tunisian Government For The Chorbane Permit

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Abbot to acquire Belgium’s Solvay for $7.6 billion

September 28, 2009

Abbot to acquire Belgium’s Solvay for $7.6 billion

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Johnson & Johnson buys 18% stake in Crucell

September 28, 2009

Johnson & Johnson buys 18% stake in Crucell

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Belgium’s UCB partners with AstraZeneca

September 28, 2009

Belgium’s UCB partners with AstraZeneca

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Obama to Attend IOC Vote to Back Chicago Bid for 2016 Games, Jarrett Says

September 28, 2009

By John McCormick Sept. 28 (Bloomberg) — President Barack Obama will fly to Copenhagen this week to attend a vote on where the 2016 Summer Olympics will be held, said Valerie Jarrett , a senior adviser to the president. Obama will attend the Oct. 2 final presentation to the International Olympic Committee for the bid by his adopted hometown of Chicago, Jarrett said in an interview. “It strengthens our bid,” she said. “There is nothing like the president expressing what it means to him.” Chicago is competing against Madrid, Rio de Janeiro and Tokyo. Organizers of the U.S. bid had been lobbying the White House to have Obama make the final pitch, although the president had previously said he was too busy with the battle in Congress over health-care legislation. “President Obama and first lady Michelle Obama symbolize the hope, opportunity and inspiration that makes Chicago great, and we are honored to have two of our city’s most accomplished residents leading our delegation in Copenhagen,” Chicago Mayor Richard M. Daley said in a statement issued by the Chicago 2016 bid committee. Amy Brundage, a White House spokeswoman, said Obama’s absence from Washington will be brief and will not hurt efforts on his top domestic legislative priority. ‘Overall Progress’ “The president made a determination that being out of the country for a day will not negatively affect his efforts on health care or the overall progress of the legislation,” Brundage said. Patrick Ryan , chairman of Chicago’s bid and founder of insurance brokerage Aon Corp., said in a statement that the president’s presence will mean a great deal in Copenhagen. “There is no greater expression of the support our bid enjoys, from the highest levels of government and throughout our country, than to have President Obama join us in Copenhagen for the pinnacle moment in our bid,” Ryan said. Brazilian President Luiz Inacio Lula da Silva, King Juan Carlos of Spain, and Spanish Prime Minister Jose Luis Rodriguez are all also scheduled to be in Copenhagen. Tokyo is urging new Japanese Prime Minister Yukio Hatoyama to attend as well. The White House said the first lady will arrive in Copenhagen on Sept. 30, along with Jarrett, who has led the White House’s Olympics lobbying effort. The president will arrive just prior to Chicago’s presentation and will fly back to Washington the same day, the White House said. ‘Bring the World Together’ “President Obama and First Lady Michelle Obama will both make presentations to the IOC during Friday’s session,” the White House said in a statement. “They will discuss why Chicago is best to host the 2016 Summer Games, and how the United States is eager to bring the world together to celebrate the ideals of the Olympic movement.” While in Denmark, the president and first lady also will meet with Danish royalty and Prime Minister Lars Løkke Rasmussen, the White House said. A White House advance team was sent to Copenhagen last week to make security and other arrangements. White House Press Secretary Robert Gibbs said on Sept. 24 that it would be a “very quick trip” if the president did go. Obama’s decision to make the trip will add star power to a U.S. delegation that already includes the first lady, television host Oprah Winfrey , U.S. Transportation Secretary Ray LaHood and U.S. Education Secretary Arne Duncan . Chicago is bidding to bring the Summer Games back to the U.S. for the first time since Atlanta in 1996. To contact the reporter on this story: John McCormick in Chicago at jmccormick16@bloomberg.net

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Yemeni Detainees Pose Obstacle to Obama’s Plan to Close Guantanamo Prison

September 28, 2009

By Janine Zacharia and Justin Blum Sept. 28 (Bloomberg) — One of President Barack Obama’s biggest obstacles to closing the Guantanamo Bay detention center by the January deadline he imposed is determining where to send about 100 Yemenis, the largest single group of prisoners by nationality. The U.S. wants many of them to go to a rehabilitation program in Saudi Arabia, according to two Obama administration officials familiar with the matter who spoke on condition of anonymity. The Saudis refuse to accept them, the officials said, and Yemen’s president wants the detainees returned to their homeland. The U.S. is reluctant to send them to Yemen because of security concerns there. Failure to find a destination for the detainees, who were held as part of the war on terrorism, may delay Obama’s plan to close Guantanamo by Jan. 22. The administration has been reviewing the cases of about 223 remaining detainees, including non-Yemenis, and is seeking countries willing to accept those deemed eligible for release. It will be easier to find destinations for the remaining non-Yemenis, one of the officials said. “This is a major concern for the Obama administration in closing Guantanamo,” said John B. Bellinger III , a State Department legal adviser during the Bush administration who is now a partner at the law firm Arnold & Porter LLP in Washington. “Obama has got to figure out a way to crack the Yemeni nut.” Deadline May Slip Defense Secretary Robert Gates said the U.S. may not be able to close Guantanamo by Obama’s deadline, in an interview broadcast yesterday on ABC’s “This Week.” The Guantanamo facility in Cuba opened in 2002 under President George W. Bush . Obama has faced criticism from lawmakers for calling for the prison to be shut without providing them with a plan outlining how it would be done. The U.S. continues to press the Saudis to accept Yemeni detainees and is assessing how many, if any, could safely be sent to Yemen, said one of the administration officials. Yemen is seeking U.S. funds to construct a facility that could be used for rehabilitating Guantanamo detainees. A compromise may include sending some Yemenis to Saudi Arabia and others to Yemen, the official said. A U.S. government task force has been reviewing Guantanamo prisoners to determine which ones should be transferred, tried or held indefinitely. The Obama administration is trying to convince other countries to accept detainees cleared for release. Detainee Transferred On Sept. 26, the U.S. announced that it transferred Alla Ali Bin Ali Ahmed, a native of Yemen, back to his homeland. He had been ruled an enemy combatant by a military tribunal in 2004 and was ordered released in May by U.S. District Judge Gladys Kessler in Washington. The U.S. is concerned about sending the remaining Yemenis to Yemen because the country is battling an insurgency and may have difficulty monitoring detainees’ activities, the official said. In 2006, al-Qaeda prisoners escaped from a jail in Yemen. The U.S. embassy in Yemen was attacked twice last year. A separatist movement in southern Yemen, a civil war in the north, and an al-Qaeda resurgence are combining to make Yemen an increasingly lawless haven for terrorists. Yemen is the poorest and fastest-growing country in the Arab world; its oil exports and sources of revenue are diminishing. Yemeni President Ali Abdullah Saleh said in an interview this month with Al-Jazeera television that his country originally agreed to allow the detainees to go to Saudi Arabia. He said Yemen has rejected more recent Obama administration requests to send them to Saudi Arabia. Saudi Arabia “We refused to send them to Saudi Arabia,” Saleh said in the interview, according to a transcript from Saba, Yemen’s state news service. The Bush administration had promised to build facilities in Yemen for use in rehabilitating the detainees, Saleh said. That didn’t happen. “Why do you not hand them over to Yemen and we would receive them in the places that you said you would prepare and equip for their rehabilitation, or we can place them in prisons and you will give us their dossiers,” Saleh said. “We will put them on trial.” Nail Al-Jubeir , a spokesman for the Saudi Embassy in Washington, didn’t respond to requests for comment by phone and e-mail. Saudi Arabia has tried to assimilate militants returning from Iraq and Guantanamo by placing them in a rehabilitation program that has been praised by U.S. officials. In January, Saudi Arabia announced it had re- arrested nine extremists who went through the program, including some from Guantanamo. Part of Solution “The Saudis are under an awful lot of pressure to take some of these Yemenis and to be part of the solution,” said Christopher Boucek, a Middle East expert at the Carnegie Endowment for International Peace in Washington who has studied the rehabilitation program. The U.S. preference of sending the Yemenis through the program is “a very bad idea” because the program requires detainees’ relatives and social networks that the Yemenis don’t have in Saudi Arabia, Boucek said in an interview. The Saudis don’t have the tools to rehabilitate the Yemenis and won’t be “able to exert control” once they are released, he said. To contact the reporter on this story: Justin Blum in Washington at jblum4@bloomberg.net

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Schumer, Rockefeller to Challenge Baucus on Health-Care Plan Public Option

September 28, 2009

By Nicole Gaouette and Laura Litvan Sept. 25 (Bloomberg) — Democrats will step up their challenge to Senate Finance Committee Chairman Max Baucus’s health-care-overhaul plan next week, the opening salvo in a larger fight over the shape and scope of final legislation. Senators Charles Schumer of New York and Jay Rockefeller of West Virginia will push for a government-run insurance plan to compete with private insurers such as Indianapolis-based WellPoint Inc. While four other congressional panels have adopted that “public option,” Baucus, a Montana Democrat, has endorsed more limited health cooperatives instead in a bid to draw Republican support, antagonizing members of his own party. “It will be a big fight all the way down to the wire,” Schumer, a member of the Senate Democratic leadership, said last night in an interview. “The health-care bill that will be signed by the president will have a good, strong, robust public option.” While the lawmakers had planned to raise the issue today, Baucus pushed the debate over that amendment and the health- care overhaul into next week. “It’s an extremely important amendment,” he said today. “We don’t have time to get into all that, but we will get into that Tuesday,” he said of the public option. Contentious Issue The public option is the most contentious element of President Barack Obama’s effort to lower costs and expand coverage to tens of millions of uninsured Americans, and the dispute will dominate committee action. Republicans say a government-operated competitor would drive many private insurance companies out of business. While Baucus has yet to secure Republican support, he has come closer than any of the other panel chairmen to drafting a bipartisan measure and has won praise from the White House. And he has thwarted challenges to his bill from both parties during his committee’s debate on the legislation this week, though Democrats say the battle has just begun. Schumer and Rockefeller each intend to introduce amendments that would include a public option in the finance committee bill. Rockefeller said including a federally backed insurance alternative was crucial to bringing down costs. ‘Weaker Health Plan’ “A health-care plan without a public option is a much weaker health plan because insurance companies continue to rule,” Rockefeller said in an interview. He said a public plan would help keep costs down because it wouldn’t need to make a profit or spend money on marketing. “That’s going to force other companies to bring down costs over time,” he said. Schumer said that in 40 states, two insurance companies have more than half the market share. “It’s very, very important to have a competitor” for insurers, he said. He said he was confident he and other “progressives” would prevail in the end on the public option, even if their amendments fail in the finance committee. The overall Senate Democratic caucus is more supportive of a public option than some party members on the finance panel, he said. The finance committee consists of 13 Democrats and 10 Republicans. Baucus’s staff has estimated that after the changes to his bill this week, the measure will cost $900 billion over 10 years and reduce the federal budget deficit by $23 billion. Drug Deal Intact Baucus yesterday fended off Democratic amendments that would have torpedoed a deal he made with drugmakers. A Republican proposal to kill a commission designed to set payment rates for the Medicare program for the elderly was defeated earlier this week. His victories in defending his proposal may bode well for final passage by the committee and lessen the chance that medical industries would organize to defeat it. Still, Baucus has faced criticism from Democrats for wooing Republicans, most of whom have responded to his efforts by attacking the proposal. Senator John Cornyn , a Texas Republican, told reporters the plan “spends too much money, borrows too much money and cuts too much out of Medicare benefits.” In one of the livelier debates yesterday, Baucus helped defeat a proposal by Senator Bill Nelson , a Florida Democrat, that would have required drugmakers to provide $106 billion in rebates over 10 years. The amendment would have overridden an $80 billion agreement Baucus reached with the industry in June. Threat to Legislation “This might undermine our ability to pass comprehensive health-care reform this Congress,” said Senator Thomas Carper , a Delaware Democrat. He and Democratic Senator Robert Menendez of New Jersey, whose state is home to drugmakers including Merck & Co. of Whitehouse Station, joined Baucus and panel Republicans in voting against the amendment. Legislation passed by three House committees is now being melded together. While all three contain the public option, lawmakers are debating whether to require the new program to negotiate rates with providers, as private insurers do, or peg them to the lower levels paid by Medicare. The Blue Dog Coalition of fiscally conservative Democrats is pushing the requirement for negotiated rates. House Speaker Nancy Pelosi , a California Democrat, said yesterday pegging the rates to Medicare is the best way to cut costs. “Where else would we go to bend the curve and pay for the legislation?” she said during a news conference in Washington. To contact the reporters on this story: Nicole Gaouette in Washington at ngaouette@bloomberg.net Kristin Jensen in Washington at kjensen@bloomberg.net

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Merkel, Free Democrats Start Talks as Tension Looms

September 28, 2009

By Tony Czuczka and Leon Mangasarian Sept. 28 (Bloomberg) — Chancellor Angela Merkel and the pro-business Free Democratic Party begin talks today on forming Germany’s next government amid disagreements over taxes and labor regulations. Merkel, whose Christian Democrats had their lowest score since World War II, stuck to her party program of waiting until 2011 to cut taxes. Free Democratic leader Guido Westerwelle pressed for faster and deeper tax relief and more deregulation of the labor market. “It’s clear that our compass in these negotiations is our party program,” Westerwelle told reporters in Berlin today, fresh from steering his party to its best result in modern German history. He said he’ll push “with full determination” for as much of the program as possible to be accepted. Merkel, 55, and Westerwelle, 47, will hold their first post-election talks in Berlin later today, when they will seek to bridge their differences. Merkel said she aims to complete the negotiations within a month and have a new government in place by Nov. 9, when Germany marks the 20th anniversary of the fall of the Berlin Wall . “We want to do this quickly,” Merkel said at a separate press briefing. “We put forward our platform in the election and naturally we’re not going to depart from it.” Germany’s deteriorating finances overshadow the coalition- building. Merkel’s administration will borrow a record 329 billion euros ($482 billion) in 2010 as it boosts spending to speed economic recovery. Tax-Cut Differences The forecast was made in June by Social Democratic Finance Minister Peer Steinbrueck and takes no account of 35 billion euros in tax cuts sought by the FDP. Merkel’s tax pledge amounts to 15 billion euros over her four-year term. Merkel will also have to try to merge the platform of her bloc, which includes the Bavarian Christian Social Union, with demands by the FDP a simpler tax system comprising just three brackets: 10 percent, 25 percent and 35 percent. “Merkel should be under no illusion: this alliance will only happen thanks to the FDP’s strong showing,” Tilman Mayer, head of Bonn-based Institute for Political Science, said in an interview. “Westerwelle will make his voice heard in coalition talks and demand a good deal of what the FDP’s been pushing for in the campaign.” Afghan Friction Afghanistan, where Germany has about 4,200 troops as part of NATO forces, is another point of potential friction. Westerwelle, the probable foreign minister replacing Frank- Walter Steinmeier , has accused Merkel’s former government with the Social Democrats of providing too few trainers for Afghan security forces. Westerwelle wants to end the mission “as quickly as possible,” Der Spiegel magazine cited him as saying in an interview last month. That’s a more urgent tone than Merkel, who said Sept. 8 that Afghan forces must make “enough progress in the next five years to allow international troops to steadily reduce their role.” German defense suppliers such as Duesseldorf-based Rheinmetall AG “could be seen negatively” because “a strong FDP within the government may mean earlier-than-expected withdrawal of troops from Afghanistan,” UBS Investment Research analyst Sven Weier said in a note today. Hiring and Firing The FDP’s campaign call to give German business more leeway to fire workers also goes further than Merkel’s party. Firing rules currently apply for companies with more than 10 employees and the FDP wants to raise the threshold to more than 20 employees. “That’s a highly contentious, highly emotive subject,” Holger Schmieding , chief European economist at Bank of America- Merrill Lynch in London, said in an interview. Merkel and the FDP will probably look for other ways to change labor laws, he said. While Merkel and the FDP agree on extending the lifespan of German nuclear plants beyond the planned closure by about 2021, the FDP probably will resist her call to impose new burdens on utilities that operate the plants to promote renewable energy, Claudia Kemfert , chief energy analyst at the Berlin-based DIW economic institute, said in an interview. IG Metall, Germany’s biggest labor union, warned of wider public opposition to plans to return to nuclear power. ‘Fierce Conflict’ Merkel and Westerwelle’s parties faces “a fierce conflict with workers and unions if they call into question matters of social welfare, labor rights and the nuclear phase-out,” Hartmut Meine , an IG Metall regional director and a board member at Volkswagen AG and Continental AG, told reporters in Hanover. Merkel’s Christian Democratic bloc won 33.8 percent in the elections to the 622-seat lower house of parliament, according to provisional complete results. The Social Democrats had 23 percent, a drop of 11.2 percentage points from 2005, the biggest decline for any party in postwar history. The anti-capitalist Left Party won 11.9 percent and the Greens 10.7 percent. “Merkel can’t expect her coalition partner to slot into its historic role as the junior mascot,” Hans-Juergen Hoffmann , managing director of Berlin-based polling company Psephos , said in an interview. “The FDP will have none of that. It’s the kingmaker of Merkel’s new coalition.” To contact the reporters on this story: Leon Mangasarian in Berlin at lmangasarian@bloomberg.net ; Tony Czuczka in Berlin at aczuczka@bloomberg.net .

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Unilever’s First Outsider Taps P&G Playbook as Sara Lee Heralds Purchases

September 28, 2009

By Jeroen Molenaar and Thomas Mulier Sept. 28 (Bloomberg) — Unilever’s Paul Polman , who helped build Nestle SA and Procter & Gamble Co. with acquisitions, is taking a page from his old playbooks in his new job. The first outsider to become Unilever’s chief executive officer, Polman broke a nine-year streak of avoiding major takeovers to pursue the 1.28 billion-euro ($1.88 billion) purchase of Sara Lee Corp. ’s shower-gel and European detergents business last week. The move may herald a turn to dealmaking for Unilever, the maker of Dove soap and Hellmann’s mayonnaise. Polman, a 53-year-old Dutch marathon runner who took the helm in January, is picking up the pace after sales growth at Unilever trailed P&G and Nestle for years. Analysts said the Sara Lee deal may be followed by more brand buyouts. At P&G, he helped plan to integrate the 2005 purchase of Gillette Co., and at Nestle he worked on the acquisition of Gerber baby foods. “Polman has increased the sense of urgency,” said Tom Russo , a partner at Gardner Russo & Gardner who met Polman when he was at Nestle, one of Gardner’s two largest investments. “He must be feeling somewhat comfortable with what he’s done so far because now he’s about to add complexity. He can say, ‘Trust me, I know it works, because I’ve seen it work twice now.’” The Sara Lee unit purchase gives the London- and Rotterdam- based company shower gel, hand-soap and deodorant brands such as Duschdas, Radox and Sanex. The deal is Unilever’s biggest since 2000, when it bought SlimFast Foods Co., Ben & Jerry’s Homemade Inc. and Bestfoods. Polman, who said in June that Unilever had “wonderful opportunities” for M&A, was unavailable to comment, according to spokesman Tim Johns. ‘Acquisition Mode’ Polman, who studied to become a priest before switching to economics, has been preaching growth by linking manager bonuses to boosting sales by volume. He argues the company needs to take market share through discounts as the recession drives consumers away from pricy products, and is trying to balance that with improving profitability. Unilever has risen 12 percent since June 30 in Amsterdam trading. The Sara Lee deal was preceded by more than $400 million in acquisitions since Polman took over, including TIGI hair care in the U.S. and Baltimor ketchup in Russia. Unilever is now in “acquisition mode,” said Robert Jan Vos , an analyst at Fortis Bank Nederland. Before Polman, Unilever spent years scrapping assets after the $24 billion Bestfoods purchase. Predecessor Patrick Cescau led more than 19 divestments, including Birds Eye frozen foods and All detergents, after a five-year program to lift sales growth by shedding 1,200 brands failed. The company wrote down the value of SlimFast as shoppers shunned the pricy ready-to-eat shakes in favor of low-carb diets. Inherited Assumptions Polman said in May that as a result of that era, there was an “inherited assumption that the company will not grow,” and according to ING analyst Marco Gulpers , Polman has criticized some of the disposals in meetings. “With only premium brands, you lose the battle for the shelves,” Gulpers said. “What he is re-introducing is the focus on categories, not brands.” He’s relying on his experience at P&G and Nestle for that, Gulpers said. He said Unilever could spend up to 2.5 billion euros on acquisitions in 2010, adding 5 billion euros in sales . Polman’s not the only one seeking deals. Kraft Foods Inc. made an unsolicited bid for chocolate maker Cadbury Plc this month worth 10 billion pounds ($16 billion). As stock markets rebound and credit markets thaw, European takeovers are picking up after the slowest August in five years. “There’s going to be a lot of M&A activity in the coming year, and I expect him to go after that,” said Martin Schulz , director of international equity investments at Allegiant Asset Management in Cleveland. P&G Playbook Born in Enschede, near the Dutch-German border, Polman knows how to fill out a lineup from 25 years spent at P&G. When he ran the Western European unit , Cincinnati-based P&G bought Clairol hair tints for $4.95 billion in 2001 and Germany’s Wella AG hair care for $7.6 billion in 2003, adding to its existing shampoos like Pantene. When P&G bought Gillette for $57 billion, the deal brought masculine products like razors to its feminine goods under the Olay, Always and Tampax brands. At Vevey, Switzerland-based Nestle , where Polman spent two years as finance chief, the $5.5 billion Gerber purchase complemented its Neslac baby formula. The Sara Lee brands like Sanex shower gel fill Unilever gaps, adding mid-priced products and fitting Polman’s strategy to play the entire price spectrum, said Fernand de Boer , an analyst at Petercam in Amsterdam. A 500-milliliter bottle of Sanex sold for 3.69 euros at an Etos drug store in Amsterdam last week, compared with 4.69 euros for Dove. Running Harder It’s a similar strategy to P&G, which sells different product lines and different price points. “P&G executives are cut from very similar molds,” said Matt McCormick , a portfolio manager with Bahl & Gaynor Inc., which manages $2.3 billion in Cincinnati. “You can essentially take them out of the P&G playbook and insert them into your own and you’re usually going to be quite pleased.” Polman rises at 6 a.m. to hit the treadmill in his London office. He completed this year’s Unilever-sponsored London Marathon in just over 4 hours and 12 minutes. Unilever is starting to turn. The company unexpectedly posted volume growth in western Europe in the second quarter. Among Polman’s fix-it initiatives for existing products, he gave margarine managers 30 days to devise a plan to restore growth in Germany. They made Homa Gold a discount brand with new packaging, and sales improved. Unilever sales may rise to 42.2 billion euros next year from an estimated 40.7 billion euros this year, according to the average of analyst projections compiled by Bloomberg. The company had 1.9 billion euros in cash and equivalents at the end of June. As ING’s Gulpers said, “These guys look at everything. And he’s got the fire power.’’ To contact the reporter on this story: Jeroen Molenaar in Amsterdam jmolenaar1@bloomberg.net ; Thomas Mulier in Geneva at tmulier@bloomberg.net .

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State Housing Agencies May Get Up to $35 Billion of U.S. Treasury Funding

September 28, 2009

By Dawn Kopecki Sept. 28 (Bloomberg) — State housing agencies in the U.S. would get help in providing mortgages to low-income borrowers under a U.S. Treasury Department program to provide new liquidity and purchase mortgage bonds, Treasury officials said. The program would provide as much as $15 billion in fresh liquidity for as long as three years and would purchase as much as $20 billion in tax-exempt mortgage bonds issued by state- sponsored housing finance agencies through the end of this year, a person familiar with the matter said. The program may be announced as early as Sept. 30, said the person, who didn’t want to be named because the plans haven’t been made public. The Treasury effort would be administered by federally controlled mortgage-finance companies Fannie Mae and Freddie Mac , which would also purchase the bonds, the person said. Those purchases would provide enough financing to restart and to fund the state home loan programs through the end of next year, according to the person. The California Housing Finance Agency and other state programs have suffered along with the rest of the mortgage industry with higher funding costs and restricted liquidity over the last 18 months. Many of the state programs, which have financed more than 2.6 million first-time homebuyers, have been shuttered as investors recoiled from the market and demand for their mortgage bonds faltered amid the worst housing market since the Great Depression, according to the National Council of State Housing Agencies. Record Foreclosures Higher debt costs, record-high foreclosure rates and lower investment income contributed to a broad-based decline in profitability across the sector last year, according to Moody’s Investors Service. To reduce funding costs, the Treasury will provide a federal backstop for several liquidity facilities, the person familiar with the matter said. Administration officials are still hammering out the plan’s final details, which may change, Treasury officials said. One in 10 mortgage borrowers in the U.S. is behind on their loan payments and one in every 25 homes is in foreclosure, Fannie Mae Chief Executive Officer Michael Williams said in a Sept. 9 speech in Washington. Homeowners across the country have lost an average of 40 percent of their equity , making refinancing more difficult, he said. The National Council of State Housing Finance Agencies, which represents the state programs, asked Treasury Secretary Timothy Geithner and Housing Secretary Shaun Donovan in March for help. No Buyers A dozen housing agencies, many of which finance their mortgage programs with variable-rate debt or VRD, haven’t been able to find buyers for those bonds and have been forced to convert $3 billion of it into “bank bonds” at higher interest rates and at faster repayment schedules, the council said at the time. The financing the industry traditionally relied upon has dried up or comes with excessive fees and unfavorable terms, the group said in its March 13 letter. “This VRD payment burden at a minimum reduces the HFA’s productive housing activity and at worst threatens the financial health of the HFAs themselves,” the letter reads. Eight of the top 10 issuers of variable-rate debt, which is cheaper to issue than fixed rate debt, saw their profits decline last year, Moody’s said in an August report. California, which is the largest with $5.5 billion in outstanding variable-rate bonds, was downgraded July 22 and given a negative outlook. The downgrade was attributed to the agency’s sharply increasing delinquencies, risk related to funding its variable rate debt and uncertainty regarding future business activity. “As with other state HFAs with variable rate debt, the agency also faces greater difficulty in renewing expiring liquidity facilities, as liquidity has become more expensive and less easily available,” Moody’s said of California. To contact the reporter on this story: Dawn Kopecki in Washington at dkopecki@bloomberg.com .

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Natural Gas Feint Means Prices Poised to Plummet 19% With Storage Swelling

September 28, 2009

By Reg Curren Sept. 28 (Bloomberg) — The steepest rally in natural gas prices since 2006 is coming to an end as the 400 salt caverns, depleted oil fields and aquifers used to store the fuel in the U.S. reach capacity for the first time. Stockpiles may surpass the record of 3.545 trillion cubic feet by as much as 350 billion cubic feet this fall, Energy Department estimates show. Gulf South Pipeline Co. says its fields in Louisiana and Mississippi are so full that customers will have to pay penalties for exceeding their limits. With no place to go, producers will be forced to dump excess fuel on the market. The worst economic slump since the 1930s will cut demand from chemical plants to carmakers to households by 2.4 percent this year, according to government estimates. The November futures contract will drop about 19 percent to near $4 per million British thermal units, said Stephen Schork , president of consultant Schork Group Inc. in Villanova, Pennsylvania. “I don’t know where all of this gas is going to go,” said Schork, a former natural gas trader on the New York Mercantile Exchange, who in June forecast inventories would reach near 3.8 trillion cubic feet. “We’re a month away from significant heating demand. Something’s got to give.” The November contract has climbed 35 percent from its low of $3.662 per million Btu on Sept. 3 to $4.948 on Sept. 25 after economic reports signaled that the recession is ending and fuel demand will rebound in 2010. October futures, which expire today, have risen 59 percent from a seven-year low of $2.508 in the same period. Awaiting Rebound Employers cut fewer jobs than expected in August, a report from the Labor Department on Sept. 4 showed. Output at factories, mines and utilities climbed 0.8 percent, in August, according to the Federal Reserve. The economy will probably expand 2.9 percent this quarter and 2.2 percent in the fourth, the median estimates of 61 economists surveyed by Bloomberg. The signs of improvement haven’t translated into a turnaround in gas demand. Consumption by factories and manufacturers will decline 9.8 percent this year, according to the Energy Department. Fuel production will increase 0.9%. Even with this month’s rally, futures have dropped 71 percent from a 30-month high of $13.694 on July 2, 2008. The 29 percent decline this year makes gas the worst performer on the Reuters/Jefferies CRB Index of 19 commodities. The index has risen 9 percent, led by gains in copper, sugar and gasoline. Natural gas will average $3.90 per million Btu in the third quarter, according a Bloomberg survey of 20 analysts, compared with $3.39 since July 1. Forecasts have retreated through the year. In March, the prediction for the third quarter was $6. Outlook Revisions The outlook for the fourth quarter, when demand for heating fuel typically increases, has also declined. Gas will average $5 in the next three months, according to the survey. The price expectation was $7.38 on Jan. 2 and $5.36 on Aug. 3. With the U.S. economy recovering from the first global recession since World War II, some investors say gains will occur sooner. November futures will probably trade between $4.50 and $5.50 as demand strengthens, said Peter Linder , president of the DeltaOne Energy Fund in Calgary. “We’re not going to see a collapse in gas prices over the next two months,” Linder said in a telephone interview. “We’re going to see significantly less production,” which will boost the fuel into 2010, he said. Rising Prices The December contract is likely to climb to around $6 from $5.66 now, Linder said. “The entire move to the upside is predicated on recovery and stimulus, and if those two things hesitate or fail to materialize, so will higher prices for natural gas,” said Michael Rose , a director of trading at Angus Jackson Inc. in Fort Lauderdale, Florida. Inventories rose to 3.525 trillion cubic feet in the week ended Sept. 18, 16 percent above the five-year average, and 91 percent of estimated peak capacity, according to Energy Department data. The previous record was reached in November 2007. Supplies may hit maximum capacity of 3.899 trillion cubic feet before November, when utilities and power generators begin to withdraw the fuel for the heating season. The Energy Department will come out with the latest totals on Oct. 1. The excess would be enough to meet almost a month’s worth of average daily consumption by households, factories and power plants across the nation during the cold-weather months, when demand peaks at an average of about 12 billion cubic feet a day, according to government data. Storage Operators Storage site operators take gas from producing wells through pipelines, usually from April through October. Using compressors, they force it down wells drilled into permeable stone, which are covered by a cap-rock to contain the fuel. A year ago, the caverns were 80 percent full. The stockpiles have grown even after companies cut back on exploration. The number of rigs drilling dropped 56 percent to 710 as of Sept. 25 from a peak of 1,606 a year ago, according to Houston-based Baker Hughes Inc., the world’s third-largest oilfield-services provider. Lower prices will keep a lid on rigs, said Cameron Horwitz , an analyst at SunTrust Robinson Humphrey Inc. in Houston. The total fell to 665 on July 17, a seven-year low, after stockpiles rose to the highest for any week in July since 1994. The surplus helped send gas to the lowest level since March 2002 earlier this month. Near Capacity “Gulf South is reaching full capacity,” said Allison McLean , a spokeswoman for the company’s parent, Boardwalk Pipeline Partners LP, in a Sept. 22 interview. “We don’t have flexibility to go above and beyond what customers have contracted for.” The company, with about 83 billion cubic feet of storage, said Sept. 4 that it may “subject offending customers to penalties.” Southern Natural Gas, a unit of Houston-based El Paso Corp., owner of the largest U.S. network of natural gas pipelines, said on Sept. 21 that 96 percent of its available 60 billion cubic feet of space was in use as of Sept. 17. A year earlier, it was at 78 percent. “The storage situation is a pretty serious one,” said Tom Orr , director of research at Weeden & Co., a brokerage in Greenwich, Connecticut. “There’s no real remedy in sight.” Futures advanced this month after Fed Chairman Ben S. Bernanke said on Sept. 15 the recession may have ended already. A report on Sept. 1 from the Institute of Supply Management showed manufacturing expanded for the first time in 19 months. Slowing Losses Price gains accelerated as traders who had sold expecting declines bought the contracts back. The rally was helped by speculators who were betting against U.S. Natural Gas Fund LP , the world’s largest exchange-traded fund in the fuel, according to Adam Felesky , chief executive officer of BetaPro Management Inc. in Toronto. When those bets failed, speculators canceled positions by buying October futures, sending the contract higher, said Felesky, whose company manages exchange-traded funds. The gain in the October contract was the biggest over a three-week span since September of 2006, after hedge fund Amaranth Advisors LLC lost more than $6 billion in bad bets in the gas market. Futures in 2006 initially dropped, reaching a four-year low on Sept. 27, partly because the fund was forced to unload its holdings. Prices then surged 62 percent by Oct. 18. Production Cost Gas may have to climb above $6 or even $7 to ensure producers pump enough to meet demand, Aubrey McClendon , chief executive officer of Chesapeake Energy Corp., said in a presentation to investors on Sept. 10. Chesapeake, the fourth-largest producer in the U.S., has been selling assets to conserve cash and reduce debt during the drop in prices. Anadarko Petroleum Corp., the second-biggest, reported a second-quarter loss of $226 million Weeden cut its 2010 forecast to $4.25 per million Btu from $5 in a report on Sept. 14, saying that stockpiles at the end of the heating season in March will be at a record high for that time of year. “You have to start thinking what next April will look like,” said Orr of Weeden. “Coming out of winter and going into spring, you’ll still have a situation where the market will be oversupplied.” To contact the reporter on this story: Reg Curren in Calgary at rcurren@bloomberg.net .

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Abbott’s $7.1 Billion Solvay Unit Purchase Expands Emerging-Market Sales

September 28, 2009

By Meg Tirrell, Albertina Torsoli and Jacqueline Simmons Sept. 28 (Bloomberg) — Abbott Laboratories’ purchase of Solvay SA’s drug unit, for about 4.8 billion euros ($7.1 billion), will increase the company’s pharmaceuticals revenue by 18 percent and give it a bigger presence in emerging markets. Abbott will pay 4.5 billion euros in cash, with as much as 300 million euros in additional payments between 2011 and 2013 based on whether products perform well. The agreement also includes the assumption of about 400 million euros of pension liabilities, Solvay said in a statement today. Abbott shares rose as much as 5 percent in New York trading. The Solvay unit will bring more than $3 billion in annual product revenue, three-quarters of which will be from outside the U.S., Abbott said. The purchase also will lower Abbott’s dependence on the arthritis drug Humira, said Larry Biegelsen , a Wells Fargo Securities LLC analyst, in a Sept. 25 report. The company’s biggest product with $4.5 billion in 2008 revenue, Humira risks losing sales as consumers cut spending. The deal “would reduce Humira’s share of Abbott’s total sales to 15 percent from the current level of 18 percent,” Biegelsen wrote. Based in New York, he recommends holding Abbott shares. About 70 percent of the Solvay unit’s revenue is from generic products, according to a presentation on Abbott’s Web site. Abbott had $16.7 billion in drug sales last year. The acquisition will add about 10 cents to earnings per share in 2010, and more than 20 cents by 2012, according to the presentation. The purchase also adds $500 million in research and development capacity, Abbott said. TriCor, TriLipix The deal suggests Abbott is confident about the prospects for TriCor and TriLipix, cholesterol drugs it co-promotes with Solvay. Both drugs use the active ingredient fenofibrate, and together account for about 20 percent of Brussels-based Solvay’s pharmaceutical sales, Biegelsen wrote. TriCor faces generic competition by 2011, and Abbott is seeking regulatory approval to market TriLipix in combination with AstraZeneca Plc’s Crestor. TriCor generated $1.34 billion in revenue last year for Abbott , of Abbott Park, Illinois, and 511 million euros for Solvay. Abbott rose $2.16, or 4.6 percent, to $49.49 at 9:37 a.m. in New York Stock Exchange composite trading, after earlier gaining to $49.69, the highest intraday value since February. Solvay fell 1.33 euros, or 1.8 percent, to 73.40 euros in Brussels, giving the company a market value of about 6.2 billion euros. Solvay, which also makes chemicals and plastics, wasn’t big enough to compete in pharmaceuticals, Chief Executive Officer Christian Jourquin said. Changing Course Buying Solvay’s drug business represents a change of course for Chief Executive Officer Miles White , who has been acquiring medical devices and eye products to reduce Abbott’s reliance on medicines as the company battles generic competition to its anti-seizure treatment Depakote. “This is a significant business that will further diversify the sources of our pharmaceutical growth,” White said on a conference call today. “I think this is a great use for our assets and a heck of a good return.” Solvay’s pharmaceutical unit brought in 2.7 billion euros in revenue last year, 24 percent of the company’s total sales . The unit focuses on therapeutic areas such as cardiometabolics, which includes its best-seller, TriCor, and neuroscience, including the Duodopa treatment for Parkinson’s disease. Products Gained TriCor is used to reduce triglycerides and adjust cholesterol levels. Solvay’s other top-selling products are Androgel, a testosterone gel, and Creon, a pancreatic enzyme to treat cystic fibrosis. Barclays Capital advised Abbott while Solvay’s advisers included Rothschild & Cie., Morgan Stanley and Citigroup Inc. Deutsche Bank AG provided a fairness opinion to Solvay’s board. Solvay’s pharmaceuticals sales come primarily from outside the U.S., which will help expand Abbott’s international presence in emerging markets such as Eastern Europe and Asia. Forty-nine percent of Abbott’s $29.5 billion in 2008 sales came from the U.S. The Solvay unit has a “significant presence in key markets” including Russia, India and Brazil, “where Abbott has also been building its presence,” White said on the call. The acquisition will be funded with cash currently on the balance sheet, Chief Financial Officer Thomas Freyman said on the conference call. Solvay will look to use the proceeds to invest in a growing business that helps it diversify away from chemicals and plastics, Jourquin, the CEO, said on a conference call today. He declined to elaborate. Cash On Hand “What is important is that we have the cash in house,” Jourquin said. “I wouldn’t make any speculation before closing of the deal.” Nycomed A/S of Switzerland and Takeda Pharmaceutical Co. of Japan also contended to buy Solvay’s drug unit, people with knowledge of the situation said. They declined to comment publicly because the talks were private. Solvay, which introduced one of the first modern antidepressants in 1983, ranks as the world’s biggest producer of soda ash, used to make glass and modify the acidity of shampoos. Solvay gets much of its annual revenue from the automotive and construction industries, among the hardest hit by the recession. Nycomed, whose owners include Nordic Capital and a buyout unit of Credit Suisse Group AG, offered 4 billion euros to 4.5 billion euros for the Solvay unit, people familiar with the situation said on Sept. 25. Nycomed wanted to buy the business in preparation for an initial public offering in 2011, a person with knowledge of the matter said on Sept. 11. To contact the reporters on this story: Meg Tirrell in New York at mtirrell@bloomberg.net ; Albertina Torsoli in Paris at atorsoli@bloomberg.net ; Jacqueline Simmons in Paris at jackiem@bloomberg.net .

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Darling Blasts Bankers’ `Greed and Recklessness,’ Says Rich Will Pay More

September 28, 2009

By Gonzalo Vina Sept. 28 (Bloomberg) — Chancellor of the Exchequer Alistair Darling , targeting what he calls “greed and recklessness” in Britain’s financial system, asked banks to curtail bonus pay and said the rich will pay more in tax. “It is right that those who earn the most should shoulder the biggest burden,” the finance minister told the ruling Labour Party’s annual conference today in Brighton, England. “We will introduce legislation to end the reckless culture that puts short-term profits over long term success. It will mean an end to automatic bank bonuses year after year.” Darling said he has raised tax rates and eliminated relief for pension contributions for the rich. The Treasury is probing 100,000 offshore bank accounts and expects to recover at least 1 billion pounds ($1.59 billion) from Liechtenstein alone. Prime Minister Gordon Brown’s government is attempting to shore up support among voters by attacking bankers and suggesting the rich will have to foot the bill for the sharpest recession since World War II. “This is a government on the cusp of losing the next election, and if banker-bashing is going to be popular they’ll do it,” said Simon Maughan , a banking analyst at MF Global Securities in London. “This is a classic case of knee-jerk political reaction to a crisis.” With the next election due by June, Labour’s support is tied with the Liberal Democrats, the third-biggest party, 15 points behind the Conservative opposition, a ComRes Ltd. poll today shows . Brown yesterday rejected suggestions that he will step down before the vote and that he had health problems. ‘Last Chance’ “This is the last chance for the Labour Party to go into an election with a new leader,” said Ivor Gaber , professor of political campaigning at City University. “If Brown is seen to have a good conference, Labour members of Parliament may shrug their shoulders and let him continue. If he has a bad conference there is still time to elect a new leader.” Darling’s speech also was aimed at reassuring bond investors that the Treasury is serious about curbing the deficit and voters that the cuts that come will protect health and education services. He aimed to draw distinctions with the Conservative opposition, which he said would slash spending indiscriminately. “Every step to limit the severity of this recession and the damage to families they opposed,” Darling said. “At every stage, the Tories have misunderstood the causes of the crisis, underestimated its severity and opposed the measures to limit its impact.” Conservative View Conservatives questioned whether the government, which spent the first half of the year insisting that no spending cuts were needed, is serious about reining in the deficit. “The idea that Gordon Brown can reinvent himself as the guardian of the nation’s finances after doubling the national debt and spending the whole year opposing anyone who said that borrowing was getting out of control is the latest attempt to treat the public like fools,” said George Osborne , the Conservative lawmaker who speaks on finance. The Treasury expects the deficit to surpass 12 percent of gross domestic product, the most in the G-20. That forecast prompted Standard & Poor’s to threaten a downgrade for Britain’s AAA credit rating. “The public understand that difficult decisions will need to be made,” Darling said. “Tighter spending doesn’t mean a return to the Tory dark ages. It does mean a determination to cut waste, cut costs and cut lower priority budgets.” Meeting With Bankers This week, Darling will speak to Richard Broadbent , chairman of Barclays Plc’s remuneration committee, along with Colin Buchan of Royal Bank of Scotland Group Plc , Mark Moody- Stuart of HSBC Holdings Plc and Wolfgang Berndt of Lloyds Banking Group Plc . His proposals are based on an agreement among leaders of the Group of 20 nations last week. Brown yesterday told the BBC the proposed Business and Financial Services Bill will “ban the old bonus systems.” He also pledged a Fiscal Responsibility Bill that would require future governments to cut the deficit. The Financial Services Authority today said it would begin looking at how to implement the guidelines drawn up by the G-20. Business Secretary Peter Mandelson told BBC radio that regulation of banks should have been “more intrusive” and that the U.K. depends too much on financial services and should stimulate other parts of the economy. Reassuring Labour Brown also is seeking to reassure Labour supporters that he’s the right person to lead the party into the next election, which must be called by June 2010. The ComRes survey in the Independent newspaper found voters said they preferred every one of the possible alternative Labour leaders to Brown. “Unless things change by Christmas it’s almost a given there will be a challenge,” Alan Simpson , a Labour member of Parliament, told BBC radio. The ComRes survey of 1,003 adults showed Labour and the Liberal Democrats both with the support of 23 percent of voters compared with 38 percent for the Conservatives. No error margin was given. At the 2005 election, Labour won six times as many parliamentary seats as the Liberal Democrats. Long-time allies that could turn into challengers to Brown yesterday remained loyal to the prime minister. Energy and Climate Change Secretary Ed Miliband said Labour “can triumph over adversity.” Education Secretary Ed Balls called for the party to unify and fight for its values against the Conservatives. “We want more fighters not quitters,” Balls told BBC radio yesterday. “We can win this election. If we believe in ourselves and have a go, we can go out and win this election.” To contact the reporter on this story: Gonzalo Vina in Brighton at gvina@bloomberg.net

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Stocks in U.S. Advance on Mergers; Abbott, Affiliated Computer Shares Rise

September 28, 2009

By Lynn Thomasson Sept. 28 (Bloomberg) — U.S. stocks rose, snapping a three- day losing streak, as takeovers in the drug and technology industries added to evidence that mergers and acquisitions are rebounding from the slowest pace in six years. Affiliated Computer Services Inc. jumped 16 percent after Xerox Corp. made its biggest purchase by agreeing to buy the company for $6.4 billion. Abbott Laboratories advanced 4.2 percent on an plans to purchase Solvay SA’s pharmaceutical unit and gain control of the TriCor cholesterol drug. Cisco Systems Inc., the largest maker of networking equipment, added 4 percent as Barclays Plc predicted revenue will increase. The Standard & Poor’s 500 Index added 1.4 percent to 1,058.82 at 10:12 a.m. in New York. The Dow Jones Industrial Average increased 114.88 points, or 1.2 percent, to 9,780.07. About 150 million shares changed hands on the New York Stock Exchange, 26 percent less than at the same time a week ago as trading slowed for the Yom Kippur holiday. “We’ve seen a pickup in acquisitions and it’s a very big plus,” said Hugh Johnson , who manages more than $1.6 billion as chairman of Albany, New York-based Johnson Illington. “It’s always good news when you see money come into the market.” U.S. stocks fell the most since July last week as disappointing housing and durable-goods reports raised concern the market’s record six-month advance outpaced the prospects for an economic recovery. The rally sent the price-to-earnings valuations on the S&P 500 this month to the highest level since 2004. Companies in the S&P 500 traded at 20.2 times their profits on Sept. 22, data compiled by Bloomberg show. ‘Chilled the Market’ Employers probably cut fewer jobs in September and manufacturing expanded for a second month as the U.S. embarked on a tentative recovery, economists said before reports this week. Walgreen Co., Micron Technology Inc. and Constellation Brands Inc. are among companies in the S&P 500 scheduled to report earnings this week. Europe’s Dow Jones Stoxx 600 Index climbed 0.5 percent. Germany’s DAX Index added 1.5 percent after Chancellor Angela Merkel’s Christian Democrats and the Free Democrats, her preferred allies, won enough votes to form the next government. The MSCI Asia Pacific Index retreated 1.6 percent, led by Japanese exporters as the yen strengthened to an eight-month high. Xerox, Affiliated Computer Xerox, the world’s largest maker of high-speed color printers, said it’s buying Affiliated Computer for $63.11 in cash and stock for each Affiliated Computer share, 34 percent more than the closing price on Sept. 25. The purchase will extend Xerox’s reach in the services market as sales of its traditional printing equipment decline. Affiliated Computer jumped 16 percent to $54.93, while Xerox slid 15 percent to $7.69. Abbott added 4.2 percent to $49.30. The company’s purchase of Solvay’s pharmaceutical unit will also give Abbott a bigger presence in emerging markets and lower its dependence on the arthritis drug Humira. Americans holding $3.5 trillion in cash are giving money managers increasing confidence that the stock market rally under President Barack Obama will continue through the end of the year. Even after reducing money-market accounts by 11 percent this year, investors have cash equal to 73 percent of S&P 500 companies’ net assets, according to data compiled by the Investment Company Institute and Bloomberg. At the peak of the bull market in 2007, the measure of buying power was 62 percent. More M&A Expected Never before have U.S. companies piled up cash faster compared with interest costs than they are now, setting the stage for a surge in mergers and acquisitions. As the economy emerges from the worst recession in 70 years, cash flow may rise from the $1.5 trillion reported by the Commerce Department for the year ended in June, according to data compiled by Credit Suisse Group AG and Bloomberg. Cash relative to share prices will climb to the highest in at least two decades next year compared with yields on corporate bonds, the data show. The previous high in 2005 preceded the two busiest years ever for takeovers. Cisco jumped 4 percent to $23.52 after Barclays raised its recommendation on the company to “overweight” from “equal- weight.” Applied Materials Inc. advanced 3.5 percent to $13.56. The largest maker of semiconductor-production machinery was raised to “buy” from “hold” at Citigroup Inc., which cited “cost savings and a renewed focus on silicon share.” Cal-Maine Foods Inc. dropped 3 percent to $26.94. The largest U.S. egg producer reported a first-quarter loss of 16 cents a share compared with earnings of 47 cents per share a year ago, citing lower demand from restaurants and food service customers. To contact the reporter on this story: Lynn Thomasson in New York at lthomasson@bloomberg.net .

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Distressed Debt Investor Club

September 28, 2009

Development for the Distressed Debt Investor Club is nearly complete (call it 90%). Final launch date is still TBD, but think soon. That being said, I thought I would put a post up on how I expect things to unfold in the next few weeks, …

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Chris Ancliff Named as General Counsel – International, Warner Music Group

September 28, 2009

NEW YORK, NY–(Marketwire – September 28, 2009) – Warner Music Group Corp. ( NYSE : WMG ) today announced that Chris Ancliff, formerly General Counsel, EMI Group, has been appointed General Counsel – International, Warner Music Group. In this newly created position, Ancliff will report to Paul Robinson, WMG’s Executive Vice President and General Counsel, and will have responsibility for all of the Group’s legal and business affairs activities outside the U.S. He will be based in London and will work closely with WMG’s recorded music and music publishing affiliates throughout Europe, Asia and Latin America.

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Allen Rozman Named Lineage Power Director of Product Management for Board Mounted Power

September 28, 2009

ColdWatt Executive to Leverage AT&T, Bell Labs and Lucent Experience

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NMTV Appoints President

September 28, 2009

NEW YORK, NY–(Marketwire – September 28, 2009) – RTGV ( OTCBB : RTGV ): NMTV has appointed Dominic Hawes-Fairley to the position of President to drive product development and growth in the burgeoning digital media market. Hawes-Fairley has an entrepreneurial track record in both media and technology marketing businesses and comes to NMTV with a dynamic vision to leverage the group’s assets and unique value propositions. An expert in structuring technology companies for fast-growth, Hawes-Fairley has consulted at a strategic level with over 20 companies in the past eight years and, at the same time, built his own successful corporation.

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John Pironti Joins Archer Technologies as Chief Information Risk Strategist

September 28, 2009

Acclaimed Author, Speaker and Industry Luminary to Play Key Role in Archer’s IT Governance, Risk and Compliance Solution Strategy

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Britton Named Senior Vice President U.S. RE Securities, LLC

September 28, 2009

NEW YORK, NY–(Marketwire – September 28, 2009) – Steven R. Britton has been named Senior Vice President, U.S. RE Securities, LLC, the investment banking arm of U.S. RE Companies, Inc., the New York-based international financial services and reinsurance brokerage firm. The announcement was made by Peter S. Rawlings, Chairman of the U.S. RE Securities Board. Britton will be responsible for origination, structuring, and placement of structured insurance products including direct collateralized placements, industry loss warranties (ILWs), reinsurance sidecars, and catastrophe bonds. He has more than 18 years of experience as a reinsurance broker, underwriter, and capital markets professional with assignments in Los Angeles, London, New York, and Bermuda.

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Skytap Attracts Key Industry Talent to Support Next Phase of Growth

September 28, 2009

Industry Veterans From Google and Quantum Bring Decades of Sales, Product and Marketing Experience to Skytap’s Management Team

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Luis Acevedo Joins Cheil USA as Creative Director for Dallas Office

September 28, 2009

Robust Advertising and Design Experience Enhances Delivery of Client Solutions Across North American Network

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Stronghold Advisors, a JPB Enterprises Company, Appoints Judith A. Britz, PhD to Board of Advisors

September 28, 2009

COLUMBIA, MD–(Marketwire – September 28, 2009) – Stronghold Advisors, a middle market advisory firm in the Mid-Atlantic region, announced today that entrepreneur Judith A. Britz has joined the company’s Advisory Board. This addition is a move to support Stronghold’s increasing presence in the life science industries. Dr. Britz has more than 25 years of experience in the in vitro diagnostics industry. She is a serial entrepreneur who has been the President and CEO of Cylex Inc. and the General Manager of Sienna Biotech, Inc., both Maryland-based companies which successfully introduced a series of patented diagnostic products.

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Authoria Announces ‘Decision Views’ Product Enhancements and Development Roadmap With Realignment of Organization

September 28, 2009

Dramatically Advances Solution With Enhanced Visualization Reporting Capabilities Targets New Customer Priorities for Multi-Million Dollar Capital Investment Redefines Management Structure Into Customer-Centric Leadership Groups

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Sony Ericsson President Joins Violin Memory Board of Directors

September 28, 2009

Bert Nordberg Enhances Strategic Vision and Guidance of Silicon Storage Appliance Leader

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RCN Names Jose A. Cecin, Jr. Executive Vice President and Chief Operating Officer

September 28, 2009

HERNDON, VA–(Marketwire – September 28, 2009) – RCN Corporation ( NASDAQ : RCNI ), a leading provider of all-digital and high-definition video , high-speed internet , and premium voice services to residential and small-medium business customers, as well as high-capacity transport services to carrier and large enterprise customers, today announced that it has named Jose “Joe” A. Cecin, Jr., 46, to the newly-created position of executive vice president and chief operating officer. Mr. Cecin will lead RCN Residential and RCN Business Services, which had each been managed separately, and will report to Peter D. Aquino, president and chief executive officer. RCN Metro Optical Networks, l

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Tiger Woods, Phil Mickelson Both Finish as Winners at Golf’s Season Finale

September 28, 2009
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Jets, Giants Stay Unbeaten as Detroit Lions End 19-Game NFL Losing Streak

September 28, 2009
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Berlin’s Trendy Art Fairs Draw Cautious Collectors as Economic Crisis Hits

September 28, 2009
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