June 2010

Euro Rallies as Commercial Banks Prepare to Repay EUR 442B, British Pound Weighed By BoE Comments

June 30, 2010

Euro Rallies as Commercial Banks Prepare to Repay EUR 442B, British Pound Weighed By BoE Comments

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Daily Sound Bites 06.30

June 30, 2010

Daily Sound Bites 06.30

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German Unemployment Falls 21K, ECB Tender Eases Fears

June 30, 2010

German Unemployment Falls 21K, ECB Tender Eases Fears

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ADP Employment and Chicago PMI Dominate U.S. Markets, While Canada GDP Should Show Expansion

June 30, 2010

ADP Employment and Chicago PMI Dominate U.S. Markets, While Canada GDP Should Show Expansion

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U.S. Private Employers Add Fewer Jobs Than Expected, While Canada GDP Shows a Flat Estimate

June 30, 2010

U.S. Private Employers Add Fewer Jobs Than Expected, While Canada GDP Shows a Flat Estimate

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Swiss Market Index climb in midday trading

June 30, 2010

Swiss Market Index climb in midday trading

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DJ STOXX add points in midday

June 30, 2010

DJ STOXX add points in midday

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European stocks incline as debt concerns ease

June 30, 2010

European stocks incline as debt concerns ease

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The euro pares two day of losses as ECB announcement alleviates concerns

June 30, 2010

The euro pares two day of losses as ECB announcement alleviates concerns

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Celgene to acquire Abraxis BioScience for $2.9b

June 30, 2010

Celgene to acquire Abraxis BioScience for $2.9b

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Eurozone inflation declines to 1.4% in June

June 30, 2010

Eurozone inflation declines to 1.4% in June

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German jobless rate falls to 7.5% in June

June 30, 2010

German jobless rate falls to 7.5% in June

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British house prices up 0.1% in June

June 30, 2010

British house prices up 0.1% in June

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French public debt reaches new high

June 30, 2010

French public debt reaches new high

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UK Consumer Confidence Falls for Fourth Month on Austerity Fears

June 30, 2010

UK Consumer Confidence Falls for Fourth Month on Austerity Fears

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Euro May Rise as Risk Appetite Recovers, German Unemployment Falls

June 30, 2010

Euro May Rise as Risk Appetite Recovers, German Unemployment Falls

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USD Graphic Rewind 06.30

June 30, 2010

USD Graphic Rewind 06.30

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US Dollar Unmoved as Stock Markets Break Down

June 30, 2010

US Dollar Unmoved as Stock Markets Break Down

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Waikato District Health Board Selects iSOFT Group Limited (ASX:ISF) To Deliver Modern Laboratory Solution

June 30, 2010

Waikato District Health Board Selects iSOFT Group Limited (ASX:ISF) To Deliver Modern Laboratory Solution

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Unemployment conditions improve in Germany amid debt crisis

June 30, 2010

Unemployment conditions improve in Germany amid debt crisis

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HMV posts rise in profit on higher Blu-ray and DVDs sales

June 30, 2010

HMV posts rise in profit on higher Blu-ray and DVDs sales

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Sanofi-Aventis agrees to take over TargeGen

June 30, 2010

Sanofi-Aventis agrees to take over TargeGen

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Tight ranges before the release of important data

June 30, 2010

Tight ranges before the release of important data

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China cellphone users reach 1.1 billion

June 30, 2010

China cellphone users reach 1.1 billion

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Nippon Oil, CNPC sign JV agreement

June 30, 2010

Nippon Oil, CNPC sign JV agreement

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Singapore tourism arrivals jump 30% in May

June 30, 2010

Singapore tourism arrivals jump 30% in May

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South Korean factory output up 21.5% in May

June 30, 2010

South Korean factory output up 21.5% in May

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Foxconn to build another plant in China

June 30, 2010

Foxconn to build another plant in China

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Europe Ahead: U.K. economy to resume expansion in the first quarter

June 30, 2010

Europe Ahead: U.K. economy to resume expansion in the first quarter

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Crude Oil Testing $75.50 Support, Gold Inches Higher on Safe Haven Appeal

June 30, 2010

Crude Oil Testing $75.50 Support, Gold Inches Higher on Safe Haven Appeal

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Australian Lending, Home Sales Offer Mixed Cues on Rate Hikes

June 30, 2010

Australian Lending, Home Sales Offer Mixed Cues on Rate Hikes

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South Korea’s manufacturing output expand for the eleventh consecutive month alongside the Leading index

June 30, 2010

South Korea’s manufacturing output expand for the eleventh consecutive month alongside the Leading index

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Dollar Rallies as Chinese Growth, European Finances Stoke Demand for Stability, Liquidity

June 30, 2010

Dollar Rallies as Chinese Growth, European Finances Stoke Demand for Stability, Liquidity

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Is Glenn Beck The Publishing Industry’s Biggest Hope?

June 30, 2010

Earlier this month, Glenn Beck did what precious few authors have tried and failed to do over the past four weeks: unseat Stieg Larsson from the top of the New York Times bestseller list. Beck’s thriller The Overton Window topped the charts with more than 132,000 copies sold in its first week, according to Nielsen Bookscan (which tracks approximately 75% of total book sales). This isn’t exactly new territory for Beck, who has seen his name at the top of the charts in fiction, non-fiction, and even children’s picture books. Since 2003, Fox News’s conservative host has sold almost 5 million copies of his books in the United States alone. Not only do Beck’s books sell at record levels, but so do his book picks. Every month or so, Beck holds up his latest choice from one of his favorite genres: thrillers, non-fiction (mainly about the founding fathers), and polemics. Like Oprah, Beck has turned into a literary tastemaker and for the authors he’s interviewed on his programs and their publishers, the results are staggering. George Washington’s Sacred Fire, Peter Lillback’s 1,200-page biography first published by the tiny Providence Forum Press in 2006, has sold more than 45,000 copies this year, according to Bookscan. The vast majority of those sales coming after Lilliback appeared on Beck’s television show in mid-May.

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AccuDial(R) Pharmaceutical Appoints Industry Leaders to Board of Directors

June 30, 2010

PALM BEACH GARDENS, FL–(Marketwire – June 30, 2010) –   AccuDial® Pharmaceutical, Inc. announced today the expansion of its board of directors with the appointment of five distinguished industry leaders. With the exciting success of its Children’s AccuDial family of pediatric, over-the-counter (OTC) products, which launched in Canada in January 2010, the private pharmaceutical company is moving forward aggressively in the dynamic global market.

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Yves Smith: Time to Investigate Lloyd Blankfein and Hank Paulson

June 30, 2010

The New York Times has unearthed a damning tidbit about the bailout of AIG: When the government began rescuing it from collapse in the fall of 2008 with what has become a $182 billion lifeline, A.I.G. was required to forfeit its right to sue several banks — including Goldman, Société Générale, Deutsche Bank and Merrill Lynch — over any irregularities with most of the mortgage securities it insured in the precrisis years. Yves here. How one reacts to this depends in no small measure as to how one views the salvage operation. For all intents and purposes, the rescue of AIG was merely a way to save the banks; the credit default swaps had been too big a source of faux capital (via risk-shifting for US firms, and for Eurobanks, as part of a regulatory arbitrage) to let the insurer go. So any effort by the officialdom to aid the banks, most notably by paying out 100% on credit default swap exposures (which had already been written down by counterparties to less than par) was simply an effort to funnel more cash to the banks. Since we’ve had massive backdoor bailout mechanisms in addition to the overt ones, this orientation should come as no surprise. But then we get to the funny business. Why a broad waiver? Why shouldn’t AIG (and by extension, taxpayers) not recover in the event of fraud? And we turn again to the ambiguous standing of AIG. By all rights, it ought to be owned by the government. The reason it isn’t is that we don’t do nationalization in America, and full ownership would require AIG’s debts to be consolidated with government debt. So another way to read this requirement is that the Fed and Treasury were opposed to having fraud at the banks exposed, period. That is a very troubling stance for bank regulators to take. And experts agreed: “Even if it turns out that it would be a hard suit to win, just the gesture of requiring A.I.G. to scrap its ability to sue is outrageous,” said David Skeel, a law professor at the University of Pennsylvania. “The defense may be that the banking system was in trouble, and we couldn’t afford to destabilize it anymore, but that just strikes me as really going overboard.” “This really suggests they had myopia and they were looking at it entirely through the perspective of the banks,” Mr. Skeel said. Yves here. Also note that the banks mentioned by the Times account for a significant proportion of the Maiden Lane III exposures (the $62.9 billion CDO portfolio; note this does not include all CDO guarantees assumed by the Federal Reserve; seven Goldman Abacus trades stayed with AIG and were salvaged via credit extensions to AIG). An analysis by Andrew Dittmer and Tom Adams showed the significance of Merrill, Goldman, and SocGen (percentages based on par amount): 1. Merrill as both packager and counterparty 7.7% 2. Goldman as both packager and counterparty 7.4% 3. Merrill as packager, Goldman as counterparty 9.6% 4. Goldman as packager, SocGen as counterparty 15.9% We thought these interrelationships were potentially significant; they account for 40.6% of the Maiden Lane III exposures. Then add in: 5. Anyone else with a pulse as packager, SocGen as counterparty 11.0% 6. Anyone else with a pulse as packager, Goldman as counterparty 5.5% That bring you to 56.5% of the total. Goldman, either as packager or as swap counterparty, was involved in 38.4% of the Maiden Lane transactions, plus had additional AIG exposure through seven Abacus trades (we only have tranche exposure on three of these transactions): Abacus 2004-1 Abacus 2004-2 Abacus 2005-2 Abacus 2005-3 Abacus 2005-CB1 Abacus 2006-NS1 Abacus 2007-18 Yves here. The time is long overdue that Lloyd Blankfein’s early and extensive involvement in the AIG rescue be investigated in detail. The legal waiver no doubt was particularly beneficial to Goldman, and given that it is now being sued by the SEC, it is fair to ask if he put the idea of the waiver forward. It is highly unlikely to have occurred to the Fed and Treasury officials unprompted, particularly given the fevered pace at which the AIG rescue was cobbled together. Moreover, while the Fed was being advised to take a tough posture towards the banks, it was Treasury, then under former Goldman CEO Hank Paulson, who was bending over backwards: For its part, the Treasury appeared to be opposed to any options that did not involve making the banks whole on their A.I.G. contracts. At Treasury, a former Goldman executive, Dan H. Jester, was the agency’s point man on the A.I.G. bailout. Mr. Jester had worked at Goldman with Henry M. Paulson Jr., the Treasury secretary during the A.I.G. bailout. Yves here. And in an astonishing lapse, Jester still owned Goldman stock . By any standard, he should not have been involved at all in the process, much less in a crucial role. But because he was a contractor, and not a government employee, this arrangement was kosher. Not surprisingly, Jester opposed measures that would require Goldman and other banks to take any pain. The Times reminds readers it pays to be a bankster: All of this was quite different from the tack the government took in the Chrysler bailout. In that matter, the government told banks they could take losses on their loans or simply own a bankrupt company; the banks took the losses. Yves here. The Audit the Fed investigation will shed even more light on the AIG rescue, but the seamy dealing of Treasury means that investigations need to extend into its role as well. But it will take a public hue and cry for that to come to pass.

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The Case for PACE: Clean-Energy Financing for Commercial Buildings Holds Promise But Untested

June 30, 2010

The pace of innovation in solar and other energy efficiency technology has historically outstripped the ability of government and the private sector to come up with creative ways to finance solar retrofit and other green technology improvements in a way…

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Equastone Real Estate Investment Advisors: Equastone Names Kirk Cypel as Chief Executive

June 30, 2010

Restructures $300 + Million Dallas Loan; Seeks to Raise Additional Capital

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Raymond J. Learsy: BP’s Smoking Gun and the Manipulation of Oil Prices

June 29, 2010

In an eye-opening front page article the New York Times (“Bold Player in Energy Markets, BP Losses Trading Floor Swagger” 06.28.10) gives smoking gun evidence of the manipulation of oil and oil product prices through trading on the commodity exchanges. It places into focus and question, what benefit is derived from these exchanges as currently constituted, other than providing a speculation platform and con game for insiders and an instrument for oil producers to hype the price of their commodity? At the heart of the article and as shining example of miscreant trading behavior are our good friends at BP. As the NYTimes informs us, “BP, whose reputation for taking risks in the oil fields is matched only by its daring in the energy markets,” has remained committed to aggressive trading that has brought in as much as a fifth of the company’s profits, or some $2billion to $3 billion a year, which before the cost of the massive destruction in the Gulf, was big money. Given its size, its ability to make enormous bets, given its enormous financial resources permitting it to hold on to positions almost indefinitely, its vast infrastructure, its standing as one of the largest producers of oil in the world, it was able to take on, with little risk, huge positions, and hold on to them until they paid off. Now this begs the question, using the commodity exchanges as a pricing tool, would BP or any other major producer (say the likes of Shell, or the national oil companies of the Organization of Petroleum Exporting Countries or their agents) trade the exchanges to pressure prices lower?? And that is the crux of the issue. Permit me to quote once again the words of Leon Hess, founder of Hess Oil, that erstwhile sage, and eminently successful general of the oil wars, made before a Senate Committee on Government Affairs some 20 years back. They were as true then as they are now when incorporating all the trading exchanges that have blossomed around the world, ” I’m an old man, but I’d bet my life that if the Merc (the Nymex) was not in operation there would be ample oil and reasonable prices all over the world without this volatility”, (please see “Oil at $111 a Barrel: We Are Being “Sovereignly Screwed!” 03.17.08) Which brings us back to BP. Would BP trade on the exchanges to bring down the price of the company’s basic profit generating commodities? Given BP’s huge interest and investment in production resources it would be highly unlikely. One can fairly assume that BP would trade in a manner that would be supportive of the overall objectives of BP, which is to sell its oil and downstream products including gasoline and propane, at the highest price level possible. And when it does, it occasionally gets caught for trying to manipulate the market. In 2005 BP agreed with the New York Mercantile Exchange ‘Nymex’- (please see “Gasoline Over $3.00 Gallon, Why? BP Knows Plus Alan Greenspan Sings In the Energy Choir” 07.12.06) to pay a substantial settlement to resolve allegations of improper oil trading activities and assurances to clean up its trading activities in the future. The settlement cited so-called wash trades- the simultaneous swaps of the same amount of a commodity for the same price. The technique is used to improperly boost trading volumes or revenue and most significantly, to influence market pricing. Clearly, the constraints on BP’s activities on the Nymex would have little or no impact on their on going trading on the London, Singapore, Hong Kong or other world exchanges. Nor did it stop them from subsequently trying to corner the propane market, waking up our otherwise somnambulant Commodities Futures Trading Commission (please see “Energy Trading Oversight Awakens from its Slumber with Anticipated BP Settlement” 10.25.07) seeking indictments against BP resulting in a fine of $303 million to settle civil charges and thereby avoiding criminal prosecution for allegedly manipulating and cornering the U.S. propane market. Ironically Tony Hayward, CEO of BP, given his recent appearance before a Senate Committee, showing himself to be a wanting expert on Gulf Oil Spills and much else, proclaimed earlier this year, with deep inside knowledge, that the “drop in the dollar is a major factor behind oil prices breaking through $75/bbl.” There, now you have heard it from an ‘expert’ without an agenda and without any interest in putting forward self serving explanations for every jump in the price of oil (please see “A Short Tutorial on the High Price of Oil and the Falling Dollar” 10.19.07). Clearly the commodity exchanges are subject to being manipulated and have and in likelihood are continuing to be manipulated. Consider that more than 137 billion barrels of oil were traded on the Nymex alone last year. That is not counting all the other exchanges throughout the world referred to above. And yet the world consumes barely 30 billion barrels of oil annually. And here we have BP clearly in the game to maximize profits, and the higher they can push prices through their trading on the exchanges, the better for BP’s bottom line. How many other producers worldwide are playing the same game? How many Wall Street or London or Singapore bank oil trading desks with no interest in consuming or producing oil, but with wide access to banking resources and to oil company trading intelligence, are going along for the profitable ride And who pays the bill? Yes, you guessed it, you do. Not only at vast economic cost, but at grave risk to our national security. Thanks for the lesson BP!

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Tourism Executives: Gulf Needs Marketing Money

June 29, 2010

WASHINGTON — States bordering the gushing oil spill in the Gulf of Mexico need as much as $500 million to boost tourism with marketing campaigns aimed at cleaning up their image, tourism executives said Tuesday. The federal government should help Gulf states coordinate with BP to receive money for promoting a region dependent on visitors, the executives said during a breakfast meeting of industry representatives. Stephen Perry, president of the New Orleans Metropolitan Convention and Visitors Bureau, proposed the $500 million figure as a reasonable sum for lifting tourism in the Gulf states. He did not say whether the money should come from the $20 billion escrow fund for damages that BP promised at the urging of President Barack Obama. The city of New Orleans has asked BP for $75 million to use for marketing. Florida, Louisiana, Mississippi and Alabama have sought $55 million from BP in a joint request from SouthCoast USA, a nonprofit trade association that helped revive tourism after Hurricane Katrina. “Everything is perception and image in our business,” Perry said. Tourism executives and Rep. Allen Boyd, D-Fla., lamented news reports showing oil-drenched birds and tar balls on beaches even though large stretches of Gulf coastline are clear. Canceled hotel stays and eliminated jobs are easier to account for than the loss of potential tourists, Perry said. The latter doesn’t fit BP’s claims process. The U.S. Travel Association is planning to unveil a recovery plan for Gulf states within a few weeks. One idea is a website providing real-time information on all states in the region. “The Obama administration has been a great ally to the industry in this effort,” said Geoff Freeman, a senior vice president of the U.S. Travel Association. “From walking the beaches of the Gulf coast and eating the food, he’s sending the message that the area’s open for business.” Uncertainty pushes visitors away from the tourist-dependent states as oil continues to spill from the rig that blew up April 20. One hotel owner in St. Petersburg, Fla., told U.S. Travel Association President Roger Dow that calls for bookings were down 27 percent. Up to three-quarters of hotel reservations have been canceled, according to Visit Florida President Christopher Thompson. In Florida, 80 million visitors generated $60 billion in 2009, Thompson said. June through August is the peak season for the state’s northwest region, which brings in 70 percent of its yearly income during the summer, he said. The need to fix the image of the states bordering the Gulf is urgent or late-booking trends and doubt about vacationing in the Gulf will persist for years, Perry said. He offered an example of the long-term effects: An American medical organization recently doubted planning a 2015 conference in New Orleans, still recovering from Hurricane Katrina. The meeting of 15,000 means a “$30 million piece of business,” he said.

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Investors Snap Up High-Quality Multifamily Properties as Rents, Occupancy Improves

June 29, 2010

With apartment vacancies appearing to have peaked, and U.S. rents even starting to edge up slightly, offerings of quality multifamily assets have attracted multiple bidders and secured premium prices in the first half of 2010, with investors having an…

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Gary Rivlin: Payday Lenders Exit Arizona — In Theory At Least

June 29, 2010

Today — June 30th – is the day that the payday lenders are supposed to close up shop in Arizona. But rather than celebrate, consumer advocates are braced for what might be coming next. They’ve seen what’s happened in North Carolina, they see what’s going on in Ohio. And maybe they follow the Payday Pundit , the alter-ego of Steven Schlein, the man the $40-billion-a-year payday industry pays handsomely to put lipstick on the pig. Last week, the Pundit quoted an article in The Wall Street Journal noting that there were nearly 600 stores in Arizona making cash advances against people’s next paychecks but changes in Arizona law “could effectively put them out of business” come July 1. “Take heart,” Schlein wrote in his role as the Pundit. “The industry has proven pretty resilient.” * The payday lending industry didn’t exist at the start of the 1990s but by 2001 there were more than 10,000 of these storefront bankers lending money $200 or $400 at a time to those living on the economic fringes. North Carolina was the first state to fight back against these lenders permitted by local law to charge fees that worked out to an annual interest rate of around 450 percent. The state legislature in North Carolina had been smart. They were willing to invite the payday lenders into the state but the law they wrote would expire unless it was renewed within four years. The payday lenders had sold their product as a once-in-a-blue-moon emergency product but in reality people were o wing money to one of the 1,000 payday stores that had opened around the state for months at a time. It was in mid-2001 that North Carolina tried ending its experimentation with payday lending yet it wasn’t until March of 2006 that the last of the big payday chains actually closed up shop. The payday lenders made the right economic choice by continuing to operate in the state, even if also a morally dubious one. North Carolina meant about $20 million in profits for the payday lenders and if the last three big chains standing – Check Into Cash , Check ‘n Go, and First American Cash Advance – didn’t quite collectively book that much money each year, the trio was adding millions annually to its coffers. And for operating in defiance of the law for nearly 5 years? The three paid a collective fine of $700,000. * To begin with the punch line. “Like mosquitoes adapting to a new bug spray,” wrote Thomas Suddes, a columnist for the Cleveland Plain Dealer . Ohio not once but twice tried pulling the plug on its payday lenders but they’re still making payday loans – even if they don’t use the term “payday” when describing them. The payday lenders first came to Ohio at the start of 1996. It was in 2007 that elected officials in Ohio started holding hearings where anybody who had something to say about the business – whether a store operator, a customer, a former employee, or just Joe or Jo Citizen – could be heard. The Attorney General held public forums around the state. In the Ohio House of Representatives, the Republican chairman of the Financial Institutions Committee held several hearings, including one that lasted seven hours. The result? In the spring of 2008, the House voted overwhelmingly in favor of imposing a 28 percent rate cap on the payday lenders and the Senate followed suit shortly thereafter. And then the day after Ohio Governor Ted Strickland’s signature made the bill a law, the payday lenders filed paperwork to put a referendum on the ballot that would reverse it. That gambit only proved that Ohioans were anything but ambivalent about payday loans. In November 2008, by nearly a two-to-one margin, voters in Ohio rejected the payday industry’s appeal to let them continue making loans at rates that worked out to 391 percent per year. Yet Ohio is pretty much a replay of North Carolina. The smaller players have tended to close shop but the chains are using one of a couple of workarounds. A favorite if for no other reason than its diabolical creativity: Charge only 28 percent interest on loans of a couple of hundred dollars – except now borrowers are paying a $15 application fee and also $10 for a credit check. And some of the more aggressive lenders are paying their customers with a check so they can charge them an extra fee to cash it. How else could they continue making 400 percent or so on their money? The Ohio House has passed a bill that would curb the fees lenders can charge its customers but the Senate has yet to take any action . * Payday came to Arizona in 2000. But like North Carolina, the Arizona legislature added a sunset provision. The payday enabling legislation expired after 10 years, i.e., now. In 2008, the payday lenders bankrolled an initiative they dubbed the “Payday Loan Reform Act.” They spent $14.8 million trying to convince Arizonans to vote for a measure that would allow them to keep operating in the state, according to David Higuera of Arizonans for Responsible Lending . (Interestingly, the industry’s ad campaign in support of their referendum called on voters to “crack down on payday lenders ,” as if theirs was an initiative supported by payday’s foes.) But despite spending so much money, the payday lenders lost that vote, just as they failed at subsequent attempts to convince the legislature to allow them to continue operating in the state. The jig is up today – June 30th. But there are other alternatives for the innovative fringe lender in Arizona, like loans against a person’s car. A lender can charge about 200 percent on a car title loan, not 400 percent (but then they hold a pretty valuable piece of collateral, the title on a person’s car), and already operators representing about half the payday stores in the state have applied for a license to make these loans, said Jean Ann Fox, a long-time staffer for the Consumer Federation of America who happens live in Arizona. And then there’s the lender offering prepaid cards that include an overdraft feature that allows people to borrow against money they don’t yet have — at rates equal to a payday loan. Arizona’s Attorney General has issued a stern warning to any payday lender thinking of continuing to make payday loans after today. And Arizona, unlike Ohio, has limits on the fees a lender can add to the cost of a loan. Fox, who has been monitoring the payday industry since the mid-1990s, is confident that Arizona won’t be as bad as North Carolina or Ohio even as she agrees that the payday lenders are a crafty and resilient bunch.

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Lawrence Jacobs: Deficits, Social Security, and the American Public

June 29, 2010

By Benjamin I. Page and Lawrence R. Jacobs Memo to Pete Peterson: Americans don’t want cuts Social Security – and here’s the proof. Deficit-hawk and investment banker Pete Peterson has devoted a substantial part of his $2.8 billion fortune to pushing for cuts in entitlements like Social Security, in the name of deficit reduction. His Foundation lavishly funded the AmericaSpeaks “town hall” forums held on Saturday, the results of which will be presented to the national Deficit Commission this week — purporting to tell what the American public thinks about various deficit-reduction options. The AmericaSpeaks forums suffered from serious defects as measures of public opinion. Yet the results, perhaps to Peterson’s surprise, correctly indicated that Americans are strongly committed to Social Security. Large majorities oppose cutting Social Security benefits, even for the sake of deficit reduction. The AmericaSpeaks town halls failed to convene a representative sample of Americans: they opened their doors to self-selected political activists with extreme views, possibly hoping to draw Tea Party backers. Their intense emphasis on reducing budget deficits “primed” participants to focus on deficits rather than on the needs of retirees when evaluating Social Security policy. The information provided to participants was one-sided, speculative, and in some cases quite misleading: it overstated the “crisis” in Social Security funding, understated the current burden of payroll taxes on ordinary workers, and failed to convey the extent to which millions of retirees count on stable, dependable Social Security benefits. The policy options that were discussed tilted rightwards. These town halls — like deliberative forums in general — should not be taken as accurate measures of “true” or “deliberative” public opinion. Carefully designed and carefully interpreted opinion surveys, based on representative samples from the whole country and carried out in natural settings rather than the artificial and manipulable “fish bowl” of town hall meetings, can do a much better job of revealing what the American public thinks. Remarkably, however, AmericaSpeaks got lucky (or perhaps, from Peterson’s point of view, unlucky.) Despite all the biases, on several issues town hall participants came up with opinions not very different from those that have been expressed by majorities of Americans in dozens of well-designed national surveys. Participants opposed cuts in Social Security benefits, insisting that benefits must be preserved when balancing the budget. They wanted to strengthen the economy, favoring the current stimulus bill ( stalled in the Senate ) by a margin of 51% to 38%. In order to reduce budget deficits, most favored cutting defense spending and enacting progressive tax measures: raising the payroll tax “cap” so that incomes over $106,800 are subject to the tax (85% in favor); raising high-end corporate and personal income taxes; and imposing new taxes on carbon and on securities transactions. Only on the Social Security retirement age did the results conspicuously stray from actual public opinion. We have carefully reviewed the best available survey-based evidence concerning public opinion on budget deficits and Social Security. It is this evidence, which provides a fuller, more representative, and more accurate picture of Americans’ thinking, that the Deficit Commission and others should pay attention to. For decades, for example, highly respected studies by the General Social Survey and the Chicago Council on Global Affairs have found large majorities of Americans wanting to expand rather than cut back spending on Social Security. In the most recent CCGA survey, for example, 69% said the program should be “expanded,” and only 10% said “cut back.” Support for Social Security is found in virtually all segments of the American population. The opinion that “too little” is being spent on Social Security is shared by majorities of Republicans, Democrats, and Independents; by majorities of men as well as women; by whites as well as African Americans or Latinos; by people with a lot of formal education as well as people with little. Most important, support is very strong among young (age 18-29) Americans, fully 63% of whom told the most recent GSS that we are spending “too little” on Social Security. The supposed generation gap on Social Security is mostly a myth. There is no intergenerational war between “greedy geezers” and the young. Even when survey questions prime respondents to focus on budget deficits, large majorities of Americans oppose the idea of cutting Social Security benefits for the sake of deficit reduction. Early this year a survey by National Review/ McLaughlin (certainly not prone to a left-wing bias) found that only 11% of Americans approved “cutting future benefits of Social Security” to reduce government spending: fully 86% opposed. Similar results have been found within the last year or so by Democracy Corps/ Greenberg Quinlan; Bloomberg; Quinnipiac; EBRI/ Greenwald, and others. When survey questions are asked in a reasonably unbiased fashion, majorities of Americans also express opposition to virtually any sort of specific cut or postponement of benefits. This includes reducing COLAs (only a bare majority would even “consider” this possibility, according to Bloomberg), or increasing the retirement age. Earlier this year, Democracy Corps/ Greenberg Quinlan found a solid 63% of Americans opposed to “allowing the Social Security retirement age for receiving full benefits to rise slowly to age 70 by the year 2020″; only 35% favored this, even when it was posed as a proposal “to help close the federal budget deficit.” To be sure, EBRI/ Greenwald found a bare, 51% to 47% majority in favor of “raising the age at which people can begin receiving full Social Security retirement benefits by one year,” but the question did not specify from what level the age would be raised: perhaps just from age 65, which the 1983 law is already doing. Thus the sole non-progressive policy option that the AmericaSpeaks forums seemed to support – raising the Social Security retirement age to 69, apparently favored by a bare majority (52%) of forum participants – may not actually be favored by a majority of Americans. On this and other questions, careful scrutiny of AmericaSpeaks’ methods is called for, including the unrepresentativeness of their participants and the biases in information presented and options discussed. Finally, abundant evidence from surveys over the years by Bloomberg , NASI, the present authors, Pew, Quinnipiace, and CBS/ NYT have all found that majorities of Americans favor raising or eliminating the payroll tax “cap” on high incomes. Most recently, Bloomberg found 78% of Americans saying that removing the cap entirely should be “considered.” Last summer, NASI found that fully 83% of Americans supported “lift[ing]” the cap “so that workers earning more than [the cap] would pay Social Security tax on their entire salary just like everyone else.” This one policy change, by itself, would erase most of the projected future deficit in the Social Security trust fund. We believe that public opinion should be taken seriously by policy makers. Indeed, elected officials ignore the public’s wishes at their peril. In assessing public opinion on deficits and Social Security, we urge that the Deficit Commission and others to take the AmericaSpeaks forums with a large grain of salt, even if they happened to come close to the truth on several points. To get a full and accurate picture of what Americans want, it is important to consult a wide range of survey-based evidence and expertise. *This post was based on the Roosevelt Institute Working Paper, “Understanding Public Opinion on Deficits and Social Security.” Full text available here . Benjamin I. Page is Gordon Scott Fulcher Professor of Decision Making at Northwestern University and coauthor (with Robert Y. Shapiro) of “The Rational Public: Fifty Years of Trends in Americans’ Policy Preferences.” Lawrence R. Jacobs is the Walter F. and Joan Mondale Chair for Political Studies and Director of the Center for the Study of Politics and Governance in the Hubert H. Humphrey Institute at the University of Minnesota. He has written numerous books and articles on public opinion and other aspects of American politics. This post originally appeared one New Deal 2.0

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Pearl Chan to Join Cheezburger Network as Chief Financial Officer

June 29, 2010

Industry Veteran to Manage Cheezburger Network’s Rapid Growth as It Continues to Tap Into the Internet Zeitgeist

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Pearl Chan to Join Cheezburger Network as Chief Financial Officer

June 29, 2010

Industry Veteran to Manage Cheezburger Network’s Rapid Growth as It Continues to Tap Into the Internet Zeitgeist

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Stuart Whatley: Orrin Opens the Hatch

June 29, 2010

Day two of the Elena Kagan Supreme Court confirmation hearing saw an act of political soap-boxing by Utah Senator Orrin Hatch, who dedicated the brunt of his time to the left’s griping over January’s Citizens United decision. Some of his frustration is likely deserved — a few responses to the ruling may have gone above and beyond the call of shrillness (further elucidation on that here ). But nor was the content of Hatch’s tirade without its flaws. His claim that the decision is widely supported does not reflect polls taken in its aftermath . And as Constitutional Accountability Center founder Doug Kendall notes , the Utah Republican conveniently avoided a central argument of the case: whether corporations should enjoy the same equal rights as individuals to vote, run for office, and participate in electioneering. Just as revealing as these outstanding blemishes though is what Hatch had to say about Utah small businesses and S Chapter corporations (small chartered, incorporated entities that can have as few as one shareholder), which by his conjecture would lose free speech rights if corporate political speech were to be managed. On some issues it is expected that the business community will unite homogeneously around a common cause, such as on taxation. But bundling in small businesses and S Chapters with multinational corporations that comprise forceful “special interests*” largely ignores the way influence peddling works in American politics. When one looks to the most destructive and inane policies operative today, or to lobbying and electioneering efforts that effectively “drown out” the voice of the people, rarely is it disparate laundromat owners or lawn services that raise eyebrows. Though Wall Street and health insurers have stolen the show this year, these are merely the latest installments in a long saga whereby the general public ultimately suffers from a concentrated industry’s bloated gains. More often than not, the story is eventually told of how that industry made its own bed through policy-oriented efforts to avoid oversight and costly regulations, or to garner the largess of contracts and extravagant subsidies. For the past decade a famously egregious but hardly exceptional example of waste stemming from special interest influence is the U.S. sugar program, which pointlessly subsidizes the largest sugar producers at an estimated cost of $2 billion annually to American households . Equally concerning is the massive waste of taxpayer dollars due to an unseemly favoritism for wildly expensive defense contractors and foreign aid distributors prosecuting American adventures abroad. In fact, another salient example could be some public labor unions , which Hatch conveniently groups in with corporations as fellow influence peddlers (the implication being that equal opportunity institutional corruption is unproblematic). Single-cause special interests in politics more resemble business cartels like OPEC than innocuous collections of freethinking but like-minded individuals. The distortive power of such highly concentrated funds on specific legislative causes cannot be overstated, and it is influence individual citizens and small business owners cannot match. In 1998, the year the sugar program began, it’s estimated that the industry enjoyed a net gain of over $1 billion at a campaigning cost of only $2.8 million because its vast reserves of potential electioneering funds were leveraged into powerful campaign threats. Donating to a pliable candidate with the threat of funding his next opponent tenfold is common practice, and it turns $2,000 spent into $12,000 worth of influence gained. What’s more, the ruling in Citizens United furnishes special interests with far more threat credibility than they previously had at their disposal. This influence equally pervades all parties and campaigns, and it has a knack for building up those who are most susceptible. Very rarely do the policy victories attained partly or wholly through such means benefit anyone else. The sugar program has done nothing but reward a few large producers at the expense of billions of dollars to consumers. The regulatory breakdown in the financial sector and that sector’s subsequent growth over the past two decades has resulted in a crash that leaves millions of homes underwater or in foreclosure and middle class incomes stagnant, to say nothing of the national debt to GDP ratio leaping up 30 percent. The influence of nationwide health insurers first ushered in significantly higher costs for care over time, and has now resulted in a reform bill that profoundly expands those very insurers’ customer bases without challenging their status as legal monopolies. Scenarios of this nature that benefit genuine small businesses and striving midsized S Corporations are simply nowhere to be found. Nor does the situation arise abruptly. Each is the foreseeable product of years of influence that is eternally trickling into the system widely unbeknown to the rest of us — American workers and business owners who are busy holding a job, raising a family, pursuing an education, or just trying to stay out of the red (or wondering why sugar is always costing more and more). When politicians from both sides of the spectrum — including Senator Hatch — condemn waste, fraud and abuse in government, these are the types of surreally counterproductive policy scenarios of which they speak. So, it doesn’t take much to see the irony in a politician simultaneously condemning waste in government while championing measures that further enable special interest participation in policy making. * The definition I am using for “special interests” in this post is that used by the IMF’s Marcos Chamon and Stockholm University’s Ethan Kaplan . It states that: “Special interest groups care only about a particular policy, and do not care inherently about which candidate wins the election as long as their special interest policy is supported by the winner.” Related Readings: Financial Reform Won’t Alter Capitalism’s Icarus Trajectory The Capitalist Hagiography Has Little Room for Saints Citizens United , the Roberts Court, and the Future of American Electioneering Obama’s State of the Union Falls Short on Correcting Citizens United American Plutocracy: Corruption Is In the Eyes of the Beholder

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Risky Business: With Stimulus Funds Running Dry, Government Betting On Private Sector

June 29, 2010

With midterm elections drawing near, it’s becoming increasingly difficult to convince Congress that more government money is needed to pull the United States out of its economic slump. Instead, lawmakers seem to be banking on expansion and investment from private businesses. Hopefully they were paying attention to Tuesday’s stock plunge — attributed to news of slowing economies from the U.S. to China — which, in the view of David Leonhardt of the New York Times, suggested that “pessimism seemed the better bet.” One day of trading isn’t necessarily a referendum on economic policy, of course. Leonhardt equivocates on the question of longer-term spending versus austerity, writing, “You can find good evidence to support either one.” But investors remain consistently reluctant to let their money ride, consumer confidence is in the gutter, and the U.S. Census Bureau hired more than ten times as many Americans in May as the entire private sector put together. As the Los Angeles Times outlines, state and local governments are still heavily dependent on soon-to-expire federal stimulus funding to avoid making painful cuts to social services that benefit millions of desperate Americans. The U.S. government isn’t alone in its hesitation to keep spending, but the devastating effects of austerity measures in Ireland offer a bleak picture of what may come if Congress continues on a similar path. There is precedent for premature economic optimism in the United States, as well. In 1937, the middle of the Great Depression, significant relative economic expansion had prompted President Roosevelt to cut spending and Congress to raise taxes, cratering the still-fragile national economy and spiking unemployment. Though Leonhardt argues that America will have to endure some painful cuts in the future, he writes, “The parallels to 1937 are not reassuring.”

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David Isenberg: The Three Imperative C’s: Comprehending Contracting Culture

June 29, 2010

Remember the Human Terrain System Program? That’s the U S. Army program which embeds social scientists with combat brigades in countries like Iraq and Afghanistan to help tacticians in the field understand local cultures. Perhaps we need to bring a HTS team home to decipher and understand the military contracting culture. That, at least, is the conclusion of a written GAO testimony, released today at a congressional hearing. It suggests that what we need for better contracting is cultural change. Titled ” Cultural Change Needed to Improve How DOD Plans for and Manages Operational Contract Support ” the statement by William Solis, GAO Director, Defense Capabilities and Management, given today at a hearing of the House Subcommittee on National Security and Foreign Affairs, Committee on Oversight and Government Reform, finds that: DOD still faces challenges that stem from the department’s failure to fully integrate operational contract support within DOD, including planning for the use of contractors, training military personnel on the use of contractor support, accurately tracking contractor use, and establishing measures to ensure that contractors are accountable. A cultural change in DOD that emphasizes an awareness of operational contract support throughout all aspects of the department, including planning, training, and personnel requirements, would help the department address these challenges in ongoing and future operations. Among other things Solis’s testimony updates contractor numbers in Iraq and Afghanistan. In Iraq and Afghanistan contractor personnel now outnumber deployed troops. For example, according to DOD, as of March 2010, there were more than 95,000 DOD contractor personnel operating in Iraq and more than 112,000 DOD contractor personnel operating in Afghanistan. While the number of troops fluctuates based on the drawdown in Iraq and the troop increase in Afghanistan, as of June 2010 there were approximately 88,000 troops in Iraq and DOD estimates that the number of troops in Afghanistan will increase to 98,000 by the end of fiscal year 2010. DOD anticipates that the number of contractor personnel will grow in Afghanistan as the department increases its troop presence in that country. However, these numbers do not reflect the thousands of contractor personnel located in Kuwait and elsewhere who support operations in Iraq and Afghanistan. By way of contrast, an estimated 9,200 contractor personnel supported military operations in the 1991 Gulf War. Solis’s concludes thusly: Looking toward the future, the challenges we have discussed demonstrate the need for DOD to consider how it currently uses contractors in contingency operations, how it will use contractors to support future operations, and the impact that providing management and oversight of these contractors has on the operational effectiveness of deployed units. These considerations would also help shift the department’s culture as it relates to operational contract support. As DOD doctrine recognizes, operational contract support is more than just logistical support. Therefore, it is important that a significant culture change occur, one that emphasizes operational contract support throughout all aspects of the department, including planning, training, and personnel requirements. It is especially important that these concepts be institutionalized among those serving in leadership positions, including officers, noncommissioned officers, and civilians. Only when DOD has established its future vision for the use and role of contractors supporting deployed forces and fully institutionalizes the concepts of operational contract support can it effectively address its long-term capability to oversee and manage those contractors.

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Dan Solin: Your Call to Action: The Financial Reform Myth!

June 29, 2010

Here’s all you need to know about pending legislation relating to financial reform: Banks stocks soared on June 25, 2010 as news of the new bill was circulated. In an excellent commentary , Jane Bryant Quinn noted that investor protection was gutted in the Senate version of the bill by removing any obligation of brokers and insurance agents to act in the best interests of their clients. Registered Investment Advisors have this obligation (known as a “fiduciary duty”). Why anyone would hand over their money to someone who can place their interests above their clients is beyond me, but that is precisely what most investors do. More appalling is the fact that most employers entrust their 401(k) plans to the same brokers and advisers. Employers have a fiduciary obligation to their employees to insure their 401(k) plans are in the best interest of the employees. You would think they would want their investment professionals to live up to the same standard. Legally, this issue is very significant. A real fiduciary under ERISA (the federal law governing retirement plans) accepts 100% of the liability for the selection and monitoring of investment options. Brokers and insurance agents toss the “fiduciary” label around, but they accept no liability for the expensive, under-performing mutual funds they select for 401(k) plans. Insurance companies are particularly ingenious at disguising their lack of fiduciary responsibility. Some issue a “Fiduciary Warranty” which seems very impressive. However, when you read the small print, this “warranty” disclaims all fiduciary responsibility! If you are an employer and want to confirm whether the investment adviser to your 401(k) plan is a real fiduciary, require the following statement to be signed and returned to you: “We confirm we are 3(38) fiduciaries under ERISA.” Accept no departures from this language. You should not count on getting it back. Congress is beholden to the securities industry. As Ms. Quinn notes, Sen. Tim Johnson (D. South Dakota), was responsible for eliminating the proposal in the House version of the bill that would have imposed fiduciary responsibility on all advisers. He’s not known as “the Senator from Citibank” for nothing. Since no meaningful legislative reform will be forthcoming, investors need to take action. Here are some suggestions you can easily implement: 1. Don’t do business with anyone who will not accept fiduciary responsibility in writing; 2. Don’t do business with anyone who requires you to submit to mandatory arbitration, particularly if the designated forum is FINRA, which is an industry trade association pretending to be a neutral arbitration forum. 3. If your employer does not match your 401(k) contribution, don’t participate in the plan. Instead, consider a traditional or a Roth IRA (if you qualify). 4. Even if your employer does match, consider not participating in your plan. This may, or may not, be a sound financial decision, but you’ll feel good about not participating in system designed to enrich brokers, advisers and mutual funds at your expense. Let’s face it. You’re on your own. However, by taking these simple steps you can (and should) opt out of a system that has destroyed the lives of so many hard working Americans. The views set forth in this blog are the opinions of the author alone and may not represent the views of any firm or entity with whom he is affiliated. The data, information, and content on this blog are for information, education, and non-commercial purposes only. Returns from index funds do not represent the performance of any investment advisory firm. The information on this blog does not involve the rendering of personalized investment advice and is limited to the dissemination of opinions on investing. No reader should construe these opinions as an offer of advisory services. Readers who require investment advice should retain the services of a competent investment professional. The information on this blog is not an offer to buy or sell, or a solicitation of any offer to buy or sell any securities or class of securities mentioned herein. Furthermore, the information on this blog should not be construed as an offer of advisory services. Please note that the author does not recommend specific securities nor is he responsible for comments made by persons posting on this blog.

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$2.3 Billion in Troubled CMBS Loans Coming Due Over Next 6 Months

June 29, 2010

There are 960 fixed rate loans representing $9.6 billion scheduled to mature by the end of the year, according to a Fitch Ratings’ review of CMBS fixed rate commercial loans. Of these 960 loans, 103 loans representing $2.3 billion (23.3%) are in special…

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