May 2011

Randal O’Toole: Transportation: From the Top Down or Bottom Up?

May 25, 2011

Should transportation be funded and planned from the top down or bottom up? Top-down advocates, such as the Brookings Institution’s Robert Puentes (writing in the May 23 , 2011 Wall Street Journal ) argue that only central planners can have a “clear-cut vision for transportation” that will allow them to target spending “to make sure all those billions of dollars help achieve our economic and environmental goals.” Advocates of bottom-up funding, such as the Cato Institute , Reason Foundation and Heritage Foundation , respond that public and private transportation providers better serve our needs when they are responsive to the fees people pay for various forms of transportation. In fact, most of the problems with transportation today, from an antiquated air-traffic control system to deteriorating bridges to empty transit buses, are due to top-down planning. Fifty years ago, America’s transportation system was almost entirely funded from the bottom up. Airlines, railroads and most transit systems were private and funded out of fares and fees. Airports and highways were public but funded out of user fees such as ticket fees and gas taxes; highway managers knew bridges to nowhere would not generate any fees, so they had no incentive to waste money on unnecessary projects. Transportation deregulation in the late 1970s and early 1980s further improved this system by making airlines, freight railroads and, most recently, intercity buses more innovative and responsive to user needs. The bottom-up paradigm began to break down in 1964, when Congress started funding urban transit. In 1973, Congress allowed cities to use federal gas taxes for transit projects for the first time, and in 1982 Congress dedicated a share of those gas taxes — initially 11.1 percent, now 15.5 percent — to transit. By the 1990s, the whole idea of a user-fee-driven system was forgotten as Congress used transportation earmarks, which didn’t exist before 1982, to divert billions of dollars of gas taxes to politically favored projects — which often had nothing to do with transportation — and dedicated increasing shares of the remainder to non-highway programs. The results of this increasingly top-down system have been huge increases in congestion and massive waste as cities and states today focus scarce transportation funds on urban monuments rather than improvements aimed at increasing mobility. According to the Texas Transportation Institute , congestion today costs the average commuter five times as much as it did in 1982, the year Congress first dedicated gas taxes to transit. Motivated by a “we-know-better-than-you” mentality, growing numbers of cities are just letting congestion get worse in the hope that a few people will stop driving their cars. Rather than relieving congestion, the mantra is giving people “transportation choices” in the form of expensive rail transit. Central planners’ fascination with trains is a wonder to behold. A group called Reconnecting America laments that only 14 million American jobs — about 10 percent — are located within a quarter mile of transit, by which they mean rail transit. The group advocates spending a quarter of a trillion dollars to increase this to 17.5 million jobs, or 12.5 percent. Simply putting transit close to jobs, however, doesn’t mean people will ride it. The Brookings Institution recently ranked San Jose as the second-most transit-accessible urban area in America, while Chicago was ranked 46th. Yet the Census Bureau says only 3.4 percent of San Jose commuters use transit, compared with 13.2 percent in Chicago. Since 1970, taxpayers have spent some $500 billion subsidizing transit, including building rail transit lines in more than twenty different urban areas. Yet the number of transit trips taken by the average urban resident has remained virtually unchanged even as per capita urban driving has more than doubled. No matter how well intentioned, top-down transportation planning quickly turns into a combination of social engineering and pork barrel. It is time to return to a bottom-up funding system that rewards transport agencies and companies for reducing costs and increasing mobility. One way would be to have states take over federal gas taxes as proposed by New Jersey Representative Scott Garrett. To the extent that the federal government distributes any transportation funds to states at all, it should use formulas, not grants, because formulas are much harder to politically manipulate. Ideally, the formulas should give heavy weight to the user fees collected by each state to reinforce, rather than distract from, the bottom-up process. Top-down planners waste tens of billions of dollars a year on barely used transportation projects that do little to relieve congestion, save energy or reduce auto emissions. A bottom-up, user-fee-funded transportation system will save taxpayers money and increase mobility, which should be the real goals of any transportation policy. Randal O’Toole ( rot@cato.org ) is a senior fellow with the Cato Institute and author of Gridlock : Why We’re Stuck in Traffic and What to Do About It.

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ProPublica: The Heroes Are Really Zeroes in HBO’s Too Big To Fail

May 25, 2011

By Jesse Eisinger , ProPublica HBO’s Too Big To Fail — I just caught up with it last night, thanks to HBO On Demand — is extraordinarily revealing about the financial crisis. Only its revelations are almost entirely inadvertent. The movie is set up in the Hollywood conventional way: A gang of misfits, each with a special expertise, is brought together for an impossible mission. There’s Treasury Secretary Henry Paulson, steely eyed at the moment of truth. There’s New York Federal Reserve head Timothy Geithner, the athlete (he doesn’t just jog, but also plays what appears to be squash). And then there’s Federal Reserve chairman Ben Bernanke, the professor with a heart of gold and secret knowledge of the Great Depression. Ostensibly it’s a story of their success against all odds. Michael Kinsley, reviewing the movie in the New York Times , labeled Hank Paulson [1] the “hero” of the account. Except that the movie actually depicts something entirely different: failure upon failure. Too Big To Fail the movie isn’t the story of how the Three Musketeers saved the global economy. It’s a story of how the three didn’t see the financial crisis coming; hadn’t prepared for it; made mistake after mistake as it was cresting; and then, in their moment of triumph, made their most colossal blunder of all. That, it turns out (whether or not Too Big To Fail knows it), is the true story of the financial crisis. How much did Curtis Hanson and the writers mean for that to be the story? Throughout, the characters drop hints about their missteps, but the plot unfolds like a financial “Die Hard,” with our intrepid heroes battling fiendishly powerful forces toward a happy ending. (Full disclosure in this era of transparency: I write a regular column [2] for DealBook, the New York Times section edited by Andrew Ross Sorkin, the reporter upon whose book [3] the movie was based.) Early on, Paulson complains to his staff that they have been behind on everything as the crisis began to emerge. And that’s true! The crisis actually started in the late summer of 2007 [4] . Paulson’s first effort, late that year, was to get a bunch of banks to assemble a giant off-balance-sheet concoction [5] that would save each individual bank’s off-balance-sheet monstrosity. It was a complete flop. In the movie, as bankers and government officials frantically try to save Lehman, Chris Flowers, the private equity investor and banking impresario, is depicted as informing Paulson and Geithner that AIG is teetering on the edge. In their fumbled response, he immediately grasps the truth. “They’re not on top of it,” he tells a confederate. And they weren’t. In real life, AIG had been struggling since the middle of 2007. Paulson and Geithner [6] of course had some inkling of the problems [7] at the world’s largest insurer. But they didn’t prepare for it. In the movie, the chief executive of General Electric, Jeff Immelt, places a terrified call to Paulson [8] saying that GE can’t borrow. GE is standing in for every Real American manufacturing company. We are reminded it makes light bulbs and washing machines. Paulson is shocked that such a stalwart could be having trouble borrowing. The reality, of course, is that GE was more a finance company than a manufacturer and was teetering because it financed those operations with billions of short-term borrowing. It is also true that Paulson, Bernanke and Geithner had no inkling of GE’s troubles until the very last moment and therefore had no plan to deal with it. Plans are, in the movie, almost nonexistent. The team of heroes races from crisis to crisis, as Bond goes from chase scene to babe, eventually stumbling on the evil SPECTRE [9] plot to take over the world. Intentionally or not, the movie is echoing real life. Despite warning signs [10] , Paulson, Geithner and Bernanke had no evident plans throughout the last half of 2007 and the first eight months of 2008. Not for how to resolve Lehman after Bear Stearns’ collapse, not for AIG, not for recapitalizing the banking system. Indeed, they asked Congress for $700 billion to implement the Troubled Asset Relief Plan [11] to buy toxic assets from the banks, and then, without any further discussion, abandoned that idea and injected capital into the banks. Many economists [12] and financial experts had been urging them to do just that, but when they finally hit on that as a solution, it was so poorly thought out that they gave the money to the banks on overly generous terms. This moment is depicted at the end of the movie, and because it is both a triumph in the conventional narrative sense, but also a major mistake by our heroes, it is the

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Bank Profits Soar And Corporate Bonuses Swell As Broader Economy Stagnates

May 25, 2011

The divide between corporate fortunes and those of ordinary Americans continues to widen, as banks post strong profits and the nation’s largest companies boost executive pay. Banks and corporations are exhibiting a confidence reminiscent of pre-crisis days, even as the broader economy still sputters. Bank profits soared in the first three months of the year, and corporate profits likewise swelled last year. And executives saw ever fatter bonuses. But the amount of cash banks sent out into the economy as loans declined last quarter, and the pace at which companies are hiring new workers remains disappointing with the unemployment rate stuck around 9 percent. For big corporations, the recession’s legacy has all but faded. But for much of the rest of America, finances are still tight. Home values are falling at an accelerating pace, and high energy prices recall the nightmarish summer of 2008. The widening divide in fortunes constitutes a long-term drag on the economy, experts say. “If a very small number of people have everything, everybody else has nothing,” said Mark Blyth, professor of international political economy at Brown University. “If they decide not to spend, or if they decide basically not to invest, then everyone else’s health and well-being depends upon the decisions of a few, whose consumption decisions are utterly different and completely independent of everyone else’s.” Bank revenue fell during the first three months of the year, but profits soared as institutions set aside less money to cover losses, according to new government report. Bank profits rose to reach $29 billion, a 66.5 percent increase from the same period last year and the best quarterly performance since the second quarter of 2007, the report said. Net operating revenue at banks insured by the Federal Deposit Insurance Corporation was 3.2 percent less than the same period a year ago, marking only the second time on record that the industry has reported a year-over-year quarterly revenue decline, the Tuesday report from the FDIC said. But banks stored away 60 percent less money to cover losses than a year ago, the smallest rainy-day provisions since the third quarter of 2007, according to the report. “The process of repairing bank balance sheets is well along, but is not yet complete,” FDIC chair Sheila Bair said in a Tuesday release, adding that “there is a limit to how far reductions in loan-loss provisions can boost industry earnings.” In corporate America, pay is up. For chief executives at the Standard & Poor’s 500 index companies, compensation grew last year after two years of decline, according to a report from private research firm Equilar. Median total compensation for S&P 500 chief executives swelled by 28.2 percent last year, largely driven by swelled bonuses. The median bonus for S&P 500 chiefs was nearly $2.2 million last year, a 43.3 percent increase from 2009, the report says. A variety of factors gave large companies a boost last year, including the Federal Reserve’s $600 billion asset-purchase program that began in the fall. As the Fed’s purchases of Treasury securities lowered interest rates, investors searching for yield turned toward riskier assets like equities, contributing to a stock market rally in the second half of the year. But in the broader economy, challenges remain. Companies have added hundreds of thousands of jobs so far this year, but the unemployment rate has still been hovering around 9 percent. Oil prices remain at highs reminiscent of 2008, when months of high energy prices helped drag the economy into recession. And home prices continue falling, with economists forecasting the decline to last at least through the rest of the year. Banks decreased their lending last quarter, with many still compensating for the excesses of the years leading up to the financial crisis. And nearly half of the loans to commercial and industrial borrowers — which increased overall — went to foreign borrowers, the FDIC says. Small loans to farms and businesses, a crucial source of jobs, declined by 2.8 percent, according to the FDIC. Economic weakness contributed to the erosion in bank revenue last quarter. Interest-earning assets showed weak growth, so that six of the 10 largest institutions reported year-over-year declines in net operating revenue, according to the FDIC. Banks’ other operations also proved less lucrative. Trading income was down by $1 billion last quarter, and service charges on deposit accounts declined by $1.7 billion, the FDIC says. Losses from bad loans, though, are gradually declining as the volume of delinquent loans goes down. Loans overdue for at least 90 days declined for the fourth quarter in a row to $341.7 billion by the end of March, a 4.7 percent decline from the end of 2010, according to the FDIC. The number of banks at risk of failure increased last quarter, as the FDIC’s “problem list” grew to 888 institutions from 884. That’s almost 12 percent of the banks insured by the FDIC. The pace of banks’ being added to the list, though, is slowing.

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GRAPHIC PHOTOS: ‘I Still Feel That Little Finger’: Table Saw Victims Speak Out

May 25, 2011

WASHINGTON — A consumers’ advocacy group and a panel of table-saw victims called on government regulators and the power-tool industry Wednesday to enact new safeguards against saw-related mutilation and amputation. The number of table-saw injuries has risen to 40,000 annually, an increase of 10,000 a year in the last decade, National Consumers League Executive Director Sally Greenberg told reporters at the National Press Club. About 4,000, or 10 percent, of the table-saw accidents each year result in finger amputation, according to statistics compiled by the NCL. The nonprofit group’s leader called for the Consumer Product Safety Commission , the federal agency tasked with protecting Americans from dangerous products, push through a table-saw safety standard that was first proposed in 2003 but has since languished. She also asked the tool industry to drop its opposition to the regulations and pass along any new costs to customers if need be. “The vast majority of table-saw manufacturers haven’t changed their technology in 50 years,” Greenberg said. “This is a major public health and safety issue that cries out for a public policy response.” Long used by carpenters, construction workers and woodworking hobbyists, table saws typically come with little more than plastic guards to prevent fingers and hands from coming into contact with the blade. These guards are often removed by the saws’ operators to make the work easier. The consumers’ league would like to see manufacturers forced to adopt a technology developed by a company called SawStop , which brings the blade to a standstill when it senses the electrical impulse emanating from human flesh. (A demo of the SawStop technology can be viewed here.) Greenberg said the NCL has no affiliation with SawStop and receives no funding from the company. The safety measure would add about $100 to the price of a saw, she added. NCL officials and table-saw victims have been meeting with lawmakers this week to make their case. The Power Tool Institute , a trade group representing table-saw manufacturers including Black & Decker and Bosch, said in a statement that the price of table saws would “increase dramatically” if companies had to use the SawStop technology. “The lower-priced consumer bench-top saws will disappear from the market,” the group warned. It also said SawStop would enjoy an unfair market advantage. Four victims of table-saw accidents spoke out in favor of new standards Wednesday, including Adam Thull of Crosslake, Minn. Thull owns his own woodworking business, and a year ago this month most of his right arm went through a table saw as he was cutting a wood panel. The blade sliced clean through the bone and nerve in his forearm. Thull’s been told it may take five years for him to recover, if he’s lucky. “My two small children and my wife suffer along with me,” the Minnesotan said. Considering Thull didn’t have health insurance, the accident has devastated him financially in two ways: With five surgeries down and six to go, he’s run up a medical tab that he can’t even fathom; and at the same time, he’s also lost his ability to earn money. He can only work for five or ten minutes at a time before the pain in his arm becomes unbearable. “I’ve been able to find ways to do it, but there’s no feasible way to turn a profit,” Thull said. “It takes me ten times longer to accomplish anything.” In his ten years in woodworking, the 30-year-old had made a decent living doing what he loved to do. But now his family is on food stamps and receiving aid from the Lutheran Social Service of Minnesota. He doesn’t know how he’ll earn money in the future. “The business is more or less done. There’s no way to pay the insurance costs,” he said. “The physical suffering is on me, but my six-year-old knows. He says, ‘I wish daddy was like before the accident.’” Although there are no hard statistics, Greenberg said that about 20 percent of table-saw accidents seem to be work-related, with the rest happening to hobbyists. Like Thull, many table-saw victims are injured in the course of self-employed work. Curtis Harper, a firefighter from Provo, Utah, said he lost his pinky and suffered severe nerve and ligament damage while he was notching a corner of a wooden board in 2007. Harper owns a small mantel-making business, Masterpiece Cabinet and Mill. Looking at his mutilated hand after it ran through the saw, his first thought was that he’d lose his primary job, as a firefighter. He’s since gone back to work at the firehouse, but he’s lost much of the strength in his hand. And the accident isn’t easy to forget. “Phantom pain is real,” Harper said. “I still feel that little finger.” WARNING: Some of the photos below are gruesome.

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Trey Ellis: Why Obama Should Recess Appoint Elizabeth Warren

May 25, 2011

These days individual news stories supplant one another like cards dealt from a deck. You draw an ace today but tomorrow a four. Sure Obama nabbed the world’s most wanted terrorist three weeks ago, but what has he done for us lately? What is more important than individual events is their syntax. The events are nouns and how they are handled verbs, but unless they are strung together coherently, consciously, the reader/voter doesn’t understand what story you’re trying to tell them. Targeting Osama was much easier for the president because he defined his enemy as the enemy. Since apart from when he is actually campaigning he is unwilling to regard the opposition as antagonists, combating them has proven not only difficult but largely unsuccessful. Since the opposition are unabashed cheerleaders for the top 2% untouched by this Great Recession, by not providing an equally forceful counter argument to the rest of us, it is difficult for us not to despair. The president has done a lot of good in this first term, most notably saving the nation and the world from another full-blown Depression, but his failure to hold those same banking interests accountable for the mire of unemployment and destroyed savings we currently suffer through has clouded his entire first term and threatens to damn his legacy. When the banks and brokers were all teetering on the brink Obama was offered a perhaps once-a-century opportunity to restore fairness to our unsustainable economic system. His saving them without fixing them — much more than race hatred — ignited the Tea Party, which co-opted the GOP, which currently dominates domestic policy making. A robust Consumer Financial Protection Bureau won’t make up for the president’s tragic missed opportunity to rein in the banks, but it could send a message that he has awakened to the problems of a middle class decimated by this recession. The poor have always struggled, but now, not only middle class, but upper-middle class Americans are making do with less and understand in more visceral ways than ever that the government is by, of and for the people in name only. This profound cynicism in the wake of Obama’s promise of hope is the president’s most devastating adversary. A first step to combat this crisis of confidence in his handling of our economy would be first to mercilessly chide Republicans for their being complicit in the continued fleecing of consumers, and then defiantly appointing Ms. Warren during the recess. It’s not class warfare for the government to protect all of its citizens from financial exploitation. It is what we assumed our government was there for in the first place. The very fact that such a simple logical step is seen as at all controversial only bitterly reinforces our despair. Going to bat for Ms. Warren is an easy show of political force and a great way to kickoff a sustained narrative of a man willing to go to bat for the vast rest of us. From now until election day the president needs to convince the middle class and seniors that he’s the only thing that stands between them and the bread line.

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Costco Profit Rises With Jump In Membership

May 25, 2011

ISSAQUAH, Wash. — Costco’s net income rose 6 percent in its fiscal third quarter, the company said Wednesday, with growing membership numbers pushing sales both at home and abroad. The nation’s biggest wholesale club has been among the top performers during the down economy and now, with more discretionary income in the pockets of shoppers, Costco had capitalized on the additional free spending. Still, shares slid 2 percent in premarket trading after a report from the Commerce Department showed that orders for durable goods slid by the largest amount in six months. Costco posted earnings of $324 million, or 73 cents per share, for the period ended May 8. That’s up from $306 million, or 68 cents per share, a year ago. The current quarter’s results included an inventory charge of 7 cents per share. Analysts polled by FactSet, who typically exclude one-time charges, expected earnings of 77 cents per share. Revenue climbed 16 percent to $20.62 billion from $17.78 billion, just edging out Wall Street expectations. Costco said its results included sales from its 50 percent owned Mexico joint venture, which accounted for 3 percentage points. Sales at stores open at least a year increased 12 percent, with the figure up 10 percent in the U.S. and 18 percent internationally. Removing the impact of rising gasoline prices and strengthening foreign currencies, sales at stores open at least a year gained 7 percent. The metric climbed 6 percent in the U.S. and 11 percent overseas. Sales at stores open at least a year is a key gauge of a retailer’s health because it excludes results from stores opened or closed during the year. Costco Wholesale Corp., based in Issaquah, Wash., currently runs 581 warehouses, including 425 in the U.S. and Puerto Rico, 80 in Canada, 32 in Mexico, 22 in the U.K., seven in Korea, six in Taiwan, eight in Japan and one in Australia. Company shares fell $2 to $79.35 before the market opened.

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Robert Reich: Paul Ryan Still Doesn’t Get It

May 25, 2011

Republican House Budget chief Paul Ryan still doesn’t get it. He blames Tuesday’s upset victory of Democrat Kathy Hochul over Republican Jane Corwin to represent New York’s 26th congressional district on Democratic scare tactics. Hochul had focused like a laser on the Republican plan to turn Medicare into vouchers that would funnel the money to private health insurers. Republicans didn’t exactly take it lying down. The National Republican Congressional Committee poured over $400,000 into the race, and Karl Rove’s American Crossroads provided Corwin an additional $700,000 of support. But the money didn’t work. Even in this traditionally Republican district — represented in the past by such GOP notables as Jack Kemp and William Miller, both of whom would become vice presidential candidates — Hochul’s message hit home. Ryan calls it “demagoguery,” accusing Hochul and her fellow Democrats of trying to “scare seniors into thinking that their current benefits are being affected.” Scare tactics? Seniors have every right to be scared. His plan would eviscerate Medicare by privatizing it with vouchers that would fall further and further behind the rising cost of health insurance. And Ryan and the Republicans offer no means of slowing rising health-care costs. To the contrary, they want to repeal every cost-containment measure enacted in last year’s health-reform legislation. The inevitable result: More and more seniors would be priced out of the market for health care. The Ryan plan has put Republicans in a corner. Some, like Massachusetts Senator Scott Brown and, briefly, presidential hopeful Newt Gingrich, are rejecting the plan altogether. Most, though, are holding on and holding their breath. After all, House Republicans approved it — and voters don’t especially like flip-floppers. Senate Democrats will bring the Ryan plan for a vote Thursday in order to force Senate Republicans on the record. Watch closely. Some GOP stalwarts say the Party must clarify its message — a sure sign of panic. Former Republican congressman Rick Lazio says the GOP “must do [a] better job explaining entitlements.” It’s just possible the public knows exactly what entitlements are — and is getting a clear message about what Republicans are up to. All this should give the White House and Democratic budget negotiators more confidence — and more bargaining leverage – to put tax cuts on the rich squarely on the table. And, while they’re at it, turn Medicare into a “Medicare-for-all” system that forces doctors and hospitals to shift from costly tests, drugs, and procedures having little effect, to healthy outcomes. Robert Reich is the author of Aftershock: The Next Economy and America’s Future , now in bookstores. This post originally appeared at RobertReich.org .

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Jared Bernstein: Cut and Grow? I Say No

May 25, 2011

Neil Irwin’s Washington Post piece this AM provides a useful review of the different ways economists and politicians are thinking about the short-term impact of spending cuts on growth and jobs. I’ve been pretty aghast to hear claims that large cuts would immediately generate job growth (and Irwin should have at least quoted someone with that view in the piece) when the opposite is almost surely the case. You can make this a lot more complicated, but when you’re as far below capacity as we are — when so many people are unemployed, e.g. — it’s really quite simple arithmetic. Government spending feeds right into GDP growth and cuts subtract from it. Now, when you’re at full capacity, it’s different. At that point you’re pouring water into a glass that’s already full so you’re just wasting water. And you’re going to need some paper towels to clean it up (that’s inflation in this example — sorry, it’s early and I’m only partially caffeinated). But with GDP growth just around trend (positive but not all that strong) factories with capacity to spare, and 20+ million un- or underemployed, there’s space in the glass. In fact, if you look at the GDP or employment accounts, it’s clear that state spending contractions are a real drag on growth and jobs right now. (Maybe I’ll try to post some graphs on this later.) If I ran the country and had my druthers and wasn’t constrained by today’s budget politics (yes, that’s a lot of ‘ifs’), I’d do another round state fiscal relief. The story the “cut-now-and-grow” lobby wants to tell depends not on arithmetic, but on what Krugman calls the confidence fairy (she’s good) and the crowding-out troll (he’s bad). In a tight budget environment like today’s, politicians love the fairy because she provides free stimulus. And since she’s a fantasy, you can attribute anything you want to her: “confidence in the markets depends on [your favorite budget cut here]!!” Then there’s the notion that high public spending levels are crowding out private borrowing. Again, not a plausible story with excess capacity, the Fed funds rate at zero, and companies sitting on cash that they could invest with if they saw good reasons to do so. One final beef with this story. Irwin cites economist Kevin Hassett at the end of the piece suggesting that cutting government benefits to individuals would be more stimulative than cutting government infrastructure. Besides being backwards — the question is what would hurt growth least, not which “…cuts would be more beneficial” — the evidence I’ve seen, like Table 11 here , shows infrastructure in the middle of the pack in terms of stimulative impact, less than some of the major benefit programs like unemployment insurance of food stamps. And here’s something else on infrastructure, from someone who’s spent part of a career tracking its impact: compared to the other spending programs that get resources to folks who need it and will spend it quickly, it’s slow. Remember, at the heart of this argument is policy measures that would generate “immediate relief,” something a lot of people in this economy could use right now. I’m all for infrastructure investment — it’s a key input to our economic productivity, security, and living standards. But compared to spending on individuals, its stimulative impact usually occurs in the medium term, not right away. This post originally appeared at Jared Bernstein’s On The Economy blog.

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Risk Of Radiation Release From Spent Fuel Is Greater In The U.S. Than Japan

May 25, 2011

• The risk of a catastrophic release of radiation from an accident at a spent nuclear fuel pool is much higher in the United States than at Japan’s Fukushima Daiichi plant, according to a new report from the Institute for Policy Studies. Spent fuel at many U.S. plants in facilities that were never designed for long-term storage exceeds that stored at the four damaged units of the Japanese plant. For example, the spent fuel in a pool at Vermont Yankee plant exceeds the combined total in the pools at the four troubled reactors at the Fukushima site. There are more than 30 million spent fuel rods in these storage pools in the U.S., the “largest concentration of radioactivity on the planet,” according to author Robert Alvarez. The institute recommends moving most of the spent fuel from pools to dry air-cooled steel casks, which is a safer storage method. • In a split vote on a contentious proposal, the Securities Exchange Commission decided to allow whistleblowers to be rewarded between 10 percent and 30 percent of the sanctions collected in enforcement cases. “The SEC refused to buckle under tremendous pressure from Wall Street lobbyists led by the Chamber of Commerce who worked overtime trying to undermine historic corporate whistleblower protections,” said National Whistleblowers Center director Stephen Kohn. Earlier, the agency’s enforcement chief Robert Khuzami testified that they have seen an uptick in “high-quality tips” and complaints since the Dodd-Frank Law and said that the SEC is not aware of any empirical data suggesting that internal compliance will be undermined by not having an internal reporting requirement. “The SEC refused to buckle under tremendous pressure from Wall Street lobbyists led by the Chamber of Commerce who worked overtime trying to undermine historic corporate whistleblower protections,” Kohn said. • When drugmaker Sanofi-Aventis lobbied the Food and Drug Administration to delay approval of a genetic drug that would cut into the profits of its blockbuster blood-thinner Lovenox, it relied on some heavy hitters, including the Society of Hospital Medicine and the North American Thrombosis Forum. Among those pleading its case before the agency was Dr. Victor Tapson, who sent a letter on behalf of the American College of Chest Physicians — unmentioned was that Tapson has been paid $260,000 by Sanofi between 2007 and 2010, according to a new report released by the Senate Finance Committee this morning. • AMD Industries in Cicero, Ill. was fined $1.2 million for exposing five workers to asbestos hazards without protection by the Occupational and Safety Health Administration. That includes 19 willful citations — which refers to violations that demonstrate an intentional disregard for the law or “plain indifference to employee safety and health.” • Oklahoma Republican Sen. James Inhofe is challenging the Environmental Protection Agency’s $1.2 billion budget request because he claims it has more than $2 billion left over from the 2011 budget. • The Federal Deposit Insurance Corporation is offering regulatory relief to banks and financial institutions that “work constructively with borrowers experiencing difficulties beyond their control because of damage caused by the severe weather around the country. • Here it is — the animated GIF of Elizabeth Warren’s reaction to being called a liar by Rep. Patrick McHenry (R-N.C.) during a contentious end-of-hearing dispute over the Consumer Financial Protection Bureau before the House Oversight and Government Reform subcommittee.

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David Vitter Makes Bold Move In Oil Drilling Battle

May 25, 2011

WASHINGTON — Democrats are crying foul after a GOP senator blocked a pay raise for Interior Secretary Ken Salazar in an effort to pressure him to approving more deepwater oil and gas drilling permits. At issue is a move by oil state Sen. David Vitter, R-La., to not only block the almost $20,000 raise for Salazar last week but then offer to allow the raise to go forward if the Interior Department issues six new deepwater permits a month. Salazar responded with a letter accusing Vitter of employing strong-arm tactics and of trying to coerce him into approving new drilling permits in order to get the raise. Salazar said Vitter’s move amounted to “attempted coercion of public acts here at the Department” and asked that efforts to give him a pay raise be halted. Salazar’s pay is lower than other Cabinet members because of an obscure constitutional requirement that blocks lawmakers who move to the executive branch from claiming pay raises they’ve voted on while in Congress. Vitter blocked legislation last week to fix the disparity, saying he was keeping the “boot on the neck” of the department. “It is wrong for Sen. Vitter to try to get something in return for moving forward on a matter that the Senate has considered routine for more than a century,” Majority Leader Harry Reid said in a statement. Democrats suggested Vitter was skating close to federal bribery laws that make it a crime to promise “anything of value … to influence any official act.” Vitter’s not backing down. “I’m glad the secretary has dropped his push for a pay raise,” Vitter said. “It was truly offensive to Gulf energy workers who are struggling under his policies. Now I hope he starts earning what he already makes and properly issues new permits for much needed drilling in the Gulf.”

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Commercial Real Estate Loan Prices Rise in April | LoanSafe.org

May 25, 2011

(Source: Business Wire) – The aggregate value of Commercial Real Estate ( CRE ) loans priced by DebtX that collateralize CMBS increased to 80.9% as of April 29,

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Bill Clinton: Brief Debt Default ‘Might Not Be Calamitous’

May 25, 2011

Former president Bill Clinton expressed optimism Wednesday about the immediate consequences of failing to raise the debt ceiling by the August 2 deadline. “If we defaulted on the debt once for a couple of days, it might not be calamitous,” Clinton said at a fiscal summit sponsored by the Peter G. Peterson Foundation. The trouble would come only “if people thought we weren’t going to pay our bills any more and … they would stop buying our debt,” he explained, according to Politico . Clinton also downplayed the results of a recent Washington Post poll , which showed that a majority of Americans are more worried about Congress raising the debt ceiling than they are about a default. Voters “haven’t lived through [a default],” Clinton said. “Nobody knows what will happen.” Previous predictions about the fallout from a debt default have been notably more severe. Federal Reserve Chairman Ben Bernanke , Treasury Secretary Timothy Geithner and President Obama have all warned that it would trigger dire consequences, ranging from devastation of the U.S. financial system to a global recession. Below is a rundown of some of the effects of failing to raise the debt ceiling .

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Geithner Blasts Wall Street, Defends Elizabeth Warren, Medicare

May 25, 2011

WASHINGTON — At a Politico breakfast on Wednesday, Treasury Secretary Timothy Geithner defended consumer advocate Elizabeth Warren, mocked a House GOP vote on the debt ceiling, warned of “several more years” of housing problems and blasted “the financial community” for attempting to block Wall Street reforms. “What happened yesterday was deeply unfair to her,” Geithner said in an hour-long interview with Politico’s Mike Allen, referring to Warren’s appearance before the House Oversight Committee , in which Republicans repeatedly accused her — falsely — of lying. The attacks damaged GOP credibility on oversight functions, Geithner added. The Treasury secretary also recalled his previous appearances before Congress and Warren’s Congressional Oversight Panel, in which Warren repeatedly grilled him about the AIG bailout and the Obama administration’s foreclosure relief program. “Tough” inquiries are good for democracy, Geithner said, but he called the House GOP’s questioning of Warren “political theater.” “The oversight process is a very important thing to preserve and make strong and credible, and I think what you saw yesterday will lead everyone to question whether the oversight process is on the up-and-up.” Geithner also openly mocked an upcoming House vote on the debt ceiling, indicating that backroom discussions with Republican leadership had assured him that the United States will not default on its debts. GOP leadership, he explained, had reached out to Wall Street to assure financiers that its upcoming vote on the debt ceiling was essentially meaningless. The Treasury secretary repeatedly insisted that there is no chance that the U.S. will default on its debts. “This is a funny place, Washington,” Geithner said. “I mean, think about this… House Republicans introduce a bill that they say they’re going to oppose, ask their members to vote against, and then go tell the investors of the world to pay no attention.” On Medicare, Geithner said, “we will not dismantle that basic commitment to seniors,” in the name of deficit reduction, taking a swipe at the budget proposal offered by Rep. Paul Ryan (R-Wis.). He noted that cutting Medicare in order to finance tax cuts for the rich was simply not politically plausible. Geithner obliquely referenced the continued foreclosure crisis, acknowledging that, “you still have this huge oversupply of houses” driving down home prices. Foreclosures create more vacant homes, which expands that oversupply. “How worried are you that there is still shake-out to come in housing?” Politico’s Allen asked. Geithner responded, “we’re sort of three or four years into the housing repair, you could say –” “‘Repair,’ that’s a nice word to describe it,” Allen interrupted, prompting laughter from the audience. “We’ve got several more years to go,” Geithner said. The Treasury secretary also criticized members of “the financial community” and Congress for attempting to repeal last year’s Wall Street reform bill, and for attempting to prevent regulatory agencies from implementing new rules. Allen repeatedly asked Geithner to identify specific financial reform obstructionists, but he refused to name names. Geithner also dodged a set of questions from Allen on whether or not criminal activity took place on Wall Street in the run-up to the financial collapse of 2008. “History has not been written,” on the issue, Geithner said. “I’m not really in a position to judge.” When asked which financial firms had been managed the best in the years leading up to the crash, Geithner replied, “I don’t think any of them covered themselves in glory.” “The system we have today is still the system that caused the crisis,” he added.

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700 New Condos Still Unsold In Downtown West Palm Beach

May 25, 2011

MIAMI, FL–Even though buyers acquired more developer units per month in the first 90 days of 2011 than a year earlier, the Downtown West Palm Beach market still has more than 700 new condos unsold from the South Florida real estate boom, according to a new report from CondoVultures.com. As of March 31, 2011, the unsold new condo inventory represents nearly 21 percent of the more than 3,400 units created in Downtown West Palm Beach since 2003, according to the report based on the Condo Vultures® Official Condo Buyers Guide To Downtown West Palm Beach And Palm Beach Island™.   In the first quarter of 2011, buyers acquired an average of 12 new condos per month at a blended price of $236 per square foot in Downtown West Palm Beach, according to an analysis of Palm Beach County records. This year’s new condo sales activity represents a nine percent increase in transactions from the first quarter of 2010 when an average of 11 units were acquired per month at a blended price of $232 per square foot. “At the current sales pace in this all-cash market, Downtown West Palm Beach has nearly five years of available inventory remaining,” said Peter Zalewski, a principal with the Bal Harbour, Fla.-based real estate consultancy Condo Vultures® LLC. “The good news is, Downtown West Palm Beach has fewer unsold new condos than the markets of Greater Downtown Miami, South Beach, and Sunny Isles Beach in Miami-Dade County. “The bad news is, Downtown West Palm Beach’s total unsold inventory number does not include some 500 units that were previously acquired in distressed bulk deals by out-of-town investment groups that are now trying to resell the condos at a profit to individual purchasers.”   Peter Zalewski of Condo Vultures® can be reached at 800-750-0517 or by email at peter@condovultures.com .

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Marcus & Millichap Capital Corp. Arranges $9.3 Million Multifamily Refinancing Loan

May 25, 2011

ANAHEIM, CA – Marcus & Millichap Capital Corporation (MMCC) has arranged $9,370,000 in refinancing for an 84-unit multifamily property in Anaheim. Rick Padilla (top right photo) , a senior director in the firm’s Long Beach office, arranged the financing. “Before coming to MMCC, the borrower was turned down for refinancing by half-a-dozen lenders, including his existing lender,” says Padilla. “He was told that his property’s rents were above market, that the property was not of agency quality and that his net worth, liquidity and experience were insufficient to qualify for an agency refinancing loan.” “MMCC’s longstanding relationships with agency lenders, and our ability to draw upon market data produced by Marcus & Millichap’s local investment sales agents and research department, helped overcome these hurdles and meet our client’s objectives,” concludes Padilla. The loan is for 10 years, amortized over 30 years with a fixed interest rate of 5.75 percent. The LTV is 75 percent.   Press Contact : Stacey Corso, Marcus & Millichap Capital Corporation (925) 953-1716   www.mmCapCorp.com

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Sotheby’s International Realty is Exclusive Sales, Marketing Agents for Spruce Creek Home and Airplane Hangar in Florida

May 25, 2011

ORLANDO, FL — Stirling Sotheby’s International Realty was named exclusive sales and marketing agents for a $1.95 million luxury home and airplane hangar at Spruce Creek Fly-In in Volusia County. Roger Soderstrom, founder and owner of Stirling Sotheby’s International Realty, said luxury home specialists Rachel McGrath and Debbie Keilin (top right photo)  are representing the property and serve as principal contacts for prospective buyers. The six-bedroom, four-and-a-half bath luxury home offers 6,032 square feet of luxury living space with a separate guest house, huge courtyard, heated oasis style swimming pool and a second gated entry. The home features golf and lake views, summer kitchen, travertine floors, a ground floor master suite with spa style bath, a second floor media room and library. The 60-foot-by-68-foot tiled, air-conditioned airplane hangar was previously owned by NASCAR driver Mark Martin and features a full kitchen and a bath, conference room and private office. Visit http://tour.circlepix.com/tour/Nitro/loadingPage.htm?tourId=793509 For more information, contact Debbie Keilin, East Volusia Associate, Stirling Sotheby’s International Realty 386 451-4251 Rachel McGrath, East Volusia Associate, Stirling Sotheby’s International Realty 386 795-0911 Roger Soderstrom, Founder/Owner Stirling Sotheby’s International Realty 407-581-7890; rsoderstrom@stirlingSIR.com Larry Vershel or Beth Payan, Larry Vershel Communications 407-644-4142    Lvershelco@aol.com .    Visit www.StirlingSIR.com .

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Family Office Exchange Names Director of Business Development – PR Newswire (press release)

May 25, 2011

Family Office Exchange Names Director of Business Development PR Newswire (press release) CHICAGO, May 25, 2011 /PRNewswire/ — Family Office Exchange (FOX), a global organization supporting wealthy families and their advisors with research, consulting, networking opportunities, and education, today announced the addition of Leigh Faber as … and more »

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Elizabeth Warren Fans Flame Patrick McHenry On Facebook

May 25, 2011

WASHINGTON — Rep. Patrick McHenry’s pants may not be on fire, but his Facebook page is getting thoroughly flamed after he called Elizabeth Warren a liar Tuesday in a subcommittee hearing. Fans of Warren think the North Carolina Republican took some unacceptable liberties with the boss of the nascent Consumer Financial Protection Bureau (CFPB), and they’re demanding that he get some McEtiquette and apologize. Hundreds — and probably thousands — have flocked to McHenry’s fan page to singe him . “I ‘like’ the fact that thousands, if not hundreds of thousands of Americans are appalled by your behavior,” wrote Jill Budzynski. “You are an insult to the title of chairman of any committee. It is out of order to abuse a loyal public servant who is trying her best to accommodate your flip-flopping of schedules. How reprehensible to accuse her of lying. Apologize now.” The dust-up Tuesday came near the end of a hearing on the CFPB when the Oversight Committee’s top Democrat, Maryland’s Elijah Cummings, noted that Warren had stayed beyond the time he had seen agreed to in internal committee communications. But McHenry denied there was any agreement, even though the hearing time had been changed as recently as that morning to accommodate the subcommittee. “You’re making this up,” McHenry told her, to her shock and gasps from the hearing audience. Warren and her staff had the same understanding as Cummings, and sources confirmed the previously agreed upon timing for The Huffington Post. Warren is an extremely popular figure among people who think Wall Street and the big banks need to be reined in, and they’re expressing their displeasure on Facebook — even if it galls them to have to become a “fan” of McHenry to do so. “I also clicked ‘like’ under duress. However, I am filled with hope for America after reading all these comments,” wrote Margarita T. Gonzalez-Newcomer. “One thing that is amazing to me is how politicians forget the innate FAIRNESS of the American people. Even when the parties try to [divide] us and pit us against each other, the American people snap out of that fog to stand up for fair play. Thanks to all who have commented on behalf of Ms. Warren.” “Your behavior toward Elizabeth Warren shows that you’re not only a greedy bastard with no regard for your constituents, you’re also arrogant and rude,” posted Beverly Tuttle Potvin. “Any apology from you would undoubtedly be an entirely insincere and empty gesture on your part so I won’t even bother with that demand.” And some North Carolina residents appear to have found the page, as well. “You are the liar Pat!” wrote Mike Sprinkle, whose own Facebook page lists his home as Hiddenite, N.C. Though that’s just outside McHenry’s district, Sprinkle added, “I can & will vote against you.” The congressman did have the occasional defender. “SorosBOTS are out in force today to protect that socialist Elizabeth Warren,” posted Kristen Peterson, referring to the billionaire Democratic Party donor George Soros. “I clicked like to let you know I appreciate you calling this woman out. Thank you and KEEP UP THE GREAT WORK!” McHenry’s spokesman said he was in a meeting Wednesday morning and could not immediately comment. But after Tuesday’s hearing he stuck to his position, and blamed Warren for stiffing Congress on the time. “Committee staff worked diligently to accommodate Ms. Warren’s schedule,” McHenry said. “I was shocked by Ms. Warren’s blatant sense of entitlement,” he added. “She was apparently under the assumption that she could dictate a one-hour time limit for her testimony to Congress and that we were there at her behest instead of the other way around. This is just further example of her disregard for congressional oversight.” McHenry press secretary Michael Babyak noted that McHenry wouldn’t try to shut down his page, pointing to a post he wrote in the past praising the dialogue it produced . “I’d also like to express my appreciation for my Facebook family — whether you agree or disagree with me — you are speaking out and engaging in the civil and honest debate that is the cornerstone of our country’s political process,” the congressman wrote. “Please continue to share your input and feedback — and give each other’s opinions the respect they rightly deserve. And always remember — this is a free speech zone.” Note: This reporter has just created his own Facebook fan page, and has not had the pleasure of being flamed in a similar fashion as McHenry. But anyone who would like to share, can do so here .

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Gasser Elected to Battelle’s Board of Directors

May 25, 2011

COLUMBUS, OH–(Marketwire – May 25, 2011) – Battelle , the world’s leading independent scientific research and technology development organization, today announced the election of an experienced global business executive to its Board of Directors. Effective immediately, Michael Gasser of Greif, Inc . ( NYSE : GEF ) ( NYSE : GEF.B ) joins some of the nation’s foremost business, military and scientific leaders serving on Battelle’s Board.

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Gasser Elected to Battelle’s Board of Directors

May 25, 2011

COLUMBUS, OH–(Marketwire – May 25, 2011) – Battelle , the world’s leading independent scientific research and technology development organization, today announced the election of an experienced global business executive to its Board of Directors. Effective immediately, Michael Gasser of Greif, Inc . ( NYSE : GEF ) ( NYSE : GEF.B ) joins some of the nation’s foremost business, military and scientific leaders serving on Battelle’s Board.

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Morrison Commercial Real Estate Completes Two Lease Transactions Totaling 31,068 SF in Southwest Orlando

May 25, 2011

  ORLANDO, FL (May 25, 2011):   Greg Morrison, CCIM, SIOR, Principal of Morrison Commercial Real Estate, announced the completion of two large lease transactions totaling 31,068 ± square feet.   Lisa Bailey (top right photo) and Phil Marchese (lower left photo) of Morrison Commercial Real Estate represented the NWP Group, LLC in leasing 20,700± square feet at 7570 Exchange Drive.   Tom McFadden of Southern Commercial Real Estate Advisors represented the Landlord in this transaction.   NWP Group is a residential plumbing company that has been in business for over 52 years serving locations throughout the Southeast.   Bailey and Marchese represented the Landlord in renewing the lease for Walgreens at Presidents Plaza for a total of 10,368± square feet .   Dan Walsh and Jeff Linklater of NAI Capital represented the Tenant in this transaction. Contac t: Buffy Gillette, Phone: 407.219.3500 Email:   bgillette@morrisoncre.com

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CNBC Anchor Mark Haines Dies

May 25, 2011

NEW YORK — Mark Haines, co-anchor of CNBC’s morning “Squawk on the Street” show, died unexpectedly on Tuesday evening, the network said. He was 65. The network said he died in his home. It did not specify the cause of death. Haines worked at CNBC for 22 years after working as a news anchor at TV stations in Philadelphia, New York and Providence, R.I. He was the founding anchor of CNBC’s “Squawk Box” morning show. In 2005, he started co-anchoring “Squawk On The Street,” a 9 a.m. to 11 a.m. show, with Erin Burnett, while “Squawk Box” was pushed to an earlier slot. Burnett recently left CNBC to host a general news show on CNN. CNBC President Mark Hoffman said Haines was “always the unflappable pro.” “He was an authentic voice in business media,” said Eric Jackson, who runs the hedge fund Ironfire Capital. “He resonated with so many people because he would speak out, and with opinion. Too often the media lets the corporate PR army and highly trained CEOs get their points across without question. He wouldn’t let that happen.” WATCH: Barry Ritholtz, head of the research firm Fusion IQ and frequent guest on CNBC, said Haines was “a no-nonsense straight shooter. He knew what questions to ask and how to ask them.” Ritholtz said that the biggest complaint about CNBC in the 1990s was that its anchors cheered on the stock-market bubble. He said the exception was Haines, who was always skeptical. “He was trained as an attorney,” Ritholtz said. “He brought that keen lawyer’s eye to everything he did. It wasn’t something often seen in the financial media.” Haines had a law degree from the University of Pennsylvania and was a member of the New Jersey State Bar Association, CNBC said. Haines is also remembered for calling a bottom to the stock market decline on March 10, 2009, his first call of the recession. The Dow Jones Industrial Average never closed below its level of March 9. Haines is survived by his wife, Cindy, his son, Matt, and daughter, Meredith. CNBC said funeral arrangements have yet to be made.

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NYU-Poly Expands Campus in Brooklyn’s MetroTech Center

May 25, 2011

NEW YORK, NY May 25, 2011 /PRNewswire/ — In an important step to fulfill NYU’s city-wide strategic vision for expansion of its academic facilities, NYU’s engineering affiliate, the Polytechnic Institute of New York University (NYU-Poly) (top left center), will expand into neighboring space in Downtown Brooklyn’s MetroTech Center.   The move is part of NYU-Poly’s $38 million capital plan, called the i-squared-e Campus Transformation – where the “i-squared-e” stands for invention, innovation and entrepreneurship.   The expansion into MetroTech will allow NYU-Poly to accommodate faculty offices, dry computational labs, small classrooms, and administrative functions, while freeing up space in current facilities for renovation and potential redevelopment. “MetroTech Center has a great central commons area,” said NYU-Poly President Jerry Hultin (lower right photo).   “Expanding into buildings that flank the commons creates a better presence of NYU-Poly in the square, and imparts a more dynamic, vibrant feel to our campus.” NYU-Poly is entering into a 20-year lease with real estate developer Forest City Ratner Companies for a total of 120,000 rentable square feet of space at 2 MetroTech and 15 MetroTech, which also involves a 9-year sub-lease of space from Wellpoint Insurance.   For more information about NYU 2031 and a complete copy of the institution’s news release ,   please log onto www.nyu.edu/nyu-in-nyc or contact   .    Wendi Parson of Polytechnic Institute of New York University, wparson@poly.edu ,   +1-718-260-3323 Web Site: http://www.poly.edu

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Affinnova Names Jeffrey Henning Chief Marketing Officer

May 25, 2011

WALTHAM, MA–(Marketwire – May 25, 2011) – Affinnova, the global leader in marketing optimization software and services, today announced the appointment of Jeffrey Henning as Chief Marketing Officer. In his new position, Henning will play a crucial role in increasing awareness of Affinnova’s technology and further communicating Affinnova’s strong business benefits of helping companies produce optimized innovations for new products, packaging and advertising.

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Affinnova Names Jeffrey Henning Chief Marketing Officer

May 25, 2011

WALTHAM, MA–(Marketwire – May 25, 2011) – Affinnova, the global leader in marketing optimization software and services, today announced the appointment of Jeffrey Henning as Chief Marketing Officer. In his new position, Henning will play a crucial role in increasing awareness of Affinnova’s technology and further communicating Affinnova’s strong business benefits of helping companies produce optimized innovations for new products, packaging and advertising.

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Ian Fletcher: How China Plans to Leapfrog the American Economy (And it’s Not What You Think)

May 25, 2011

Many Americans are already concerned about China’s growing economic challenge to the United States. Indeed, the challenge itself is hardly news anymore. But a new book, Red Alert by Stephen Leeb, argues that Americans have radically misunderstood just what this challenge consists of. Everyone who has “woken up” to the problem (i.e. not the administration, the U.S. Chamber of Commerce, or the Republican leadership) understands the threat posed by China’s cheap labor and low standards for everything from child labor to environmental protection. Most people who aren’t hopeless laissez-faire ideologues are twigging to the fact that China’s state-directed capitalism is running rings around America’s private-sector capitalism right now. But what few people realize is that China has an even more radical economic strategy up its sleeve, a strategy that aims not just to equal the United States but to surpass it and quite possibly shut America out of the economic future. The basis of China’s strategy is the fact that the world is heading rapidly into the era of fundamental resource constraints. Up until the present time in human history, although various natural resources have been scarce enough to fight over, no important natural resource have ever been scarce enough that humanity simply ran out of it. This, the author argues, is going to change. The interesting thing is that the resource in question isn’t the usual suspect: oil–though oil is certainly going to become prohibitively expensive as we hunt down the last few drops in harder-and-harder-to-reach places that require more-expensive drilling and extraction techniques for less return. It isn’t gas or coal, either, though these have similar futures. (Any reader who believes these resources will last indefinitely can stop reading right here; those who are unsure should consult the persuasive analysis in the book itself.) The resource, paradoxically, is every environmentalist’s dream: green energy. Huh? How can the world run out of green energy? Isn’t that the whole point? Oops. In our rush to green energy, we’ve forgotten something. Those pretty blue photovoltaic cells glinting in the sunlight don’t grow on trees. Neither do those magnificent 300-foot windmills or their smaller cousins. They have to be made , and they are made out of some very scarce materials. Like Indium. And antimony. Beryllium. Gallium. Germanium. Tungsten. Lanthanum. Tantalum. Neodymium. Niobium. Rhenium. Cobalt. Tantalum. Even familiar platinum, silver, and chromium. Even humble graphite. Go look on the periodic table that you vaguely remember from high-school chemistry. These elements are the ones whose names you had to memorize but which nobody had much significant use for until recently. These obscure substances may one day be more strategic than the oil of the Middle East. These are elements , remember. That means–basic chemistry–that you can’t make them out of anything else. You either have them or you don’t. Why are they important? For example, the so-called rare earths among these materials are needed to make the super-strong magnets that are needed whenever you want to mechanically generate (or consume) electricity efficiently. The authors estimate that a three-megawatt wind turbine contains nearly two tons of rare earths of various kinds. Even a humble Toyota Prius contains 22 pounds of lanthanum in its battery. No lanthanum, no electric cars. “Fine,” you say. “Surely clever scientists will find other ways of making all these products if their present ingredients become unavailable?” Not so fast. The problem here is that, unlike inventing a new computer program, what these products do is closely constrained by fundamental laws of physics. There simply aren’t an infinite number of ways to make, say, a small but powerful magnet or a silicon wafer that will generate electricity when exposed to the sun. It’s like trying to find a substitute for water. Innovation and creativity will probably loosen some of these raw-materials constraints a little, as alternative ways of making things are discovered. But only a little. Mother Nature bats last. What about the old American faith that “innovation can solve anything.” Well, be careful with that word “anything.” If you look at the successfully innovative parts of our economy, they are all industries where innovation isn’t blocked by fundamental physical laws. So we simply cannot assume that technology is going to bail us out of this one. It is equally unjustified to retort that all gloom-and-doom analyses are wrong because gloom-and-doom analyses have been wrong in the past. So they have. (Club of Rome, anyone?) This proves, on its own, nothing but the need to examine every analysis on its own factual merits. How about the “magic of the marketplace?” Nope. Having a market economy will (more or less) guarantee that whatever physical resources we have will be used in the way that adds the most economic value. It cannot itself magically bring those resources into being. Here’s where China comes in. China is seeking to establish a strategic lock on these key raw materials. It plans to build itself an economy powered by this energy and then just sit back and watch the United States run out of gas. This strategy doesn’t only consist in establishing a monopoly on key raw materials, though this is its hardest point of ultimate leverage. China also aims to dominate the industries that convert these materials into green energy products. It is using price competition to squeeze out the American solar industry, for example, which it hopes to dominate as Japan now dominates consumer electronics If China’s master plan reaches even partial fruition, it will gain a gigantic economic advantage over the U.S. Americans will be left struggling with $10/gallon gasoline and its likely inflationary and recessionary consequences. Our living standard will be hobbled for decades. And if China’s master plan reaches its full fruition, the game is simply over for us as a superpower. Indeed, under some scenarios, it may well be over for us as a developed nation. This is grand strategy on a civilizational scale. It is possible that economic and military decline will prove mutually reinforcing. If the world decisively moves–as it is already gradually moving–away from market allocation of natural resources to political allocation and so-called resource nationalism, then the inability to project sufficient power to guarantee access to key resources will itself curtail that access, weakening the economy that supports that military strength. There is a huge controversy right now about whether China is sincere about cleaning up its environmental act. The authors argue that in significant part, it is indeed, as evidenced by the fact that China is now the world’s largest producer of green energy technologies. But they’re not doing it because they’ve joined the Sierra Club. They’re doing it for the same reason they do everything: because it is a component of their plan for advancing national power. Beijing makes plans in very long increments. They, unlike our own election-cycle worshiping rulers, think through where they want their country to be 100 years from now. This is why China is busy economically colonizing Africa–now home to an estimated one million Chinese workers–and is making fools of us in Afghanistan, where American military power is currently protecting huge Chinese investments in coal, copper, and other resources. We, on the other hand, sold off most of our own strategic minerals reserve in 1992, confident that the end of history had arrived and the Soviet Union was the last enemy we would ever face. We allowed Molycorp’s Mountain Pass mine in California’s Mohave desert–historically one the entire world’s largest sources of rare earths–to be shut down by cheap Chinese competition. We almost allowed China to buy this mine outright in 2005, when it was owned by a subsidiary of Unocal petroleum. We didn’t. So there may be hope for us yet. Congress passed a strategic minerals bill , the Rare Earths and Critical Materials Revitalization Act ,in 2010, albeit a tiny sop compared to Beijing’s grand strategy on the issue. Australia similarly checked a Chinese buyout in 2009. James Schlesinger, who served under President Carter as our first Secretary of Energy, once noted that the American public has only two attitudes towards energy policy: “complacency and panic.” I suspect, after reading this book, that a little bit of salutary panic might be in order.

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Al Franken To Obama: Give Elizabeth Warren A Recess Appointment

May 25, 2011

WASHINGTON — Sen. Al Franken (D-Minn.) urged President Obama Wednesday to grant Elizabeth Warren a recess appointment to head the Consumer Financial Protection Bureau. In September, the President tapped Warren as the chief architect of the agency charged with protecting consumers from abusive lenders. Since that time, the former Harvard professor has been serving as Special Adviser to the Secretary of the Treasury while helping create the new consumer agency. “Since the president appointed Elizabeth Warren to set up the Consumer Financial Protection Bureau she has proven she can stand up to Wall Street,” Franken wrote in a letter that will be circulated by the Progressive Change Campaign Committee on Wednesday. “Now, it’s time for a permanent leader to be appointed and, because Republican senators have vowed to block anyone, it’s up to President Obama to use his power constitutional power to bypass Republicans and make a recess appointment.” Rep. Barney Frank (D-Mass.) first suggested the possibility of a recess appointment after Senate Republicans promised earlier this month to block anyone the President nominates. “It’s the worst abuse of the confirmation process I’ve ever seen,” said Frank, as The Hill reported. “What it clearly says is that the president will have to make a recess appointment .” PCCC has organized an open letter to Obama to appoint Warren. Signers so far include a mix of lawmakers, academics, economists, progressive activists and Wall Street figures. “Republicans boxed themselves in with their ridiculous letter saying they wouldn’t confirm anybody who is nominated,” said PCCC co-founder Adam Green. “We’re showing the president that the public will have his back if he makes the logical decision — to give Elizabeth Warren a recess appointment.” Warren may be the person Republicans least want to see in charge of the CFPB. The outspoken and respected academic and advocate is credited as the intellectual founder of the agency , which she advocated for four years ago. Earlier this month, Republicans blocked a bid to name Warren the head of the agency. A measure offered by Rep. Carolyn Maloney (D-N.Y.) to give the top job to the person “credited with coming up with the idea” for the CFPB, failed on a party-line vote . On Tuesday, Warren went through a contentious hearing before the House Oversight subcommittee. She frequently had to correct Republican lawmakers who were trying to grill her, and at one point was called a liar by subcommittee chair Rep. Patrick McHenry (R-N.C.). Support for a recess appointment for Warren has even come from a group that once called her ” akin to the Antichrist .” In a May 19 letter, the president and CEO of the Oklahoma Banker’s Association wrote to Obama and encouraged him to name her to the top job.

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Joplin Tornado Inflicts Economic Setback On Community Still Struggling With Recession’s Legacy

May 25, 2011

The tornado in Joplin, Mo., has dealt severe economic damage to a community still struggling to recover from the Great Recession. As local leaders respond to the devastation from the Sunday tornado that claimed at least 125 lives , efforts to care for the injured naturally take precedence over economic considerations. But in the coming weeks, as the community rebuilds the hospital that was damaged, the roads that were torn up and the homes and stores that were destroyed, the cost will weigh heavily on this city of 50,000, where the local economy already faced strains. As many as 2,000 buildings in the city were destroyed by the tornado, according to estimates from local emergency management officials. And as many as 10,000 buildings were damaged, according to a Tuesday report from the Oakland, Calif.-based catastrophe risk modeling firm EQECAT. The insured loss is estimated to be between $1 billion and $3 billion, EQECAT said. But the full economic consequences will likely be even greater, EQECAT senior vice president Tom Larsen said in an interview. With buildings destroyed, workers will go without jobs, and businesses will lose revenue. Even as insurers pay claims, residents will likely absorb personal financial losses of untold value. The cost to the region, Larsen said, will likely amount to at least an additional $1 billion, borne partially by the local government and individual residents. “This is a major hit upon that area,” Larsen said. “Some people may move out and never come back.” For a city whose general fund budget is just over $20 million , these figures seem enormous. President Barack Obama has declared a disaster in Joplin, making the city eligible for federal assistance . After the tornado struck, the House Appropriations Committee approved a $1 billion aid package , in an effort to keep federal disaster relief accounts funded through the end of September, the AP reported. The economic fallout could be long-lasting, however, as the city continues to grapple with the recession’s legacy. In 2006, before the economic crisis, the unemployment rate in Joplin was 3.8 percent, according to the city’s most recent financial report. By 2010, it had jumped to 8.2 percent. As of October, the city’s third-largest employer was St. John’s Hospital, with 2,480 employees, according to the financial report . Walmart was the sixth largest, with 920 employees, the report says. Both employers have been devastated by the storm. On Sunday, the tornado tore into St. John’s Regional Medical Center, leaving a path of destruction and killing five patients, according to a New York Times report. A local Walmart now lies in ruins . The local real estate market, too, could face a major setback. The pace of building in Joplin has slowed in the years since the economic crisis. Construction during the six months that ended April 30 amounted to $13.4 million, a 36 percent decline from the same period a year earlier, the Joplin Globe reported this month, citing building permits. For the fiscal year that ended last October 31, the value of residential and commercial construction reached $60.4 million, less than half of the construction during the fiscal year that ended in 2007, the Globe said . Reached by phone on Monday and Tuesday, the city’s accounting manager, Joel Gibson, said it was too early to estimate the financial damage from the tornado. “Right now we’re in the search and recovery phase,” he said Tuesday. “I’m trying to manage phones, take care of people here.”

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Robert Scheer: Access Journalism: The Movie

May 25, 2011

It is not true, as a Wall Street Journal reviewer claimed, that the HBO movie version of Andrew Sorkin’s book Too Big to Fail was “Too Boring to Watch.” On the contrary, the problem with the film, featuring excellent acting and taut direction, as with the richly anecdotal book, is that it is all too effectively misleading. Fortunately, if viewers have already watched Inside Job , the spot-on Academy Award winner, they will not be led too far astray by this film’s adulation of the likes of Henry Paulson and Timothy Geithner. Paulson is portrayed as an eminently decent man, troubled by the imperfections of the TARP bailout, and when he throws up off camera in one scene it is not at all suggested that perhaps he could be disgusted that the misery he brought to the world had left him a billionaire. When he resigned his position as head of Goldman Sachs to become treasury secretary, he cashed in $485 million in Goldman stock and was saved from a $100 million tax liability because he was entering government “service.” The film barely mentioned that Paulson was the head of Goldman Sachs when his company deceptively packaged and sold the collateralized debt obligations (CDOs) based on the subprime and Alt A mortgages that proved so toxic. As Paulson concedes in his memoir, after George W. Bush appointed him treasury secretary, the president asked plaintively as the economy was crumbling: “How did this happen?” In Sorkin’s book, it is stated that the treasurer “disregarded the question, knowing that the answer would be way too long.” But in his memoir, Paulson provides a clearer insight: “It was a humbling question for someone from the financial sector to be asked — after all, we were the ones responsible.” No such honesty has yet emerged from Geithner, who was an undersecretary of the treasury during the Clinton years, when he worked closely with his bosses, first Robert Rubin and then Lawrence Summers, to pass the radical deregulation hinted at but never fully explained in either the Sorkin book or the film. There is scant reference to the obliteration of the Glass-Steagall Act, a repeal that permitted the too-big-to-fail merger of companies such as Travelers and Citicorp, which became Citigroup — a company that had to be bailed out with $50 billion in taxpayer money. Nor is there any reference in the film to the fact that Rubin, mentor to both Summers and Geithner, went on to help run that new megabank at a salary of $15 million a year. Geithner, who later became head of the New York Fed, a job obtained with the effusive recommendations of both Rubin and Summers, worked to salvage Citigroup from the mess its packaging of toxic mortgages had created. Geithner is lionized in both Sorkin’s book and the film version. As Nancy deWolf Smith put it in the Wall Street Journal : “Some viewers who remember the book may be galled again by the portrayal of certain characters. For instance, Timothy Geithner (Billy Crudup), then president of the Federal Reserve Bank of New York, still comes across as a blameless saint and Wunderkind with a compassionate finger on the pulse of the victimized ordinary man.” The fawning in the book is embarrassing, as in the description of Summers and his treasury assistant in the Clinton years going off to tennis camp, with Sorkin noting, “Geithner, with his six-pack abs, had a game that matched his policy-making prowess.” Not to be overlooked is “his usual firm, athletic handshake.” That policy prowess must extend to the destructive CDO deregulation that Geithner and Summers pushed through Congress and that, in an image in the movie, we see Bill Clinton signing into law. That legislation, not specifically referenced in Sorkin’s book, was called the Commodity Futures Modernization Act (CFMA). It banned the application of any existing regulation or regulatory agency authority to the emerging market in CDOs that turned out to be disastrous. These were the same CDOs that AIG backed with phony insurance “swaps,” resulting in the Geithner-led $170 billion bailout of the company with the money passed through to Goldman and the other banks covered by AIG. Neither the CFMA nor the heroic and incredibly prescient Brooksley Born, then chief of the Commodity Futures Trading Commission, whose dire warnings about the new financial gimmicks were effectively silenced by the CFMA, are mentioned in the index of Sorkin’s book. At the end of HBO’s film about how skillfully Henry Paulson, Ben Bernanke and Timothy Geithner managed to force the top banks to accept $700 billion in bailout money, the question is posed as to whether the banks so saved would turn around and lend money to save the homes of ordinary folks. The outcome was quite the opposite. The economy remains in deep trouble thanks in considerable measure to the “bankers-first” priorities that Geithner and Summers brought with them to the Barack Obama presidency. The housing industry is deeply depressed, new home construction starts this year are expected to match the lowest point since records first were kept in 1963, housing values are predicted to decline at least 5 percent more this year, and without an improvement in housing there will be no significant increase in consumption or jobs. Further, on the day HBO premiered the film, the New York Times reported that the top banks now have an inventory of foreclosed homes that is twice as high as when the crisis began four years ago, and, “In addition, they are in the process of foreclosing on an additional one million homes and are poised to take possession of several million more in the years ahead.” The film and the book, by centering on TARP, make that bailout the big deal, and when the bailout money was paid back to free the bankers’ bonuses from regulation, it was celebrated by Geithner as “the most effective government program in recent memory.” Rubbish! As Paul Atkins and two other members of the Congressional Oversight Panel on TARP wrote in a blistering WSJ column exposing the TARP settlement: “It hides the full story of the government’s financial crisis effort, of which TARP is but a minor part”; the major part being the $1.1 trillion in toxic mortgages that the Fed purchased from the banks, the $380 billion bailout of Fannie Mae and Freddy Mac, and the loan guarantees of “other Fed and FDIC programs [that] added another $2 trillion of taxpayer money at risk to the 19 stress tested banks alone.” And then there is the 50 percent run-up in the national debt, thanks to the banks’ savaging of the economy that will haunt us for decades to come. Perhaps the main value of the book and film is the instruction they provide on the limits of mainstream journalism in the decade that led up to the meltdown. Sorkin, who rose to be a business editor at the Times , covered Wall Street deal-making in exquisite detail, relying on an access journalism that has often proved deeply flawed in traditional business news coverage. What was largely ignored as it was unfolding was the story of the unbridled power of Wall Street financiers over the political process that caused this tragedy for so many tens of millions who have lost jobs and homes.

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AIG Share Sale Makes A Profit For U.S. Treasury

May 25, 2011

NEW YORK/WASHINGTON (Clare Baldwin and Pedro da Costa) – The U.S. Treasury made a small profit when it sold a portion of its shares in American International Group Inc on Tuesday, but it was unclear how its investment in the beleaguered insurer will ultimately fare. The shares were sold for $29 apiece, just above the $28.73 average price the Treasury will need to break even on its record bailout of AIG during the financial crisis. But the sale price was at only a 1.6 percent discount to Tuesday’s closing price, which could prove scant comfort to investors who have watched AIG shares plummet 40 percent since the beginning of the year. Tuesday’s $8.7 billion stock offering, which included 200 million shares sold by the Treasury and 100 million sold by AIG itself, is far smaller than the $10 billion to $20 billion deal some banking sources had suggested earlier this year, hinting at a potential lack of investor interest. To be sure, Treasury and AIG only agreed earlier this month on the size of the offer, and the U.S. government did not make its investments in AIG with the intention of turning a profit. Rather, it acquired the stock under extreme duress, as the potential failure of the insurance giant threatened to exacerbate an already severe financial crisis in late 2008. “We’re hopeful that we can recover all the investment that we made,” Tim Massad, the Treasury’s acting secretary for financial stability said during a conference call with reporters on Tuesday. The extent of the profits or losses will not be known until Treasury fully exits its investment, a landmark event for which there is no specific timetable, Massad said. Following an agreed “lock-up” period of 120 days, Treasury will continue to reduce its holdings “in an orderly fashion.” “We’re going to sell in a way to maximize value to the taxpayer,” Massad said. So far, Treasury has raised $5.8 billion of the $47.5 billion it needs to break even on the equity portion of its investment. Treasury cut its stake in AIG from 92 percent, but, by far remains the majority shareholder, with 77 percent. It has another 1.5 billion shares to sell. HOW QUICKLY, AND AT WHAT PRICE? AIG’s share sale is important for the U.S. government, which is trying to sell out of multiple investments it made in companies during the financial crisis. The bailouts were highly unpopular, especially after it became known that top managers in the same AIG unit that drove the company into a rut had continued to pay themselves handsome bonuses while receiving taxpayers’ help. The AIG share sale is also a key moment for Chief Executive Officer Robert Benmosche. Benmosche, who became AIG’s fifth CEO in less than five years in August 2009, halted a plan to break the company up in a fire sale of its parts. He instead embarked on a revival centered around two core businesses: U.S. life insurer SunAmerica and global property insurer Chartis. Other businesses were sold, taken public or left to operate with a view toward an eventual sale. AIG was literally minutes from bankruptcy when it was rescued in September 2008. The various iterations of the rescue package ended up being worth $182 billion, dwarfing various other bailouts around the world during the financial crisis. The question now is how quickly the U.S. government exits its investment and whether it ultimately breaks even. Benmosche has said he expects the government to be out of its AIG position by mid-2012. Fitch Ratings said recently its own models for the company assume the government is out by the end of 2012. (Additional reporting by Ben Berkowitz; Editing by Gary Hill and Erica Billingham) Copyright 2011 Thomson Reuters. Click for Restrictions .

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Tytan Holdings, Inc. Expands Sales Force in Australia and Pacific Northwest

May 25, 2011

KALAMA, WA–(Marketwire – May 25, 2011) – Tytan Holdings, Inc. (“the Company”) ( PINKSHEETS : TYTN ) ( www.tytantractors.com ), is pleased to announce the addition of two highly qualified sales organizations.

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William Scharninghausen Joins Obopay as Executive Vice President and Chief Financial Officer

May 25, 2011

International Expertise Will Contribute to Company’s Growth and Expansion

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U.S. Should Raise Interest Rates, OECD Says

May 25, 2011

WASHINGTON (By Pedro Nicolaci da Costa) – The Federal Reserve should begin to hike interest rates in coming months, the Organization for Economic Cooperation and Development said on Wednesday, as it raised its outlook for U.S. economic growth. In its semi-annual forecast, the OECD said it sees U.S. economic growth of 2.6 percent in 2011, up from its forecast last November for growth of just 2.2 percent. The outlook, however, is much lower than the Fed’s own “central tendency” estimates, which as of April 27 pegged growth for this year in the 3.1 percent to 3.3 percent range. Despite what it sees as significant potential downside risks to expansion from higher energy and commodity prices, the OECD recommends the Fed begin slowly withdrawing some of its extraordinary aid to the economy as 2011 progresses. “A modest reduction in monetary stimulus should get under way in the second half of this year,” the OECD said in its report. Alan Detmeister, the OECD Economics Department’s U.S. desk officer, said in a press briefing the Fed should raise its benchmark federal funds rate to 1 percent from the current zero to 0.25 percent range before the end of the year. Continued high levels of unemployment are not enough of a reason to keep rates at rock-bottom lows, the OECD said, since low rates raise the risk of future bubbles or inflationary shocks. The group predicts the U.S. jobless rate, currently at 9 percent, will remain close to 8 percent for much of 2012. “At present there is little sign that continued extraordinarily loose monetary policy settings have increased inflation expectations more than a small amount or are resulting in another asset price bubble,” the OECD added, citing oil and other commodities as a “possible exception.” The OECD expects the trend of subdued inflation to continue for the foreseeable future, predicting U.S. consumer price inflation of 1.9 percent for this year and just 1.3 percent next year — well beneath the Fed’s implicit target of 2 percent or a bit below. The Fed looks set to complete its $600 billion bond-buying program aimed at keeping long-term rates down in June, as scheduled. Its balance sheet now stands at a record $2.74 trillion, but a large amount of bank reserves remain parked at the Fed rather than being lent out to businesses. A LITTLE TOO LOOSE? Still, the OECD’s call for rate hikes, potentially controversial given a still-fragile U.S. recovery, appears to be based on the presumption that rates are so far below their normal levels that the tightening process must begin soon. Detmeister believes a “neutral” U.S. benchmark rate that neither retards or stimulates growth should be around 4.5 percent. “Tightening somewhat now would reduce the need for steeper, and potentially disruptive, increases in interest rates later,” the OECD said. At the same time, the group said long-term unemployment presents a dangerous challenge for the United States, since it risks becoming self-reinforcing and reducing the productivity of the labor force over time. Just under half of the 13.7 million jobless Americans have been out of work for six months or longer, the highest ever. The OECD noted that countries such as Germany and Japan, where firms were either reluctant to lay off workers or were able to reduce their hours through workshare arrangements, fared better than countries without such programs in place. “The ability of these countries to cushion the employment impact of the crisis may offer lessons that could help improve labor market resilience to future shocks,” the report said. (Reporting by Pedro Nicolaci da Costa; Editing by Leslie Adler) Copyright 2010 Thomson Reuters. Click for Restrictions .

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As France’s Lagarde Launches IMF Bid, China, Criticism Surfaces

May 25, 2011

PARIS/WASHINGTON (Jean-Baptiste Vey and Lesley Wroughton) – France’s Christine Lagarde has entered the race to head the IMF despite anger in big emerging economies over Europe’s “obsolete” lock on the job. France’s finance minister announced her candidacy on Wednesday, the eve of a G8 summit, after securing the unanimous backing of the 27-nation European Union and, diplomats said, support from the United States and China. “It is an immense challenge which I approach with humility and in the hope of achieving the broadest possible consensus,” Lagarde told a Paris news conference. The 55-year-old former corporate lawyer, who speaks fluent English, has won plaudits for her deft chairing of the G20 finance ministers and communications skills. But unlike Dominique Strauss-Kahn, who resigned last week after being charged with attempted rape, she is not an economist and may struggle to match his thought leadership over the management of the world economy. Brazil, Russia, India, China and South Africa criticized EU officials in a joint statement for suggesting the next International Monetary Fund head should be a European, a convention that dates back to the founding of the global lender at the end of the Second World War. However, the countries known as the BRICs failed to unite behind a common alternative candidate, leaving the way clear for Lagarde unless she slips on a pending French legal case. Diplomats said the complaint was mostly aimed at securing a commitment from developed countries that nationality will no longer be a covert criterion for selecting future IMF chiefs. In a nod to the emerging nations’ concerns, Lagarde said she would work for “greater representativity and greater flexibility” at the IMF if elected. BRICS AGGRIEVED In the first joint statement issued by their directors at the Fund, the BRICs said the choice of who heads the IMF should be based on competence, not nationality. They called for “abandoning the obsolete unwritten convention that requires that the head of the IMF be necessarily from Europe.” Lagarde said she was running as a candidate to serve all IMF members, not just Europe, although she noted her experience and good relations with European officials would be an advantage in steering the IMF’s role in the bloc’s debt crisis. “Being European shouldn’t be a plus, but it shouldn’t be a minus either,” Lagarde said. Hours before the statement was issued in Washington, France’s government said China would back Lagarde. The Chinese Foreign Ministry declined comment. Some emerging market government officials say privately that although they are fed up with advanced economies controlling the selection process, they are not in a position to put forward a challenger who could stand up to Lagarde. Mexico has nominated its central bank chief for the job and he said some countries had welcomed his decision to run. South Africa and Kazakhstan may put forward their own candidates. Under a long-standing agreement between the United States and Europe, the top job at the IMF goes to a European while an American leads its sister organization, the World Bank. The United States also fills the number two position at the IMF. European diplomats said Washington had asked the French government about the legal case hanging over Lagarde, in which she faces accusations of abusing her authority. The Court of Justice of the Republic, a special court created to try ministers for alleged offences committed while in office, is examining the procedure followed in awarding the 285 million euro settlement to Bernard Tapie, a convicted ex-minister who backed Sarkozy’s 2007 election campaign. French officials have told other governments privately the case will not be a show-stopper, the diplomats said. Lagarde said her conscience was clear. “I have every confidence in this procedure because my conscience is perfectly clear,” she said. “I acted in the interest of the state and in respect of the law.” U.S. BACKS EUROPEAN The EU and the United States, which sources in Washington have said will back a European, have enough joint voting power to decide who leads the IMF. Securing support from some emerging economies would defuse a potentially bitter row over the decision though. In April 2009, the Group of 20 leading nations endorsed “an open, transparent and merit-based selection process” for heads of the global institutions. France, which presides over the G20 this year, has made an effort to work with Beijing on key issues for developing nations like global monetary reform and commodity market speculation. Last week, the head of China’s central bank, Zhou Xiaochuan, said the IMF’s leadership should reflect the growing stature of emerging economies. But he stopped short of saying its new boss should be from an emerging economy. Wu Qing, a researcher with the Development Research Center government think tank in Beijing, said it was plausible that China would support Lagarde as there weren’t many qualified candidates from China or Asia in general. The IMF’s board will draw up a shortlist of three candidates and has a June 30 deadline for picking a successor. (Additional reporting by Julien Toyer in Paris, Jiang Yan in Beijing, Leigh Jones and Michelle Nichols in New York; Writing by Emily Kaiser and Paul Taylor) Copyright 2011 Thomson Reuters. Click for Restrictions .

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David B. Barr Joins Charles & Colvard Board as Independent Director

May 25, 2011

MORRISVILLE, NC–(Marketwire – May 25, 2011) – Charles & Colvard, Ltd. ( NASDAQ : CTHR ), the sole manufacturer of created moissanite gemstones, The Most Brilliant Jewel in the World ® , today announced that David B. Barr was elected to serve as an independent member of the Company’s Board of Directors at the Company’s Annual Meeting of Shareholders on Thursday, May 19, 2011.

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Maxim Group LLC Attracts More Bulge Bracket Talent for Its Institutional Sales and Trading Platform

May 25, 2011

NEW YORK, NY–(Marketwire – May 25, 2011) – Maxim Group LLC, a leading full service investment banking, securities and wealth management firm, today announced the appointment of James Manfredonia as a Senior Vice President of the Institutional Equity Trading division.

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Slush-Fund Surtax? IRS Could Penalize Secret Campaign Spending

May 25, 2011

WASHINGTON — Top Republican political strategist Karl Rove’s method of secretly funneling unlimited contributions from big donors was so hugely successful in the 2010 campaign that Democrats are now trying to copy it. But his model may yet end up backfiring spectacularly. In one scenario, groups like Rove’s Crossroads Grassroots Political Strategies could find themselves subject to massive fines, ranging as high as 35 to 70 percent of the money they received in secret donations. In another scenario, their deep-pocket donors could be hit by a 35 percent tax on their contributions. Rove may well have found a way around the nation’s federal election laws. But now the key question is whether the Internal Revenue Service is willing to be assertive. Because if it is, then just like with Al Capone, it could be the IRS that gets him. In Crossroads GPS’s solicitations for money, the group describes itself as a tax-exempt 501(c)(4) organization, and due to a controversial loophole in federal campaign finance rules, the names of donors to those organizations do not have to be disclosed publicly. But contrary to popular belief, Rove’s group has not formally attained 501(c)(4) status. The group’s application, requesting the IRS to classify it as a “social welfare” group, is still pending. And while the designation is typically not much more than a formality — organizations routinely call themselves (c)(4) groups before they’ve been formally approved — tax and campaign finance experts contacted by The Huffington Post said the IRS could well deny Crossroads GPS’s application. IRS guidelines for 501(c)(4) status state that social welfare groups “must operate primarily to further the common good and general welfare of the people of the community” — which “does not include direct or indirect participation or intervention in political campaigns on behalf of or in opposition to any candidate for public office.” Intervening in political campaigns isn’t prohibited, it just can’t be the primary activity. Were Crossroads GPS denied its 501(c)(4) status, the organization could be on the hook for tens of millions of dollars in fines. And operating in secrecy would suddenly come with an enormous new price tag. THE RISE OF 501(c)(4)s In the 2010 cycle, Rove wasn’t the only one to use a 501(c)(4) as a source of clandestine funds. A slew of other , mostly conservative, often interrelated groups did so as well, led by the Wall Street-backed American Action Network . Indeed, more of these groups seem to be popping up every day, with Rove’s organization often cited as a role model. “If people look at what Crossroads did over the course of the last couple of years, that’ll give them a good sense of our activity,” said Bill Burton, a former aide to President Barack Obama and one of the co-founders of Priorities USA, a newly-formed Democratic 501(c)(4), in an interview with The Huffington Post last week. Crossroads GPS spokesman Jonathan Collegio confidently insists that his group “is comfortably within the guidelines set out by the IRS” for social welfare groups. “GPS invested millions of dollars in social welfare issue advocacy advertising before the FEC’s 60 day reporting window last summer,” he said in an email. And, Collegio added, “we’ve been one of the most heavily active issue advocacy organizations in Washington over the last six months.” But when it comes to defining political activities, the IRS doesn’t engage in the same kind of legalistic hairsplitting that the Federal Election Commission does, and much of the spending Collegio puts on the non-political side of his group’s ledger, the IRS might well decide does not belong there. “Lots and lots of things that would not be considered ‘express advocacy’ by the FEC, the IRS would consider intervention in a political campaign,” said Donald Tobin, a tax and campaign finance law expert at the Moritz College of Law. TIPPING THE SCALE To qualify as a legitimate 501(c)(4) organization, in its first fiscal year Crossroads GPS would need to have spent more on what the IRS considers non-political expenditures than on political ones, said Marcus S. Owens, a Washington lawyer who used to head the IRS division that oversees tax-exempt organizations. “My guess is they haven’t,” he said. And there’s not enough time to take dramatic measures to restore the balance, either — the group’s first fiscal year ends on May 31. Consider the numbers: Crossroads GPS dropped a whopping $17 million on campaign spending that it considered obligated to report to the FEC — most of it on televised attack ads — in the run-up to the November 2010 elections. And while Collegio said the group raised a total of $43 million in 2010 — leaving plenty available for other purposes — there are few indications that it spent more than a fraction of that money on anything that, by IRS standards, is unrelated to campaigning. Asked for examples of big-ticket expenditures that weren’t election-related, Collegio came up short. Crossroads GPS made a $750,000 ad buy in March attacking public sector unions, and recently launched an anti-Obama wiki , he said. But all that only amounts to pocket change for the group. Collegio also cited as unrelated to elections the $1 million Crossroads GPS spent to run an ad in California during August 2010, that called on Democratic Sen. Barbara Boxer “to stop the Medicare cuts.” Boxer was facing reelection three months later. “What Crossroads is going to argue is that these ads you’re talking about are lobbying — and lobbying is a social welfare purpose — because they say in the tagline: ‘Call Barbara Boxer,’” Tobin said. “But that is using federal election law jurisprudence, not tax jurisprudence.” The IRS, he said, takes a “fact and circumstances approach” to decide whether ads — or groups — are basically there to influence elections. And the group’s primary purpose really couldn’t be clearer. Its own blog recently linked to a Wall Street Journal story in which Rove and fellow Republican strategist Ed Gillespie — the co-founders of Crossroads GPS and its Super PAC twin American Crossroads — announced that they’re “raising $120 million in the effort to defeat President Barack Obama, win a GOP majority in the Senate and protect the party’s grip on the House in the 2012 election.” “There’s a good chance the IRS will deny the (c)(4) application,” said Lloyd Mayer, who teaches tax law at the University of Notre Dame. So what would the group do should it come to that? Collegio told The Huffington Post he was “not going to argue hypotheticals based on a tax expert’s opinion.” And he stuck to his guns, adding: “[t]he laws as they are set out by the FEC and IRS are clear, and Crossroads follows them closely.” MILLIONS IN PENALTIES But without its 501(c)(4) status, the group would find itself in real trouble. Experts say the most likely scenario is that the IRS would classify Crossroads GPS as a “527″ organization instead. Unlike 501(c)(4), Section 527 of the U.S. Code is specifically intended for organizations that are primarily engaged in political advocacy. It exempts them from taxes and allows unlimited donations from individuals and corporations. And, thanks to recent Supreme Court decisions, it no longer imposes any limits on what they can say in their ads. But Section 527 also explicitly requires political groups to publicly disclose from whom they got their money and how they spent it. Karl Sandstrom, a former FEC commissioner now at the Washington law firm of Perkins Coie, predicts that “the IRS would come in and say, ‘you’re not properly a (c)(4), all indications are that you’re operating as a political organization. And political organizations have a responsibility to file regular reports with the IRS, and you failed to do so.’” Suddenly in violation of those disclosure rules, the group would then be subject to a massive penalty, established in the statute as the maximum corporate tax rate (35 percent) times all the money that should have been disclosed but wasn’t. For Crossroads GPS, that turns out to be a lot. “You would aggregate all donations that were not disclosed, and you would take that amount at 35 percent,” said Tobin. If indeed the group took in $43 million in donations in 2010 alone, that would mean well over $15 million in penalties right there. “In addition, the organization is also taxed on non-disclosed expenditures, so my reading of the statute would subject all expenditures that were not disclosed to the FEC to the 35 percent tax,” Tobin said. So Crossroads GPS would also owe more than a third of however much it spent beyond the $17 million it has already reported. In a twist sure to be frustrating to disclosure advocates, however, the group still would not have to disclose its donors’ identities once it paid its fines. But that would be secrecy at a very high price, indeed. The tax experts consulted by The Huffington Post say that another possible path exists for Crossroads GPS should it be denied its 501(c)(4) status: It could conceivably declare itself a regular, tax-paying corporation. But the group would arguably take a huge hit there, as well. In that case, the company would potentially have to pay corporate income tax on all the money in took in as donations. And all those campaigns ads wouldn’t be deductible, as they don’t qualify as ordinary and necessary business expenses. WAITING ON THE IRS Why, then, is Collegio still so confident? And why, given these huge potential pitfalls, are political (c)(4)s the hottest thing in D.C.? Because the IRS may be afraid of a fight. “That’s the issue here,” said Mayer, the Notre Dame law professor. “Because usually when there are penalties — especially of this magnitude, especially when you’re dealing with an organization this politically sensitive — the IRS blinks.” An IRS spokesman declined to comment for this story. Mayer described what he considers a likely scenario: The IRS denies Rove’s group its (c)(4) status, but ends up letting him off with just a slap on the wrist. “The IRS can waive those penalties if they find that the failure was due to reasonable cause and not due to willful neglect,” Mayer said. “And, of course, reasonable cause is all in the eye of the beholder.” “That would be the easy way out,” he added. Another possibility is that the IRS could just decide to let the issue drag out indefinitely, Mayer said. As it is, the earliest opportunity for decisive action may not be for almost another year. Experts say that at this point, the IRS would be wise to hold off on any action until Crossroads GPS files it annual tax form, a Form 990. By law, that form has to include a lot of detailed information about donations and expenditures. But Crossroads GPS will have four and a half months after the end of its fiscal year to file its taxes. That won’t be until Oct. 15. And tax rules make it pretty easy to get extensions for as long as six months, or until mid-April 2012 — still before the November elections, but not soon enough to stop the proliferation of copycats 501(c)(4)s. The IRS is notoriously skittish about making political decisions, Mayer said. “They will go after these (c)(4)s, but they may not have the stomach or the resources to fight a battle royale all the way to the Supreme Court.” That’s particularly the case if Rove’s group fights back hard — as it would be expected to do — and accuses the IRS of trying to limit free speech, he said. But this time around, the IRS could also face a lot of heat if it blinks — not just if it doesn’t. This past fall, IRS Commissioner Doug Shulman was besieged with letters demanding that he enforce the (c)(4) rules. Senate Finance Committee Chairman Max Baucus (D-Mont.) requested an investigation into the use of tax-exempt groups for political advocacy, generally speaking. Sen. Dick Durbin (D-Ill.) sent a letter requesting an investigation of the tax status of Crossroads GPS and other groups like it. And campaign finance reform groups Democracy 21 and the Campaign Legal Center called for an investigation of Crossroads GPS, in particular. “If the IRS investigation establishes that the facts and circumstances show that Crossroads GPS is primarily engaged in participating or intervening in political campaigns,” the letter from the reform groups said, “appropriate penalties should be imposed on the organization, including penalties that take into account the need to deter similar widespread violations from occurring in future elections.” THE COST OF GIVING There have also been some signs lately that the IRS is getting a bit bolder in this area. Last December, when it released its annual workplan, the IRS’ Exempt Organizations Division noted its intention to broaden its historical historical concentration on 501(c)(3) organizations — groups that are not only tax-exempt, but can accept tax-deductible contributions. “Beginning in FY 2011, we are increasing our focus on section 501(c)(4), (5) and (6) organizations,” the workplan said. And during the last two weeks, media reports have disclosed that the IRS is examining what could be the first five of many cases in which taxpayers who donated large amounts of money to 501(c)(4)s failed to report them on their gift tax returns. Gift taxes are not an issue for most people; gifts greater than $13,000 — or $26,000 per couple — don’t need to be reported at all. And there is a $5 million lifetime exemption for gifts made after 2010. But for the really big donors, especially those who give away several million dollars a year, the gift tax could result in a hefty assessment on some or all of their contributions. The gift tax rate is 35 percent this year. And unless Congress acts, it will jump to 55 percent in 2013, even as the lifetime exemption falls to $1 million. The IRS insisted in a statement to reporters that the examinations were “not part of a broader effort looking at donations to 501(c)(4)s” but rather were initiated by career employees looking at non-filing of gift and estate tax returns. But this could nevertheless be the tip of a very big iceberg. The examinations in the news were based on 2008 donations to (c)(4)s — back when such groups were still severely limited in what sorts of campaign ads they could run. The 2010 elections brought a huge infusion of campaign money, a good chunk of which is thought to have come from a handful of deep-pocket donors, such as the Koch brothers on the right, and George Soros on the left. For the IRS, cross-referencing those huge donations with gift tax filings would be the work of seconds. (Groups that don’t disclose their donors publicly still have to report them to the IRS in a confidential section of their Form 990s.) What it all comes down to is that, just as 501(c)(4)s weren’t designed to enable non-disclosure of massive political spending, the gift tax may turn out to be an accidental — but hugely effective — enforcement mechanism. By contrast, the gift tax issue wouldn’t be an issue at all if donors hadn’t tried to circumvent disclosure with (c)(4)s, as donations to 527 groups are, by statute, exempt from the gift tax. “That’s sort of one of the underlying themes here, that there is a potential cost to your anonymity,” said Ofer Lion, a Los Angeles tax lawyer who represents tax-exempt organizations. “Your anonymity is currently worth 35 percent of your contribution,” he said. “And 55 percent in 2013.” ************************* Dan Froomkin is senior Washington correspondent for The Huffington Post. You can send him an email , bookmark his page ; subscribe to his RSS feed , follow him on Twitter , friend him on Facebook , and/or become a fan and get email alerts when he writes.

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ATI Allied Health/NHA Names Derek Reid Director of Employer Relations

May 25, 2011

STILWELL, KS–(Marketwire – May 25, 2011) – ATI Allied Health and National Healthcareer Association (NHA), the allied health training and certification arms of Ascend Learning, today named industry veteran Derek Reid as director of Employer Relations. This appointment reinforces the companies’ commitment to building and maintaining strong partnerships with their allied health clients.

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Funds empty their clips as Sudan divides

May 25, 2011

As Sudan divides into north and south, CalPERS and other UN PRI funds are divesting shares in public companies in that country, while at the same time warning on the fragile peace and the precarious economy. CalPERS, the US’s largest public pension fund with about $236 billion in market assets, now owns stock in only eight companies in Sudan and Iran, down from 47 companies five years ago. The amount invested has, accordingly, fallen from $2 billion to $160 million. This sell-off has been in line with California’s divestment Acts, with Rob Feckner, CalPERS’ board president, saying the fund also would not make any new investments in the countries. “The cost of continuing to hold the stock of these eight companies is greater than the value of divesting them,” he said. Strong sanctions adopted last year by the US federal government, the UN and the EU prompted the withdrawal of several large multinational oil and energy companies from Sudan and Iran. The 12 signatories, including CalPERS, to the Sudan Engagement Group (SEG) statement diplomatically urged oil companies such as CNPC/PetroChina, Sinopec, ONGC, and Petronas to do more “to address risks and opportunities associated with operating in Sudan”. The statement congratulated companies such as Schlumberger, Total and Petrofac for their “balanced focus on economic purpose and social development in the region that, in the long run, should lead to greater benefits for all concerned”. Shareowners could be a force for peace, said Doug Pearce, CEO/CIO of the British Columbia Investment Management Corporation (BC IMC), one of the members of the Sudan Engagement Group and a signatory to the statement. “Shareowners can be instrumental in using our investment capital to be a positive force for human rights, community development and economic growth in Sudan,” he said. The SEG statement was signed by 12 investors with $2.7 trillion in assets under management: APG, Aviva Investors, BCIMC, CalPERS, Hermes Equity Ownership Services, Local Authority Pension Fund Forum, Mn Services, New Zealand Superannuation Fund, PGGM Investments, Robeco, The Co-operative Asset Management, and Universities Superannuation Scheme.

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