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Paul J. Stockinger: How Did We Get Here?

December 14, 2011

The world witnessed uprisings last year in four Arab countries. The protesters were mad as hell, and wanted rid of the despots they blamed for their troubles. They had an agenda, and in two of those countries they managed to accomplish the goal of eliminating the scourge at the top. In America, another protest movement arose. They call themselves “Occupy Wall Street” an aptly named group, who, recognizing that the financial calamity experienced in 2008 was caused by greedy recklessness of those in power on Wall Street, aided and abetted by those in power in Washington. Billions were lost as the house of cards that is mortgage derivatives came tumbling down as a superheated housing market did what bubbles always do. It burst, bringing down the collateral value of mortgage-backed securities. How did this happen? What caused this giant Wall Street calamity? What can be done to put things right, so it doesn’t happen again? The seeds of this destruction began to be sown 26 years earlier, in 1982, when, under the aegis of an actor in the White House, the powers that be began the systematic dismantling of safeguards put in place following the last major economic collapse that was the Great Depression. It began with the relaxing of banking regulations covering the savings and loan industry, making it possible for marginal borrowers to “live the American dream.” Repeal of Glass-Steagall I remember in 1998 when talk of Glass-Steagall repeal was circulating Wall Street, my associates and I were very skeptical. “Wasn’t that law passed for a reason?” we asked. In the Great Depression of 1929-1932, Congress examined the mixing of the “commercial” and “investment” banking industries. Hearings revealed conflicts of interest and fraud in some banking institutions’ securities activities. The Glass-Steagall Act, then set up a formidable barrier to the mixing of these activities. In 1999, Wall Street convinced Congress and President Clinton to repeal this act so that the banking and insurance/brokerage giants could combine, merging the Citibank branch network with the Salomon Smith Barney brokerage and Travelers insurance. That was only the first of many, many similar combinations. With the banks once again in the securities business, the stage was set for a repeat of 1929. Mortgage-Backed Derivatives In the U.S. the most common securitization trusts (mortgage pools) are Fannie Mae and Freddie Mac, U.S. and Ginnie Mae, a U.S. government-sponsored enterprise. Private institutions, like Investment Banks, Real Estate Mortgage Conduits (REMIC) and Real Estate Investment Trusts (REIT), also securitize mortgages, known as “private-label” mortgage securities. Issuance of private-label mortgage-backed securities increased dramatically from 2001 to 2007, and is where most of the problem lies. Effect of Mortgage Backed Derivatives on the Mortgage Industry The increased use of mortgage-backed securities created a fundamental shift or new paradigm in the mortgage lending industry. Whereas traditional lending practices required prudence in lending only to credit-worthy borrowers, now the concern regarding repayment was removed, as the original lender as “off the hook” once his loan was packaged in a mortgage pool. Repayment became the pool buyer’s problem. The mortgage industry then grew like topsy, making loans to virtually all comers. “Interest only” mortgages mushroomed. Historically marginally or unqualified borrower’s loan could now become part of a “subprime” mortgage pool. Everyone concerned seem to ignore the fact that one day, the borrower was going to have to “pay the piper.” Making loans to unworthy or marginal borrowers had an effect on the real estate market, as the number of buyers grew dramatically, so did real estate values, far beyond where they would have gone otherwise. This set the stage for two things: When prices reversed course, the decline would be far more severe than otherwise, and the number of foreclosures would be at record levels. I predicted this in 2004 (October). Credit Default Swaps When I was in the banking industry in the early-to-late sixties, there was not such a thing as “Credit Default Swaps”(CDS). A credit default swap, similar to a traditional insurance policy, obliges the seller of the CDS to compensate the buyer in the event of default. In the event of default the buyer of the CDS receives money, and the seller of the CDS receives the defaulted loan. However, there is a significant difference between a traditional insurance policy and a CDS. Anyone can purchase a CDS, even buyers who do not hold the loan instrument and may have no direct interest in the loan. The buyer of the CDS makes payments to the seller and, in exchange, receives a payoff if the loan defaults. These are called “naked” CDS, and in fact are a “bet” on default. The European Parliament has approved a ban on this kind of CDS, starting December 1, 2011. Credit default swaps have existed since the early 1990s, and increased in use after 2003. Between the end of 2007 and mid-year 2010 the outstanding CDS amount fell from $62.2 to $26.3 trillion . Insurer AIG required more than one bailout because they were the prime CDS issuer, and unwisely invested heavily in the same instruments they were insuring, in effect compounding their losses. The U.S. government now owns a large stake in AIG. The Fundamental Error I am constantly amazed at man’s failure to learn the lessons of history. Contributing to the Great Depression was rampant speculation, which caused a severe imbalance as security values soared to unsustainable highs. A bubble, if you will. The dramatic gains set the stage for the decline that followed. Because the commercial banks and the investment banks were so closely linked, the failure of one lead to the failure of the other. So, why undo the safeguards designed to prevent a reoccurrence? In retrospect, that was asking for trouble. What about real estate values? History tells us that, as with anything valued in currency, the price has and will continue to fluctuate. If you study price fluctuations in real estate, you will see that real estate values have had a ten-year cycle, with some variations. For example, the 1986 peak was followed by the 1996 low, as prices in more volatile markets like California were halved. It seems that, in their greed-fueled frenzy for bonuses, mortgage lenders became myopic and forgetful.

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Bennet Kelley: Taxation by Press Release in the Cradle of Liberty

December 14, 2011

Pennsylvania’s recent enactment of the so-called “Amazon Tax” via a press release from the Department of Revenue may be seen as a deft political move by Governor Tom Corbett to close a budget gap without enacting any new taxes, but viewed from afar the action is a cause for alarm over the state of politics in Pennsylvania today. The Amazon Tax is an attempt to collect revenue from a legal black hole. Like most states, Pennsylvania has a sales tax under which retailers (both online and offline) are required to collect and remit the tax from all sales. The exception to this rule is for out-of-state retailers who have no physical presence in the state, which is a bright line that the Supreme Court crafted pursuant to the Constitution’s Due Process and Commerce clauses. Where the sales tax is not collected, however, consumers are still obligated to pay the tax to their state, which is almost universally ignored or at least forgotten. Pennsylvania estimates that it loses $380 million annually to this black hole. This is where the Amazon Tax comes to the rescue by redefining who is an in-state retailer by including out-of-state online merchants (such as online behemoth Amazon.com) which pay commissions to in-state affiliate marketers and thus extending the collection obligation to such merchants. The Amazon Tax has become a popular item of discussion in state capitols the past few years because in theory it generates revenue for cash strapped states without having to actually raise taxes or, stated more frankly, is a gimmick that allows politicians to avoid an honest debate and accountability when it comes to state finances. Several states have enacted legislation to adopt the Amazon tax, but Pennsylvania is not one of them. While the website for the Pennsylvania capitol explains that “[m]aking law in Pennsylvania is a meticulous process — and for good reason,” Governor Corbett has enacted the Amazon tax by simply releasing a press release saying that existing law includes the Amazon tax. This, of course, begs the question why the Commonwealth left over a billion dollars in sales tax revenue on the table during e-commerce’s first generation or thought it necessary to attempt to pass Amazon tax legislation earlier this year. In addition, this expansive interpretation of the tax code flies in the face of Pennsylvania law that tax laws are to be strictly construed. In reality, the Amazon tax is not quite the panacea advocates portray it to be. In fact, enactment of the tax causes immediate economic hardship as hundreds of online retailers immediately sever their relationship with in-state affiliate marketers who lose as much as 50% of their income as a result. For Pennsylvania’s 9,000 affiliate marketers this means an immediate loss of as much as $350 million in annual income (which is more than five times greater than the losses to state businesses due to record flooding caused by Tropical Storm Lee). That may be why “Amazon Tax states” Illinois, North Carolina and Rhode Island have seen little to no increase in revenue as a result. While this is catastrophic for affiliate marketers, all Pennsylvanians should be alarmed that in this cradle of liberty, a mere forty miles from where Lincoln so eloquently honored those who fought to preserve government of and by the people, the tax laws can be dramatically altered by a mere press release. Carl Sandburg noted that “[w]henever a people . . . forget its hard beginnings, it is beginning to decay.” That is why the bankruptcy that Pennsylvanians should be alarmed about emanates not from Harrisburg City Hall but from the Governor’s mansion.

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Loud TV Commercials May Soon Be A Thing Of The Past

December 14, 2011

Excessively loud television commercials should be a thing of the past, thanks to the Federal Communications Commission. Responding to years of complaints that the volume on commercials was much louder than that of the programming that the ads accompany, the FCC on Tuesday passed the Commercial Advertisement Loudness Mitigation Act to make sure that the sound level is the same for commercials and news and entertainment programming.

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FINALLY: PG&E Assumes Civil Liability In San Bruno Blast

December 14, 2011

SAN FRANCISCO — Pacific Gas & Electric Co. officials confirmed Tuesday the company will take financial responsibility for the deadly San Bruno pipeline explosion and compensate victims who have filed civil suits in the wake of the blast. The announcement came as company attorneys prepared for a hearing Friday regarding about 90 civil suits filed against the utility in San Mateo County Superior Court. PG&E President Chris Johns said the company issued the statement in response to a judge’s request for an official position, but PG&E is hoping to settle cases without going to trial. The company has not specified how much it will pay victims, nor the amount of its total liability, but the latter is expected to be in the millions of dollars. “PG&E is hopeful that today’s announcement will allow the families affected by this terrible tragedy to receive compensation sooner, without unnecessary legal proceedings,” Johns said Tuesday. “We thought it was more appropriate to make it very clear that we’re acknowledging our liability.” The Sept. 9, 2010 explosion in San Bruno killed eight people, injured dozens and laid waste to dozens of 1960s-era homes in the hills overlooking San Francisco Bay. The utility previously indicated that it planned to compensate people affected by the blast, but victims later questioned whether the company had plans to hold them at fault. Frank Pitre, an attorney who represents about 75 victims of the blast, said the company’s acknowledgment of its liability won’t change his legal approach as the trial date draws closer. “This is not just about one exploding pipeline that ended up killing people and placed others’ lives upside down by burning them beyond recognition,” he said. “This case deals with exposing the corporate culture at PG&E.” A trial date has been set for July 23, 2012, but attorneys for the plaintiffs and the San Francisco-based company are still figuring out a process so that suits filed by victims and their families can be brought to trial as a group. Johns said the acknowledged liability would apply to current and future suits filed in the San Mateo court system. Lawsuits brought against PG&E by shareholders will be heard separately.

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Wendy K. Leigh: Peace, Love and Flash Grenades: Witness to the Seattle Port Strike

December 13, 2011

As demonstrators poured out of Westlake Park in the financial district of Seattle at 1:30 p.m on December 12, I scanned the crowd to see exactly who these people were. As part of a massive coordinated effort along the West Coast to bring the issues of economic disparity down to America’s ports of call, these were people who had been fully warned that this could get ugly. Yet, as I joined the throng for the three-mile march through the city’s core and down to the shipyards and the port, all I could see were “ordinary” Americans: a woman in a wheelchair … a couple hand-in-hand swinging their young child, who whooped with delight … a lady in her 60s playing a bongo drum on the side of the road … Native Americans in traditional garb … professional businesswomen in uncomfortable looking suits and heels … old men who served in our country’s wars generations ago — and young ones who’ve just returned. By various estimates, 400 people or more in total moved en masse through Seattle’s streets on this unusually clear, crisp December afternoon. Highlighted by festive Christmas decorations, with snow-capped mountains in the distance, the air was filled with recitations of poetry, guitars strumming, and voices united with songs and slogans. Truckers pulled on their horns, giving the thumbs-up. Shopkeepers, dock workers, waitresses and more appeared out of nowhere, lining the streets in solidarity for brief moments. One policeman on horseback was smiling and chatting with protesters. I heard him say ” If ever we meet when I’m not doing my job, we’ll sit down and have a conversation.” Traffic came to a dead stop and the police presence grew thicker. Though it would have been easy to be lulled into a romanticized illusion that this was the sixties and that “peace, love and flower-power” were being reincarnated in the 21st century, I reminded myself that the issues today are no less powerful and potentially violent than those 50 years ago. These people were marching with passion and full awareness that ports of call in America are federal property — and that the terminal we were marching toward is owned in part by Goldman Sachs, one of the most powerful financial entities in the world. In addition, these Americans, who consider themselves representative of the 99%, are in fact reviled and suspected by many in the same majority with which they align themselves. I stepped off the sidelines where members of the press generally cling, and fell in step with “we the people” as they chanted, “This is what democracy looks like!” The face of democracy , however, would show a darker side in less than three hours. Arriving at the port, still blocking major thoroughfares that held trucks and automobiles filled with workers trying to clock in to their jobs on the other side of quickly forming picket lines, the group halted in front of Terminal 18. In a pre-organized movement, everyone aligned themselves according to “willingness to be arrested.” Clearly defined sections were divided by constantly changing color zones of green, yellow and red, with red indicating a high risk of exposure to violence and potential arrest. Those who ensconced themselves safely in the green zone were occasionally taunted by those sitting defiantly in the middle of major expressways, who called out: “Get off the sidewalk and into the fight.” A loud “green” voice quelled the tension by proclaiming, “There has to be someone left to bail your asses out of jail.” Within minutes, that prediction came true, as the first arrests began. Three were detained at that point, with two taken into custody. As protesters fell into picket lines in front of the entrance to the terminal, it was yet to be seen whether arriving union workers would cross the lines to keep their jobs. Though the International Longshore and Warehouse Union (ILWU) were not participating in the attempts to shut down the port, Gabriel Prawl, a local longshoreman and co-convener of the Million Worker March of the Pacific Northwest, is quoted in a previous statement posted on the Occupy Seattle website, as saying: “Many differences between economic classes have traditionally been aired out on the waterfront throughout the last century, including long before my union existed. As West Coast longshoremen, we follow a set of ten guiding principles to help us do the right thing in situations like this. Principle number four states that we respect any picket line as if it were our own. And we hold this principle more sacred than the sanctity of any contract under which we work.” Hovering between the safety of the green zone and the “maybe you’re safe” yellow zone, I fell into step beside Kurt Goble, a weathered man who says that he worked in the surrounding shipyards and barge companies for 45 years. After first accusing me of being a “journalism slut” and part of the 1% who just want to sensationalize the struggles of everyday working men and women, he invited me to follow him to where the real battles are fought — and often lost. As we strolled across the waterfront, in a surreal diorama of police boats, hovering sheriff helicopters and police officers mounted on horseback and bicycles, he pointed out the sub-world structures to which most are oblivious. Storage containers adjacent to the picket lines are what he claimed were “tank farms” which are vulnerable to oil spills and sabotage. Trains, barges, trucks and freighters all synchronize on a daily basis to form the foundation of the container transfer operation surrounding the now “occupied” grounds. Having come this far, I struck out on my own into the soon-to-be infamous red zone at Terminal 18. Protesters were erecting an enormous blockade out of wood scraps, crates and aluminum debris, which eventually blocked all access to traffic. Many climbed atop the mound, which was soon surrounded by police officers. A young woman stood silent and stiff, holding a sign that declared “Our Ports.” At 4:40 p.m. a man with a megaphone climbed the barricade and the crowd erupted in cheers as he made the announcement: “Terminal 18 is now shut down for the night.” Port workers had been told to go home, alleviating a potential showdown over crossing picket lines. While many celebrated success, about 100 protesters remained at the barricade, refusing to dismantle and disperse. The legally required warnings from police were being issued when officers on horseback began to lose control of the animals. Hoofs were raised and protesters in close proximity stood their ground. At approximately 5 p.m., just minutes after the declaration of successful port closure, police officers threw two “flash bang” percussion grenades into the crowd, which landed directly behind me. Smoke filled the air as people struggled to don protective masks. Pepper spray permeated the space and protesters fell at my feet, screaming, as Occupy medics grabbed bottles of water, milk and other homemade remedies and began treating the wounded. Multiple arrests were made, including two medics, identified by bystanders as Brendan McCormack and Kelly Larsen. Later statements by the police and press assert that demonstrators began throwing bags of bricks, flares and paint at officers monitoring the event. While in the midst of the red zone, approximately 20 feet from the line of law enforcement personnel, I did not personally observe these actions prior to the explosion of flash bang grenades and the dispersal of pepper spray. As the night wore on, the movement to occupy the port shifted focus to Terminal 5, where additional blockades were erected and protesters linked arms in front of an employee entrance. Some vowed to continue the occupation into the following days – but my work here was done. As a peaceful observer, I had done what I came to do: watch a version of democracy in process. Wendy K. Leigh is a citizen journalist and photographer who has been documenting the Occupy movement in Seattle. If you would like to contribute as a citizen journalist to The Huffington Post’s coverage of American political life, please contact us at www.offthebus.org .

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Texas Adopts Rules On Fracking Chemical Disclosure

December 13, 2011

HOUSTON — Texas regulators have adopted rules requiring oil and gas drillers to disclose on a website the chemicals they use in hydraulic fracturing operations. The Texas Railroad Commission adopted rules Tuesday to enforce a law passed by the Legislature earlier this year. Texas has been a pioneer in efforts nationwide to force drillers to be more open about chemical-laced water pumped into the ground to crack dense rock formations to withdraw oil and gas. The process is known as fracking and some environmental groups fear the chemicals could taint water and pollute the air. Texas will require companies to disclose chemicals but not concentrations. Other states, such as Colorado, require disclosure of concentrations.

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Downtown Detroit To See $160 Million In Capital Investment

December 13, 2011

By Jonathan Oosting The Michigan Economic Growth Authority today approved more than $17 million in brownfield tax credits for the redevelopment of four historic buildings west of Woodward Avenue in downtown Detroit. In separate votes, the board approved credits for the David Whitney Building on Woodward along with the former United Way, Capitol Park and Farwell buildings on Capitol Park. The David Whitney project won $9.79 million in credits while MEGA awarded the others between $2 million and $3 million each.

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OECD: Europe Must Act To Stop Youth Jobs Crisis

December 13, 2011

PARIS (Anna Maria Jakubek) – Europe must invest in jobs for young people despite the reigning climate of austerity or risk long-term consequences for growth and competitiveness, an international panel of employment experts said on Tuesday. With youth jobless rates across the European Union averaging an alarmingly high 20 percent, governments need to fight the trend by stimulating growth, creating jobs and training youths, said the researchers from the Organisation for Economic Co-operation and Development (OECD). Jobless rates among young people vary widely across the 27-member bloc, rising as high as 45 percent in Spain in the second quarter versus 7 percent in the Netherlands. Some countries, including the Netherlands and Germany, have kept youth unemployment low thanks in part to apprenticeship and mentoring programs which the OECD said should not count as spending items in national budgets. “It’s an investment for the present, an investment for the future, so I think that while we are thinking about where to cut, we have to bear this in mind,” said Stefano Scarpetta, deputy director of the OECD’s employment division, speaking at a two-day conference at the Paris-based body. Not only do governments need to increase benefits for the unemployed, but they should also help to reintegrate jobless youths into the labor market by helping them look for jobs and training them to work in new sectors, the panel said. “This should not be just passive income support and then the young person stays at home waiting for a job to come,” Scarpetta said. High jobless rates have dogged Europe for decades. But youth unemployment has emerged as a particular concern during the European debt crisis as companies in countries with high labor costs eschewed making new hires. While overall EU unemployment hit 9.8 percent at the end of October 2011, the rate for youths has risen at a much faster pace, to 22 percent in October 2011 from 16 percent in 2007, according to the European Commission. The struggle to find jobs was not confined to the unskilled and poorly educated, the panel said. “People with higher education are just not getting jobs, and we can’t allow that sort of waste of the investment in education skills to start to evaporate away in terms of hopelessness, frustration,” said John Evans, general secretary of the OECD advisory on union issues. Copyright 2011 Thomson Reuters. Click for Restrictions .

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Chuck E. Cheese Fined For Multiple Child Labor Law Violations

December 13, 2011

Chuck E. Cheese, that famed birthday party venue “where a kid can be a kid,” has allegedly been forcing some children to grow up a bit too fast. The U.S. Department of Labor fined nine San Francisco-area Chuck E. Cheese’s restaurants a total of $28,000 for allowing 16 young workers to operate on-site trash compactors in violation of the law, according to the Los Angeles Times . The eateries also allowed two minors to run a dough-mixing machine illegally. The Fair Labor Standards Act sets the minimum wage for most non-agricultural work at age 14, but it does prohibit youth from working in manufacturing, mining or performing other “hazardous jobs.” But it appears the restaurants have learned their lesson. Officials at CEC Entertainment Inc., the Irving, Texas-based owner of Chuck E. Cheese’s, are now telling teen workers not to operate the equipment and have put stickers on the machines warning minors not to use them, according to the San Francisco Chronicle . Brenda Holloway, a spokeswoman for the company, told the Chronicle that there were some regulations that the CEC hadn’t been aware of previously. “As soon as we were made aware of that, we did correct the deficiencies and paid our fines,” Holloway told the Chronicle . “We’re walking the straight and narrow now.” The Labor Department has collected more than $650,000 in back pay and penalties from 271 south Florida restaurants for labor law violations including breaking child labor provisions, according to a press release. A Connecticut family fought back in 2010 when the Labor Department accused them of violating child labor laws by allowing their children to work in the family pizzeria, according to ABC News. The Chuck E. Cheese news comes as child labor regulations have been thrust back into the national spotlight thanks to Republican presidential candidate Newt Gingrich. Gingrich, a former House Speaker, has proposed putting poor children to work as janitors in their schools to help them learn a proper “work habit.” This isn’t the first scandal at Chuck E. Cheese this year. A photo surfaced in July of what appeared to be a mascot pointing his middle finger at a camera while next to a child. In 2010, a Chuck E. Cheese manager was accused by female employees of sexist and derogatory comments.

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John Boehner Predicts House Will Approve Payroll Tax Cut Legislation

December 13, 2011

WASHINGTON — House Speaker John Boehner predicted Monday that the House will approve legislation that renews a payroll tax cut and curtails extra benefits for the long-term unemployed. The House is expected to approve the roughly $180 billion measure on Tuesday. Senate Majority Leader Harry Reid, D-Nev., has said the bill will go nowhere in the Senate, citing a provision all but forcing President Barack Obama to move ahead quickly with a controversial oil pipeline that would run from Canada to Texas. Boehner, R-Ohio, sidestepped a question about whether he rules out eventually agreeing to a compromise with that chamber. “The House is going to do its job, in time for the Senate then to do its job,” Boehner told reporters. Senate Democrats’ version of the bill pays its costs largely by boosting taxes on the wealthy. Republicans prefer freezing federal workers pay and other spending cuts. The House legislation would continue the Social Security payroll tax that workers pay at 4.2 percent in 2012, the same as this year. That tax is normally 6.2 percent, but was temporarily cut in a bid to spur the economy. The reduction means an extra $1,000 in the wallets of families earning $50,000 annually. The Democrats’ Senate bill, which that chamber has already rejected, would drop the payroll tax to 3.1 percent next year and provide employers with similar reductions, as Obama has proposed. If Congress takes no action by Jan. 1, the payroll tax will return to 6.2 percent. Congress is hoping to adjourn for the year before Christmas. The House GOP bill would also curtail the current 99 weeks of maximum unemployment coverage, dropping it gradually to 59 weeks by mid-2012. And it would prevent a 27 percent cut in Medicare reimbursements to doctors next year, a reduction that could prompt some physicians to stop serving Medicare patients. It would instead increase their Medicare payments by 1 percent each of the next two years.

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Verizon ‘Emergency’ Text Alert Causes Panic In New Jersey

December 13, 2011

NEWARK, N.J. — Not quite the “War Of The Worlds” broadcast of a Martian invasion in New Jersey, a Verizon “emergency” alert Monday that the company texted to its wireless customers still jangled some nerves and triggered hundreds of calls from concerned residents to local and state offices. The company sent the alert to customers in Middlesex, Monmouth and Ocean counties, warning of a “civil emergency” and telling people to “take shelter now.” Trouble was, the message was meant to be a test but it wasn’t labeled as such, Verizon later admitted. Within about 90 minutes, the state homeland security and emergency management offices posted on Twitter that no emergency existed, but by then people had called a variety of local, county and state agencies to express their concerns. In Monmouth County, the number of calls to the county 911 call center doubled between noon and 1 p.m. to more than 170, compared to the same time last week, Cynthia Scott, a county sheriff’s department spokeswoman, said. “It was more concern than panic,” Scott said. “We had people calling who had a lot of questions.” New Jersey State Police also fielded calls, as did numerous public offices in Ocean County. “It seemed like calls went to any agency that had a listed phone number,” said Lt. Keith Klements, division commander for the county sheriff’s office. The reaction wasn’t as extreme as the panic touched off by Orson Welles’ 1938 “War Of The Worlds” radio broadcast of a fake Martian invasion in Grovers Mill, N.J. Many people believed the broadcast was a real emergency announcement. But for a short while Monday, the alert started a chain reaction across a wide swath of central New Jersey. “We were getting reports from individuals but not from any of our people out in the field,” Klements said. “And no one was saying it was coming from a specific source. But we have to take it seriously, so we immediately checked with the state.” A spokesman for the state Office of Homeland Security and Preparedness didn’t immediately return a phone message. In an email, a Verizon spokesman said the company apologized for any inconvenience or concern that the message caused. The company didn’t say why the message was sent without being labeled as a test or whether Monday’s incident was the first time such a mistake had occurred.

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Aaron Shapiro: RIM’s Only Road Back: Building a Better Product

December 13, 2011

Once upon a time, Research in Motion was the world’s leading smartphone company. Armies of executives were loyal to their “crackberries.” It had a stock price that wouldn’t quit. Fast-forward a few years and its failed tablet has caused RIM to miss its third-quarter revenue target . It’s been weighed down by lengthy network outages. Legions of people are ditching BBMs for iMessages and abandoning BlackBerry keyboards for Android keyboards. Speculation over RIM’s demise hits the press daily, and I’m sure many news outlets already have drafted its obituary. But there’s still time for RIM to save itself and recapture its former glory. How? It’s time to get up off the floor, stop wasting time with me-too products and finally build a product that’s better than the iPhone. That’s right. Stop strategizing and pontificating about the future, stop getting distracted by tablets and do what Apple did to you: Simply build a better product. If RIM built a product people preferred using to the existing choices; if it took a step back from playing catch-up and producing me-too products to innovate and produce a device that makes everyday tasks more convenient, that delights and astonishes users, that improves the quality of consumers’ lives, RIM could very well survive. Because that’s all that users of digital media and technology want: technology that makes their lives easier. Focusing on user needs, somewhat ironically, is how RIM became the original smartphone wunderkind. It defined its user base as executives and politicians that relied on the device to rapidly send important, sensitive, and secure emails. To this end, for example, in 2004 it produced a keyboard that had 20 keys rather than 26 and powered this usability innovation with proprietary predictive text software — a great idea. But then when smartphones began offering cameras and downloadable software like games, RIM nixed these features because of security concerns. You know how this story ends. They were so myopically focused on meeting the needs of corporate customers, by the time they realized these executive email senders were also consumers who wanted to enjoy using their devices, they had already been leapfrogged by the competition. Ever since, RIM has tried to put this right by releasing their own versions of Apple and Google devices, but again, you know where this goes — to a stock price down from its high of $148 in 2008 to today’s bargain-basement $17 price tag. RIM’s challenge is both simple and incredibly difficult. To survive, it must produce a new product people love to use more than the iPhone. But this is doable: Apple proves it once a year at least. The 4GS bested the iPhone 4 with Siri, the iPhone 4 bested the 3GS with FaceTime. Microsoft has tried to do it with its now-defunct Kin and its current Windows Phones that provide a user experience that breaks away from the same-old, same-old grid of application icons. The first step for RIM to create an iPhone killer is achieving parity in function, if not form. That, after all, is Android’s user experience in a nutshell. This comes down to two things: Making sure the network never crashes again. If I were in charge, I wouldn’t try to prevent network outages; I would harness all of the resources necessary to actually solve the problem. Creating a rich app library. I’d make sure all BlackBerry devices could run Android apps — admittedly, not a trivial challenge, but both are based on the Java programming language so it’s technologically feasible. Designing a better device comes down to the right people, the right strategy, and the right environment. I’d start by: Hiring the best design talent . The opportunity to reverse the fortunes of a former tech darling and revolutionize the smartphone market is an appealing proposition. Exploiting the one weakness that the iPhone will always have: its hard-to-use screen-based keyboard, and simultaneously leveraging one of BlackBerry’s former strengths, its keyboard. Running it as a “skunkworks” project, insulated and freed from the company’s existing corporate culture and bureaucracy. Organizing the talent in microteams where each would operate on a discrete component of the larger system. This would maintain a nimble, entrepreneurial atmosphere. With these ingredients in place, RIM would stand the chance of joining Apple on the list of legendary companies that were written off for dead and then returned to triumphant glory. It just needs the right product to get there. Aaron Shapiro is the CEO of HUGE and the author of Users Not Customers: Who Really Determines the Success of Your Business .

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‘Supply Is Down, So Prices Are Up’

December 12, 2011

This article comes to us courtesy of California Watch . By Michael Montgomery A crackdown by federal prosecutors is casting a long shadow over the state’s marijuana industry, but there is one bright spot, at least for some Northern California growers willing to risk prison time: Wholesale prices appear to be on the rise. After slumping precipitously, prices for a pound of high-grade, outdoor-grown marijuana are stabilizing and in some areas are up between 20 and 40 percent, according to interviews with growers, law enforcement agents and analysts. “It’s been a downward thrust since 1996, but this year, prices have been up,” said Kym Kemp, a Humboldt-based blogger who closely follows Northern California’s marijuana scene. “People are saying, ‘Maybe this isn’t our last season,’ ” she said. “I don’t think people are ready to be optimistic, but they’re less depressed.” In recent years, California’s booming medical marijuana industry attracted a rush of new players who harvested increasingly large amounts of pot – for storefront dispensaries and the black market. Some longtime operators responded by also “growing big.” Surging production pushed down prices for some strains to less than $1,000 per pound. This led more growers to illegally ship their marijuana out of state, where they can double or triple their profits. But this year, production levels have dropped, in part because of rainy weather and a “bumper crop of mold,” said medical marijuana grower and activist Charley Custer. “It was a perfect storm,” he said. It wasn’t just the weather. Stepped-up enforcement actions by local and federal law enforcement led some growers to lay low and reduce their plant counts to double digits. “Some growers decided to keep it small this year,” said Dale Gieringer, state director for the National Organization for the Reform of Marijuana Laws. With marijuana supplies under pressure, prices responded as they would with any other commodity. Since the fall harvest, Northern California growers have seen prices jump to between $2,000 and $2,500 per pound for “good-quality” marijuana, according to Kemp. Law enforcement agencies say it’s too early to get a clear read on this year’s harvest. “Marijuana remains readily available in California, and we have not noticed a substantial change in prices,” said Casey McEnry of the Drug Enforcement Administration’s San Francisco office. But data collected by local law enforcement and a federally funded drug task force indicate street prices have nearly doubled in some parts of the state. “Supply is down, so prices are up,” said Tommy LaNier, director of the White House-funded National Marijuana Initiative. LaNier credited the shift in prices to new law enforcement tactics, including the use of more informants, undercover agents and wiretaps and an aggressive effort to intercept marijuana being shipped in vehicles and through commercial carriers like FedEx and UPS. He also said recent actions by the state’s four U.S. attorneys have shaken the marijuana industry. “The market is significantly disrupted,” he said. LaNier said creating market disruptions has been a top priority for law enforcement because it could make marijuana less affordable for minors. But law enforcement agencies are not the only groups welcoming the changes. Black market growers say rising prices mean a return to higher profits. “This is a relief, since my margins were getting very thin,” said one Bay Area grower, who asked that his name be withheld because he is operating outside of state medical marijuana laws. Because of the profit margins, he said he had given up trying to sell his product in California. Instead, he’s been delivering it to the East Coast concealed in private vehicles. The grower said he might return to the California market if prices continue to rise. “I’d rather not take the extra risk of shipping out of state,” he said. But Tim Blake, a Mendocino-based medical marijuana grower, activist and impresario, said it is an outrage that illegal growers stand to benefit from the federal crackdown while medical marijuana operators are the targets of raids and forfeitures. “Prices are going up, but the people who will cash in are the men hiding in the mountains,” he said. “If this continues, the people who are trying to follow medical marijuana laws won’t get anything because they’ll be out of business, thanks to the feds.” Michael Montgomery is an investigative reporter for California Watch, a project of the non-profit Center for Investigative Reporting. Find more California Watch stories here .

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Another Immelt? Obama’s Latest Appointments Questioned

December 12, 2011

WASHINGTON — President Obama on Monday charged two of his senior advisers with pursuing policies to strengthen the American manufacturing sector , a move progressives have long argued was overdue. But his two picks to run a White House Office of Manufacturing Policy — Commerce Secretary John Bryson and National Economic Council Director Gene Sperling — raised some of the same concerns that arose when Obama named General Electric CEO Jeffrey R. Immelt as his top adviser for job-creation efforts . Ron Bloom, a former senior official for the United Steelworkers who had also served as Obama’s “car czar,” stepped down from his job as assistant to the president for Manufacturing Policy in August. “It is gratifying to see, after such a long wait, replacements being named for Ron Bloom, who so honestly and well represented the manufacturing sector as the President’s Manufacturing Czar,” Leo Hindery, a former CEO who heads the US Economy/Smart Globalization Initiative at the New America Foundation , and is one of the foremost advocates of a U.S. industrial policy, said in an email. “However, it is disappointing that it couldn’t be people whose bona fides re: the manufacturing imperative are clearer and more established,” Hindery wrote. “How is this so much different than having Jeffrey Immelt of General Electric head the President’s Jobs Council when GE under Mr. Immelt’s stewardship has offshored many more American jobs than it has created?” Bryson previously led Southern California Edison, a massive utility company, and served as Boeing’s longest-serving director. Sperling, who has held a series of senior economic policy jobs in both the Clinton and Obama administrations, is a lawyer by training. In between the two Democratic administrations, he did lucrative consulting work that in 2008 alone netted him $2.2 million, including $887,727 from Goldman Sachs for a part-time job advising it on its charitable giving and $158,000 for speeches mostly to financial companies. Obama said in a statement on Monday: “At this make or break time for the middle class and our economy, we need a strong manufacturing sector that will put Americans back to work making products stamped with three proud words: Made in America.” These days, Buying American isn’t so easy . As Richard McCormack wrote in the American Prospect in 2009, over the previous decade or so, “Americans stopped making the products they continued to buy: clothing, computers, consumer electronics, flat-screen TVs, household items, and millions of automobiles.” Just last week, the Council on Competitiveness , a nonpartisan business and labor group, became the latest group to criticize the U.S. approach, concluding that “policy prescriptions for manufacturing are in disarray.” Indeed, the nation currently lacks any unified industrial policy, which could entail such things as a sustained program to encourage homegrown industry, a more assertive trade policy, the chartering of a national development bank, ending the favorable treatment of foreign investments, creating new tax credits for research and development, and actively discouraging offshoring. Bloom, reached by The Huffington Post on Monday, did not join the criticism of his successors. “Everybody brings a different set of skills to the party,” he said. “Obviously I had a bunch of background in labor.” “There are multiple good ways to attack this problem,” Bloom said. “I don’t know if this one is going to work. No one can know.” But he added: “I think this president has demonstrated more commitment and interest to manufacturing than any president has in a long time.” House Democratic Whip Steny H. Hoyer (Md.) responded enthusiastically to the news. “By appointing Commerce Secretary John Bryson and National Economic Council Director Gene Sperling to co-chair the White House Office of Manufacturing Policy, the President again demonstrates his commitment to expanding U.S. manufacturing,” he said in a statement . * * * * * 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 , subscribe to him on Facebook , and/or become a fan and get email alerts when he writes.

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‘Millionaire Job Creators Are Like Unicorns’

December 12, 2011

Senate Majority Leader Harry Reid (D-Nev.) compared millionaires who create jobs to unicorns Monday on the Senate floor. “Millionaire job creators are like unicorns,” he said, according to The Hill . “They are impossible to find and don’t exist.” Reid said that most of the “fictitious millionaire job creators” are “hedge fund managers or wealthy lawyers that don’t do much hiring.” The Senate has twice rejected paying for the extension of the one-year payroll tax cut with a surtax on millionaires. Republicans have said that the millionaire surtax would hurt job creation. “Well, over half of the people who would be taxed under this plan are, in fact, small businesspeople,” said House Speaker John Boehner (R-Ohio) in November. “And, as a result, you’re going to basically increase taxes on the very people that were hoping will reinvest in our economy and create jobs.” Sen. John Thune (R-S.D.) agreed. “If you’re somebody who’s in business and you get hit with a tax increase, it’s going to be that much harder, I think, to make investments that are going to lead to job creation,” he said . NPR asked numerous House and Senate Republican offices recently to find a millionaire job creator to interview that would be affected by the legislation, and they were unable to produce one. The Huffington Post’s Jason Linkins analyzed the Republican claim, and found that small-business owners were overwhelmingly concerned with demand, not tax policy. Linkins added on the NPR report: Thune responded by insisting that NPR found “exceptions to the rule.” But if the “rule” is correct, why wouldn’t a small-business owner want to talk to a reporter about an issue of paramount importance? Why couldn’t any of the congressional offices or lobbying outfits that consider this a matter of paramount importance proffer the contact information of anyone willing to offer a testimonial about the adverse conditions this surtax would impose? Politico recently reported that Senate Democrats are seriously weighing scrapping the surtax. Reid said that the Senate will not pass the House version of the payroll tax cut extension since it includes a provision requiring the Obama administration to make a decision in two months on the proposed Kesytone XL pipeline, which the administration has pushed back until 2013.

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U.S. Financial Sector By Far The Worst Performer In S&P 500 This Year

December 12, 2011

(Angela Moon and Ryan Vlastelica) – Even experienced Wall Street contrarians are eyeing the beaten-down U.S. financial sector warily. The sector is down 20 percent this year, by far the worst performer in the S&P 500. The weakness has been so pervasive that the S&P, which is down 1.8 percent in 2011, would be up 3.3 percent on the year if financials were excluded, according to Standard & Poor’s Equity Research. Most market participants agree these stocks are set for a rebound over the long term. They still appear too risky for short-term traders. Arguably, this is when intrepid bargain hunters who buy into investor fear would be snapping up the beaten-down sector. But the problems dogging banks all year – from the debt crisis in Europe to the bleak outlook for profits – do not appear to be abating. “Our job is to buy low and sell high. With financials, I’m still questioning, ‘What is low?’” said John Manley, chief equity strategist for Wells Fargo Advantage Funds in New York. The aversion to financials is great. Assets in bank-focused funds have dropped by 40 percent in the last six months, and the group is the only one of 10 S&P sectors trading at less than the value of the assets on their books. Market participants cite various reasons for financials to decline further, including regulations, weakness in the housing sector and fears linked to Europe’s escalating debt crisis. “Valuations are attractive, but there has to be a catalyst to move prices higher and I just don’t see that,” said Peter Coleman, director of research at JMP Securities in San Francisco. VALUATIONS In the last six months through the week ended December 7, the assets under management (AUM) in the U.S. financial/banking funds sector have dropped a net $8 billion, or nearly 40 percent, according to Thomson Reuters’ Lipper U.S. Fund Flows database. Assets in the sector hit a peak in February 2011 of nearly $23 billion in AUM. Since then, it’s been mostly outflows. Investors have remained skittish due to the worries about Europe. The predominant investing strategy this year has been to trade on macro events, specifically the euro zone debt crisis. Whenever the outlook for Europe worsens, the banks are punished, particularly brokerages such as Morgan Stanley and Jefferies & Co, on fears of exposure to Europe. It has contributed to high volatility in the sector. “The things that made these stocks cheap are still around. It’s still a risky business and you have no idea how bad business can get until they really get bad,” said Manley. That’s contributed to making banks more undervalued than any other sector based on anticipated growth. By StarMine’s current estimates, the financials are priced at 57 percent of their intrinsic value, compared with 72 percent for the S&P. Intrinsic value is where StarMine believes a stock should trade based on likely growth over the next decade. “If you have a three to five year timeline you’ll look back at today’s prices and wish you bought in, but I don’t see anything to move them higher over the next 12 months and I just can’t ignore the headwinds,” said Coleman. This is the reason the market capitalization of the bank sector is less than the value of the assets on their books. The combined market cap of the sector is $1.68 trillion, compared with book value of $1.95 trillion, according to StarMine. OPTIONS AND DOOM Even the options market does not suggest optimism for the future. Last week open interest on the Select Sector Financial SPDR fund , which tracks the S&P financial sector, reached its highest since the financial crisis. Put options outpaced call options by a ratio of 1.7, according to Interactive Brokers. Normally, the ratio is between 1 to 1.2. When Bank of America shares fell to a fresh two-year low of $5.03 last week, instead of betting on a rebound, option traders moved to hedge themselves against more declines. “There’s a group of high-quality banks that have bottomed, but Bank of America isn’t one of them,” said Marty Mosby, large-cap bank analyst at Guggenheim Partners in Memphis, Tennessee. Mosby listed Wells Fargo, US Bancorp and Bank of New York Mellon among those where “we haven’t yet reached an inflection point where their strong fundamentals will drag prices up in a risk-averse market.” Among individual names, the put-to-call open interest ratio on Goldman Sachs was 1.11 while Citigroup’s ratio was 0.62. “I think what you would find looking at trades on specific names is that there are traders positioning for a range of scenarios from recovery to disaster,” said Caitlin Duffy, Equity Options Analyst at Interactive Brokers. Even some of those speak positively about the banks are staying cautious. BNY Mellon’s wealth management core portfolio recently moved to a slight “overweight” position on the group due to the bad news already priced into the sector. “As a group, banks are fairly valued, however it’s understandable that we’re going to be cautious about moving to a large overweight at this time,” said Leo Grohowski, chief investment officer at BNY Mellon Wealth Management in New York. “This could turn out to be an outstanding entry point, but it depends on your risk appetite… there could be more risk than potential reward.” (Reporting by Angela Moon and Ryan Vlastelica; Additional Reporting by Dan Bases; Editing by Andrew Hay) Copyright 2011 Thomson Reuters. Click for Restrictions .

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Swiss, U.S. Officials Inch Closer To Deal On Tax-Dodging Americans: Reports

December 11, 2011

ZURICH – Swiss and U.S. officials have met in recent days in Berne to try to end a long-running dispute over wealthy Americans using secret Swiss accounts to dodge taxes, and seem to be getting closer to a deal, two newspapers reported on Sunday. The fact that Michael Danilack of the U.S. Internal Revenue Service travelled to Berne for the first time to meet Swiss negotiator Michael Ambuehl was seen as a positive sign. “That shows the U.S. has a considerable interest in the negotiations and that a breakthrough seems possible,” an unnamed Swiss diplomat told the NZZ am Sonntag newspaper. Mario Tuor, a spokesman for the Swiss secretariat for international financial affairs, confirmed the talks had taken place, but declined to comment further beyond saying more negotiations were planned. The NZZ am Sonntag and the SonntagsZeitung newspaper said the negotiators were seeking a deal for the whole Swiss banking industry, as well as the 11 banks under formal investigation over allegations they assisted tax evasion. They include Credit Suisse (CSGN.VX), Julius Baer (BAER.VX) and Basler Kantonalbank (BSKP.S). The Swiss want the investigations dropped in return for payment of fines and the transfer of hundreds, or even thousands, of names of clients suspected of tax evasion but have been haggling over how to do this given strict bank secrecy laws. The SonntagsZeitung cited an unnamed source as saying negotiators are seeking two parallel deals, one for the 11 banks under investigation, and a separate one for the industry as a whole which would levy a punitive tax on undeclared assets. In 2009, Swiss authorities reached a deal for UBS (UBSN.VX) to pay a fine of $780 million to avert criminal charges, and ultimately agreed to allow the bank to reveal details of around 4,450 clients. Copyright 2011 Thomson Reuters. Click for Restrictions .

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Consumer Bureau Developing Simpler Credit Card Form

December 7, 2011

Imagine a credit card agreement that’s short, to the point and easy to understand. If one federal agency gets its way, what you’re picturing could become a reality. The Consumer Financial Protection Bureau launched a campaign aimed at simplifying credit card agreements Wednesday. The agency is asking the public for feedback on a more transparent credit card form that is broken down into three sections — costs, changes and additional information — and features information high up on fees, interest rates and other information. The bureau will also be soliciting feedback through a pilot program that will offer the agreement to customers of the Pentagon Federal Credit Union. “When a consumer has to read through pages of legal fine print in their credit card agreement to figure out how their card works — it’s easy to get confused,” Raj Date, a special adviser to the Treasury said in a statement announcing the program. “With a short, simple, easy-to-understand credit card agreement, consumers can clearly see the terms of the deal and make the decisions that are right for them.” The announcement comes after a CFPB report analyzing more than 5,000 credit card complaints found that customers are confused by their credit card terms. The report also found that consumers are still complaining about interest rates, billing disputes and other issues, despite legislation passed in 2010 that aimed to make credit cards more transparent. The complaint system was the first of its kind for the CFPB, which launched in July. The agency plans to expand the complaint system to all financial products starting with mortgages. The bureau, which was created as part of the Dodd-Frank Financial Reform legislation, has been controversial since before its inception . Consumer advocates welcomed the agency as a necessary step towards preventing another financial fallout, while the financial industry and some lawmakers derided it as over-regulation. The new credit card form may be coming at just the right time. Credit card purchases climbed more than 10 percent last quarter after an 8.6 percent increase and a 9 percent boost in the first and second quarters respectively, according to statistics from First Data. The findings may indicate that credit card use is edging up after consumers cut back on debt immediately following the recession. Check out an early version of the CFPB’s simplified credit card form:

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Jeanne Kelly: Make a List, Check It Twice and Have a Debt-Free Christmas

December 7, 2011

With the holiday season just around the corner, it’s that time of year when your credit cards come out of hibernation and play “Santa’s Elves” to make sure that everyone in your family gets what they asked for. It’s easy to spend and spend (and spend!) during this season. While generosity is a good thing, going into unmanageable debt is not. It’s like coal in your stocking and it will be an unpleasant “gift” if you’re still paying it off months from now. Here are 5 ways to add a dash of organization to your holiday shopping to help you avoid the credit agencies’ “Naughty” list. Don’t just go to the store and look for inspiration! Get your family to make a list of what they want for Christmas. This will keep you focused and help you to avoid impulse shopping on other peoples’ behalf! Sit down with those lists and do some comparison shopping online. Sure, there might be Christmas sales at stores but you might find the same stuff cheaper if you buy it altogether online (like at Amazon.com for example). End result? You save money plus you avoid the shopping mall headaches and hassles. For the stuff you can’t get online, organize your shopping trip(s) to the mall. Minimize the trips (to avoid excess fuel and eating-out costs). Know what you want to buy and where it’s available and how much it should cost. (A chart would help but that sounds like it will suck all the fun out of Christmas. Believe me when I tell you: it may make Christmas seem less festive but it will keep you merry through the spring when you don’t have as much debt to pay off.) Create a payment plan! This is something that almost no one does but it will help you. Decide up-front how much you can spend (based on what you want to get people) and how you will pay for it. For most people, paying for Christmas is a mix of cash and credit. (More cash than credit is better but I’m also realistic enough to know that this is improbable.) Keep all your receipts. This is critical for two reasons. First, if that sweater you bought your husband doesn’t quite fit, it’s easy to bring back for a refund or exchange. Second, when your credit card bill arrives in January, you can pull out your receipts and confirm the amount. There won’t be any surprises and you might catch any problems (such as overcharging or even credit theft). Meryl Starr ( http://www.merystarr.com ) a personal organizer, offered these tips: Keep it simple! Give out gift cards. If you know someone likes a certain magazine, give them a subscription. Save on wrapping and look for old fabric napkins you have and wrap up a gift. This season of the year is always chaotic — the kids have school plays, you’ve got holiday parties to attend, there are family dinners and extended family dinners and who-are-these-people dinners you have to go to. But when the tree comes down and the giftwrap is cleaned up, you’ll enjoy your spring a lot more because you rose above the chaos with a little organized Christmas debt-management. Please let me know any holiday credit questions you may have: Jeanne.Kelly@TheCreditOwl.com

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Kraft Names New CEO Of Snacks Business

December 5, 2011

NORTHFIELD, Ill. — Kraft Foods Inc., which is splitting its business into two publicly traded companies, has named Chairman and CEO Irene Rosenfeld to head the global snacks company after the breakup. Rosenfeld, 58, will serve as chairman and CEO of the snacks business which will include brands such as Trident gum and Cadbury chocolate. Rosenfeld has served as CEO of Kraft Foods since 2006 and as chairman since 2007. The other company, which will focus on the North American grocery business, will be headed by W. Anthony Vernon, who is executive vice president and president of Kraft Foods North America. The 55-year-old Vernon will oversee the Maxwell House coffee, Oscar Mayer meats and other brands. Vernon became president of Kraft Foods North America in 2009. The grocery business will keep the Kraft Foods name, while a name for the snacks business – which has yet to be determined – will be up for a vote at its shareholders meeting in May. Kraft also said on Monday that John Cahill, industrial partner of private equity firm Ripplewood Holdings LLC, will become non-executive chairman of the grocery business. The 54-year-old Cahill will start out as executive chairman due to the “tremendous effort” needs to launch and transition to a public company, Kraft said. Cahill, who has served as chairman and CEO of The Pepsi Bottling Group Inc., will start at Kraft in January to start working on the separation. Rosenfeld and Vernon will take on their new roles when the companies launch. The spinoff is expected to be complete by the end of next year. Kraft, which is based in Northfield, Ill., said its management structure will stay the same until the spinoff. Last month the company reported that its third-quarter net income rose 22 percent, boosted by higher prices on some of its products that helped offset increased costs for everything from ingredients to packaging. Its stock slipped 3 cents to $36.44 in morning trading Monday.

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The Good Times May Be Over For U.S. Defense Industry

December 1, 2011

U.S. weapons makers told investors this week they are doing all they can to prepare for leaner and more uncertain U.S. defense budgets, including redoubling their efforts to cut costs, drum up export sales and sell more goods to commercial clients. Industry executives and Pentagon officials say they are still sorting out the potential impact of an additional $600 billion in defense cuts over the next 10 years, on top of some $489 billion in cuts already being absorbed. Even if those additional cuts can be averted, as Republicans hope, the industry is facing pressure on profit margins and a dearth of new programs after more than a decade of strong growth, industry executives and analysts agreed. The Pentagon’s No. 2 budget official, Mike McCord, told a conference hosted by Credit Suisse and Aviation Week that the fiscal 2013 defense budget proposal now being finalized already included cuts in the $40 billion-range from previous plans, following a cut of around $25 billion in fiscal 2012. He said the White House had not ordered the Pentagon to revamp that plan to reflect another $50 billion in cuts, and it would be difficult, if not impossible, to do that in the few weeks before the budget documents must be completed. “We’re a little bit in the dark like everybody else is about the future of sequester,” McCord said. Clay Jones, chief executive of Rockwell Collins Inc (COL.N), a flight-controls supplier and subcontractor on many key weapons programs, said commercial sales would account for a growing share of his company’s revenue as government orders declined. “It’s been a great ride,” he told the conference. “The ride’s over.” Rockwell Collins expects sustained double-digit growth in its commercial business but says its outlook for government sales is clouded by lingering uncertainty about the U.S. defense budgets for fiscal 2012 and beyond. Bill Swanson, chief executive of Raytheon Co (RTN.N), said he was hopeful that Washington could avert the additional $600 billion in defense cuts but said his company had studied the potential impact of such cuts. “We’ve got to be smaller, we’ve got to be more efficient. We’ll get the job done,” he said. Raytheon, he said, was well positioned, given prospects for continued sales in the missile defense, intelligence, surveillance and reconnaissance, and cyber security areas. International sales — likely to account for 30 percent of Raytheon’s bookings in 2011 — would help the company offset the downturn in U.S. defense spending, he said. Swanson cited arms sales already in the works or soon to be completed, naming Saudi Arabia, Taiwan, Kuwait, Turkey and Oman. “We got a lot of activity in the pipeline,” he said, noting that in addition to solid demand from the Middle East and Asia, Raytheon was also eyeing new orders from India, Brazil and other countries in South America. The Navy’s No. 2 acquisition official said the service had not yet been asked to plan for additional budget cuts, and there was no “convergence” within the Pentagon on how to deal with the possible additional cuts. Vice Admiral Mark Skinner, principal military deputy to the Navy’s acquisition chief, said budget plans submitted by the Navy and other military services to Pentagon leaders addressed only the initial round of cuts, not the additional $600 billion now on the table. The Navy’s share of the initial cuts is $9 billion to $10 billion in fiscal 2013, Skinner said. “Sequestration is bad,” he said, referring to the additional budget cuts required because a congressional “super committee” failed to agree on at least $1.2 trillion of deficit reduction over 10 years. The cuts would affect all Pentagon programs across the board and could result in violations of existing multi-year contracts, he said. “We’re going to break a lot of china,” he told conference participants. Shay Assad, the Pentagon’s director of pricing, said the department was continuing its efforts to trim waste and improve oversight of billions of dollars of contracts. He emphasized that the effort was not aimed at squeezing corporate profit margins, but said well-run companies deserved better results than those whose programs were over budget and behind schedule. “We’re raising the bar and the expectations of our workforce, and we expect the companies to do the same on their side of the table,” Assad told the conference. Swanson welcomed Pentagon efforts to reform the way it buys weapons and said Raytheon was continually trying to reduce its costs and safeguard its healthy profit margins. But he said industry was also vigilant about taking on too much risk on new development programs, especially on bigger programs. (Reporting by Andrea Shalal-Esa and Karen Jacobs; Editing by John Wallace and Gunna Dickson) Copyright 2011 Thomson Reuters. Click for Restrictions .

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Steven Strauss: Actually, Despite GOP Claims — the U.S. Isn’t Over-regulated

November 29, 2011

The GOP presidential candidates believe, as an article of faith, that the United States is an overly-regulated society. They want to eliminate “unnecessary” regulations and even entire regulatory agencies to, in their view, unleash the growth potential of American business. Governor Perry wants to eliminate 3 federal regulatory agencies (2 he named; one whose name he couldn’t remember), Ron Paul wants to eliminate 5 agencies, and so on ( Republican Presidential Debate , November 9th 2011). The GOP candidates claim that the U.S. regulatory environment is not competitive with that of our peer group, and risks losing jobs to other countries. Still another article of faith among GOP candidates is that the regulatory scheme has worsened under President Obama. I describe these as “articles of faith”, because to my knowledge — they have not shown any non-partisan research, or international benchmarks, to demonstrate that our overall regulatory environment is particularly burdensome. Leaving aside the GOP candidates’ anecdotal views, it is helpful to examine real data that compares the U.S. regulatory burden with that of our peer group. The World Bank conveniently prepares an Ease of Doing Business Index (Index) whereby: ‘Economies are ranked on their ease of doing business, from 1 – 183. A high ranking on the ease of doing business index means the regulatory environment is more conducive to the starting and operation of a local firm. This index averages the country’s percentile rankings on 10 topics, made up of a variety of indicators, giving equal weight to each topic. The rankings for all economies are benchmarked to June 2011.’ As with any index of this nature, this Index is not a perfect proxy for each country’s actual level of regulatory burden. Nonetheless, it is a good indicator of how the U.S. compares to its peer group and to a list of 183 other countries. The Index examines: starting a business, protecting investors, enforcing contracts, among other relevant topics. The Index data can be sorted three ways: 1. Large Countries (List 1 below): I view this as our peer group. In this category, the U.S. is the easiest country where one can do business. 2. High Income Countries (List 2 below): In this category, the U.S. is the fourth easiest for doing business, behind several much smaller high-income countries. 3. All Countries (List 3 below, including many under-developed countries): Again, the U.S. ranks fourth. The World Bank Index samples 10 regulatory categories, so is not exhaustive across all regulations. But it clearly shows that overall — we are among the easiest of countries in which to conduct business, particularly when compared with our peers. As for the Obama administration’s performance, a recent General Accounting Office study found no particular increase in the regulatory burden by comparison with the preceding Bush administration ( Bloomberg News , ‘Obama Wrote 5% Fewer Rules Than Bush’, October 25, 2011). Finally, an additional interesting piece of data comes from a recent survey of high net worth entrepreneurs in China — 60% of which are considering emigrating, most to the U.S. The reasons cited include: the strength of the American regulatory system — and the resulting safety of our food, environment, workplace, etc. ( Bloomberg Business Week ,’China’s Super-Rich Buy a Better Life Abroad’, November 22, 2011). Not every regulation or law in the U.S. is perfect; not every regulator is a paragon of virtue. We can all name individual failures. Certainly, we should strive, as a country, to be the best we can be, and compare ourselves against international standards. But we cannot make our economy stronger or more competitive by making judgments and major structural changes based on faith — rather than reality. The data collected for the U.S. and its peer group — over several years — does not show that the U.S. has a systematically bad regulatory environment. But if we eliminate several major regulators (e.g., EPA) we: a) Will likely make our country significantly less safe, less healthy, and more unpleasant, b) Won’t improve our international competitiveness, and c) May actually dissuade foreign investors from coming to the U.S. What do you think? List 1: Large Countries Ranked for Ease of Doing Business (Top 5) 1. U.S. 2. UK 3. Republic of Korea 4. Saudi Arabia 5. Canada List 2: High Income Countries Ranked for Ease of Doing Business (Top 5) 1. Singapore 2. Hong Kong 3. New Zealand 4. U.S. 5. Denmark List 3: All Countries Ranked for Ease of Doing Business (Top 5) 1. Singapore 2. Hong Kong 3. New Zealand 4. U.S. 5. Denmark Steven Strauss was founding Managing Director of the Center for Economic Transformation at the New York City Economic Development Corporation. He will be an Advanced Leadership Fellow at Harvard University for 2011-2012. He has a Ph.D. in Management from Yale University. Follow him on Twitter @steven_strauss.

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Pamela Anderson Ready To Rent

November 29, 2011

Pamela Anderson has been a poster girl for many things, and now she may become the face of the sluggish high-end real estate market. The former “Baywatch” star is offering her vacant Malibu Colony, Calif., home as a short-term rental at $20,000 a week or $75,000 per month. Anderson’s listing appears on VRBO.com (for Vacation Rentals by Owner), one of a growing number of sites that seek to help homeowners lease their vacant houses. While Anderson isn’t the first celebrity to rent out her home for income — many in Malibu and the Hamptons are displaced for the summer by high-paying tenants — she’s certainly the highest-profile personality to enter the short-term rental market without the shield of anonymity. Christine Karpinski, author of “How to Rent Vacation Properties by Owner,” calls Anderson’s move “brilliant.” “Having Pamela Anderson’s name attached to a property gives it a higher premium. It’s not just any old house anymore and becomes something much more attractive,” Karpinski said. It gives renters the cachet of saying they moved into a celebrity’s home, slept in her bed, etc. Karpinski noted that in the housing downturn many second-home owners began to lease their vacation properties when they weren’t using them, hoping to generate some extra income. The result has been the proliferation of both online sites and the number of properties they have listed. VRBO.com, started in 1995 as a family business with a single listing in Breckenridge, Colo., now has 165,000 homes listed, many of them at the high end of the market. An unoccupied property is a financial drain, said Karpinski. As for the Canadian-born Anderson, she wrote on the VRBO site that she’s been traveling a lot and spending more time with family in Canada, leaving the Malibu home empty. Agents in Malibu suggest she is most likely keeping her options open, preferring not to sell her house in a depressed market and allowing for a possible return there as her base. Eileen Buesing, a spokeswoman for VRBO parent company HomeAway, said the actress did not receive any remuneration for listing her home. In fact, VRBO charges homeowners to post photos and descriptions of properties, and the owner manages the leasing transaction. Other vacation rental sites function differently, some providing tenant screening and more active management of the property for a percentage of the rental fee.

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99 Percenters Hurt More By Austerity Measures Than The 1 Percent: Study

November 29, 2011

Government belt tightening hurts the budgets of the 99 percent more than those of top earners, a recent study finds. Income inequality rises when countries use spending cuts instead of tax hikes to deal with budget deficits, according to a new paper from researchers Luca Agnello and Ricardo Sousa. The paper analyzes data from 18 countries between 1970 and 2010. The findings come after a 12-member congressional panel failed to agree on measures to reduce the budget deficit in time to avoid triggering $1.2 in spending cuts starting in January 2013. What deadlocked the committee? A stalemate over whether to use spending cuts or tax hikes to reduce the deficit. “During periods of fiscal consolidation, income inequality significantly rises,” the researchers wrote in the study. “Moreover, fiscal adjustments that are led by spending cuts tend to have a more detrimental impact on income distribution than those driven by tax hikes. Similarly, we show that the top 1% income share in total income increases after consolidation.” Spending cuts are a controversial around the globe right now. In Greece, unions are planning a mass strike on December 1 to protest the 2012 austerity budget as lawmakers grapple with a sovereign debt crisis. Greece’s negative reaction to the budget may be because they could face government salary cuts or lose some social services if the budget is passed. The majority of residents of France, Germany and Spain — like their Greek counterparts — say that it’s important to make sure no one else is left in need . But if European leaders implement an austerity budget while the economy is weak, it may have less of an effect on income inequality , the study found. Fiscal austerity that takes place during banking crisis episodes leads to a negligible effect on income inequality, while budget tightening in the absence of crises boosts the income gap. Nations that implement austerity after a banking crisis is resolved experience an “amplified” effect on income inequality. The wealth gap in the U.S. has skyrocketed in the last thirty years . The top one percent of earners saw their incomes grow by 275 percent between 1979 and 2007, according to the Congressional Budget Office, while the bottom fifth of earners saw their incomes rise by 20 percent. Americans’ median income fell for the second year in a row in 2010 to $26,364, while nearly half of households lack access to basic needs . At the same time, the 400 richest Americans control as much wealth as the bottom 50 percent of earners.

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‘The Office’ Dunder Mifflin Paper Now An Actual Product!

November 28, 2011

After seven and a half seasons of teasing us with their product, Dunder Mifflin will finally give the general public the opportunity to use their famed paper. Comcast, the parent company of “The Office” broadcaster NBC, has licensed for production a line of paper stock from the world’s largest (fictional) Northeastern Pennsylvania-based mid-sized paper company. Staples will produce and sell the product on its Quill.com, meaning fans of the show can print out their own love letters to Jim Halpert on the paper he’s made a career of pushing. That Comcast decided to go with Staples may raise some eyebrows amongst hardcore fans of the show; after all, Staples is one of Dunder Mifflin’s biggest competitors, and where Dwight briefly worked while on a sojourn from his beloved company. Another question to ponder: will the pages display the classic, recalled watermark that involved a duck and a mouse in a very obscene way ? For more, click over to the Wall Street Journal .

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Raymond J. Learsy: Germany’s Misguided Paradigm as Versailles Treaty Enforcer While The Brilliance Of Reunification Goes Unheeded

November 28, 2011

Sometimes it is not just the numbers. The human factor and historical imperatives need play their role in policy formation. Unquestionably, the financial impasse in Europe today has historical foundations. A prosperous and diligent Germany is called upon to relent its rigid financial determinants to relieve the regional economic pressures, to in effect underwrite the noble experiment of a now faltering Europe. The Germany being asked to step up and take the risks inherent to underwriting the enterprise of ‘Europe’ has a memory writ large of financial excess and mismanagement. The destructive inflation of the 1920′s was a primary factor that brought about the societal upheaval permitting the ascent to power of the National Socialists. The rest, of course, is history. What seems to have been overlooked was that the inflation and German economic mismanagement of that period was instigated in large measure by the rigid demands of the Versailles Treaty imposing on Germany’s war torn economy reparations it was not in any position to accommodate. The printing press was, at that time, the only solution and the devastating inflation that resulted has left an indelible scar on the German psyche, and in turn one can assume, plays a profound role in today’s financial policies. Yes, the printing of money was the end result, but the fundamental cause was the intransigence in the enforcement of the Versailles Treaty, an intransigence that led to Germany’s economic disaster and in turn to Europe’s greatest carnage with the loss of millions upon millions of lives. It was In pained reaction to these events that led to the vision and formation of today’s ‘Europe’. It is this grand vision of a united ‘Europe’ that the financial crisis is threatening to dismember. It therefore becomes more than ironic, bordering on the frightening, that history would cast Germany as the nominative 21st Century ‘Versailles Treaty’ enforcer, a treaty that was meant to bring to an end to a war that was meant to “end all wars” Yet, there was/is another moment, another time, another Germany. It is the moment that the new postwar Germany undertook its greatest risk, financial and human, and achieved an extraordinary triumph on a human, historical and now economic level. The Reunification with East Germany was an act of magnanimity still not fully understood outside the borders of Germany extant. To absorb 18 million fellow Germans from an impoverished, underdeveloped landscape, and to support them freely, unstintingly to help them to reach the economic and societal norm of the their Western compatriots was an act of such magnanimity. It has been rewarded with a flourishing landscape of economic achievement and societal well being. It has turned Germany from laggard, often described as the “sick man of Europe” in the early 1990′s, having undertaken the gargantuan task of unification, to becoming the economic behemoth that it is today. Bloomberg Business Week in its cover article”Best Merger Ever” 10.16.10 would state unequivocally: “It’s no exaggeration to say that the contours of the Western world as we know it today were forged by German unification. As a result, the European Continent is more peaceful and unified now than at any time in modern history.” Yes, unification had its difficult moments. Initially the introduction of the Deutschmark on a 1 to 1 basis into the newly unified States of what had been the German Democratic Republic, had a devastating impact on East German industry, making their manufactured goods suddenly unaffordable outside their borders and all the societal dislocation that entailed. Yet Germany was unstinting in its support, committing well over the equivalent of $1 trillion to the reunification project. As the former West German President Richard von Weizsacker was to declare that the rebirth of a united Germany was the “the most moving experience of our lifetimes.” The sinews and commitment of “Germany’s Reunification” is the lesson that deserves to be emulated. This is the lesson that went far toward restoring the self confidence both of a German nation and a German psyche, traumatized by the earlier events of that century. This is the moment once again, in the spirit of that example, for today’s Germany to step forward. For Germany and for Europe, much more is at stake than simply the balance sheet of the European Central Bank

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How To Turn $1,000 Into $66 Million

November 28, 2011

Real-estate mogul Barbara Corcoran takes a look back at her early days as an entrepreneur.

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Black Friday Shoppers Ignore Dying Man Collapsed On Shop Floor

November 28, 2011

A Black Friday shopper who collapsed while shopping at a Target store in West Virginia went almost unnoticed as customers continued to hunt for bargain deals. Walter Vance, the 61-year-old pharmacist, who reportedly suffered from a prior heart condition, later died in hospital, reports MSNBC . Witnesses say some shoppers ignored and even walked over the man’s body as they continued to shop, reports The Daily News . Friends and co-workers saddened to learn of his death, expressed outrage over the way he was treated by shoppers. “Where is the good Samaritan side of people?” Vance’s co-worker Sue Compton told WSAZ-TV . “How could you not notice someone was in trouble? I just don’t understand if people didn’t help what their reason was, other than greed because of a sale.” Gawker points out there is no legal obligation to come to someone’s rescue, only a moral one. While some news organizations say that no one helped the collapsed man, his wife refuted this report. Lynne Vance said six nurses shopping in the store came to her husband’s rescue and performed CPR until paramedics arrived, notes the Sunday Gazette Mail . This wasn’t the only incident to taint America’s biggest shopping day. While one customer sprayed fellow shoppers with pepper spray so she could snag a video game, another scenario involved an exhausted Target worker accidentally driving her car into a canal after working the Black Friday midnight shift.

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Holiday Gift Guide: The Best From Our Board Of Directors

November 25, 2011

Black Friday marks the chaotic kickoff to the holiday shopping season. This year, an estimated 152 million Americans — yes, half the country — will be heading out in full force to start crossing items off their lists. Big retailers open their doors earlier and earlier each year, and some eager shoppers even camp out to get their hands on the best deals. Sure, you could head out to your local mall. But that’s boring. Even if you’re not an entrepreneur, that doesn’t mean you can’t shop like one. In an effort to help Santa’s helpers get a little more creative this year, we reached out to members of our Board of Directors — who, we must admit, make some pretty cool stuff — for their best offerings. From books that inspire (Virgin’s Richard Branson ) to jewels that sparkle (DANNIJO’s Danielle and Jodie Snyder ) to eco-friendly soap that will help you clean up a little spilled egg nog (Method’s Eric Ryan ), our team has got you covered this year. Oh, and did we mention you can buy everything here from the comfort of your own home? Happy gifting!

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Janet Tavakoli: MF Global Revelations Keep Getting Worse

November 22, 2011

• Shortfall estimated at $1.2 billion or more (up from $600 million) • “Repo-to-Maturity” is a “Total Return Swap-to-Maturity,” a Type of Credit Derivative • Probable Shortfalls Throughout 2011 • Regulators Waive Required Tests for Jon Corzine • Questions About How MF Global Became a Primary Dealer • MF Global Wrote Rubber Checks for some Electronic Checks for Others • Tip-Offs for Some Customers? • CFTC’s Gary Gensler Didn’t Act • MF Global Debacle Damages a Key Global Market When MF Global collapsed on October 21, it was the biggest financial firm to collapse since Lehman in September 2008. Then Chairman and CEO Jon Corzine is connected to the head of one of his key regulators, the Commodity Futures Trading Commission (CFTC), through his former protégé at Goldman Sachs, Gary Gensler. He also knows the Fed’s William Dudley, a key member of the Fed’s Open Market Committee, from their days at Goldman Sachs. The Fed approved MF Global’s status as a primary dealer, a participant in the Fed’s Open Market Operations, just before Jon Corzine took its helm and beached it on a reef called leveraged credit risk. MF Global’s officers admitted to federal regulators that before the collapse, the firm diverted cash from customers’ accounts that were supposed to be segregated : MF Global Holdings LTD. “violated requirements that it keep clients’ collateral separate from its own accounts…Craig Donohue, CME Group’s chief executive officer, said on a conference call with analysts today that MF Global isn’t in compliance with the rules of the exchange and the Commodity Futures Trading Commission.” ” MF Global Probe May Involve Hundreds of Millions in Funds ,” Bloomberg News – November 1, 2001 by Silia Brush and Matthew Leising Cash in customers’ accounts may be invested in allowable transactions, and MF was allowed to make extra revenue from the income. But what isn’t allowed, and what MF Global apparently admitted to doing, is to commingle customers’ money with its own and take money from customers’ accounts to meet margin calls on MF Global’s own allowable transactions. Even if all of the money is eventually clawed back and recovered, this remains an impermissible act. Moreover, full recovery–even if it is possible–is not the same as restitution. People have been denied access to their money, and businesses and reputations have been tarnished. In layman’s terms, you may buy a Rolls Royce with customers’ excess cash, sell it at a profit, and pocket part of the profits. You may buy a Rolls Royce and try to resell it at a profit with your firm’s cash. But you aren’t allowed to take customers’ money to make the car payments on your firm’s Rolls Royce. If one engages in this impermissible activity, it becomes almost impossible to cover up if you have an accident driving your Rolls Royce. Implausible Denial and an Ugly Surprise On November 1, Kenneth Ziman, a lawyer for MF Global, relayed information from MF Global to U.S. Bankruptcy judge Martin Glenn in Manhattan: “To the best knowledge of management, there is no shortfall. ” If that sounded like a cover-up, it was, unless of course you prefer to believe that the “best knowledge” of management is actually no knowledge at all. How long does it take to find more than $600 million to $1.2 billion of customers’ money? MF Global’s books seem so messed up that one person couldn’t have created this chaos alone. A lot of people had to agree to throw away controls, standards, and procedures. I doubt this happened just in the final week or two before MF Global blew itself up. “According to a U.S. official, MF Global admitted to federal regulators early Monday [October 31, 2011] that money was missing from customer accounts. MF Global acknowledged a shortfall in a phone call amid mounting questions from regulators as they went through the firm’s books.” ” MF Global’s Collapse Draws FBI Interest, ” by Devlin Barrett, Scott Patterson, and Mike Spector, WSJ , November 2, 2011 The initial bankruptcy estimate was a shortfall of around $600 million. As of Monday November 21, MF Global’s liquidating trustee believes the shortfall may be as much as $1.2 billion and possibly even more. “Repo-to-Maturity” is a “Total Return Swap-to-Maturity,” A Type of Credit Derivative If you call a total return swap-to-maturity a “repo-to-maturity,” you are much less likely to freak out regulators. Many regulators still remember that Long Term Capital Management (LTCM) used total return swaps (among other things). Jon Corzine should remember, too, since he was closely involved with LTCM when he headed Goldman Sachs. In September of 2011, FINRA seemed to catch on that MF Global’s transactions were riskier than it previously thought and asked for more capital against these trades. Part of AIG’s acute distress in 2008 was due to credit default swaps, another type of credit derivative, linked to the risk of shady overrated collateralized debt obligations. The basic problem was risk on fixed income assets that could only go down in value combined with lots of leverage. I’d like to interject a side note. I understand that some pundits tried to say that the New York Times’s Gretchen Morgenson was incorrect when she wrote MF Global was felled by derivative bets . She is correct. The pundits leaped to the conclusion that when she referred to credit derivatives and “swaps” that she meant credit default swaps, but she was referring to total return swaps, a type of credit derivative. (Later in the article she discussed a different topic, lack of transparency in credit default swaps, another type of credit derivative.) MF Global’s problematic trades were different from AIG’s, but they were also derivatives, in fact, they were a form of credit derivative. The “repo-to-maturity” transaction was just a form over substance gimmick to disguise this fact. Specifically the transactions are total return swaps, a type of credit derivative, and the chief purpose of these transactions is leverage. A total return swap-to-maturity includes a type of credit derivative. It allows you to sell a bond you own and get off-balance sheet financing in the form of a total return swap. Alternatively, you can get off-balance sheet financing on a bond with risk you want (but do not currently own so there is no need to sell anything) and take the risk of the default and price risk. (Price risk can be due both to credit risk and/or interest rate risk.) This is an off-balance sheet transaction in which the total return receiver (MF Global) has both the price risk and the default risk of the reference bonds. In this case, MF Global had the price risk and the default risk of $6.3 billion of the sovereign debt of Belgium, Italy, Spain, Portugal, and Ireland. As it happened, the price fluctuations of this debt in 2011 weren’t due to a general rise in interest rates, they were due to a general increase in the perceived credit risk of this debt. Repo transactions are on balance sheet transactions, but they don’t draw as much scrutiny from regulators. There was just one little problem. MF Global wanted the off-balance sheet treatment of a derivative, a total return swap, but it didn’t want to call it a total return swap, so it used smoke and mirrors. Even if MF Global engaged in a wash trade at the end (if there is no default in the meantime) to buy back the bonds, MF Global would receive par on the bonds from the maturing bonds. The repurchase trade at maturity is a formality with no real (or material) economic consequence. In other words, the “repo-to-maturity” exploits a form-over-substance trick to avoid calling this transaction a total return swap. Accountants paid by the form-over-substance seekers and asleep-at-the-switch regulators will sometimes, at least temporarily, go along with this sort of relabeling. The fact that MF Global was exposed in a leveraged way to default risk and liquidity risk because of these transactions and that the risk was- linked to European sovereign debt was disclosed in MF Global’s 10K for the year ending March 31, 2011, a required financial statement filed with the SEC. The CFTC and other regulators had the information right under their noses, but it appears they didn’t understand that they were looking at a leveraged credit derivative transaction that could lead to margin calls that MF Global would be unable to meet. See Also: ” Credit Derivatives and Leverage Sank Jon Corzine’s MF Global, ” by Janet Tavkaoli, Huffington Post, November 4, 2011, The result is that yet another large financial institution has been felled when it couldn’t meet margin calls due to the credit risk of fixed income assets combined with high leverage in an off-balance sheet transaction. The ugliest part of this story, however, isn’t that MF Global got in over its head, it’s that the bankruptcy trustee estimates customers’ money to the tune of $1.2 billion or more is still missing. Probable Shortfalls Throughout 2011 MF Global reportedly employed 35:1 leverage–some reports are 40:1–against a portfolio comprised around 20% of European Sovereign risks including Belgium, Italy, Spain, Portugal, and Ireland. MF Global would have had several trading days in 2011 with moves of 5% to 10% on this sovereign risk. MF Global was so thinly capitalized that this trade alone could eat up half of its capital. Any of MF Global’s other asset positions moving the same way in 2011′s highly correlated markets would have put MF Global in a position of negative equity. From a risk management point of view, examiners have to consider the very strong possibility that MF Global had several negative equity days throughout 2011. How did MF Global meet margin calls throughout 2011? It seems an investigation into money flows throughout 2011 is in order. By the end of October, the combination of a $90 million August legal settlement against MF Global coming due, increased capital calls by FINRA, and margin hikes from counterparties worried about MF Global’s credit made it impossible for MF Global to cover up its shortfall. Regulators Waive Required Tests for Jon Corzine Jon Corzine resigned as Chairman and CEO of MF Global on November 4, just days after the October 31 bankruptcy announcement. As a matter of corporate governance, holding the position of Chairman nad CEO meant that Corzine had a lot of concentrated power with little oversight. Many question the wisdom of a corporate structure that allows officers to hold this dual position. (Ken Lewis, the former Chairman and CEO that merged Bank of America into the poorhouse held this dual role, too. Lewis defended this practice at the Federal Reserve Bank of Chicago’s Bank Structure Conference in 2003.) Corzine was the former governor of New Jersey and had been out of the active markets for twelve years. Prior to that, until 1999 he had been the CEO of Goldman Sachs. The Financial Industry Regulatory Authority Inc. (FINRA) gave Jon Corzine a waiver from his Series 7 and Series 24 exams when he took the helm of MF Global in March 2010. The former is required for anyone involved in the investment banking or securities business including supervision, solicitation, or training of persons associated with MF Global, and that included Corzine. As an officer of MF Global the latter was required for Corzine, since he had been out of the business for around 12 years or more than six times the 2 year expiration date for reactivating these qualifications. Jon Corzine to Credit Derivatives Head: Next Time “Double Up” (See note below) The test waiver by regulators seems to be blatant cronyism, because Corzine not only hadn’t been involved in the day-to-day markets for more than a decade, his responsibilities at MF Global included active decision making. The waiver wasn’t justified. Corzine reportedly authored the strategy for the MF Global killing trades, and he also had authority on the trading floor. Jon Corzine pushed traders to increase their risk. According to an MF Global employee, Corzine knelt down beside Jim Parascandola, head of credit derivatives trading, and told him that next time he should “double up” on his winning protection bets on brokerages. Traders loved Corzine, because he pushed them to increase risk. Now the traders aren’t lifting offers, they’re pounding the pavement. Update : Subsequent to this report Jim Parascandola told me that he was never told to increase the size of any position, albeit his trades were profitable. MF Global Becomes a Primary Dealer Unregulated by the Fed: How Did That Happen? MF Global’s financials were shaky ever since Man Group spun it off in 2005 and saddled it with a lot of debt. Yet MF Global was added to the Fed’s list of 22 primary dealers in February 2011, just before former Goldman CEO Jon Corzine officially came on board. Primary dealers buy and sell U.S. treasuries at auction and are a counterparty to the Fed’s Open Market operations. William C. Dudley is the president and chief executive officer of the FRBNY. He is also vice chairman of the Federal Open Market Committee (FOMC) and VP of the Markets Group, which oversees open market and foreign exchange trading operations and provisions of account services to foreign central banks and manages the System Open Market Account. Dudley is a former partner at Goldman Sachs (1986-2007), and he was Goldman’s chief economist. David Kotok of Cumberland Advisors has raised important questions about the fact that the Fed has dropped its role of surveillance of primary dealers, and his commentaries are available here . Besides trading treasuries, the big benefit to primary dealers is the perception that the Fed will provide funding to primary dealers during a systemic liquidity crunch. Just before Bear Stearns imploded, the Fed changed the rules so that non-U.S. banks, along with brokers that were primary dealers (as MF Global later became), were allowed to borrow through a program called a Term Securities Lending Facility (TSLF) to finance mortgage backed securities, asset backed securities, and more. TSLF’s start date was too late to help Bear Stearns, and the program has now been discontinued, but the perception of a Fed safety net has precedence. Why did the Fed award prestigious primary dealer status to a shaky operation like MF Global, an entity it does not regulate? MF Global Stalled and Wrote Rubber Checks: Did Some Customers Get Better Treatment? The week before the bankruptcy, when customers asked for excess cash from their accounts, MF Global stalled. According to a commodity fund manager I spoke with, MF Global’s first stall tactic was to claim it lost wire transfer instructions. Instead of issuing an electronic check or sending an overnight check, MF Global sent paper checks via snail mail, including checks for hundreds of thousands of dollars. The checks bounced. After the checks bounced, the amounts were still debited from customer accounts, and no one at MF Global could or would reverse the check entries. The manager has had to intervene to get MF Global to correct this, and still hasn’t gotten the entries corrected. Reuters’s Matthew Goldstein reported more in ” MF Global and the Rubber Check. ” I thought that was bad enough, but on November 10 I was a guest on Stocks & Jocks, a Chicago radio show, when Jon Najarian said that a large broker he knows got a $400,000 electronic check from MF Global the Friday before that bankruptcy, and the check cleared. If that’s accurate, MF Global treated some customers differently than others. Tip-Offs for Some Customers? In August, customers started pulling billions of dollars out of their segregated accounts with MF Global. It was the biggest outflow of funds since January 2009 . The bankruptcy trustee may clawback transfers of funds from MF Global as it was teetering, because it is likely that employees within MF Global were well aware of the problems and tipped off key customers. Yet Gary Gensler, head of the CFTC, did not investigate or begin transferring accounts out of MF Global before the bankruptcy, and that is unprecedented for the CFTC. Given that Gary Gensler was a protégé of Jon Corzine at Goldman Sachs, one should question why Gary Gensler didn’t act and why he should be allowed to remain head of the CFTC. CFTC’s Gary Gensler Didn’t Act Gary Gensler, Jon Corzine’s former Goldman Sachs colleague and current head of the Commodities Futures Trading Commission (CFTC), had reason to be concerned about MF Global’s risk management. In early 2008, a rogue trader racked up $141.5 million in losses in unauthorized trades that exceeded his trading limits. It seems he accomplished this in under seven hours. In August of this year, MF Global and the underwriters of its 2007 initial public stock offering (IPO) agreed to pay around $90 million to settle claims by investors that they were misled about MF Global’s risk management prior to the rogue trader’s actions. Since 2008, MF Global’s financial condition has been nothing to brag about. Now the settlement is in jeopardy due to the bankruptcy. [Michael Stockman, the chief risk officer of MF Global as of January 2011 (after the previous mentioned incident) was in my Liar's Poker training class lampooned by another classmate, Michael Lewis.] In the past, the exchanges and CFTC “always” moved customer positions before a Futures Commission Merchant (FCM) declared bankruptcy. The CFTC had ample reason to have contingency plans for MF Global based on publicly available information. Yet the Gensler-led CFTC hasn’t followed this historical precedent when an FCM led by his former Goldman colleague teetered on the edge of bankruptcy. Gensler has recused himself from the CFTC’s probe of MF Global. The exchange-traded futures markets have been shaken to the core. The Bankruptcy Code apparently conflicts with the Commodity Exchange Act, so customers of MF Global have less protection than one might expect. The Securities Investor Protection Corporation (SIPC) is not the FDIC. Account holders have no idea how long it will take to get back all of their money, if it is there to be recovered, and right now, it appears a lot of it cannot be found. This is why many traders sweep all of the excess cash out of their accounts each day, and only put in cash when required. MF Global Debacle Damages a Key Global Market The “risk wizards” of Goldman Sachs once again look like market wrecking balls. The futures market is a globally connected market and it is a key mechanism for farmers, metals miners, and metals fabricators (among others) to hedge their risk. Confidence in the futures market has been shaken. No one knows if their money is safe, but what is more disturbing is the appearance of crony capitalism once again giving favored treatment, lax regulation, and absent oversight to a crony capitalist that abused all of these perks to blow up a large financial firm and damage a key global market. This commentary is available in pdf form by clicking this link .

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Increased Lamb Prices Help Sheep Farmers Prosper

April 22, 2011

LUBBOCK, Texas — In his 33 years raising sheep in West Texas, Glen Fisher has never seen it so good. Demand by U.S. consumers is up, imports are down and prices have soared. “You have almost what you can call a perfect storm,” said Fisher, 64, who has about 3,100 animals on his acreage near Sonora. “The great part is we have record prices for lambs – the highest ever by a whole lot.” Last year’s May delivery of lamb fetched about $1.39 a pound; this year the price is around $2.20 a pound, said Fisher, the immediate past president of American Sheep Industry Association. Lamb numbers far outstrip those for mutton. In 2010 about 156 million pounds of lamb was slaughtered at federal and state inspected plants, compared with about 11 million pounds of mutton. About 30 percent of lamb is purchased near Easter and Christmas, and consumers this year likely have noticed the increased cost at supermarkets and nontraditional markets that cater to people of Hispanic decent and those from Middle Eastern and African countries who live in urban areas of the Midwest and Northeast. The price is so high that Abbas Ammar, whose family owns two restaurants and a meat market in Dearborn, Mich., won’t carry it in the market. And he tells the restaurant’s wait staff to steer customers away from lamb. “Eat something else, pay less, enjoy,” said Ammar, who refuses to sell it in his market at $7 a pound. “I want to give a quality product for a low price,” he said. “I know it sounds weird. It’s really difficult to keep our (high-quality) standard and keep it at a low price, so I prefer to say I’m just out of it.” Still, Mazen Munaser, who father owns the Islamic Village Market in Dearborn, said demand remains strong. “It’s the busiest thing that we have in the store,” said Munaser. “It’s at a point that it’s very, very big sales. About 5.5 million sheep are raised in all 50 states, with Texas and California leading the nation. Roughly 35 percent of lamb and mutton are imported to the U.S. About one-third of U.S. sales are through nontraditional markets, which use smaller processing plants, farmer’s markets, direct sales off farms and through local butcher shops. The other two-thirds go through larger commercial plants and supermarket chains. Lately, nontraditional markets have grown more quickly. “The growth of the nontraditional markets has surprised everybody,” said Robert Oreck, executive director of the American Sheep Industry Association. “And it hasn’t peaked.” Higher prices have put meatpackers in a bind, said Greg Ahart, director of producer relations for Superior Farms, one of the nation’s larger lamb processors. If Superior raises its prices, it runs the risk that stores won’t buy and sales could plummet. “We need more product in front of the consumer so if they’re thinking about it they can easily find it,” Ahart said. “There’s got to be a happy medium where everyone can make money and the consumer can still find it.” That increased demand has come amid a drop in supply, in part due to decreased production in Australia and New Zealand, two of the world leaders in production and large exporters to the U.S., Orwick said. Australia has about 70 million sheep, down from 170 million 20 years ago. The drop has been blamed on the ending of a government support program and extended drought followed by recent flooding, Orwick said. In New Zealand, sheep numbers have dropped from about 70 million to 40 million, and many producers have switched to dairies and beef production. Drought also has hurt some producers in Texas, but others in states such as Tennessee, Kentucky, Michigan and Ohio have picked up the slack, Orwick said. There also has been increased interest in buying from U.S. producers, most notably demonstrated by a decision by Super Wal-Mart to sell only domestic lamb for the next two years. “It’s great,” Fisher said. “It’s going to be significant and should tip the demand curve up.” The worldwide drop in sheep populations also has created a tighter supply of wool, which is sold in a separate commodity market. That comes amid near-record prices for cotton and synthetic fibers, which are oil-based. It’s combined to push wool prices to a 20-year high. The sheep association has developed a plan to increase sheep numbers by adding two ewes per operation or by two ewes per 100 by 2014. The group also wants producers to increase the average birthrate per ewe to two lambs per year, and to raise the lamb slaughter rate by 2 percent. The program would mean 315,000 more lambs and 2 million pounds of wool for the industry to market. It also would add $71 million in lamb sales and about $3 million for wool, according to the group’s website. “If we can achieve that that’s a lot,” Fisher said.

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Layoffs Plunge — But Not For Government Workers

March 30, 2011

NEW YORK: The number of planned layoffs at U.S. firms fell in March, despite continued downsizing in the public sector, a report said on Wednesday. Employers announced 41,528 planned job cuts this month, down 18 percent from the 50,702 cuts announced in February, according to the report from consultants Challenger, Gray & Christmas, Inc. The March figure was down 39 percent from a year ago, when 67,611 job cuts were announced, the report said. Overall, 130,749 job cuts were announced in the first three months of the year, marking the lowest rate of downsizing since 1995, when employers announced 97,716 first-quarter job cuts, Challenger, Gray said. Announced first-quarter job cuts for 2011 were also down 28 percent compared with the same period of 2010, when there were 181,183 planned cuts, the report said. Government has led job reduction this year, with 19,099 planned cuts in March — the highest in 12 months, the report said. There were 41,929 government job cuts announced in the first three months of 2011 — a 33 percent drop from the 62,700 government layoffs announced in the first three months of last year. “Despite the decline from last year, it is difficult to be optimistic about the outlook for government workers,” Rick Cobb, executive vice president of Challenger, Gray & Christmas, said in a statement. “Most cities and states have only just begun to address their massive budget deficits and we have yet to see how budget cutbacks are going to impact workers at the federal level.” Downsizing activity in other sectors appears to be stabilizing, he said. “The sectors that had the heaviest job losses at this point a year ago have seen significantly fewer layoffs,” Cobb said. Downsizing has slowed in the pharmaceutical, auto and telecommunications sectors, compared with a year ago, he said. The downsizing figures come ahead of the much-anticipated U.S. jobs report, which is due at 8:30 a.m. EDT (1230 GMT) on Friday. The U.S. economy is expected to have added 200,000 private jobs in March, and slightly fewer jobs overall for non-farm payrolls, according to a Reuters poll. For more, see (Reporting by Edith Honan; Editing by Dan Grebler) Copyright 2010 Thomson Reuters. Click for Restrictions .

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Sara Ackerman: Over 4 Million Move Their Accounts From Wall Street Banks in 2010

March 25, 2011

More than 4 million accounts have already moved away from the nation’s largest banks and this trend will only increase according to Moebs Services, an economic research firm in Lake Bluff, IL. Previously, large banks with over $50 billion in assets held 45% of the 130 million consumer checking accounts in 2009. That number has been decreasing dramatically with Bank of America losing 400,000 accounts in 2010 alone. This trend will only continue, according to Michael Moebs, CEO of Moebs Services, who predicts an additional 7 to 9 million accounts moving by the end of 2011. The trend should plateau in 2012 after the nation’s largest banks see between 13 and 17 million accounts moving to local community banks and credit unions in just three short years. If Moebs’ predictions come to fruition, the largest financial firms will only hold a third of all free checking accounts in the US by the end of 2012, a huge drop from the 45% they held in 2009. This mass-exodus from the nation’s ‘Too Big To Fail’ firms is by no means accidental. Customers are beginning to wise-up to Wall Street’s abuses and are choosing to vote with their dollars. The Move Your Money project, a campaign that began around a Christmas dinner table by Arianna Huffington and a few friends, encouraged individuals and institutions to divest from the nation’s largest Wall Street banks and move to local financial institutions. One year later, the campaign has been a major success, boasting over 36,000 supporters and coverage in more than 150 different media outlets. The Move Your Money project continues to give the disenfranchised American a chance to truly make a statement against the financial firms who wreaked havoc on our economy. Not only are people seeing the moral imperative to move their money out of the ‘Too Big To Fail’ firms, they are also growing weary of the exorbitantly high fees that Wall Street execs continually dream up and dupe their customers into paying. Previously, banks were allowed to enroll consumers into “overdraft protection” which allowed a person to spend beyond their checking account, but with a hefty fee ranging from $25-35. After the Dodd-Frank Wall Street Reform bill passed in July of last year, the rules have changed and consumers have to opt-in for overdraft protection. Unfortunately, it didn’t take the banks long to come up with new ways to swindle money from their customers. Bank of America, Wells Fargo and JP Morgan Chase have already begun experimenting with new fee structures based on consumer behavior such as maintaining a certain minimum balance, enrolling in direct deposit and using a debit card a certain number of times each month. Banks are also beginning to charge customers monthly fees for what once was a free checking account, and customers are beginning to take notice. Derek Juhl of Seattle went into Chase to close his account after he found a monthly fee had been attached to his once free checking account and was told, “Congress made us do it,” a fairly disingenuous claim considering 65% of banks still offer free checking in-spite of the new rules. Moebs predicts that with an increase in fees, the largest banks have signaled an intention to move away from free checking accounts altogether, in large part because the endeavor is no longer profitable for them. Moebs explains, “If banks have high overhead, deposit accounts are not helpful. Usually banks in the transaction business have to be very efficient and be within their economies of scale.” Moebs, who created a process on economies of scale, patent pending, explains that the large financial institutions have long surpassed this mark and are currently trying to reign in on overhead by getting rid of their least profitable customers–people who maintain low balances and commit too many errors like overdrawing their account and bouncing checks. However, “this is not the death of free checking” says Moebs. Rather, small regional and community banks, as well as credit unions are still willing and able to offer free checking accounts and on average, charge 70% less in overdraft fees. With lower overhead costs and higher efficiency, small financial institutions can still offer free checking accounts and remain profitable. So what are you waiting for? Don’t wait for the Wall Street firms to nickel-and-dime you, move your money today! To find a community bank or credit union near you, visit www.moveyourmoneyproject.org

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Sean Black: Diary of a Silicon Valley CEO

March 9, 2011

It’s a well kept secret that startup CEO’s spend an inordinate percentage of their time selling. From raising money to recruiting talent to landing new customers and even negotiating an office lease, CEOs sell something to someone every day. To prove my point, I started keeping a diary of my day-to-day as an Internet startup CEO. Here’s a sampling of my week: Monday: Murphy’s Law I have a meeting with one of the largest banks in the world. It’s only a 7-minute cab ride from our edgy downtown office in Union Square to their imposing glass tower on Park Avenue, but it feels like I went through a time space continuum under the Helmsley Hotel. As the cab lets me out I see suits pouring in and out of the building and become painfully aware that I am wearing the standard issue startup uniform of dark blue jeans, a button up shirt and a sports jacket. I just broke a basic sales 101 rule — dress to mirror your audience. Feeling underdressed and a little self-conscious, I shoot up to the 50th floor in one of a maze of elevators. To appreciate this story it’s important to know that we are in the business of selling web-based applications that help companies socialize sales across their company and customers, so having Internet access to demo our apps is kind of critical. We sit down in a meeting room with a window that peers freakishly into the next building where dozens of meetings are on display seemingly for our entertainment. I fire up my Mac to start a demo, only to discover there is no WiFi in the building. I spot an Ethernet cord on the wall and plug it in, but its dead. I whip out my Verizon wireless card, but the buildings’ thick walls render it useless. As we turn the corner my host’s office to try her computer I see what looks like a government issued mainframe sitting on her desk and can’t help but think of that scene from the movie A Christmas Story where the kid drops the lug nuts and blurts out “Ohh Fuuuuddge”. She turns on the big white box and I half expect a few clunks and some smoke to pour out. Instead, something far worse — a five-year-old version of the Internet Explorer browser struggles to come to life. The Internet connection is so slow the page slowly paints from left to right across the screen. I type our URL into the browser to see what looks like a war-torn version of our slick new website that clearly isn’t built to backward support a five year old browser. That’s it; I shut her computer off, open PowerPoint on my Mac and give her an old school presentation. As I leave her office I take comfort knowing I am headed back to my George Jetson high-tech world downtown alive to sell another day. Tuesday: Dirty Sexy Money I spend the morning working on my book Dirty Sexy Money — How to Build Sales at a Startup . In addition to being provocative, the title pokes fun at the fact that the Internet startup world is full of entrepreneurs who dream of making lots of money, but who naively think they don’t need to sell their wares because if they build it customers will come. Anyway, I get on a call with our public relations consultant to sell her on my idea of throwing an underwear-only book launch party for the New York tech community at the Penthouse Mansion, now owned by someone from my business school alma-mater. After picking her jaw up off the floor she spends the next 15 minutes telling me why that is not such a great idea. We’ll see who wins that sale in a month or two. Meanwhile, I’m shocked to get an email from the woman at the bank asking for a copy of the presentation to send to her team — redemption is at hand, or so it seemed. I send her a link to the presentation using our own application that tracks when someone opens it and the number of minutes and seconds they send on each slide, like Google Analytics for presentations. But she can’t open it on the “oh fudge” computer. So I send her a link to our super fun animated demo video on YouTube, but the bank bans employee access to social media. It’s a scary reminder that social media marketing isn’t as mainstream as the propaganda machine would have us believe. Alas, I am forced to email a PowerPoint and miss another opportunity to demonstrate our own product. Wednesday: Sky’s The Limit Our law firm Cooley gave me a conference room on the 48th floor of the Grace building across from Bryant Park. I walk into the room to see New York City sprawled out in front of me; the Empire State Building reaching for the sky, the sun glimmering off the Hudson River and the Statue of Liberty is off on the horizon dwarfed by the distance. I am thankful I can do my job from anywhere in the world (except a bank) and that I don’t have a “real job” where I have to show up at a cubicle at 9am everyday. The sweeping view of New York is the perfect inspiration to work on my book totally undistracted. Of course, I’m distracted an hour later by my attorney Bo, but it’s a welcome distraction as I asked him to stop by to talk about SiliconCEOs, a peer group I am putting together and want Cooley to sponsor. The idea is to get CEO’s of fast growing venture backed Internet companies in New York (Silicon Alley) and the Bay area (Silicon Valley) together each month so we can candidly and confidentially help each other build amazing companies. My company has the good fortune of being backed by top tier investors like First Round Capital and Accel Partners, so we have access to plenty of great CEO’s. We just need a sponsor so we can pay for gatherings. Before I leave Bo agrees to allocate a good chunk of his marketing budget for the cause — score one for the team! Thursday: A Window Closes I wake up to an email from Jeremy Stopplemen, founder & CEO of Yelp. I asked him to come speak at our next SalesSchool event and talk about how he built Yelp’s inside sales team to over 300 salespeople that now drive most of Yelp’s reportedly $100M a year in revenue. Not surprisingly, the Yelp sales machine never came up in any of the press a few months ago around Yelp refusing Google’s $500M buyout offer. I tried to sell Jeremy on the idea that this was the perfect venue to give back as well as give the Yelp sales team the credit it deserves. We did a similar event at NYU in December that was a huge success with almost 400 RSVPs from the New York tech community. Unfortunately, Jeremy’s response was “I don’t think this is a fit for us, but appreciate you reaching out”. Oh well, you win some and you lose some. Friday: A Few Doors Open I wake up to two great emails. One is from MIT offering to host the next SalesSchool on campus next month. The second is from the VP, Sales at Boston based Hubspot Mark Roberge accepting my invitation to build the event around Hubspot’s amazing sales team. We agree the event will likely sell out in an hour of releasing tickets. High off that bit of good news and a little too much Starbucks I grab a cab to met one of our advisory board members for breakfast at the Pain Quotidian on 5th Avenue and 8th Street. It’s one of my favorite blocks of Greenwich Village lined with beautiful pre-war buildings and anchored at one end by the Washington Square Park Arch. The fact that the arch, modeled after the Arc de Triomphe in Paris, has been standing in that spot since 1892 acts as a sort of pinch reminder that I live in this amazing city. Our advisor is the president of popular and fast-growing online media company and I am meeting with him to ask him to speak at the first SiliconCEO event about how his company socialized selling throughout the company. They literally made sales everyone’s job from founder down through the ranks, culminating with the announced sale of the company for several hundred million dollars. He agrees to do it — score! I am off to my next meeting with a serial entrepreneur friend that writes a popular blog to get his advice on writing a regular post about what its like to sell the dream every day as founder & CEO of an Internet startup. He proceeds to warn me that to do so successfully would require writing in the first person, exposing intimate details about myself and being on the opposite side of safe. Saturday: Exposure or Exposed? Inspired by friend’s advice and story I start writing this diary. I try to reveal as much as possible about just a few of the best and worst things that happened to me this week. I am taking a lot of risk by sharing these intimate details. I have to admit that I am a bit worried that I might tip my hat to our competition, piss off the people I mention (sorry Jeremy) or that my investors will think I’m an idiot for showing my cards. This is why there aren’t any other CEO’s writing this type of stuff for public consumption while they are still in office. But I am equally excited not only by the idea that exposing my day-to-day can help other current or aspiring entrepreneurs realize they are not alone on the startup roller coaster, but also we might gain far more than we have to lose by tapping into the wisdom of the crowds, open sourcing solutions to some of our initiatives and challenges and race past our competition. At least, that’s the story I’m going to sell to my board if all hell breaks lose after this article is live for all to see. Wish me luck!

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Alan Simpson Rants About ‘Snoopy Snoopy Poop Dogg’

March 7, 2011

Alan Simpson, co-chairman of President Barack Obama’s debt commission, furthered his penchant for colorful commentary Monday when he unleashed a rambling diatribe targeting what he characterized as a generation of disrespectful youth and their confused grandparents. “This is a fakery,” the former Wyoming senator said on Fox News, referring to retirement-age Americans expressing fears about having Social Security funds slashed. “If they care at all about their children or grandchildren, and sometimes I doubt that — I think, you know, grandchildren now don’t write a thank-you for the Christmas presents, they’re walking on their pants with the cap on backwards listening to the enema man and Snoopy Snoopy Poop Dogg, and they don’t like them!” Simpson has been a proponent of considering reforms to entitlement programs such as Medicare, Medicaid and Social Security in the effort to reduce the deficit, suggestions that so far appear to have been ignored in the Obama administration’s budget proposals. In February, Simpson exhibited his flair for the dramatic when he called the White House’s spending cut effort a “sparrow belch in the midst of the typhoon.” The deficit, he later said , was “a stink bomb in the garden party and it’s never going to go away.” The debt commission co-chairman also came under heavy fire last year after it was revealed that he had referred to the nation as “a milk cow with 310 million tits” in an email to the executive director of the Older Women’s League.

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Layoffs Reach 11-Month High, But They’re Not The Major Worry

March 2, 2011

The number of planned layoffs in February rose to an 11-month high according to data released Tuesday, but economists think it’s too soon to say whether this is indicative of a broader slump in the labor market. According to a separate survey released Wednesday — the ADP National Employment Report — private-sector payrolls added 217,000 jobs in February. Layoffs rose to 50,702 in February, according to outplacement firm Challenger, Gray & Christmas, a 20 percent increase over the same period last year. Taken together with the ADP numbers, the picture painted by Challenger’s layoff report is not so bleak. But the ADP numbers have diverged widely from official job data for the past several months. In January, ADP reported an increase of 187,000 private sector jobs. The BLS reported only 36,000 new positions, public and private sector. (On Friday, the Bureau of Labor Statistics will release the government’s official unemployment report for February.) Additionally, there’s reason to believe February’s layoff surge, while disturbing, may not be that bad. “Even if the job market was humming right now like it was in 2007 you’re still going to see layoffs every month,” said Wells Fargo economist Jay Bryson. “When you look at the total number of jobs lost relative to where we were in 2009, these numbers are very low right now.” In May 2009, the last month there was a year-over-year increase, 111,182 jobs were lost. “There’s an issue with the labor market right now, but it’s not layoffs,” Bryson said. “The issue is, at least up to this point, many businesses have not started to hire folks.” In his firm’s report, CEO John A. Challenger said that while it was too soon to say whether the increase in layoffs in January represents a trend, rising oil prices could prove to be a looming challenge in the labor market. “Certainly the specter of rising gas prices could impact employers’ staffing decisions over the next six months,” Challenger said. “At the very least, rising energy costs could force employers to postpone hiring plans. At worse, increased costs could kill the fragile recovery and spur another round of layoffs.”

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Home Depot To Add More Than 60,000 Seasonal Jobs

February 15, 2011

ATLANTA — Home Depot Inc. will hire more than 60,000 seasonal workers to help with its busy spring season. The world’s biggest home improvement retailer said Tuesday it will fill the positions before its second annual Spring Black Friday promotion. “Spring is our Christmas and traffic is at its highest during this season,” Craig Menear, executive vice president for merchandising, said in a statement. Consumers typically head to home improvement stores in the spring to pick up flowers, vegetables and lawn care products as they prepare their residences for the summer. Home Depot said the workers, who will be hired and trained in February and March, will be in every market. The Atlanta company currently has more than 300,000 employees. Home Depot said it will also add some permanent part-time and full-time jobs this year, but did not specify how many. In December Home Depot boosted its 2010 earnings and revenue outlooks on stronger sales. The chain also said it plans to open 10 new stores in 2011, including seven in Mexico. Home Depot has 2,247 retail stores in all 50 states, the District of Columbia, Puerto Rico, U.S. Virgin Islands, Guam, 10 Canadian provinces, Mexico and China.

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Planned Layoffs Rise 20 Percent

February 2, 2011

NEW YORK (Reuters) – The number of planned layoffs at U.S. firms in January rose 20 percent from the previous month to 38,519, but the tally was still the lowest for a January since at least 1993, according to a report released on Wednesday. Noting that January was typically a month of large job cuts, global outplacement company Challenger, Gray & Christmas said in its report that the slowdown in job cuts that began in the latter half of 2010 appeared to be continuing. Challenger said the January total was the lowest for that month since the company began tracking monthly layoff announcements in 1993. Job cuts in January were led by the government and non-profit sector, it said. Copyright 2010 Thomson Reuters. Click for Restrictions .

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Janine R. Wedel: Shadow Elite: Eisenhower’s Dark Vision Realized – The Military-Industrial Complex At 50

January 13, 2011

President Eisenhower was, of course, prophetic when he warned 50 years ago about the “grave implications” of the military-industrial complex. But while he was certainly dead-on about the big picture, we can imagine even he might be surprised by the dirty details of how that “complex” has evolved since his farewell speech January 17, 1961, and the role that many esteemed retired generals now play in it. A real culture shift seems to have occurred among some in the military elite, and it mirrors my (Janine’s) findings in Shadow Elite , which show a decline in loyalty to institutions such as government. Even in a place like the military, where devotion to the institution is paramount, many of the top players are focused on turning themselves into one-man defense industry moguls, some of them angling for personal rewards even before official retirement. Senator Jack Reed of Rhode Island — a West Point grad — said this to Bryan Bender of the Boston Globe : When I was an officer in the 1970s, most general officers went off to some sunny place and retired….Now the definition of success … is to move on and become successful in the business world. Bender’s must-read investigation just after Christmas examines the activities of the staggering numbers of top generals who “retire” to highly lucrative consulting or defense industry work. (This tracks alongside the trend in which more and more governing is outside of formal government and, where, for instance, three-quarters of people working for federal government are private contractors.) Lest one think the “rent-a-general” phenomenon is old news, Bender shows that this longtime trend seems to be accelerating: From 2004 through 2008, 80 percent of retiring three- and four-star officers went to work as consultants or defense executives…[also known as] the ‘rent-a-general’ business…That compares with less than 50 percent who followed that path a decade earlier, from 1994 to 1998. [In 2007,] thirty-four out of 39 three- and four-star generals and admirals who retired…are now working in defense roles — nearly 90 percent. Not only do these generals and admirals profit from their years of privileged access to vital information and connections, but they also receive the deference accorded to them because of their service and those stars. Bender says this automatic deference continues after retirement, with generals often treated in advisory meetings as if they are still holding official roles. Bender’s work comes a year after USA Today broke the story of so-called “senior military mentors,” retired officers who are then brought in to advise their former colleagues on services to buy, even when they might also have financial ties to the company peddling the services. Amplifying their power, these generals are also in hot demand as media analysts. And according to a 2008 New York Times report, “[m]ost of the analysts have ties to military contractors vested in the very war policies they are asked to assess on air.” Journalist David Barstow later that year painted an indelible portrait in the Times of retired four-star Army General Barry McCaffrey, his swirl of defense consulting activities, and his success in promoting his interests on television: Barstow called it “One Man’s Military-Industrial-Media Complex.” The influence of McCaffrey and his peers derives from their overlapping, mutually influencing, and perhaps not fully disclosed, roles in pursuit of their own agendas. As they carve out “coincidences of interest,” their roles morph and blur into one another and ambiguity swirls around their activities. What is not ambiguous is that all these military players highlighted above intertwine state and private power–and this practice is hardly confined to the military. As Janine has documented, these twisted arrangements and resulting lapses in accountability are rife in nearly every corner of government. But there are reasons why the military-industrial complex is perhaps the most disturbing case (neck-and-neck with the privatization of intelligence work.) The process of vetting defense projects should be, at least in theory, unimpeachable. First and foremost, the lives of U.S. servicemen and women are on the line, not to mention the many contractors who now do much of the military’s work these days and the overseas civilians who might find themselves in the crosshairs. Second, defense projects carry staggering price-tags, and can last for decades. This kind of investment of taxpayer dollars and time means that the process of allocating these precious public resources must be as fair and free of corruption as possible. That is hardly the system we have now. And these retired generals aren’t sneaking around. The reporting (from the Globe , the Times , USA Today and others) finds that the Pentagon either ignores their behavior, accepts that this is how business is done these days, or, at times, actively encourages it. Some of these retired officers seem to think that we should just take it as a given that they will behave with the purest of motives and the utmost of integrity. As the Globe ‘s Bender puts it: The generals who navigate these ethical minefields said they are capable of managing potential conflicts without oversight….’You have to have a firewall in your head,’ said industry consultant and former Vice Admiral Justin D. McCarthy. With all due respect to the Vice Admiral, we would prefer the firewall to be on paper for all of us to see. And while it seems anachronistic, one would hope and expect that whatever roles and relationships these generals accept do not undermine the integrity of the institution and the public interest. We’re guessing that a certain 5-star General named Eisenhower would agree.

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Richard (RJ) Eskow: Which Is More "Gangsta" – 50 Cent’s Twitter Stock Pitch or Goldman’s Facebook Deal?

January 12, 2011

Music was Clarence “50 Cent” Jackson’s second career. News reports say he began dealing crack at the age of twelve, after the murder of his coke-dealer mother. Early tracks like “Ghetto Quran” and “How to Rob” reflect a brutal, street-hustling life, and Jackson has the bullet wounds to match. He’s talented, wildly successful, and I sure wouldn’t mess with him. But when he starts mixing social media with pumped-up investment pitches, 50 Cent is moving into Goldman Sachs territory. “Fitty” reportedly earned millions for touting a stock on Twitter, without disclosing that he owned shares in the company. How does that stack up against Goldman’s own social media deal with Facebook? When you move into the stock market, you’re going where the real gangstas roll. The Message We’re in the middle of a much-needed national dialog about harsh and violent rhetoric, and rappers like 50 Cent have been singled out again for criticism. I’m opposed to music censorship, but I get the concern. Even some of the best rappers glamorize things I despise. Yet even as some politicians wag their fingers at hip-hop criminals, their other hand’s stretched our for campaign cash from corporate lawbreakers. Sometimes the difference between crime on the Mean Streets and crime on Wall Street is just a matter of degree. And don’t think the language and lifestyle can’t get rough on Wall Street. Morgan Stanley’s brokers had a now-famous phrase, used whenever they sold their own clients bad investments: “I ripped his face off.” It was a Goldman Sachs executive who praised another employee for selling Goldman clients on a program he described as a “shitty deal.” (That guy’s now a senior exec at Bank of America.) And the depositions in Goldman’s sex discrimination suit read like the script to a rap video: female employees pressured to join a party in a topless bar, a woman pinned against a wall and forcibly kissed, a Christmas party with female escorts wearing “short black skirts, strapless tops and Santa hats.” Throw in some beats and a few “uh-huh’s” and “yeahs” and you’ve got yourself a video. Fitty Twitters “Ok ok ok my friends just told me stop tweeting about HNHI so that we can get all the money. Hahaha check it out its the real deal.” 50 Cent tweeted about a marginal stock all weekend and into early Monday , calling it “BIG MONEY” and saying “you can double your money right now.” The effect was mindblowing: Jackson’s credited with moving the stock of a company called HNHI by $50 million dollars in one day , even though its own auditor reportedly ” expressed concerns about its financial future .” Fitty didn’t mention that he held 30 million shares of the stock, which he picked up for $750,000 last fall. Yesterday’s surge reportedly netted him somewhere between $8.7 million and $10 million. No wonder so many news accounts repeated the name of his hit album, Get Rich or Die Tryin’. HNHI increased in value by about 200%. Even after it dropped more than 23% today, Jackson was way ahead of the game. Fitty’s attorneys presumably got a little worried, because the disclaimers started appearing late Monday: “HNHI is the right investment for me it might not be for u! Do ur homework,” “I own HNHI stocks thoughts on it are my opinion. Talk to your financial advisor …” Old School How does Fitty’s Twitter run compare with Goldman Sach’s Facebook deal? Goldman consolidated a number of its clients into a single artificial “investor” to get around a legal requirement that any company with more than 500 investors be publicly traded and subject to the regulations that protect investors. Felix Salmon observes that this deal is bigger than many IPOs, but doesn’t have to follow any of the same rules. Goldman sure knows how to create a feeding frenzy. They wouldn’t let anybody into the deal for less than $2 million – a surefire way to make the marks salivate – and touted the deal shamelessly to its clients: “When you have a chance I wanted to find a time to discuss a highly confidential and time sensitive investment opportunity … If you agree not to use information that we reveal to you … I will be able to disclose the name of the company and provide you with more information…” Former Goldmanite Nomi Prins captures the essence of the deal: create an artificial bubble and then “pawn off the overpriced goods on the clients.” As Prins notes, Goldman’s giving itself the option to unload this investment if it goes bad, but is locking its clients in until 2013. Knowing Goldman, they’ll also be shorting Facebook somewhere along the way. The country learned their M.O. afer the last crisis by reviewing their internal emails , and by the cynical and lawless way they played clients in the ABACUS deal. To avoid legal trouble this time around, Goldman’s even disclosed in advance that it may short Facebook. Goldman skims a lot off the top, then lets you buy into a deal so skewed that one of its own funds turned it down. In return, you get to say you own a piece of Facebook. Maybe they’ll even give you a nice certificate you can hang on the wall of your Las Vegas investment property. Blowing Bubbles Is Facebook this year’s version of Vegas real estate? It looks that way. Even the most successful business has a real and an inflated value, after all, and I tend to agree with all the people who say Facebook’s going to fade away like MySpace did. Think about it: Facebook has a badly designed interface, it’s difficult to use, and it continues to irritate and infuriate its customers. Badly-managed companies can thrive for a while, but not forever. And the Goldman deal sidesteps the very public accountability that might encourage Facebook to make the changes it needs. But whatever happens to Facebook, the Goldman deal is a bubble machine designed to inflate its price. And Goldman’s tapped the mother lode: the US government. As Simon Johnson points out, their Facebook investment is backed by the Fed – and therefore by the public’s dollars. 50 Cent may have made a few mil, but the big banks have knocked off Fort Knox. Goldman invested $75 million in Facebook early on through a hedge fund. Now they’re saying they’ve put $450 million of their own money into this deal, but they get that money at the ultra-low Fed rate the government gives them. So they don’t need to earn the same returns their clients do. What’s more, they can unload their investment whenever the bubble deflates and walk away with their “client’s” money one more time. Throw in the $60 million plus they’re charging for the deal, and they’re sitting pretty. Those “lucky” Facebook investors: Goldman will get rich. They’ll die tryin’. Fitty vs. Blankey So how does 50 Cent stack up against Goldman – morally, ethically, and legally? For one thing, Mr. Jackson is not a bank or investment manager and doesn’t claim any special financial expertise. Fitty doesn’t receive low-rate loans through the Fed’s discount window. Neither he nor his company, G-Unit Records, received a Federal bailout. 50 Cent did not receive $13 billion in taxpayer money as a “backdoor bailout” through AIG. (Disclaimer: I used to work at AIG.) And 50 Cent has never paid himself a nickel, much less a huge bonus, after being rescued with Federal funds. Goldman wouldn’t admit that it misled clients about its ABACUS product until it was time to plea bargain its way out of SEC fines and potential criminal charges. Until then Goldman execs congratulated themselves for dumping bad investments on their clients. Now that’s cold . Fitty, on the other hand, copped to his actions right away. On the rhetoric front, 50 Cent’s pretty rough: “I’ll hit your vertebrae, rip through your tissues/your wife on the futon huggin’ the shih tzu.” Goldman’s more genteel – but some of its political allies aren’t. Most of its campaign contributions are placed through intermediaries – in this case, the GOP Senate and Congressional Committees. Some of the candidates funded by these groups have used a lot of violent rhetoric, like threatening “Second Amendment” reactions (i.e., gun violence) to decisions they don’t like,firing guns at targets with their political opponent’s face on it, and suggesting they would issue “hunting permits” for “liberals.” If there’s a difference between this rhetoric and 50 Cent’s, I can’t see it. (And despite all their populist Tea Party rhetoric, these candidates have come through for their Wall Street patrons . ) The chorus to the “shih tzu” song is “I’m laughing all the way to the bank.” But 50 Cent has an actual product – music – so he’s a part of the productive economy, not the financial sector. Curtis Jackson’s a self-made success who came up the hard way, with talent. If Kanye is rap’s F. Scott Fitzgerald, its chronicler of the high life’s pain and pleasure, 50 Cent is its Jim Thompson. He’s the poet of blood and bullets. His raps remind me of what a great jazz bass player once told me about that instrument: that it stands on the bordeline between melody and percussion. 50 Cent raps on the border between prose and percussion. There’s no evidence of criminal behavior in either Curtis Jackson’s Twitter move or Goldman’s Facebook deal. But 50 Cent has proved that the so-called “rational” “free market” is neither. And Goldman has proved that Wall Street is still up to its old tricks, getting rich creating bubbles and then getting even richer as they pop. No, I don’t like the violent language. Or the sexism. Or the glorification of bad behavior. But enough about Wall Street: I don’t like those things in music, either. One of the things worth remembering about language is that it reflects deeper values. If we despise what these words reflect, we shouldn’t tolerate the behavior. Don’t censor music. Regulate banks. _______________________________ (Two videos for your enjoyment: 50 Cent and Lloyd Blankfein. Play them at the same time for the proper effect.)

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Identity Theft Victim Can’t Convince Freddie Mac He Owns His Home

January 7, 2011

The Identity Theft Resource Center says Ty Powell is a victim of identity theft. Freddie Mac says he hasn’t paid his mortgage in two years. The local paper says he’s dead. Powell says, “I don’t know what to say.” He’s afraid to leave his Casa Grande, Ariz. house for an extended period of time because the mortgage servicer, Chase, might send someone to break in and try to change the locks — something Powell said already happened twice last year after the bank foreclosed on him. The foreclosure was completed last July, and Powell, 30, could be evicted at any time. He said he doesn’t sleep much. “I spent Christmas alone,” he said. Powell said he bought the house from a builder in January 2007, paying $217,000 in savings and cash he’d earned playing professional basketball in Brazil after graduating from Yale in 2002. But as far as Freddie Mac knows, it owns a delinquent $376,703 mortgage taken out in November 2006. Powell said he was in Brazil at the time and had nothing to do with that mortgage. Jay Foley, founder of the nonprofit Identity Theft Resource Center, said the builder apparently used Powell’s personal information, which Powell sent months in advance from Brazil, to take out a fraudulent mortgage in his name. The builder went as far as to make some payments on the mortgage and even attempt a loan workout in 2008. “The builder took out a mortgage on the house in Ty’s name. Then he turned around and maintained the mortgage until Ty came back and bought that house,” Foley said. “This builder sounds like a pretty slick dude and I would love to see him making little rocks out of big ones someplace.” Powell said he found an eviction notice on his door in March. He hired a pricey lawyer. “The argument was that I was not properly served,” he said, “which was not the right argument.” An Arizona judge ruled in favor of Freddie Mac in September. Foley reached the same conclusion as Powell. “His attorney is arguing the wrong point,” he said. “Instead of arguing the loan was fraudulent, the attorney’s arguing it’s the nature of the service because Ty wasn’t served.” Now Powell owes tens of thousands in legal fees, both to his own lawyer and to Freddie Mac’s. Foley isn’t the only one advocating for Powell. In October, his congresswoman, Rep. Ann Kirkpatrick (D-Ariz.), wrote a letter to Freddie Mac stating that the “home mortgage loan was secured without his consent along with various credit cards, and student loans.” (Kirkpatrick was defeated in November by Republican Paul Gosar, whose office should now have Powell’s case file.) Freddie Mac just doesn’t buy it. The loan is in default, the mortgage giant says, so it’s their house now. “We first learned of Mr. Powell’s claim after the foreclosure was completed last July,” a Freddie Mac spokesman told HuffPost. “He filed suit in March 2010 — eight months later — and our request for summary judgment was granted by the court on Sept. 14, 2010. “We believe the foreclosure was legitimate because the loan secured by the property was in default. Despite a mortgage workout in 2008, no mortgage payment had been received since January 2009. We have also referred the matter to our fraud investigations unit.” The Casa Grande Dispatch reported this summer that Powell “died on July 12, 2010, at Casa Grande Regional Medical Center of heart problems.” Managing Editor Donovan Kramer Jr. told HuffPost there’s no record of the email sent to the paper alleging Powell’s passing, or much else. “This was a very brief one and apparently there was no corroborating information,” he said. Powell figures the death notice is a threat from the fraudster. Foley said it’s more likely an effort by the perp to confuse Freddie Mac. Either way, there’s plenty of information corroborating the claim that Powell is a victim of identity theft. The Identity Theft Resource Center provided HuffPost with a stack of letters from banks and local municipalities absolving Powell of other, smaller frauds committed in his name, like phony accounts and drivers’ licenses Chase, the servicer of the allegedly-bogus mortgage, declined to comment because of “ongoing litigation” it refused to describe. Powell said he didn’t know anything about that. “I’ve exhausted all of my resources to try to remedy this,” he said. Convincing Freddie Mac he doesn’t have a mortgage, he said, is like convincing “birthers” that Obama has a legitimate birth certificate. “Obama has the luxury of dismissing these claims as from people on the fringe,” he added. “I don’t have the luxury of dismissing this ridiculousness.”

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Marc Middleton: Growing Bolder: What Was Under Your Tree?

January 3, 2011

What was on your holiday wish list?” If you’re over 50, advertising and marketing executives think it’s the same things that have been on the list of 50-plus consumers for the past five decades — not much and not very exciting. Amazingly, most “experts” still subscribe to the outdated and outright ridiculous belief that all 50-plus consumers are poor, overly frugal, highly technophobic and averse to switching brands. As a result, they spend all of their efforts trying to attract 18-year-olds with little money and attention spans roughly equivalent to the squirrels in my back yard. The notion that 50-plus consumers are extremely brand-loyal and therefore not worth targeting with marketing dollars defies common sense. The truth is, we are less brand-loyal than ever because we’re smarter than ever. We know how to research. We’ve learned that the shiniest object isn’t necessarily the best object. We don’t purchase to impress. We purchase to get high value and utility and because we have many new interests, we have many new needs. Most of the brands I buy didn’t even exist 10 years ago. My Christmas wish list this year included: a Garmin Forerunner 410 GPS watch, an Amazon Kindle, an Apple iPad, a Roland electronic drum set, a Flip camera, a Finis Swimp3 waterproof MP3 player and Joby Gorillamobile for iPhone. I’m pretty sure I wasn’t marketed to by any of these companies. Sandy Scott, 70, on his $3000 bike How dismissive are television advertisers and marketers when it comes to the 50-plus demographic? Enough that Nielsen ratings come to a screeching and premature halt at age 54. And because Neilsen doesn’t track ratings over age 54, your local television station doesn’t care what you think. Literally. When the station does market research, the first question they ask is, “How old are you?” If the answer is over 54, they discontinue the interview. That made sense two decades ago. Today, it’s so laughable that it could be an SNL skit. NBC Universal recently called a press conference to report that its new research reveals that the 55-to-64 demographic is as vibrant as younger demographics in ad spending. They even went so far as to say “54-65 is the new 18-34.” Kudos to NBCU, but it’s not like they just discovered the new world. There is nothing in their aha! moment, their marketing epiphany, that hasn’t been said a hundred times, very clearly, by the likes of Ken Dychtwald , Mary Furlong , Chuck Nyren, Matt Thornhill , Dick Stroud, Brent Green and a dozen others. In some cases, major corporations and media networks hired and paid the above to tell them exactly that. And then they pretty much ignored what they learned. Of course, I’m not implying that everyone over 50 has money or leads a vibrant, active lifestyle. Fifty-plus is not only the largest demographic; it’s also the most diverse — in every imaginable way. It contains poverty and wealth; obesity, morbidity and extreme vitality. But here’s the simple, obvious and undeniable equation. From the whole, subtract the group with poor health and finances. What’s left is a very large and growing number of men and women who will continue to be the greatest consumers of all time for another 30 or 40 years. Mark my words — in 30 years, it will be commonplace for 90-year-olds to spend large sums of money traveling, skiing, dining out and buying the latest and greatest gadgets. The money spent by 90-year-olds will determine the success of many businesses. Change is coming in a way that will be too big to ignore. The proof is on the holiday wish lists of today’s 50-plus consumers. Smart companies are not waiting to react. They have already positioned themselves by beginning to actively court the 50-plus consumer in a thoughtful and respectful way. The others will learn that disliking a brand lasts longer than liking one. Banana George Blair barefoot waterskiing at 92

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Ebooks Now Outsell Paper Books On Web Bookstore

December 30, 2010

NEW YORK (AP) — Bookseller Barnes & Noble Inc. on Thursday said its line of Nook e-reading devices are the biggest-selling items in its history, and added it sold nearly 1 million e-books on Christmas Day. The New York company said its Nookcolor e-reader, which launched eight weeks before Christmas, was its top-selling gift of the holiday season. Barnes & Noble also said it now sells more digital books than physical books on its Web site. Nearly 1 million e-books were purchased on Christmas Day alone, the company said, with popular titles including James Patterson’s “Cross Fire” and Stieg Larsson’s “The Girl With the Dragon Tattoo. Electronic book readers are a nascent but growing electronic category, and companies have so far been reticent to say exactly how many are selling. On Monday, Amazon.com, which sells the Kindle electronic book reader, said its third-generation Kindle was the bestselling product in its history, besting the seventh book in the Harry Potter series, “Harry Potter and the Deathly Hallows.” Forrester Research expects U.S. e-book sales to total $2.8 billion in 2015, up from nearly $1 billion in 2010. The research firm projects the number of e-readers and tablets in the U.S. will soar from more than 15 million in 2010 to nearly 60 million in 2015. Barnes & Noble shares fell 4 cents in light trading to $14.27. Amazon.com shares fell 22 cents to $183.15.

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EXCLUSIVE: Obama Team Dysfunction Hurt Economic Policy, Says New Epilogue To Book

December 30, 2010

Some revelations about the Obama administration detailed in the new epilogue to the upcoming paperback release of Jonathan Alter’s bestseller, “The Promise,” probably won’t please too many folks at the White House. Alter claims that a dysfunctional relationship between top White House aides hurt the administration’s policy on job creation, the Consumer Financial Protection Bureau was almost dropped from financial reform legislation and was only reinstated after complaints by Elizabeth Warren, and Bill Clinton continually grumbles about being disrespected by the administration. The Obama administration’s perceived failure to take laser-like aim at the unemployment crisis was partly due to the dysfunctional relationship between White House chief of staff Rahm Emanuel, top economic adviser Larry Summers and senior adviser David Axelrod, specifically the intransigence of Summers, according to Alter: “The inability to pivot in 2010 to a single-minded focus on jobs was a by-product of what one senior aide called “dysfunction” between Emanuel, Summers, and Axelrod. Rahm had always admired Larry, but he was becoming exasperated with his failure to give him a jobs plan he could sell. ‘Week after week, Rahm would say, ‘Let’s explore this’ or ‘How about that?’ and Larry would slow-walk everything,’ recalled one senior advisor. ‘He basically doesn’t believe in the government helping small business’.” Alter writes that the CFPB survived certain death only because of Warren’s commitment: “The most popular provision of Dodd-Frank almost didn’t happen. In late 2009 Elizabeth Warren learned that a proposed bureau of consumer financial protection had been dropped from the bill. She went to the White House to object, and the bureau, to the dismay of predatory lenders, was reinstated.” Obama’s relationship with the Clintons remains strained and Bill Clinton constantly complains in private about how he’s been disrespected by the administration, writes Alter. Though they talk frequently, the former president was annoyed that Obama didn’t give him credit for helping to negotiate a spy swap that led to the release from Russian jails of four Russians who had been working for the CIA (in the wake of the bust of Russian spies living in American suburbs six months ago), Clinton’s aides tell Alter. In addition, Clinton was miffed that Samantha Power, who insulted Hillary during the 2008 campaign, was chosen as an emissary to Bosnia in July. (“Bill Clinton might not have accepted the job, but he wanted to be asked,” Alter writes.) “An old friend compared him [Clinton] to a big puppy dog who just needed some attention to be happy and helpful.” Clinton felt dissed because, after negotiating the release by North Korea of two imprisoned American journalists, he was told to travel on a separate plane so as not to overshadow the arrival of the women. “Some of these guys in the White House act small,” one aide told Alter. And Clinton’s team was angry that former protégés like Rahm Emanuel didn’t show the former president proper respect. After Clinton “worked like a nerd” to prepare a detailed 30-page memo on how to incentivize banks with loan guarantees to spur job creation, the White House ignored the memo for a few months, and then treated Clinton like a “prop” during Obama’s meeting with CEOs. When a Clinton aide complained to Emanuel, “Are you serious?”, the chief of staff replied that Clinton should be grateful he was on the president’s schedule at all, writes Alter. “Clinton felt better disposed toward his 1992 opponent, George H.W. Bush… one senior aide described Bush as a ‘father figure’ to Clinton, who never knew his natural father…” Tough media coverage continued to annoy the administration. When the New York Times reported in August that BP was rising to the challenge of cleaning up the oil spill but hardly noted the administration’s role, Obama snapped, “I’m getting pounded for not pushing BP hard enough and now they turn around and say BP did an acceptable job in spite of Obama. We can’t win.” Alter details Obama’s poisonous relationship with Congressional Republican leaders John Boehner and Mitch McConnell — though the president talked to John McCain in spite of his 2008 rival’s anti-Obama rhetoric, he refused for months to meet one-on-one with McConnell, because he thought it was unfair to Senate Majority Leader Harry Reid. After a frustrating mid-summer meeting with Republican leadership at the White House, Obama expressed his annoyance at Boehner’s insistence on extending tax cuts for the wealthy despite the budget deficit. The president told friends: “All I want for Christmas is an opposition I can negotiate with.” The White House has not yet responded to a late-afternoon request for comment.

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Storms Delay $1B In Retail Spending

December 29, 2010

ATLANTA — The blizzard that swept through the Northeast on Sunday and Monday delayed $1 billion in retail spending, according to research firm ShopperTrak, but won’t derail a holiday shopping season expected to be the best since 2007. The effect won’t be as bad as last year’s pre-Christmas snowstorm that similarly paralyzed parts of the East Coast. That cost retailers an estimated $2 billion, according to weather research firm Planalytics. About $10 billion in retail sales usually occurs Dec. 26-27, ShopperTrak says. Bad weather likely delayed about 10 percent of that. The storm’s effects weren’t enough to change ShopperTrak’s estimate for a 4 percent gain over last year in revenue for the Nov. 1-Dec. 31 holiday season. Retailers will still see much of the spending when shoppers return to stores as streets are cleared and transportation restored. This year’s storm cost retailers 11.2 percent of their foot traffic Sunday and 13.9 percent Monday, ShopperTrak estimates. The fact that the day after Christmas fell on a Sunday this year might have hurt sales a bit even where it didn’t snow, ShopperTrak founder Bill Martin said, because of local laws that limit or ban Sunday hours in some places. Dec. 26 will rank 10th-busiest day of the holiday shopping season, the firm estimates. Last year, it was second-busiest behind Black Friday. Black Friday was again the busiest shopping day this year, with $10.69 billion in sales. Coming in second was Dec. 23, as last-minute shoppers picked up $7.86 billion in gifts and other items and gave retailers a strong finish. Strong sales the week ending Dec. 31, which accounts for about 15 percent of total holiday spending, could make this year the best holiday season ever. Earlier this week, MasterCard Advisors SpendingPulse, another research firm, said consumer spending excluding autos rose 5.5 percent to $584.3 billion from Nov. 5 through Dec. 24, compared with the same period a year ago. SpendingPulse tracks all forms of spending, including cash. The total beat the 2007 record of $566.3 billion for the period, though adjusted for inflation, it is slightly below the record.

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Retailers Hurt By East Coast Snow Storms As Post-Christmas Shoppers Stay Home

December 27, 2010

U.S. retailers expecting to ring up sales on the day after Christmas may have to intensify discounts after an East Coast snowstorm slammed the region yesterday, disrupting one of the busiest shopping days of the year.

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Video: Straszheim Says China Fighting Inflation With Rate Hike

December 27, 2010

Dec. 27 (Bloomberg) — Donald Straszheim, director of China research at International Strategy & Investment Group, talks about the People’s Bank of China’s increase of its key one-year lending and deposit rates by 25 basis points on Christmas Day. He speaks with Carol Massar on Bloomberg Television’s “In the Loop.” (Source: Bloomberg)

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After Christmas Sales 2010: Retailers Roll Out Deals As Snow Threatens East

December 26, 2010

ATLANTA — An East Coast snowstorm put a damper on after-Christmas shopping on Sunday. But shoppers across the rest of the country scoured clearance racks and spent gift cards during the afterglow of the best holiday season for retailers since 2007. Washington, D.C., was expecting 5 to 8 inches of snow Sunday. Blizzard warnings were issued in New York and parts of New England. Predictions called for 11 to 16 inches of snow in New York City. “The forecast will tend to keep them at home, it’s not the best day for shopping,” said Scott A. Bernhardt, chief operating officer at weather research firm Planalytics. Because the storm is after Christmas, the loss will be less significant than last year’s snowstorm the Saturday before Christmas that buried much of the same area. That one cost retailers about $2 billion. This time, there’s no Dec. 25 deadline. “People will just wait a day to do exchanges and use their gift cards. It’s no big deal,” said Greg Maloney, CEO of the retail practice of Jones Lang LaSalle, which manages malls throughout the country. He expects December revenue to grow 7 percent to 10 percent from last year. Revenue rose 10 to 15 percent the week before Christmas, he said. Strong sales this week would build on the highest-spending holiday season since 2007, which was a record year. Dec. 26-Jan. 1 makes up less than 10 percent of the Nov 1-Dec. 31 season but accounts for more than 15 percent of holiday spending, research firm ShopperTrak says. The day after Christmas was the second-highest revenue day for retailers last year with $7.9 billion spent, according to ShopperTrak. Shoppers were out before the snow at Roosevelt Field Mall on New York’s Long Island, Wall Street Strategies analyst Brian Sozzi said. “Traffic is pretty solid as people are getting returns done before the storm,” he said. Some stores were light on inventory. The Gap was missing many sizes of sweaters and items from the Gap Body pajama and underwear collection were sold out. Inventory at Guess and Macy’s looked picked over, he said. Lorraine McGrath, 54, wanted to pick up pajamas for her husband at J.C. Penney in New York on Sunday morning. She was one of the first people in the store but couldn’t find big-and-tall pajamas to fit her husband. At Best Buy at Atlantic Center mall in Brooklyn, Marie Brown, visiting from Florida, was disappointed to find a laptop computer advertised at $200 off long gone. “We should have come earlier, because what we wanted was totally sold out,” she said. She bought another laptop at $60 off. “We still saved money.” Across the country, stores expanded their hours and in some cases brought in fresh merchandise. Marshal Cohen, chief industry analyst at market research firm NPD Group, said strong after-Christmas sales would be icing on the holiday cake for retailers. “They came into December having made money,” he said. “If December is prosperous, that will lead them to feel confident in 2011, and that’s really what this last week is all about.” ___ AP Writer Emily Fredrix and Sara Frazier in New York, Ray Henry in Atlanta and Barbara Rodriguez in Miami contributed to this report.

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The Best Day After Christmas Sales This Year

December 26, 2010

There are a number of day after Christmas sales for those willing to brave the crowds at major retailers this year, starting Dec. 26, 2010. After Christmas sales for 2010 can be found at Walmart, Best Buy, Sears, Target, Kmart and elsewhere (scroll down for the best deals) . In addition to those bargain-hunting, there will also be many trying to return gifts. The National Retail Federation’s Scott Krugman says Dec. 26 should “pad the numbers of [an already] successful holiday season” for retailers; since this year’s day after Christmas falls on a Sunday, it could be more crowded than normal. ABC News reports that this year’s Christmas season is expected to surpass the last few years, with Americans spending a predicted $451.5 billion, up 3.3 percent from last year. The bargains on Sunday will be numerous, as “Atlanta Bargain Hunter” Lauren Davidson notes : Dec. 26 is the day my frugal family stocks up on everything from blenders to clothes to gifts for next year. My father (who has purchased any electronics prior to Christmas and is done shopping for the year) stays at home while my mother, sister and I load up at 6 a.m., coffee cups in hand, and head to the outlet malls. Here are some of the after Christmas sales you can find today, Dec. 26, 2010. Let us know if there are any other standout deals you come across. WALMART: An end-of-year storewide clearance event starts at 6 a.m. on Dec. 26 at Walmart locations across the country. A list of all clearance items can be found here . BEST BUY: A massive after Christmas sale runs from Sunday, Dec. 26, through Monday, Dec. 27. Deals include $399.99 Gateway or HP laptops, $860 off Samsung HDTV and Blu-ray package, $50 off Samsung HD camcorders, and 20 percent off all holiday music; there is free shipping on many items. SEARS: Stores open at 7 a.m. on Dec. 26. There is up to 65 percent off original prices Sunday only; deals include up to 30 percent off Kenmore appliances and all Samsung TVs on sale including free delivery. TARGET: An online-only sale includes tons of deals and select opportunities for free delivery after Dec. 25; Philips products are on sale, you can save $120 on laptops, and more. KMART: There will be up to 50 percent off all storage items and free shipping on items. Deals include $120 off 37-inch Panasonic VIERA HDTVs; $44.99 Vivitar ViviCam Digital Cameras; up to 50 percent off boots; and all bedroom and dining furniture will be on sale.

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Are Stores Open On Christmas Day?

December 25, 2010

Wondering what stores are open on Christmas Day 2010? Hardly any. Even though more stores than usual stayed open this Thanksgiving, and plenty of stores kept later hours this Christmas Eve, stores will widely be closed as typical on Christmas Day. It’s one of the few days every year in which nearly all businesses are closed across the country. Of course, this year Christmas falls on a Saturday, only solidifying the day off for many. Walmart, Target, Kmart, Old Navy and Toys R Us were open on Christmas Eve, but will all be closed Christmas Day this year. However, if you need to make a quick run to the store, Walgreens locations across the country will be open , and many CVS locations will also be open. Other stores could be open locally too; it’s best to check your local listings or call individual stores near you to be sure.

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