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Huffington Post…

WASHINGTON (Tim Reid) – At least 219 former officials at the Securities and Exchange Commission have left since 2006 to help clients with business before the agency, bringing fresh allegations of a “revolving door” that leaves the commission too cozy with the Wall Street firms it regulates. According to a report to be released on Friday, between 2006 and 2010 there were 219 former SEC employees who filed letters with the agency indicating their intent to represent a client with business before the commission. In all, those former officials advised firms on SEC business nearly 800 times, according to an advance copy of the report seen by Reuters. The study by the nonpartisan Project on Government Oversight, which analyzed post-employment statements provided by the SEC after a Freedom of Information Act request, says the former officials joined a total of 131 firms to provide legal, lobbying, accounting and other advice to clients being investigated or regulated by the SEC. Republican Senator Charles Grassley, a senior member of the Senate Finance Committee, said of the report: “The SEC’s revolving door seems to be more active than ever.” Grassley said there should be public disclosure of where former financial regulators are working and what issues they are working on. “Transparency is a proven back-stop to enforce ethics rules,” he said. A report by the SEC’s Inspector General earlier this year criticized the SEC for failing to keep adequate records about potential conflicts of interest. While critics such as Grassley contend the system leaves the SEC unable to effectively regulate Wall Street, defenders argue the practice of officials leaving government agencies to work in the private sector is to be expected. “Who do you want representing these clients before agencies such as the SEC with very, very complex rules,” said Roberta Karmel, a former SEC commissioner and now a professor at Brooklyn Law School. “Lawyers who know nothing about the rules — or lawyers who do?” Professor Karmel added that the SEC is one of the few agencies that require former employees to provide written notice if they intend to represent a client before the commission. SEC employees are barred by federal law for life from working on matters that they worked on while at the commission. “We have a rigorous program for departing employees to help them meet both the spirit and the letter of the law,” said John Nester, an SEC spokesman. The oversight group’s report shows some SEC officials joined new employees with business before the commission within days of leaving the agency. Alan Reifenberg, for example, a branch chief in the SEC’s Enforcement division, resigned on June 6, 2006. Six days later he joined Credit Suisse. Many companies who hired SEC officials turned to them for help in SEC litigation. Jill Slansky, a former senior attorney in the SEC’s New York Regional Office, resigned in December 2009. In June 2010, she filed a statement saying she had been retained to represent an unidentified client in a lawsuit brought by the SEC against Galleon Management, the complaint that charged billionaire hedge fund owner Raj Rajaratnam with insider trading. He was found guilty on 14 counts this week. John Freeman, a former SEC lawyer and now an emeritus professor at the University of South Carolina School of Law, did his own SEC “revolving door” study in 2003 and found a high proportion of officials left to work for regulated entities. “A lot of the brain power and logistical know-how that existed in the SEC was being used for the benefit of mutual fund managers and not for the benefit of shareholders,” said Freeman. (Reporting by Tim Reid; Editing by Tim Dobbyn) Copyright 2011 Thomson Reuters. Click for Restrictions .

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‘SEC’s Revolving Door Seems To Be More Active Than Ever"

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Goldman, Citigroup Among Large Banks Targeted By EU Over Alleged Collusion

April 29, 2011

BRUSSELS — The EU’s competition watchdog is investigating the practices of some the world’s biggest banks, as well as a market data firm and a clearing house, in the market for credit default swaps. The two probes home in on a market that has come under fire for lacking transparency and allegedly worsening debt market turmoil during the financial crisis. While the investigations focus on competition issues, they accompany a broader regulatory crackdown in Europe on credit default swaps and other derivatives. The European Commission said it has “indications” that the 16 banks acting as dealers in the CDS market – practically all the big players in global investment banking – give essential information on pricing and other daily activities only to Markit, the leading financial data provider for that market. Such preferential treatment “could be the consequence of collusion between them or an abuse of a possible collective dominance” and could lock other data providers out of the CDS business, the Commission said. The 16 firms targeted are JP Morgan, Bank of America Merrill Lynch, Barclays, BNP Paribas, Citigroup, Commerzbank, Credit Suisse, Deutsche Bank, Goldman Sachs, HSBC, Morgan Stanley, Royal Bank of Scotland, UBS, Wells Fargo, Credit Agricole and Societe Generale. Credit default swaps were invented to help investors insure themselves against the default of a company or a state whose bonds they hold. However, they have also been used for speculation and the profits some banks and hedge funds make from such transactions have come under scrutiny during the financial crisis. “CDS play a useful role for financial markets and for the economy,” said Joaquin Almunia, the EU’s competition commissioner, said in a statement. “Recent developments have shown, however, that the trading of this asset class suffers a number of inefficiencies that cannot be solved through regulation alone.” In a second case, the Commission is also investigating whether nine of those banks received preferential treatment – such as lower fees and profit-sharing deals – from ICE Clear Europe, the biggest CDS clearing house in the EU. “The effects of these agreements could be that other clearing houses have difficulties successfully entering the market and that other CDS players have no real choice where to clear their transactions,” the Commission said. The banks targeted in the second probe are Bank of America, Barclays, Citigroup, Credit Suisse, Deutsche Bank, Goldman Sachs, JP Morgan, Morgan Stanley and UBS. Almunia said he hoped that the “investigation will contribute to a better functioning of financial markets and, therefore, to a more sustainable recovery.”

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Greece’s Government Deficit Even Worse Than Predicted

April 26, 2011

BRUSSELS — Greece’s government deficit was significantly bigger than forecast last year, European Union data showed Tuesday, underlining the difficulties the debt-ridden country is having to get its finances under control. Greece’s deficit hit 10.5 percent of economic output in 2010, well above the 9.6 percent the European Commission, the EU’s executive, predicted last fall. The country’s debt swelled to 142.8 percent of gross domestic product, according to data released by EU statistics agency Eurostat – the highest in the eurozone and above the 140.2 percent the Commission had forecast. Greece had to be saved from bankruptcy with euro110 billion ($160 billion) in rescue loans last May, but continues to struggle to raise revenue as its economy shrinks. Most economists expect the country will eventually have to restructure its debt – either by asking creditors to give it more time to repay or even cutting the total amount owed. However, EU officials have so far ruled out a restructuring. The Greek finance ministry attributed the larger deficit to a deeper than expected recession, which cut into tax revenues and social security contributions. “In any case, the Greek government remains committed to achieving its deficit targets under the Economic Adjustment Programme and will take all necessary measures in that direction,” the ministry said in a statement. In its bailout program – which spells out Greece’s path to financial health – Athens promised to get its deficit below the 3 percent maximum allowed by EU rules in 2014. The 17 countries that use the euro had an average deficit of 6 percent last year, double the 3 percent allowed under EU rules. The highest deficit was produced by Ireland – the second country that needed to be bailed out by other EU nations and the International Monetary Fund – reaching a record 32.4 percent of GDP because of expensive bank bailouts, only slightly above the 32.3 percent forecast. Portugal, which is currently negotiating its own package of rescue loans, had a deficit of 9.1 percent, way above the 7.3 percent the Commission had expected last fall, but Lisbon had warned markets of the upward revision on Saturday. There were some good news for Spain, the country that most analyst view as the next weakest link in the eurozone. It’s deficit was 9.2 percent of GDP, slightly below the 9.3 percent forecast by the Commission. Euro newcomer Estonia was the only eurozone country to produce a surplus – 0.1 percent of GDP – last year, but the tiny Baltic nation adopted the common currency this January. Bond markets quickly reacted to the news. The yield – or interest rate – on Greek 10-year bonds hit 15.18 percent, up from 15.06 percent at the open, while Portugal’s rose to 9.54 percent from 9.47 percent. Spain’s 10-year yield meanwhile inched down to 5.47 percent, from 5.48 percent, but remained way above the 4 percent they traded at just last October. The United Kingdom, which is not in the eurozone, recorded a deficit of 10.4 percent of GDP – the third highest in the EU behind Ireland and Greece. However, Eurostat said it had some reservations on the quality of data reported by the U.K. because of the way the country records its military expenditure. Eurostat spokesman Tim Allen said it was too early to tell for which years and by how much U.K. deficit figures would have to be revised to comply with the agency’s rules, but because the issue was only related to the timing of the expenditure rather than the overall amount, any revisions should not affect the U.K.’s debt levels. Overall, the eurozone managed to cut the massive deficits it built up during the financial crisis faster than predicted. The average deficit stood at 6.3 percent in 2009 and the Commission had expected that figure to remain stable in 2010. Apart from the three most troubled countries, Greece, Ireland and Portugal, only Austria failed to undercut the Commission’s autumn forecast. The small Alpine nation’s deficit rose to 4.6 percent in 2010, above the 4.3 percent forecast, due to changes in the way countries have to record debts they take on from public companies. ___ Elena Becatoros in Athens contributed to this story.

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Obama Administration Asks Supreme Court To Reinstate FCC Indecency Policy

April 22, 2011

WASHINGTON — The Obama administration asked the Supreme Court Thursday to reinstate a policy that allows federal regulators to fine broadcasters for showing nudity and airing curse words when young children may be watching television. The administration is seeking the high court’s review of appeals court rulings that threw out the Federal Communications Commission’s rules against the isolated use of expletives as well as fines against broadcasters who showed a woman’s nude buttocks on a 2003 episode of ABC’s “NYPD Blue.” Last year, the 2nd U.S. Circuit Court of Appeals in New York threw out the FCC policy, saying it was unconstitutionally vague and left broadcasters uncertain of what programming the agency will find offensive. The challenge to the FCC rules arose over celebrities’ use of the F-word and S-word on live awards show programs. In January, the same court said its ruling on the FCC policy compelled it to nullify a penalty of more than $1.2 million against ABC and 45 affiliates over less than seven seconds of airtime from “NYPD Blue.” Acting Solicitor General Neal Katyal, the administration’s top Supreme Court lawyer, said the justices should hear the case because the appeals court has stripped the FCC of its ability to police the airwaves. “The court of appeals’ decisions preclude the commission from effectively implementing statutory restrictions on broadcast indecency that the agency has enforced since its creation in 1934,” Katyal wrote. Katyal included a DVD of the “NYPD Blue” episode with the filing for the court’s convenience. The “NYPD Blue” episode led to fines only for stations in the Central and Mountain time zones, where the show aired at 9 p.m., a more child-friendly hour than the show’s 10 p.m. time slot in the East. In the “NYPD Blue” episode, actress Charlotte Ross played a police detective who had recently moved in with another detective. In the scene at issue, Ross disrobes as she prepares to shower. After her buttocks and the side of one of her breasts are briefly shown, the camera pans down and reveals her nude buttocks while she faces the shower. Then the other detective’s young son enters the bathroom and sees the naked woman. Embarrassment ensues as the child retreats from the room. The appeals court said ABC said the scene was intended to portray the awkwardness between a child and his parent’s new romantic partner, and the difficulty of adjusting to the situation. The part of the case involving the awards shows has been to the high court before. Three years ago, the justices narrowly upheld the policy, but in a ruling that pointedly avoided dealing with First Amendment issues. Instead, the court directed the appeals court to undertake a constitutional review. For many years, the FCC did not take action against broadcasters for one-time uses of curse words. The policy flowed from a 1978 Supreme Court decision that upheld the FCC’s reprimand of a New York radio station for airing a George Carlin monologue containing a 12-minute string of expletives in the middle of the afternoon. But, following several awards shows with cursing celebrities in 2002 and 2003, the FCC toughened its long-standing policy after it concluded that a one-free-expletive rule did not make sense in the context of keeping the air waves free of indecency when children are likely to be watching television. The FCC said that some words are deemed to be so offensive that they always evoke sexual or excretory images. The policy essentially excluded news programming and some other broadcasts, including ABC’s airing of “Saving Private Ryan” in 2004.

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Daniel Dicker: Oil Speculation Continues Unabated — $5 Gas Next?

April 4, 2011

While prices at the pump shoot over $4 a gallon, five United States senators are calling on the Federal Trade Commission (FTC) to investigate whether gas prices are being manipulated. The job of assuring that our energy markets are fair actually falls not upon the FTC but upon the Commodity Futures Trading Commission (CFTC), but it’s had little success to date at curbing oil speculation and slowing this latest run-up in price. The senators may be hoping that the FTC, using a newly crafted 2009 law, can lend a hand. There’s good reason for Senators Maria Cantwell (D-Wash.), Olympia Snowe (R-Maine), Jay Rockefeller (D-W.Va.), Mark Pryor (D-Ark.) and Ron Wyden (D-Ore.) to be frustrated with the CFTC. The Dodd-Frank Financial Reform bill, signed into law on July 21, 2010, mandated that the CFTC write rules for the oil markets designed to stop speculation from controlling prices on crude oil and gasoline and driving them to astronomical levels, as they did in 2008. The bill also demanded that these rules be in place and working by February of this year. There’s just one problem: Those rules haven’t yet been written and approved. They haven’t been written largely because of the pushback that the CFTC has received from the traders that make massive profits from the financial oil markets and the advocacy groups and lawyers that represent them. As the CFTC has proposed new rules, they’ve been met by a who’s who of derivative traders and their advocates arguing for the status quo and urging caution, including PIMCO, BlackRock, Goldman Sachs, JPMorgan, the Futures Industry Association (FIA) and the Securities Industry and Financial Markets Association (SIFMA) — to name only a few. The lawyers arguing their case are predictably the best, brightest and most expensive in Washington, including attorneys from Alston & Bird, Gibson, Dunn & Crutcher, Patton Boggs, Sullivan, Cromwell and Skadden, Arps. Under this pressure, the CFTC has buckled and thrown in the towel on much of the needed rulemaking, at least for now. To take one example, the Commission has given up trying to craft a rule on position limits in oil derivatives until at least 2012 , and position limits is only one of thirty complex rulemaking areas the CFTC has acknowledged it must tackle before its mandate is complete. If these five senators are serious about restoring fair pricing to the oil market, and not merely acting outraged for the sake of their constituents, they will likely not find the Federal Trade Commission better equipped to answer their call. All of the tools at the federal government’s disposal that could be used to reduce the speculative interest in oil — in trading, clearing and reporting — reside with the overseeing regulatory agency: the CFTC. Moreover, it’s hardly assured that even the completion of the CFTC’s rulemaking mandate, if it ever comes, will make prices fair. Investment in paper barrels of oil from both commercial funds and individuals is the single most important speculative source driving energy prices higher. A ban of both commodity index funds and exchange-traded funds that use commodity futures, removing much of this investment, would be an important and instantly measurable first step. So far, however, a ban of these instruments is not even being considered. But it’s important to remember that chasing destructive speculative activity out of a commodity market is not an impossible task. In January 1980, the Federal government and the exchange overseeing silver futures trading, the COMEX, took collaborative action: In a series of draconian but necessary measures, the exchange instituted a “liquidation-only” restriction for the market, forcing speculators to either take delivery of contracts or find massive credit for their holdings while the Federal Reserve blocked commercial lenders from extending that credit. The impact was immediate: Within three months, prices dropped 77%. The example of silver in 1980 shows that the tools are available and that only with the combined will of the industry and our government can we restore fair prices to commodities. Whether we see such will in action to help lessen oil prices for consumers, however, remains to be seen.

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The 3 U.S. Nuke Plants Regulators Are ‘Most Concerned About’

March 31, 2011

WASHINGTON — The Nuclear Regulatory Commission says three U.S. nuclear power plants need increased oversight from federal regulators, although officials stressed that all are operating safely. NRC Chairman Gregory Jaczko (YAHT’-skoh) says the three plants – in South Carolina, Kansas and Nebraska – need more intensive review than other plants because of problems with safety systems or unplanned shutdowns. Jaczko told a House subcommittee Thursday that the plants “are the ones we are most concerned about” among the 65 U.S. nuclear power plants in 31 states. Jaczko did not identify the plants, but an agency spokesman said they are the H.B. Robinson nuclear plant in South Carolina, Fort Calhoun in Nebraska and Wolf Creek in Kansas.

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Japan Crisis Renews Call For Wider Distribution of Radiation Pills in U.S.

March 30, 2011

NEW YORK — Three weeks ago, it was a chemical compound familiar mostly to pharmacists and radiation experts. Now, in light of the ongoing nuclear crisis at the Fukushima Daiichi plant, potassium iodide has become a highly desired commodity in both Japan and the United States for its protection against radiation-induced thyroid cancer, especially in young children. But in the years leading up to the calamity at Fukushima, the U.S. Nuclear Regulatory Commission and top officials in the Bush and Obama administrations have resisted efforts to expand distribution of potassium iodide to a wider array of people living near nuclear power plants in the United States. Their principal argument has been that limiting access to food, water and milk potentially tainted by radioactive elements is more effective than supplying more radiation pills to the public. Congress in 2002 passed a counterterrorism bill that required state and local governments to stock supplies of potassium iodide for people living within a 20-mile radius of nuclear power plants, an expansion of an optional 10-mile zone for the radiation pills that was previously in place. The law included a provision, however, that allowed the president to waive the new rules if alternative, more effective measures were identified. In a January 2008 memo , a science adviser to President George W. Bush wrote that it would be more effective to tell people outside of the 10-mile zone to evacuate or avoid eating contaminated food from the area if there were a radiological release. The memo from John M. Marburger, the director of Bush’s Office of Science and Technology Policy, wrote that the new 20-mile mandate “places an unnecessary burden on state and local emergency preparedness coordinators already struggling with the establishment and maintenance of programs within the 10-mile (emergency zone).” He added, “A nuclear power plant accident that creates public health risks beyond the 10-mile range would be a highly unusual catastrophic event.” But as concerns widen over elevated radiation levels found in food and water supplies 50 to 100 miles away from the stricken Fukushima plant in Japan, there is a growing scrutiny of U.S. emergency response standards in the event of a nuclear disaster at home. “When radiation comes out of a plant like this, you have no idea how far it’s going to go, how heavily it’s going impact one area versus another,” said Jeffrey Patterson, a radiation exposure expert at the University of Wisconsin School of Medicine and Public Health who serves on the board of the advocacy group Physicians for Social Responsibility. “It has to do with wind patterns, it has to do with rainstorms. All of those things affect where the iodine goes.” The 10-mile emergency zone in the United States applies both to distribution of radiation pills and mandatory evacuation around a nuclear power plant, which is significantly less than the Obama administration’s call last week for evacuation of U.S. citizens within 50 miles of the Fukushima Daiichi facility. The disaster in Japan has prompted renewed calls to expand distribution of potassium iodide to a wider area, particularly from Rep. Edward Markey (D-Mass.), who authored the potassium iodide provision in the 2002 counterterrorism bill. Markey wrote a letter to the Obama administration in the week after the tsunami urging that the 20-mile zone be adopted. “We should not wait for a catastrophic accident at or a terrorist attack on a nuclear reactor in this country to occur to implement this common-sense emergency preparedness measure,” Markey wrote. The letter followed a similar December 2009 letter to Obama. The administration rejected Markey’s argument last summer, claiming that the previous limits were adequate. Potassium iodide is in no way a cure for radiation emitted from a nuclear disaster, but if taken before or immediately after exposure it can be effective in reducing the risk of thyroid cancer. Taking the pills effectively fills the thyroid gland with enough iodine to prevent the gland from absorbing radioactive iodine, a harmful isotope emitted from a nuclear reactor. Infants and young children are particularly susceptible to thyroid injury. The pills can also be harmful to young children, however, if taken in greater quantities than prescribed. Adults over 40 have the least risk of developing thyroid cancer from radiation, according to the Centers for Disease Control and Prevention , and also are more prone to an allergic reaction. The pills do not shield the body from other complications due to radioactive exposure, or from any other radioactive elements aside from iodine. People who are allergic to iodine or have a preexisting thyroid disease are advised to consult doctors before taking potassium iodide, according to the CDC. In recent weeks there has been a run on potassium iodide at drug stores in the United States, as some have panicked that radiation from the reactor in Japan would reach the West Coast. Local and state public health agencies in California have warned against taking potassium iodide in response to the Japanese reactor crisis, because of the minuscule chance of radiation traveling thousands of miles across the Pacific Ocean. The debate in the United States involves those living in the immediate vicinity of a reactor. The Nuclear Regulatory Commission and the Department of Health and Human Services have provided potassium iodide to state and local government agencies that request the pills within the 10-mile zones around nuclear plants. Local government agencies then either choose to distribute the potassium iodide or stockpile it in the event of an emergency. At the time the 20-mile rules were proposed, the Nuclear Regulatory Commission wrote in formal comments that expanding potassium iodide distribution was “unnecessary.” “We have concluded that other, more effective, protective measures are in place to protect the thyroid gland in the event of a release of radioactive iodine,” the commission wrote in a letter to the Department of Health and Human Services, which was tasked with enforcing the rule. The alternatives included preventing people in the area from eating or drinking contaminated food, milk and water, and protecting livestock. Other state and local government bodies expressed concerns about requirements to expand stockpiles of potassium iodide. Although the NRC pays for the potassium iodide supplies, state and local governments must pay to administer the pills to the public. A spokeswoman for the Nuclear Regulatory Commission wrote in an email, “As part of the NRC’s 30-, 60- and 90-day report on ‘lessons learned’ from the Japanese nuclear emergency, all aspects of nuclear power plant safety and security regulations will be reviewed.” A spokesman for Obama’s Office of Science and Technology Policy offered a similar response, saying that distribution of potassium iodide will be among many policies under review.

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Regulators Knew Of Understated Seismic Risks To Nuclear Plants For Years

March 18, 2011

By Jim Morris and Bill Sloat The Center For Public Intergrity Nearly six years before an earthquake ravaged Japan’s Fukushima Daiichi nuclear power plant, U.S. regulators came to a sobering realization: seismic risks to nuclear plants in the eastern two-thirds of the country were greater than had been suspected, and engineers might have to rethink reactor designs. Thus began a little-noticed risk assessment process with far-reaching implications despite its innocuous-sounding name: Generic Issue 199. The process, which was supposed to have been finished nearly a year ago, is still under way. It is unclear when it will be completed.GI-199, as it is known, was triggered by new geophysical data and computer models showing that, as the Nuclear Regulatory Commission put it in an August 2010 summary document, “estimates of the potential for earthquake hazards for some nuclear power plants in the Central and Eastern United States may be larger than previous estimates.” Data from the U.S. Geological Survey and other sources suggest, for example, that “the rate of earthquake occurrence … is greater than previously recognized” in eastern Tennessee and areas including Charleston, S.C., and New Madrid, Mo., according to the NRC document. There are 11 reactors in Tennessee, South Carolina and Missouri. GI-199, a collaborative effort between the NRC and the nuclear industry, has taken on new urgency in light of the crisis in Japan. “Updated estimates of seismic hazard values at some of the sites could potentially exceed the design basis” for the plants, the NRC document says. NRC spokesman Roger Hannah said the exercise was never meant to provide “a definitive estimate of plant-specific seismic risk.” Rather, he said, it was done to see if certain plants “warranted some sort of further scrutiny. It indicates which plants we may want to look at more carefully in terms of actual core damage risk.” The information collected under GI-199 has been shared with operators of all 104 reactors at 64 sites in the U.S., Hannah said, and NRC officials are in the process of determining whether any plants require retrofits to enhance safety. He added that the assessment indicated “no need for any immediate action. The currently operating plants are all safe from a seismic standpoint.” Every proposed nuclear plant in the U.S. already must undergo an extensive environmental review that examines the site’s seismology, hydrology and geology, NRC spokesman Joey Ledford said. The Nuclear Energy Institute, a trade group, said in a statement this week that nuclear plants “are designed to withstand an earthquake equal to the most significant historical event or the maximum projected seismic event and associated tsunami without any breach of safety systems.” The U.S. Geological Survey updates its seismic hazard analyses roughly every six years, the institute said, and “the industry is working with the NRC to develop a methodology for addressing” newly recognized hazards. Asked why GI-199 has taken nearly six years, Ledford said, “These are very complicated issues. We’re talking about 64 plant sites. It’s not a small task.” According to a January 2010 NRC document, GI-199 was to have been completed last April. An agency document dated January 2011 says the completion date is “to be determined.” The NRC blamed the delay on issues relating to the release of a copyrighted Electric Power Research Institute report to an NRC contractor and on “the desire for internal and external stakeholder agreement.” Over the years, the NRC often has been criticized for taking too long to resolve important safety issues. One example: what’s known in the industry as a loss-of-cooling accident, regarded as the most serious event that can happen at a reactor. Since the 1980s, the NRC has been looking into the problem of clogged emergency core cooling pumps in boiling water reactors. The issue has not been resolved. The Fukushima Daiishi reactor and 35 reactors in the U.S. are boiling water reactors. Japanese regulators, too, recognized that they had understated seismic risks to their nuclear generating facilities, and were pushing utilities to engineer plants better able to resist tsunamis. At a previously scheduled NRC conference in suburban Washington last week, just days before the 9.0 earthquake that crippled Fukushima Daiichi, Japanese officials briefed their American counterparts on four quakes in Japan since 2005 that exceeded design standards for some nuclear plants. In no case was the damage severe. Nonetheless, the Japanese were re-evaluating seismic data and moving to buffer the plants. At the conference, the Japanese delegation said that tsunamis were a particular concern for coastal plants located in seismic zones. The officials said the industry should build upon “significant progress in tsunami hazard assessment, tsunami warning and mitigation and tsunami resistant design.” EVENTS GET AHEAD OF THE REGULATORS Earthquakes can occur in all sorts of locales. In January 1986, a late-morning quake measuring 4.96 on the Richter scale was blamed for cracks in the Perry Nuclear Power Plant on Lake Erie near Cleveland. At first, people thought it wasn’t a quake; speculation focused on an explosion somehow related to the Challenger space shuttle disaster or an attack on New York City. The newly licensed plant’s reactor was to be fueled for the first time the next day. Officials and the public were caught by surprise; few suspected Northeastern Ohio was in an active seismic zone. But it is. Experts determined that the quake’s epicenter was 11 miles from the plant, which has been dogged by controversy ever since. A previously unknown fault line also runs near the Indian Point plant, 24 miles north of New York City. Indian Point’s two units are up for relicensing by the NRC in 2013 and 2015, respectively, and a fierce battle is expected. New York Gov. Andrew Cuomo, while campaigning last year, called for Indian Point to be closed. Now he has ordered a safety review of the plant. In a 2008 paper, four researchers from Columbia University reported that “Indian Point is situated at the intersection of the two most striking linear features marking the seismicity and also in the midst of a large population that is at risk in case of an accident at the plants.” Indian Point’s two reactors, the researchers noted, “are located closer to more people at any given distance than any other similar facilities in the United States.” The plant’s operator, Entergy Corp., issued a statement saying all its nuclear plants “were designed and built to withstand the effects of natural disasters, including earthquakes and catastrophic flooding. The NRC requires that safety-significant structures, systems and components be designed to take into account the most severe natural phenomena historically reported for each site and surrounding area.” Even where nuclear plants have been built in established zones of potentially severe earthquakes, such as California, scientists are often far ahead of the regulators in raising questions about the safety of the plants. The California Coastal Commission, for example, has been sparring with the NRC over what the commission claims are under-appreciated seismic risks at the San Onofre plant, on the Pacific Ocean south of Los Angeles. After a review several years ago, the commission said “there is credible reason to believe that the design basis earthquake approved by [the NRC] at the time of the licensing of [San Onofre Units] 2 and 3 … may underestimate the seismic risk at the site.” Mark Johnsson, a geologist with the commission, said GI-199 suggests that the NRC is taking such risks more seriously. “In California, we’ve had our differences with the NRC,” Johnsson said, “but they are saying there is credible evidence the earthquake risk in large portions of the country may have been underestimated for decades. We have objected to things they have done. We have not particularly relied on their work here in California. But in this instance they are trying to get it right, I think. They are looking at the new science and are open to it. Right now, there is insufficient data to understand how these faults work at great depths under these power plants.” The Coastal Commission has accused the NRC of trying to weaken safety regulations for spent fuel storage sites in areas prone to tsunamis and quakes. It said the most likely incident on the West Coast would involve a major earthquake “immediately followed by inundation of the damaged facility by a tsunami.” That is exactly what happened in Japan. In a 2002 letter to the NRC, the commission’s executive director, Peter Douglas, said the storage areas should have safety standards “consistent with the requirement for nuclear power plants.” He said the NRC hadn’t offered any logical explanation for trying to weaken the rules. Douglas wrote, “It is especially important that an appropriate standards for … tsunamis be applied because perhaps the most likely scenario for release of radiation to the environment is damage to an [independent spent fuel storage installation] or [monitored retrievable storage installation] during a major earthquake, immediately followed by inundation of the damaged facility by a tsunami.” The NRC rejected Douglas’s complaint and lowered the seismic standards for spent fuel storage. Joe Litehiser, a Bechtel Corp. researcher, has studied the implications of earthquakes on licensing of proposed new nuclear plants in the central and eastern U.S. Litehiser said there is more seismological information available now than there was decades ago, when the existing plants were built. Scientists now believe, for example, that major earthquakes occur around Charleston, S.C., every 550 years instead of several thousand years apart, as industry models had assumed. This is relevant not only because South Carolina has seven active reactors, but because four more units are planned for the state. Applications filed by the proposed operators, Duke Energy and South Carolina Electric & Gas, seek NRC permission to build Westinghouse Advanced Passive 1000 (AP1000) reactors in Fairfield and Cherokee counties. In a March 7 letter to NRC Chairman Gregory Jaczko, U.S. Rep. Edward Markey, D-Mass., wrote that one of the agency’s own experts believes the AP1000’s shield building could “shatter like a glass cup” in the event of an earthquake or a similar disaster. Aaron Mehta and Susan Stranahan contributed to this story. What are the risks of an earthquake beneath a reactor near you? This image combines a 2006 map by the United States Geological Survey showing varying seismic hazards across the U.S. with locations of nuclear reactors. Reactors in black are active; reactors in blue are proposed sites for the new model known as the AP1000. Probability of strong shaking increases from very low (white), to moderate (blue, green, and yellow), to high (orange, pink, and red). Credit: Kimberly Leonard/Center for Public Integrity. For more information on each nuclear reactor in our map, d ownload the list. ” target=”_hplink”> map by the United States Geological Survey showing varying seismic hazards across the U.S. with locations of nuclear reactors. Reactors in black are active; reactors in blue are proposed sites for the new model known as the AP1000. Probability of strong shaking increases from very low (white), to moderate (blue, green, and yellow), to high (orange, pink, and red). Credit: Kimberly Leonard/Center for Public Integrity. For more information on each nuclear reactor in our map, d ownload the list.

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At California Nuclear Plant, Emergency Response Plans Don’t Include Earthquakes

March 16, 2011

As the world’s attention remains focused on the nuclear calamity unfolding in Japan, American nuclear regulators and industry lobbyists have been offering assurances that plants in the United States are designed to withstand major earthquakes. But the emergency plan for the Diablo Canyon nuclear plant on the California coast, which sits less than a mile from an offshore fault line, does not include a ready response for an accident triggered by an earthquake. Though experts warned from the beginning that the plant would be vulnerable to an earthquake, asserting 25 years ago that it required an emergency plan as a condition of its license, the Nuclear Regulatory Commission fought against making such a provision mandatory as it allowed the facility to be built. As Americans absorb the spectacle of a potential nuclear meltdown in Japan — one of the world’s most proficient engineering powers — the regulatory review that ultimately enabled Diablo Canyon to be built without an earthquake response plan amplifies a gnawing question: Could the tragedy in Japan happen at home? Experts who recall how the California plant came to be erected offer a disconcerting answer: Yes. And some are calling for more urgent government action to review safety at nuclear plants across the country. “What they’re displaying now is exactly what was wrong in the past with the nuclear establishment, which is that they didn’t have their priorities right,” said Victor Gilinsky, who served on the Nuclear Regulatory Commission during the Diablo Canyon debate and agreed with the call for greater attention to earthquakes in emergency plans. “They’re more concerned about the protection of the plants, and installation of further plants, than they are about public safety. The president should be saying, ‘I want every single plant reviewed.’” Back when the California plant was being finalized in the mid-1980s, local activists and environmental lawyers sued the Nuclear Regulatory Commission in an effort to slow the project, arguing that the clear risks from earthquakes nearby required additional planning. The case made its way to the U.S. Court of Appeals in Washington, D.C., where a 5-4 majority — including current Supreme Court Justice Antonin Scalia and former Clinton independent counsel Kenneth Starr — ruled that earthquakes did not have to be included in the plant’s emergency response plans. The underlying theory was that the plant’s design, which came after years of planning and geological studies, could withstand any foreseeable earthquake in the area — the same assumption that guided thinking in Japan. Emergency response plans at the Diablo Canyon plant still do not take an earthquake-induced nuclear release into account. “What they’re saying is that there could be an earthquake, but in no way could it ever cause a radioactive release at the same time,” said Rochelle Becker, who led the San Luis Obispo, Calif., group that first sued the Nuclear Regulatory Commission over earthquake preparedness in the 1980s. “I’m pretty sure we now have evidence that it does.” A spokeswoman for the Nuclear Regulatory Commission confirmed that the emergency response plans at Diablo Canyon do not have an earthquake contingency plan because the commission is satisfied that the plant’s structure will be able to withstand an earthquake in the area — calculated as a maximum magnitude of 7.5. But officials at Tokyo Electric Co., the operator of Japan’s stricken Fukushima Daiichi plant, said over the weekend that the strongest earthquake they had anticipated was much lower than the magnitude-9.0 quake that struck last Friday. “That’s a lesson that we ignore at our own peril, because we could be wrong, too,” said Joel Reynolds, the attorney who originally brought the case against the Nuclear Regulatory Commission and who is now a senior attorney with the Natural Resources Defense Council in California. “It is a story as old as science that we’re always learning new things. We’re always discovering the unexpected.” Critics have raised particular questions about how a standard emergency response to a nuclear disaster could be complicated if it had been caused by an earthquake, where roads and other surrounding infrastructure would also be impaired. So far, the commission has not specifically recommended any changes to safety regulations or emergency response procedures at nuclear plants in the United States. “All our plants are designed to withstand significant natural phenomena like earthquakes, tornadoes and tsunamis,” the commission’s chairman, Gregory B. Jaczko, said earlier this week. “We believe we have a very solid and strong regulatory infrastructure in place now.” He added that the commission would “continue to take new information and see if there are changes that we need to make with our program.” Michael Mariotte, the executive director of the Nuclear Information and Resource Service, a group critical of the nuclear industry and the regulatory process, said the pushback on response planning reflects an environment where the industry is helped along by regulators. “That’s the logic behind a lot of our nuclear regulation, unfortunately, is that it’s designed to accommodate the operation of a plant, and not necessarily the protection of the public,” Mariotte said. “If they acknowledged that an earthquake occurred that damaged the plant, then they’re also acknowledging that an earthquake has damaged the transportation infrastructure, that you can’t get people out properly, that the plant doesn’t work, and then it can’t be approved.” At the time the Diablo Canyon case was being litigated in the mid-1980s, the Nuclear Regulatory Commission and the electric utility looking to build the plant had been dealing with more than a decade’s worth of federal and state reviews for the facility. Federal regulators were comfortable with their seismic reviews of the remote coastal area between Los Angeles and San Francisco. Comments made during closed meetings, later released to the public, showed that some NRC commissioners were concerned that additional public hearings surrounding the emergency response plan and earthquakes would slow the process further. “One of the things that I think makes me shy away often from hearings is because as soon as we hear the word ‘hearing,’ you see so much time elapse that it maybe over-influences one,” then-NRC Chairman Nunzio J. Palladino, who has since passed away, said at the time. “I do feel that at this late stage, requiring a delay while we wait for a hearing is not in the best national interest.” When the case involving earthquake response was eventually litigated all the way to the federal appeals court in D.C., which ultimately sided with the Nuclear Regulatory Commission, the five-member majority noted that there had already been extensive review of seismic activity around the plant. “We can think of no potential natural or unnatural hazards, regardless of their improbability, that the Commission would not be required to consider,” failed Reagan Supreme Court nominee Robert Bork wrote in an opinion for the appellate court. “That is a prescription for licensing proceedings that never end and plants that never generate electricity.” The four dissenting judges, including current Supreme Court Justice Ruth Bader Ginsburg, noted: “The very purpose of the exercise is to plan for the unthinkable eventuality that the design safeguards will not prevent an accident.” “It defies common sense to exclude evidence about the complicating effects of earthquakes from a proceeding dealing with how to respond to a nuclear accident at a plant located three miles from an active fault, a plant in which seismic concerns dominated the design and construction proceedings for well over a decade,” the justices wrote. In recent years, the utility that operates Diablo Canyon, Pacific Gas and Electric Company, has recently found another fault line less than a mile from the plant after conducting research with the U.S. Geological Survey. The plant’s original design had accounted for a fault that was farther offshore — about three miles from the plant. The spokeswoman for the Nuclear Regulatory Commission, Lara Uselding, said the utility has not found evidence that the newly discovered fault line would pose a risk to the plant. The commission is currently reviewing the company’s geological report.

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Robert Reich: Safety on the Cheap

March 16, 2011

Can we please agree that in the real world corporations exist for one purpose, and one purpose only: to make as much money as possible, which means cutting costs as much as possible? The New York Times reports that GE marketed the Mark 1 boiling water reactors, used in TEPCO’s Fukushima Daiichi plant, as cheaper to build than other reactors because they used a comparatively smaller and less expensive containment structure. Yet American safety officials have long thought the smaller design more vulnerable to explosion and rupture in emergencies than competing designs. (By the way, the same design is used in 23 American nuclear reactors at 16 plants.) In the mid-1980s, Harold Denton, then an official with the Nuclear Regulatory Commission, said Mark 1 reactors had a 90 percent probability of bursting should the fuel rods overheat and melt in an accident. A follow-up report from a study group convened by the Commission concluded that “Mark 1 failure within the first few hours following core melt would appear rather likely.” Sound familiar? The National Commission appointed to investigate the giant oil spill in the Gulf of Mexico last April recently concluded that BP failed to adequately supervise Halliburton Company’s work on installing the well. This was the case even though BP knew Halliburton lacked experience testing cement to prevent blowouts and hadn’t performed adequately before on a similar job. In short: Neither company bothered to spend the money to ensure adequate testing of the cement. Nor did Massey Energy spend the money needed to ensure its mines were safe. And so on. Don’t get me wrong. No company can be expected to build a nuclear reactor, an oil well, a coal mine, or anything else that’s one hundred percent safe under all circumstances. The costs would be prohibitive. It’s unreasonable to expect corporations to totally guard against small chances of every potential accident. Inevitably there’s a tradeoff. Reasonable precaution means spending as much on safety as the probability of a particular disaster occurring, multiplied by its likely harm to human beings and the environment if it does occur. Here’s the problem. Profit-making corporations have every incentive to underestimate these probabilities and lowball the likely harms. This is why it’s necessary to have such things as government regulators, why regulators must be independent of the industries they regulate, and why regulators need enough resources to enforce the regulations. It’s also why the public in every nation is endangered if the political clout of its biggest corporations — BP, Halliburton, Massey, G.E., or TEPCO — grows too large. Robert Reich is the author of Aftershock: The Next Economy and America’s Future , now in bookstores. This post originally appeared at RobertReich.org .

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Vampire Squid? Big Government? U.S. Crisis Reports Murky

January 24, 2011

WASHINGTON (By Kevin Drawbaugh and Dave Clarke) – Three competing, politically recognizable tales of the financial crisis will emerge this week when a U.S. congressional panel finally concludes its 20-month investigation. The Financial Crisis Inquiry Commission has failed to produce a consensus explanation of the 2007-2009 banking debacle, as it was asked to do in May 2009. Instead, the 10-member panel has fractured along the same ideological fault lines that divide much of political Washington. Three reports will be issued by commission members on Thursday, each conforming with a familiar political slant. The panel’s six Democrats, including Chairman Phil Angelides, will offer a report focused on the greed and power of Wall Street, a lack of effective regulation and the “shadow banking” system, said people familiar with the document. Derivatives markets will come in for sharp criticism from the Democrats, along with a 1999 law that allowed bank holding companies to move into other financial businesses, and the immense influence of Wall Street on government. One person, who asked not to be identified, compared the Angelides report to the “vampire squid” view of the crisis, referring to a memorable 2009 description by journalist Matt Taibbi of Goldman Sachs Group Inc as “a great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money.” Republican commission member Peter Wallison will offer his own dissenting report that largely blames the crisis on the housing policy of “big government.” This well-worn GOP view is shared by conservative foes of Fannie Mae and Freddie Mac, the troubled giants of mortgage finance. THIRD REPORT Three other Republican commission members will offer a separate account of the crisis. People familiar with it said it will downplay the banks’ culpability and clout and stress a confluence of global trends in tracing the origins of the devastating crisis that peaked in late 2008. “It is what it is,” Douglas Holtz-Eakin, a Republican commission member said of the lack of a single narrative coming out of the commission’s work. “We know where Peter Wallison is, and in my view the majority went too far to the left for me to sign on. So we ended up in the middle,” Holtz-Eakin told Reuters regarding the report he will issue with former GOP Representative Bill Thomas and former Bush White House economic adviser Keith Hennessey. That dissent, like Wallison’s, will be attached to the main report being released by Angelides and the Democrats. A year ago, the commission hauled some of banking’s heaviest hitters into public hearings for questioning. Goldman Sachs Group Inc Chief Executive Lloyd Blankfein, JPMorgan Chase & Co CEO Jamie Dimon and former Citigroup executives testified to the panel. Angelides noted pointedly as the commission got going in mid-2009 that it would have the power to refer cases for criminal prosecution, but that now seems unlikely to occur. One Wall Street investor, focused on the still-unfolding Basel III global bank capital accord, said the congressionally appointed commission’s potential findings were “already in the past. “What else is it going to tell us? That we were light on capital and light on reserves? We know that, and that’s already going up on Basel III,” the investor said. (Additional reporting by Maria Aspan in New York, editing by Gerald E. McCormick) Copyright 2010 Thomson Reuters. Click for Restrictions .

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Video: Regulators and Lobbyists Among D.C.’s Top Power Brokers

January 21, 2011

Jan. 21 (Bloomberg) — Bloomberg’s Megan Hughes reports on the top power brokers in Washington featured in the latest edition of Bloomberg Businessweek magazine, including Cass Sunstein, director of the White House Office of Information and Regulatory Affairs, Jon Leibowitz, chairman of the Federal Trade Commission, and lobbyist Kirsten Chadwick. (Source: Bloomberg)

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Fox News Host Gets Good News In FEC Case

January 20, 2011

In a case with potential implications in the roiling debate about the politicization of talk media, the Federal Election Commission last month effectively dismissed a complaint accusing Sean Hannity of illegally raising cash for a Republican congressional candidate, because the commission concluded Hannity was acting in his capacity as a member of the media and serving a “legitimate press function.”

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Intel Gets FTC Nod For 76B McAfee Deal

January 3, 2011

Intel has received approval from the US Federal Trade Commission to acquire securitysoftware company McAfee for about 768 billion

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FCC Chair OKs 137B ComcastNBC Deal

January 3, 2011

Comcast has received conditional approval from the Federal Communications Commission for its acquisition of NBC Universal

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David Isenberg: PMSC vs. Pirates

December 24, 2010

In the past few years, in response to the increased attacks on maritime shipping by Somali pirates there has been increased call for and use of what might call PMSC (Private Maritime Security Contractors). In particular, some have been advocating utilizing the lessons of the past by issuing letters of marquee. Such letters have an honorable pedigree. In past centuries a Letter of Marque and Reprisal was a government license authorizing a private vessel to attack and capture enemy vessels, and bring them before admiralty courts for condemnation and sale. Nor was this just something done by other nations. Most people don’t remember that Article 1 of the United States Constitution lists issuing letters of marque and reprisal in Section 8 as one of the enumerated powers of Congress, alongside the power to “declare War”, and because the United States has not renounced privateering by treaty, in theory it could still issue letters of marque. In fact, Representative Ron Paul (R-TX) called on Congress to “issue letters of marque and reprisal, deputizing private organizations to act within the law to disable and capture those engaged in piracy. Thus, the main question is whether, from an economic, national security, or public policy perspective, governments should take advantage of these private sector capabilities. In that regard one should read a law journal article published earlier this year. It is

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Magnum Hunter Resources Elects Former Railroad Commissioner Victor G. Carrillo to Board of Directors

December 22, 2010

HOUSTON, TX–(Marketwire – December 22, 2010) – Magnum Hunter Resources Corporation ( NYSE Amex : MHR ) ( NYSE Amex : MHR-PC ) (“Magnum Hunter,” or the “Company”) announced today the election of the Honorable Victor G. Carrillo, former Chairman of the Texas Railroad Commission, to the Company’s Board of Directors, effective January 5, 2011. Mr. Carrillo will serve and qualify as an independent director. With the election of Mr. Carrillo, the Magnum Hunter Resources Board of Directors will be comprised of 9 members. Mr. Carrillo will be replacing Wayne P. Hall on the Company’s Board of Directors. Mr. Hall is a Company founder, former Chairman and CEO, and has served as Magnum Hunter’s Vice Chairman since May 2009. Mr. Hall has elected to retire as of December 31, 2010.

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Net Neutrality Rules Poised To Pass FCC Tomorrow

December 20, 2010

WASHINGTON — New rules aimed at prohibiting broadband providers from becoming gatekeepers of Internet traffic now have just enough votes to pass the Federal Communications Commission on Tuesday. The rules would prohibit phone and cable companies from abusing their control over broadband connections to discriminate against rival content or services, such as Internet phone calls or online video, or play favorites with Web traffic. FCC Chairman Julius Genachowski now has the three votes needed for approval, despite firm opposition from the two Republicans on the five-member commission. Genachowski’s two fellow Democrats said Monday they will vote for the rules, even though they consider them too weak. The outcome caps a nearly-16-month push by Genachowski to pass “network neutrality” rules and marks a key turning point in a policy dispute that began more than five years ago. “The open Internet is a crucial American marketplace, and I believe that it is appropriate for the FCC to safeguard it by adopting an order that will establish clear rules to protect consumers’ access,” Commissioner Mignon Clyburn, a Democrat, said in a statement. Yet many supporters of network neutrality are disappointed. Clyburn and the other Democrat, Michael Copps, both said the rules are not as strong as they would like, even after Genachowski made some changes to address their concerns. That sentiment was echoed by some public interest groups on Tuesday. “The actions by the Federal Communications Commission fall far short of what they could have been,” said Gigi Sohn, president of Public Knowledge. “Instead of strong, firm rules providing clear protections, the commission, created a vague and shifting landscape open to interpretation.” A number of big Internet companies, including Netflix Inc., Skype and Amazon.com Inc., have previously expressed reservations about the proposal as well. Meanwhile, even the weakened rules are likely to face intense scrutiny as soon as the Republicans take over the House next year. The chairman’s proposal builds on an attempt at compromise crafted by outgoing House Commerce Committee Chairman Henry Waxman, D-Calif., as well as a set of broad net neutrality principles first established by the FCC under the previous administration in 2005. The rules would require broadband providers to let subscribers access all legal online content, applications and services over their wired networks – including online calling services, Internet video and other Web applications that compete with their core businesses. But the plan would give broadband providers flexibility to manage data on their systems to deal with problems such as network congestion and unwanted traffic like spam as long as they publicly disclose their network management practices. Senior FCC officials stressed that unreasonable network discrimination would be prohibited. They also noted that this category would most likely include services that favor traffic from the broadband providers themselves or traffic from business partners that can pay for priority. That language was added to help ease the concerns of Genachowski’s two fellow Deomcrats. The proposal would, however, leave the door open for broadband providers to experiment with routing traffic from specialized services such as smart grids and home security systems over dedicated networks as long as these services are separate from the public Internet. Public interest groups fear that exception could lead to a two-tiered Internet with a fast lane for companies that can pay for priority and a slow lane for everyone else. They are also worried that the proposal lacks strong protections for wireless networks as more Americans go online using mobile devices. The plan would prohibit wireless carriers from blocking access to any websites or competing applications such as Internet calling services on mobile devices. It would require them to disclose their network management practices too. But wireless companies would get more flexibility to manage data traffic as wireless systems have more bandwidth constraints than wired networks. “Individuals who depend on wireless connections to the Internet can take no comfort in this half-measure,” said Joel Kelsey, political advisor for the public interest group Free Press. Republicans, meanwhile, warn that the new rules would impose unnecessary regulations on an industry that is one of the few bright spots in the current economy, with phone and cable companies spending billions to upgrade their networks for broadband. Burdensome net neutrality rules, they warn, would discourage broadband providers from continuing those upgrades by making it difficult for them to earn a healthy return on their investments. Still, Genachowski’s proposal is likely to win the support of the big phone and cable companies because it leaves in place the FCC’s current regulatory framework for broadband, which treats broadband as a lightly regulated “information service.” The agency had tried to come up with a new framework after a federal appeals court in April ruled that the FCC had overstepped its existing authority in sanctioning Comcast Corp. for discriminating against online file-sharing traffic on its network – violating the very net neutrality principles that underpin the new rules. Comcast argued that the service, which was used to trade movies and other big files over the Internet, was clogging its network. To ensure that the commission would be on solid legal ground in adopting net neutrality rules and other broadband regulations following that decision, Genachowski had proposed redefining broadband as a telecommunications service subject to “common carrier” obligations to treat all traffic equally. But Genachowski backed down after strong opposition from the phone and cable companies, as well as many Republicans in Congress.

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Robert K. Lifton: The Real World vs. The Make Believe World

December 20, 2010

These thoughts were inspired by an exchange I watched on CNBC this morning between Tom Friedman, Pulitzer prize winning author and columnist for the New York Times and Joe Kernen, a co-anchor on CNBC’s Squawk Box. Friedman commented that although the extension of the Bush tax cuts may have been necessary given the state of the economy, they added billions of dollars to our debt to China. He argued correctly that the only way for the U.S. to get out of our difficulties is to find a way to create jobs, reduce debt, innovate products that allow us to become competitive, improve education and increase immigration of highly qualified people. Kernen didn’t see why the tax reduction should be characterized as increasing the debt to China since it was “our money” and thought the real solution to all the problems was to just “get the government out of the way.” As I see the political structure of America both of these concepts fall into the realm of the make believe world. Yes, Friedman is right on target as to what is needed for this country to regain its financial and political position. It would be great if the nation would be able to gird its loins and face the realities of the huge competitive and structural unemployment, the debt, the failure of our education system and the damaging restrictions on immigration. Unfortunately, the simplistic formulation by Kernen explains why all that will not happen. I previously noted that creating jobs, reducing the debt and making America competitive cannot be accomplished without enormous sacrifices by every elements of our society. It will require that labor gives up hard earned health and pension benefits, that managements very sharply reduce their salaries and benefits; that federal, state and city governments pare down costs across the board, including pension payments for retired employees; that taxes be raised far beyond merely eliminating the Bush tax cuts; that social security and Medicare benefits be adjusted to reduce costs. All will feel the pain of reduced standards of living — labor, management, the affluent, the old and the young. I raised the question: “Can the American democratic system manage such painful change… Can our democracy survive when it has to take from each constituency something of great value? The first test of our willingness to make tough choices came up in the extension of the Bush tax cuts and we saw part of the answer. True, there was a rationalization for not increasing taxes on the middle class during this stressful economic period but the extension of benefits went well beyond the middle class to the very wealthy and included reducing estate and other taxes. It is not a great leap of the imagination to expect that when the cuts expire in 2012 — an election year — they will be extended again. We also witnessed the reaction to the efforts by the Simpson-Bowles led National Commission on Fiscal Responsibility and Reform. Even fourteen members of the Commission could not agree on the recommendations in order to bring them to the floor of Congress. Moreover, its recommendations were immediately denounced by elements on the left and the right. The Kernen mantra that we should just “get government out of the way” disguises the problem with misdirection. The bulk of pubic spending is on Social Security, Medicare, the military and interest on the debt. There is no way that in our system the government will get out of the way of those activities and, in addition, we will always need services and programs that only the government and not business can deliver. There is also no possibility that the American electorate will vote for such a drastic approach. But repeating the mantra as if it were a solution, allows the cop out on what realistically could and must be done – the belt tightening sacrifices from all the American constituencies to reduce debt yet allocate resources to carry out the kind of recommendations that Friedman made. This is reality. Until it happens, we will continue to live in a world of “make believe” and neither “get government out of the way” nor carry out Friedman’s recommendations. Robert K. Lifton has written extensively on political, business and economic issues. He is presently writing a memoir titled: Life’s Stories and Lessons from a Member of the ‘Greatest Generation.

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.Org, The Public Interest Registry Hires Don Blumenthal as Senior Policy Advisor

December 2, 2010

RESTON, VA–(Marketwire – December 2, 2010) – . ORG, The Public Interest Registry (PIR) — manager of the world’s third largest generic top-level domain — announced today the hiring of Don Blumenthal as Senior Policy Advisor. An esteemed attorney, Blumenthal brings a unique combination of technology, policy, law and law enforcement experience to the PIR policy team. Prior to joining PIR, Mr. Blumenthal created and then directed the Federal Trade Commission’s Internet Lab, a pioneering effort in the development of facilities dedicated to the collection and development of evidence needed to prosecute illegal online activity. That role provided extensive experience in phishing, spam and malware detection — areas of utmost importance to PIR.

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FCIC Delays Report Despite Republican Opposition, Citing ‘Very Powerful Interests’ Seeking To Undermine Investigations

November 18, 2010

The bipartisan panel created to investigate the roots of the financial crisis voted Wednesday to delay the Dec. 15 publication of their report despite Republican opposition, foreshadowing disagreements that are sure to arise when the commission attempts to reach a consensus on the causes of the worst financial crisis since the Great Depression. The Financial Crisis Inquiry Commission’s 6-to-3 vote came after the panel’s four Republicans argued privately against the decision to ignore the statutory deadline set by Congress. One of the Republicans, former Congressional Budget Office Director Douglas Holtz-Eakin, was unable to participate in the vote, though he made his dissent known. The report will now be released in January. The move comes on the heels of revelations that the nation’s biggest mortgage companies employed possibly-fraudulent tactics in trying to foreclose on distressed homeowners. The recent disclosures by the likes of Bank of America, JPMorgan Chase and Ally Financial that they used flawed documentation practices sparked inquiries by all 50 state attorneys general, as well as federal prosecutors and federal regulators, among others. Those investigations are ongoing. The crisis commission is also looking into the matter, said Phil Angelides, the panel’s Democratic chairman. The Republicans on the panel are resisting further inquiries, according to people familiar with the matter. Angelides said in an interview that “there are very powerful interests” seeking to undermine the panel’s investigation. “People who have trillions of dollars at stake who have been watching our efforts closely,” Angelides said. “There have been efforts throughout the year to undermine me and my fellow commissioners.” Among other things, Angelides’ panel is probing the documentation practices that federal watchdogs say may be emblematic of the entire mortgage securitization chain, in which lenders may have used bogus documents when originating mortgages and passed them through to other entities before they were sold to investors, ignoring basic due diligence along the way. The discovery of the use of “robo-signers” — employees whose sole job was to rubber-stamp documents without actually reading them or verifying their contents — “may have concealed much deeper problems in the mortgage market,” the Congressional Oversight Panel reported Tuesday. Large lenders and Wall Street banks may be on the hook for hundreds of billions of dollars in unexpected losses, threatening to undermine “the very financial stability that the Troubled Asset Relief Program was designed to protect,” the COP report noted. The information the crisis commission has gathered from its numerous public hearings has added fuel to that fire. During an April hearing, the panel heard from Richard Bowen, former chief underwriter for Citigroup’s consumer-lending unit, who said he discovered in mid-2006 that more than 60 percent of mortgages the bank bought from other firms and sold to investors were “defective.” Investors were not informed, however. In September, the former president of the nation’s leading home-loan due-diligence firm testified that as many as 28 percent of mortgages given to borrowers with poor credit that the firm examined for Wall Street banks failed to meet basic underwriting standards, and that nearly half of them were likely sold to investors anyway. Keith Johnson, formerly of Clayton Holdings, said he was unaware of any disclosure to unwitting investors by the banks. Together, the testimony and accompanying data could bolster pension funds and other investors in their pursuit to force Wall Street banks to buy back the bogus mortgages they peddled. Investors are trying to use the rights prescribed in the agreements from their initial purchases of the mortgage-linked securities. Analysts from Compass Point Research and Trading LLC pegged potential losses for 11 global banks to reach $179.2 billion, the Washington-based firm said in an Aug. 17 report. The crisis panel, though, was expected to be wrapping up its report on the crisis. The law that created the commission says: “On December 15, 2010, the commission shall submit to the President and to the Congress a report containing the findings and conclusions of the commission on the causes of the current financial and economic crisis in the United States.” In a statement, the four Republicans on the panel — Holtz-Eakin, Vice Chairman Bill Thomas, Keith Hennessey and Peter Wallison — said that the commission is “statutorily required to deliver the report on December 15.” They added that the panel “has had over a year to complete the report” and that the delay was due to a need to “accommodate the publication of a book-length document.” The FCIC hopes to publish a book on its findings, similar to the national best-seller that came from the work of the 9/11 Commission. The crisis panel recently switched publishers. The law allows the panel an additional 60 days “for the purpose of concluding the activities of the commission … and disseminating the final report.” It’s under that additional 60-day authority that Angelides and his fellow Democrats are using to justify their delay by up to six weeks. The panel’s authority formally ends Feb. 13. To date, the commission has interviewed more than 700 people, examined hundreds of thousands of documents and held 19 days of public hearings, Angelides wrote in a Wednesday letter to President Barack Obama. In an interview, Angelides said his team of investigators continue to pursue leads in their “ongoing investigation.” He added that they’re also interviewing new witnesses, in addition to circling back to old ones, indicating that the panel continues to push its investigation further. Congress tasked the panel to deliver its findings on 22 distinct areas, ranging from monetary policy to accounting rules and international capital flows. They also include the role of “fraud and abuse in the financial sector, including fraud and abuse towards consumers in the mortgage sector”; “lending practices and securitization”; and “the quality of due diligence undertaken by financial institutions.” All three of those areas would seem to include the current mortgage and foreclosure documentation issues roiling big banks and the financial sector. However, there may be complications in trying to advance its investigation. Because the law says that the commission’s findings must be sent to the President by Dec. 15, there are open questions regarding the validity of further investigative actions beyond that date, including issuing subpoenas, people familiar with the crisis panel’s efforts said. For example, a firm may have grounds to resist the subpoena, these people said. Hennessey wrote that a vote to delay the report “would violate the law, or at a minimum would be inconsistent with the law,” according to a post on his blog. “The FCIC is a creation of a law, and we must be governed by that law whether we commissioners like it or not,” he wrote. The crisis panel isn’t the first to unilaterally delay the release of its congressionally-mandated report. The Commission on the Prevention of Weapons of Mass Destruction Proliferation and Terrorism blew past its deadline, as did the National Bipartisan Commission on the Future of Medicare and the Commission on Affordable Housing and Health Care Facility Needs in the 21st Century. Those panels, however, didn’t have subpoena authority. And their reports were largely advisory. The FCIC can make criminal referrals to the Department of Justice. Like the FCIC, the 9/11 Commission also had substantial powers, and it, too, extended its own deadline. However, the 9/11 panel got its extension from an act of Congress. Angelides said the extra time will be critical for the panel’s investigation and subsequent report. In a statement, the spokesman for Senate Banking Committee Chairman Christopher Dodd said the Connecticut Democrat supports the panel’s investigation, and was not opposed to the report’s delay. Dodd indicated that a “brief delay to allow the commission to finalize and prepare a more thorough report was not unreasonable,” spokesman Sean Oblack wrote in an email.

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FCIC Delays Report Despite Republican Opposition, Citing ‘Very Powerful Interests’ Seeking To Undermine Investigations

November 18, 2010

The bipartisan panel created to investigate the roots of the financial crisis voted Wednesday to delay the Dec. 15 publication of their report despite Republican opposition, foreshadowing disagreements that are sure to arise when the commission attempts to reach a consensus on the causes of the worst financial crisis since the Great Depression. The Financial Crisis Inquiry Commission’s 6-to-3 vote came after the panel’s four Republicans argued privately against the decision to ignore the statutory deadline set by Congress. One of the Republicans, former Congressional Budget Office Director Douglas Holtz-Eakin, was unable to participate in the vote, though he made his dissent known. The report will now be released in January. The move comes on the heels of revelations that the nation’s biggest mortgage companies employed possibly-fraudulent tactics in trying to foreclose on distressed homeowners. The recent disclosures by the likes of Bank of America, JPMorgan Chase and Ally Financial that they used flawed documentation practices sparked inquiries by all 50 state attorneys general, as well as federal prosecutors and federal regulators, among others. Those investigations are ongoing. The crisis commission is also looking into the matter, said Phil Angelides, the panel’s Democratic chairman. The Republicans on the panel are resisting further inquiries, according to people familiar with the matter. Angelides said in an interview that “there are very powerful interests” seeking to undermine the panel’s investigation. “People who have trillions of dollars at stake who have been watching our efforts closely,” Angelides said. “There have been efforts throughout the year to undermine me and my fellow commissioners.” Among other things, Angelides’ panel is probing the documentation practices that federal watchdogs say may be emblematic of the entire mortgage securitization chain, in which lenders may have used bogus documents when originating mortgages and passed them through to other entities before they were sold to investors, ignoring basic due diligence along the way. The discovery of the use of “robo-signers” — employees whose sole job was to rubber-stamp documents without actually reading them or verifying their contents — “may have concealed much deeper problems in the mortgage market,” the Congressional Oversight Panel reported Tuesday. Large lenders and Wall Street banks may be on the hook for hundreds of billions of dollars in unexpected losses, threatening to undermine “the very financial stability that the Troubled Asset Relief Program was designed to protect,” the COP report noted. The information the crisis commission has gathered from its numerous public hearings has added fuel to that fire. During an April hearing, the panel heard from Richard Bowen, former chief underwriter for Citigroup’s consumer-lending unit, who said he discovered in mid-2006 that more than 60 percent of mortgages the bank bought from other firms and sold to investors were “defective.” Investors were not informed, however. In September, the former president of the nation’s leading home-loan due-diligence firm testified that as many as 28 percent of mortgages given to borrowers with poor credit that the firm examined for Wall Street banks failed to meet basic underwriting standards, and that nearly half of them were likely sold to investors anyway. Keith Johnson, formerly of Clayton Holdings, said he was unaware of any disclosure to unwitting investors by the banks. Together, the testimony and accompanying data could bolster pension funds and other investors in their pursuit to force Wall Street banks to buy back the bogus mortgages they peddled. Investors are trying to use the rights prescribed in the agreements from their initial purchases of the mortgage-linked securities. Analysts from Compass Point Research and Trading LLC pegged potential losses for 11 global banks to reach $179.2 billion, the Washington-based firm said in an Aug. 17 report. The crisis panel, though, was expected to be wrapping up its report on the crisis. The law that created the commission says: “On December 15, 2010, the commission shall submit to the President and to the Congress a report containing the findings and conclusions of the commission on the causes of the current financial and economic crisis in the United States.” In a statement, the four Republicans on the panel — Holtz-Eakin, Vice Chairman Bill Thomas, Keith Hennessey and Peter Wallison — said that the commission is “statutorily required to deliver the report on December 15.” They added that the panel “has had over a year to complete the report” and that the delay was due to a need to “accommodate the publication of a book-length document.” The FCIC hopes to publish a book on its findings, similar to the national best-seller that came from the work of the 9/11 Commission. The crisis panel recently switched publishers. The law allows the panel an additional 60 days “for the purpose of concluding the activities of the commission … and disseminating the final report.” It’s under that additional 60-day authority that Angelides and his fellow Democrats are using to justify their delay by up to six weeks. The panel’s authority formally ends Feb. 13. To date, the commission has interviewed more than 700 people, examined hundreds of thousands of documents and held 19 days of public hearings, Angelides wrote in a Wednesday letter to President Barack Obama. In an interview, Angelides said his team of investigators continue to pursue leads in their “ongoing investigation.” He added that they’re also interviewing new witnesses, in addition to circling back to old ones, indicating that the panel continues to push its investigation further. Congress tasked the panel to deliver its findings on 22 distinct areas, ranging from monetary policy to accounting rules and international capital flows. They also include the role of “fraud and abuse in the financial sector, including fraud and abuse towards consumers in the mortgage sector”; “lending practices and securitization”; and “the quality of due diligence undertaken by financial institutions.” All three of those areas would seem to include the current mortgage and foreclosure documentation issues roiling big banks and the financial sector. However, there may be complications in trying to advance its investigation. Because the law says that the commission’s findings must be sent to the President by Dec. 15, there are open questions regarding the validity of further investigative actions beyond that date, including issuing subpoenas, people familiar with the crisis panel’s efforts said. For example, a firm may have grounds to resist the subpoena, these people said. Hennessey wrote that a vote to delay the report “would violate the law, or at a minimum would be inconsistent with the law,” according to a post on his blog. “The FCIC is a creation of a law, and we must be governed by that law whether we commissioners like it or not,” he wrote. The crisis panel isn’t the first to unilaterally delay the release of its congressionally-mandated report. The Commission on the Prevention of Weapons of Mass Destruction Proliferation and Terrorism blew past its deadline, as did the National Bipartisan Commission on the Future of Medicare and the Commission on Affordable Housing and Health Care Facility Needs in the 21st Century. Those panels, however, didn’t have subpoena authority. And their reports were largely advisory. The FCIC can make criminal referrals to the Department of Justice. Like the FCIC, the 9/11 Commission also had substantial powers, and it, too, extended its own deadline. However, the 9/11 panel got its extension from an act of Congress. Angelides said the extra time will be critical for the panel’s investigation and subsequent report. In a statement, the spokesman for Senate Banking Committee Chairman Christopher Dodd said the Connecticut Democrat supports the panel’s investigation, and was not opposed to the report’s delay. Dodd indicated that a “brief delay to allow the commission to finalize and prepare a more thorough report was not unreasonable,” spokesman Sean Oblack wrote in an email.

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Rob Johnson: Deficit Commission Recs: We Gotta Get Out of This Place

November 12, 2010

The Deficit Commission co-chairmen’s report came out on Wednesday. The number of pundits and editorial boards who are trying to declare their first proposal as courageous or bold or balanced is testament to how silly the ritual has become. Many commentators are reveling in the fact that both the Left and Right are screaming. What seems sad to me is how disappointing the analysis is. The scale of defense spending in the USA, as Chalmers Johnson has repeatedly pointed out , is beyond what any other citizen base in the world shoulders as a percent of GDP and adds up to approximately the defense spending of the rest of the world combined. So a little nip and tuck here is considered significant. Why do these commissions never ask what it is that all of this defense spending does for America? The suggested Social Security cutbacks are similarly amazing. We are fretting over some problems that occur beyond 2037!!! This collection of wise men are ones that could not see the financial crisis right before their eyes in 2007, but somehow they are clairvoyant about the train wreck of 2037. Some, including leading progressive thinkers, have suggested that this will be good for market credibility. Since when do we need to appease markets that are charging 2.5 percent for 10 year debt? Raising the age of social security payouts seems fine until, as Paul Krugman points out , you see that life expectancy has only improved for those in the upper reaches of the income distribution. Overall, this is predictable. David Sirota may have said it best : “If you can admit the two real parties in Washington are not the Republicans and Democrats but the Money Party and the People Party, then you can admit that this commission is not a bipartisan commission — it’s purely partisan for the Money Party.” These are money party recommendations from a Commission appointed by two money parties that survive on money to conjure votes through media expenditure in a money politics distorted framework. Commissioners are being treated as if heroic. Yet they take little real risk. Nothing surprising here. Shared sacrifice is the buzz phrase. Sorry, but in the money-takes-all American political system, this sacrifice is fair like giving the opposing team the ball on the 3 yard line and saying we have a fair game when they are nine feet from the end zone and 47 yards from mid field at the start. Sirota’s People’s Party is on defense. As Eric Burdon and the Animals once sang : We gotta get out of this place If it’s the last thing we ever do We gotta get out of this place Girl, there’s a better life For me and you Cross-posted from New Deal 2.0 .

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EU Commission approves Credit Agricole’s purchase of 172 branches of Intesa Sanpaolo

November 11, 2010

EU Commission approves Credit Agricole’s purchase of 172 branches of Intesa Sanpaolo

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Richard (RJ) Eskow: Simpson/Bowles: A Predawn Raid on the Middle Class

November 11, 2010

Today the Presidential Deficit Commission’s co-chairs released a radically right-wing budget proposal. They acted without any prior announcement, just three weeks before the entire Commission was scheduled to deliver its collective report. Consider it as a sneak attack on the middle class, a pre-dawn raid on the American dream. Many things can and will be said about this draft proposal, but first and foremost it must be considered an admission of failure. Erskine Bowles and Alan Simpson were asked by the President to lead a commission that was to agree on a set of proposals most of its members could endorse. This proposal is their admission that they’ve failed, and it should be read with that failure of leadership in mind. It’s also important to remember that this is not an isolated act. The release of their proposal today was the culmination of a highly coordinated and extremely well-funded assault led by deficit hawks willing to harm our already-weak economy in order to cut government, and who would slash important programs like Social Security and Medicare to advance their agenda. And the timing of this proposal was no accident. Simpson and Bowles know they don’t have the 14 votes they need to issue a report. Releasing this proposal may be a desperate attempt to pressure some of their Commission own members. Or they may be trying to deliver some “shock and awe” by issuing a proposal so extreme that any subsequent package of cuts, no matter how unfair, will seem reasonable by comparison. Whatever their motives, the President who appointed this Commission is now in an ideal position to reject their conclusions. For one thing, endorsing them would violate his campaign promise not raise the retirement age or to cut Social Security benefits. (Check it our here .) Instead he should reiterate his argument that we need to reduce runaway health care costs, not cut or cap Medicare benefits, if we want to fix the deficit. As for Simpson and Bowles, this attempted end run around their own Commission shows they’ve failed to carry out the mission he gave them. It would have been more honorable if they had simply resigned. Since they haven’t, the President should look elsewhere for good ideas. Because of the covert way this was done, only their ideological allies were given a preview of the proposal. But an initial reading makes it clear that their agenda is a radical upward redistribution of national wealth and resources, with budget policy as the vehicle and “deficit reduction” as the rhetorical smokescreen. The bald guy says everybody should get a haircut It’s the perfect metaphor for this proposal: The cue-ball-headed Mr. Simpson is proposing an “across-the-board ‘haircut’” for public programs while saying absolutely nothing about Bush’s tax cuts, a budget-busting bonanza for the ultra wealthy that Republicans are pledging to defend at all costs. Their proposal calls for great sacrifices from the elderly, college students, and veterans. Surely, people will say, a plan that asks so much of those in need must also call for increased taxes on the wealthiest Americans. After all, their tax burden will be lower than it was for most of the 20th Century, even if the Bush cuts are allowed to expire. So they’ll share in the sacrifice too, right? Nope. When it comes to asking the super rich to pay their fair share, these deficit hawks suddenly go silent. If these Commissioners lack the political will to call for rolling back the Bush tax cuts, they should go back to Wyoming and North Carolina. The US economy and the global economic system are still struggling to recover from the worst recession since the 1930s. The nation urgently needs more jobs and increased economic growth. Instead the co-chairs have laid out a reckless set of proposals that would impose crippling austerity on the US government precisely when we need a strong increase in public investment. This plan is a recipe for pushing the economy into another recession. In the past, Bowles and Simpson have given lip service to the reality that any spending cuts must wait until we’ve achieved a strong economic recovery and sustained growth. But the document they released today would send the economy right off a cliff. They’re proposing major cuts to public spending that start in 2012, when most economists expect the economy will still be weak and fragile. Even if your only goal is a balanced budget, that’s a bad idea. A smart deficit hawk would first work to create jobs, increase income, and expand business activity, all of which reduce deficits in the long run. These are not smart deficit hawks. Co-Chairs Simpson and Bowles acknowledge that Social Security contributes nothing to the Federal deficit. That doesn’t prevent them from pushing cost-of-living changes that would harm current retirees, along with future increases in the retirement age that would reduce benefits even more for those who retire in the years to come. The Campaign for America’s Future just conducted election day polling which found that strong majorities of Americans – including Tea Party supporters – strongly oppose the cuts they’re proposing . Most voters of all political persuasions prefer eliminating the cap that limits the taxes wealthy individuals now pay for Social Security. The truly ‘bipartisan’ solution, embraced by Democrats and Republicans alike, is to lift the tax cap while protecting benefits. That’s the exact opposite of what Simpson and Bowles have proposed. At a time when most Americans are worried about their jobs and everyone has just taken a huge hit to their retirement savings, any politician who embraces these proposals is committing political suicide. And any leader who has the public’s best interests at heart will understand that these ideas must be rejected. Roger Hickey is Co-Director of the Campaign for America’s Future. He was a leader of the campaign to stop the privatization of Social Security, and he is a founder and member of the steering committee of Health Care for America Now. In the late 1980s he and Jeff Faux created the Economic Policy Institute. Richard (RJ) Eskow is a Senior Fellow with the Campaign For America’s Future. He is also a former executive with experience in health care, benefits, and risk management, and a policy consultant who has worked in the United States and in over 20 countries.

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Donald Trump Among Wealthy Donors To Karl Rove-Backed Group

October 21, 2010

More specifically, the reports to the Federal Election Commission, which covered from Sept. 1 to Oct. 15, included a $50,000 donation by none other than Donald J. Trump, the real estate developer, who previously had not had much of a reputation as a major financial backer of Republican politics.

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European Commission proposes new budget rules

September 29, 2010

European Commission proposes new budget rules

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In The Pipeline: CoStar Development and Construction News for Sept. 26-Oct. 2

September 28, 2010

In this week’s edition of Pipeline, the San Francisco Port Commission is seeking developers to revitalize Pier 70, a property that has been in near-continuous industrial service since the Gold Rush; apartment developer Wood Partners acquires land in…

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Dems Propose Bill That Would Gut FCC’s Ability To Protect Net Neutrality

September 27, 2010

The FCC will not have rulemaking authority under a network neutrality bill that key House Democrats plan to introduce soon, according to a recent draft obtained by Tech Daily Dose. Instead, the commission will deal with enforcement on a case-by-case basis. Broadband providers who violate the law will face a maximum penalty of $2 million by the FCC, under the bill. The absence of the rulemaking authority, along with other provisions of the bill, is consistent with information reported by Tech Daily Dose last week.

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David Isenberg: When Doing More With Less Is Not A Good Idea

September 21, 2010

The Commission on Wartime Contracting in Iraq and Afghanistan always does good work so its recent hearing, held Sep. 16, on ” The Contingency Acquisition Workforce: What is needed and how do we get there? ” merits reading, if only to better understand the state of governmental oversight of contractors. Let’s go straight to the prepared statements. From the opening statement of CWC Co-Chairman Christopher Shays: When you consider that the Department of Defense spent $384 billion on contracts in 2009 more than double the level of 2001 while its organic acquisition workforce actually declined, you are forced to suspect that opportunities for waste, fraud, and abuse have multiplied. Many acquisition outrages could be avoided or at least mitigated by a more effective federal acquisition workforce in general. Our focus at this hearing, however, is more specifically the contingency acquisition workforce. That bureaucratic-sounding phrase simply means that we are talking about the federal civilian and military folks who define requirements, procure goods and services, manage contracts, and provide oversight and accountability in support of contingency operations. … What may be the simplest aspect of the acquisition workforce sheer numbers is already receiving attention. The DoD Strategic Human Capital Plan Update published in April 2010 describes initiatives intended to add 20,000 Defense acquisition personnel by 2015. That would bring the department’s total acquisition workforce to 147,000. That is a laudable increase, but one that would still lag the growth in acquisition activity and only slightly exceed the personnel count of 1998. Since that DoD plan update was released, Secretary of Defense Gates has spoken forcefully to his department on the need to recognize looming pressures on DoD appropriations and to achieve $100 billion of savings over the next five years. To his credit, Secretary Gates said he will not look to the acquisition workforce for cutbacks. But adequate funding will undoubtedly remain a challenge. The defense acquisition workforce currently stands at about 133,000 people, about 11 percent military and 89 percent civilian. That sounds like a lot of people until you notice that DoD also deals with 1.4 million active-duty, 846,000 Guard and Reserve, and 752,000 civilian personnel in non- acquisition jobs. So the DoD acquisition workforce is only about 4 percent of all the people connected with the department. And nobody disagrees that we need more of them especially since more effective acquisition can produce some of the savings that Secretary Gates demands. … Here’s the bottom line. The U.S. military has often stated that “Money is a weapons system,” and has invoked that statement to emphasize the importance of good stewardship of taxpayer funds. Without a fully trained and operational acquisition workforce, however, our money will be a weapons system turned against us in the form of waste, fraud, and abuse that erodes morale, undermines missions, and betrays taxpayers. That is why the Commission considers this hearing so important. Statement of Jacques S. Gansler, Ph.D. University of Maryland. Gansler chaired the Commission on Army Acquisition and Program Management in Expeditionary Operations, released in October 2007, popularly known as the Gansler report, which was scathing in its critique of U.S. Army acquisition and management programs, including contracting problems plaguing Operation Iraqi Freedom and Operation Enduring Freedom. In 2007, our Commission recommended an increase in Army contracting personnel authorizations, both military and civilian. We recommended an increase of just under 2,000 people, which is a 38 percent increase, relative to the total people currently in the Army contracting career field, but only 70 percent of the 1990 levels, despite the increased workload that today’s professionals face. (In 1990, the Army had approximately 10,000 people in contracting. The Army lowered this level to 5,500 following the Congressional mandate to reduce the acquisition workforce, and has remained relatively constant since then. Yet, both the number of contract actions (workload) and the dollar value of procurements (an indicator of complexity) have dramatically increased in the past decade.) Three years later, in April 2010, the Army testified to the Wartime Commission that it has a five-year plan to grow Army contracting by 1,650 positions. Our Commission understands that growing the acquisition workforce cannot be accomplished overnight, but the pace at which the Army has approached this challenge makes acquisition appear to be of precarious value to the organization. While the Army is taking positive steps to grow its contracting personnel, it is not clear that there is sufficient momentum to make this timely. The Army is the DoD “Executive Agent” for contracting in Iraq and Afghanistan. For the first time since the creation of a theater contracting command, an Army General Officer, Brigadier General Camille Nichols, is leading the command, which was previously led by the other Services first by the Air Force with a 2-Star General, then by the Navy with a 1-Star Admiral. But even with BG Nichols in place, the Army is unable to fill military or civilian contracting billets, in either quantity or qualifications, in her Joint Manning Document. As of today, both the Air Force and Navy have been able to staff 100 percent of their respective contracting command staffing requirements, whereas the Army has only met 80 percent of its personnel commitment (after its commitment was reduced to reflect the Army’s inability to staff Army positions). This continues to create a strain on the other Services, particularly the Air Force. Further, in accordance with its Section 849 report to Congress, the Army is to assume responsibility for contingency contract administration services in 2012, to ensure the acknowledged need for contract administration in theater occurs. Due to resource shortfalls, the Army subsequently determined its resources would not be ready for this mission until 2015. This means that DCMA continues to bear an Army load, straining its own mission. I cannot help but view these resourcing struggles in direct relationship to the unfilled General Officer positions, particularly that on the Army staff. Army contracting is still under civilian leadership, which, while exemplary, is not at the table with military officers making mission decisions. As we stated in our report, if the Army is serious about its commitment to support the expeditionary mission, it must channel more Soldiers to the contracting field, and they must do so rapidly and at an earlier point in their military careers. A further concern about Army resource readiness is the immediate and ongoing need for contracting officer’s representatives (CORs) for contract oversight. While the Department has done much to train and pre-identify CORs, the challenge of rapid unit turnover and mission change to stability operations, with its concomitant troop withdrawal, makes CORs an ongoing area of concern. Although tactical units are now out of Iraq, contracts remain. And with those withdrawing troops went technical expertise to oversee contract performance. Among the solutions being explored, we trust that the Department is examining the role the reserve component might play in providing continuity and professionalism. The importance of contract administration cannot be overstated – and we need a cadre of professionals to give it the attention it deserves. Statement of Daniel I. Gordon Administrator, for Federal Procurement Policy Office of Management and Budget: From 2001 to 2008, contract spending more than doubled to over 500 billion dollars, while the size of the acquisition workforce – both civilian and defense – remained relatively flat. This inattention to the workforce resulted in increased use of high-risk contracting practices and insufficient focus on contract management, as well as the especially troubling phenomenon of agency dependence on contractors to support the acquisition function. … Reducing Risk — Between FY 2000 and FY 2008, spending on high-risk contracts increased significantly, at least in part as a result of having an insufficient workforce to develop clear requirements, conduct rigorous market research, and structure contracts to promote competition. During that timeframe: — Contracts awarded without competition increased from $73 billion to $173 billion, and procurements that were open to competition, but generated only one bid, also increased from $14 billion to $67 billion. Spending on cost-reimbursement contracts increased from $71 billion to $135 billion, while spending on time and material (T&M) and labor hour (LH) contracts increased from $8 billion to $29 billion. Statement of Mark D. Shackelford Military Deputy, Office of the Assistant Secretary of the Air Force for Acquisition The Air Force Contracting career field is stretched beyond its limits and our personnel, whether deployed or remaining at home station, are experiencing the strains over an extended period of time. The Air Force is filling the Department of Defense’s wartime contracting mission by providing more than 80 percent of the joint contingency contracting individual augmentees. As a result, our contracting personnel are currently at a 1:1 dwell, meaning they are deployed for six months and stationed at home for six months. This 1:1 dwell rate is the highest operational tempo in the Air Force, and the contracting contingency personnel have sustained this rate since 2008 after being formally re-postured. The Office of the Secretary of Defense, Defense Policy and Procurement (OSD (DPAP)) determined fair share allocations for contingency contracting officers to be 29 percent Air Force, 57 percent Army, 6 percent Navy, and 8 percent Marine Corps. If the Air Force continues at this current level of contingency support, we risk overstressing our military contracting workforce, and will experience retention problems that will negatively impact mission stability at home station and our ability to support U.S. Central Command (CENTCOM) missions. The bottom line is that the government has hired more auditors in the three years since the Gansler report came out. Yet it needs to hire more, a lot more. That would help explain, as the Washington Post reported yesterday, why the Army is planning over the next five years to move in house more than 4,000 acquisition jobs that are currently performed by contractors as part of a larger effort to bolster its buying workforce, service officials said last week.

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EU Proposes Tougher Rules On Derivatives And Short-Selling

September 15, 2010

BRUSSELS — The European Union’s executive on Wednesday proposed tougher curbs on financial market practices seen to have contributed to the global market crisis that drove the world’s largest economies into recession. EU Services Commissioner Michel Barnier said Wednesday he wants to rein in the market for derivatives – financial instruments based on the value of other assets – and insisted regulators should have powers to restrict, and even ban, short selling. Barnier said the measures on the derivatives market would kick in in 2012 and bring Europe in line with restrictions the U.S. Congress passed over the summer to get a better grip on banks and Wall Street. “We have to limit the risks of this hyper speculation by shedding light, by forcing people to be transparent. We have to know on all of these markets, with the Americans and the other regions, who is doing what,” Barnier said. “No player, no market, no territory, must remain outside this supervision,” he said. “No financial market can afford to remain a Wild West territory,” Barnier said, arguing that lack of controls on specialized financial products compounded the global financial crisis. He said such specialized markets had been working too long as an entity unto themselves, without control or scrutiny. He said his proposals would increase transparency and make the markets safer. The proposals still need to be adopted by the EU member states and parliament before they become law. In Berlin, German Chancellor Angela Merkel renewed a call for tougher financial market regulation and welcomed a move to oblige banks to hold more capital. Merkel told parliament that Germany still believes “every product, every actor, every financial market participant must be regulated so that we have an overview of what is happening on the financial markets.” She also insisted Germany expects the EU “regulate derivatives markets properly.” Barnier said trade in the $600 trillion derivatives market will change, with over-the-counter contracts – those not traded through an exchange – reported to central databases where authorities will have access to find any potential trouble or excessively risky behavior. When it comes to short selling and credit default swaps, the proposal wants to increase transparency by forcing investors to report short positions in shares to regulators if they are above 0.2 percent in issued share capital and to the market if they are above 0.5 percent. The proposals won a mixed review from European legislators, who will have to rule on them. “These proposals should be welcomed as they will provide greater transparency which will help make the financial markets safer and more stable,” Kay Swinburne, a British legislator of the European Conservatives and Reformists group said. For the European Greens, the proposals did not go nearly far enough. “Given the central roles played by derivatives and short selling in the financial crisis, the Commission should have proposed far-reaching legislative measures that would fully address their flaws. Unfortunately, today’s proposals are not ambitious enough,” said France’s Green legislator Pascal Canfin.

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Merton and Joan Bernstein: Our Response to Alan Simpson

September 2, 2010

Former Senator Simpson, co-chair of President Obama’s Fiscal Responsibility Commission, calls our Huffington Post blog opposing Social Security benefit cuts and raising retirement age “a remarkable spew of drivel” and “an “extraordinary screed.” His letter with that attack (below) invited our comments. Here they are. All that we hear from commission members is the supposed need to trim Social Security benefits and to raise retirement age, which also cuts benefits. That is strange because Social Security does not contribute to deficit growth. Cuts are not necessary because the Social Security trust fund, now at $2.6 trillion and projected to grow to over $4 trillion, makes the funding outlook quite solid for another quarter century. Then, if necessary, a very modest FICA rate increase, about 1% for employees and a matching amount by employers, would banish the small Social Security long-term shortfall. Meanwhile, improved earnings — which are projected — would make such a change completely affordable. Why don’t we hear about that from commission members? The secrecy of Commission meetings denies the public and experts any opportunity to address areas of concern. Here we do not know what the Commission asked Steve Goss which might explain why he emphasized the aged dependency ratio in the material you sent us. While demographic dynamics are important to Social Security funding, so are other factors, like the level of employment. And, as our post shows, improved productivity has offset some dramatic shrinkage in the working population. For example, in 1900, almost 40% of the work force farmed; today, fewer than 2% do. By the alarmist logic of the aged dependency ratio, the United States would be starving. Of course, we are not because the technology of food production has changed so spectacularly. This argues for greater attention to encouraging technological innovation and education and training to use it. And, of course, few advances match the enhancement of productivity achieved by computerization. As late as the 1990s, that effect was pooh-poohed by many. Further, Social Security benefits are quickly transformed into purchases of goods and services. Reducing them would reduce business income by hundreds of billions of dollars. Social Security is performing just as it was designed to: expand benefit payout when the economy weakens and building on the biblical principle of laying up reserves during years of plenty to meet needs in leaner years. Our article presented analyses shared by nationally respected economists. More importantly, a majority of the American people support our conclusions. Here is the letter we received: Simpson Letter

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Barbara Roper: Fiduciary Duty: What Investors Need to Know

August 30, 2010

At the end of the day Monday, the comment period officially closes on the Securities and Exchange Commission’s (SEC) study of the standard that should apply to brokers when they give investment advice and recommend securities. Yet as of last Monday, with only one week remaining on the comment period, only 32 individual investors had submitted comments out of 1535 filed. This is arguably the single most important investor protection issue for retail investors, but unless they make their voices heard, this issue is likely to be decided without their input. Most investors choose to rely on a professional – a broker, a financial planner, or an investment adviser – to help them make investment decisions. These investors rely heavily, if not exclusively, on the recommendations they receive from these professionals. Surveys show, for example, that the typical mutual fund investor does little if any additional research on the funds that are recommended; instead, they do exactly what their broker or financial planner or investment adviser suggests, without second-guessing that recommendation. This makes investors extremely vulnerable, particularly given the conflicts of interest that pervade the securities industry and investors’ difficulty in distinguishing between sales- and advice-based services. What many investors don’t realize is that even though the services investment advisers and broker-dealers provide are often virtually indistinguishable, they are regulated under different statutory and regulatory frameworks. Investment advisers are subject to a fiduciary duty to act in the best interests of their clients and to provide disclosures to clients regarding conflicts of interest. Brokers do not have this fiduciary duty. Instead, they are required to make recommendations that are generally “suitable” for the investor. Under this lower standard, brokers are free to recommend a particular product that provides the broker with higher compensation, even if a different product would be better for the customer. And they don’t even have to disclose this conflict of interest to the customer. To add to the confusion, brokers have encouraged investors to rely on them as advisers, by giving their salespeople titles like “financial advisers,” offering extensive advisory services, such as investment planning, and marketing their services based on the advice offered. The recently passed financial reform bill allows the SEC to end this confusion and require all professionals who provide investment advice, whether they are brokers, financial advisers, or investment advisers, to meet the same standard of investor protection. But before the SEC can adopt these new rules, the law requires the agency to conduct this study. Those not currently subject to a fiduciary duty have made a concerted effort to submit their comments. Unfortunately, most investors appear to know nothing about this proposed change. On several of the issues addressed by the study investors should be able to add valuable insights. They can explain how confusing they find the different titles used by brokers and investment advisers, such as financial advisor, financial planner, and investment adviser. They can offer their views on whether services that sound similar, if not identical, to the average investor – services like investment planning, retirement planning, financial planning, and advice about investments – should be subject to the same standards. They can tell the Commission what they believe the appropriate standard for such advice should be. In short, do they want all those who provide investment advice to have to act in the best interests of their customers? We believe the answer is obvious. The dramatic changes that brokers have made in their business model have rendered the old regulatory distinctions obsolete. Brokers have worked hard to convince investors to rely on them as trusted advisers. It is high time they were regulated accordingly. The SEC has a golden opportunity to end investor confusion by requiring that all who offer investment advice to act solely in the best interests of their clients, without regard to their own interests, to take steps to avoid and minimize potential conflicts, and to disclose any conflicts of interest. It can’t happen soon enough.

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Dean Baker: Senator Simpson: He’s Not Just Offensive, He’s Ignorant

August 25, 2010

Former Wyoming Senator Alan Simpson, the co-chairman of President Obama’s deficit commission, has sparked calls for his resignation after sending an offensive and sexist note to Ashley Carson, the executive director of the Older Women’s League. While such calls are reasonable — Simpson’s comments were certainly more offensive than remarks that led to the resignation of other people from the Obama administration — the Senator’s determined ignorance about the basic facts on Social Security is an even more important reason for him to leave his position. I was also a recipient of one of Simpson’s tirades. As was the case with the note he sent to Carson, Simpson attached a presentation prepared for the commission by Social Security’s chief actuary. Simpson implied that this presentation had some especially eye-opening information that would lead Carson and myself to give up our wrong-headed views on Social Security. While I opened the presentation with great expectations, I quickly discovered there was nothing in the presentation that would not already be known to anyone familiar with the annual Social Security trustees’ report. The presentation showed a program that is currently in solid financial shape, but somewhere in the next three decades will face a shortfall due to an upward redistribution of wage income, increasing life expectancy, and slow growth in the size of the workforce. The projected shortfall is not larger than what the program has faced at prior points in its history, most notably in 1982 when the Greenspan Commission was established to restore the program’s solvency. It was disturbing to see that Simpson seemed surprised by what should have been old hat to anyone familiar with the policy debate on Social Security. After all, he had been a leading participant in these debates in his years in the Senate. Simpson’s public remarks also seem to show very little knowledge of the financial situation of the elderly or near elderly. He has repeatedly made references to retirees driving up to their gated communities in their Lexuses. While this description may apply to Simpson’s friends, it applies to very few other retirees, the vast majority of whom rely on Social Security for the bulk of their income. Cutting the benefits of the small group of genuinely affluent elderly would make almost no difference in the finances of the program. Furthermore, the baby-boom generation that is nearing retirement has seen most of its savings destroyed by the collapse of the housing bubble that both wiped out their housing equity and took a big chunk of the limited money they were able to put aside in their 401(k)s. Simpson shows no understanding of this fact as he prepares to cut benefits for near retirees. He also doesn’t seem to have a clue as to the type of work that most older people are doing. While it is possible for senators to continue in their jobs late in life, nearly half of older workers have jobs that are either physically demanding or require they work in difficult conditions . Simpson seems totally clueless on this point when he considers proposals to raise the retirement age. The key facts on Social Security are not hard to understand. The shortfall is relatively minor and distant. Most retirees have little income other than their Social Security, and most workers would find it quite difficult to stay at their jobs in their late 60s or even 70. We might have hoped that Senator Simpson understood these facts at the time when he was appointed to the commission, but we should at least expect that he would learn them on the job. His determined ignorance in the face of the facts is the most important reason why he is not qualified to serve on President Obama’s commission. Someone who is co-chairman of such an important group should be able to critically evaluate information, not just insult and demean his critics.

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Two Top Investigators Leave Financial Crisis Commission

August 23, 2010

Two senior staffers have quietly left the Financial Crisis Inquiry Commission, a panel working under a tight deadline that has been dogged by rumors of discord among key personnel. Matthew Cooper, a former journalist who joined the FCIC as a senior adviser, left the unit Aug. 13. Bradley J. Bondi, counsel to the Securities and Exchange Commission who joined the financial crisis investigation as an assistant director and deputy general counsel, left Aug. 6. Neither immediately returned emails or phone calls seeking comment. Formed in July of last year, the FCIC is charged with examining the root causes of the current financial and economic crisis — specifically, 22 areas designated by Congress, all of which are highly complex. Its final report is due Dec. 15. The departures of Cooper and Bondi, following two others from earlier in the year, leave 10 of the original 14 chief staffers to complete that report. Martin Biegelman, a fraud and white-collar crime investigator who served the commission as an assistant director, was the first top staffer to exit. He was followed by Beneva Schulte, formerly an assistant director involved in communications. Three other full-time staffers as of June 30 have also since returned to their pre-commission employers, FCIC records show. Sources familiar with the FCIC investigation said Cooper’s and Bondi’s departures were the result of disagreements with Chairman Phil Angelides, a Democrat and former California state treasurer. Angelides and Vice Chairman Bill Thomas, the Republican former chair of the House Ways and Means Committee, have been particularly involved in the commission’s operations. Officially, however, the commission denies that personal friction with Angelides led to the staff shakeup. “I don’t think the two are related,” spokesman Tucker Warren said. “Brad was always going to go back to the SEC, and it was time for him to do that. … Matt has some opportunities before him that could not wait until the commission’s work was finished, and he is pursuing those opportunities. “Neither left as a dispute with the Chairman,” Warren added. Bondi had served as counsel to SEC commissioner Troy A. Paredes, a 2008 George W. Bush appointee. He worked with the crisis commission as an SEC employee, Warren said. Bondi helped lead the commission’s hearing investigating Citigroup’s pre-meltdown activities. The global banking giant recently agreed to pay $75 million to settle federal charges that it misled investors regarding its massive holdings of subprime mortgage-linked investments that ultimately cost the firm tens of billions of dollars. Taxpayers saved the firm from collapse with a mixture of guarantees and direct aid totaling more than $300 billion, federal records show. Bondi also was heavily involved in the investigation into credit-rating agencies. One of the commission’s top investigators with significant securities-related experience, Bondi has authored at least six published academic articles on securities law. While in private practice, he worked for Kirkland & Ellis LLP and Williams & Connolly LLP, two of Washington’s most prominent litigation firms. Cooper’s departure comes at an even more surprising time. A former White House correspondent for Time magazine who has covered Washington for a variety of publications, he was hired primarily to lead the writing of the final report, weaving the disparate elements of the global financial crisis into a compelling and understandable narrative. In Cooper’s absence, at least six former journalists on a staff of nearly 60 will help write the final report, Warren said, including former Bloomberg News reporter Greg Feldberg. Warren noted that the 10 commissioners are the ultimate authors of the final report. Little, Brown is slated to publish the commission’s findings, and taxpayers may profit from book sales. Still, the timing of these departures lends credence to sources familiar with the commission’s investigation who say Cooper and Bondi clashed with Angelides, already well-known for his hard-charging style. Cooper and Bondi — as well as other current and former staffers — are bound by confidentiality and nondisclosure agreements limiting what they can say about the financial crisis commission and their time there. Except for the 10 commissioners and designated spokespersons, staffers are barred from discussing the FCIC or its work until Feb. 11, 2011, and that deadline can be extended. Reports of turmoil within the commission aren’t new. In April, the commission’s executive director, Thomas Greene — a former top lawyer under California’s attorney general — was replaced by Wendy Edelberg, an economist at the Federal Reserve who had been serving as the FCIC’s research director. Another former top staffer, Kim Leslie Shafer, who once worked as a senior managing director at defunct investment firm Bear Stearns and as a top aide for the Senate Banking Committee, recently switched from full-time to part-time. “When you have an organization like this that’s really demanding a lot from people, and one that’s going to come to an end in December, people are going to be presented with opportunities,” Warren, the FCIC spokesman, said of the staff turnover. “A lot of people here have made tremendous sacrifices to work for the commission. And that asks a lot of people.” The commission resumes its public work next Wednesday, when it is scheduled to hold its final investigative hearing. It will examine Too Big To Fail, systemic risk and government intervention during the crisis. Witnesses have yet to be announced. ************************* Shahien Nasiripour is the business reporter for the Huffington Post. You can send him an e-mail ; bookmark his page ; subscribe to his RSS feed ; follow him on Twitter ; friend him on Facebook ; become a fan ; and/or get e-mail alerts when he reports the latest news. He can be reached at 646-274-2455.

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Video: Lahey Says Australian Businesses Want to See Tax Reform: Video

August 22, 2010

Aug. 23 (Bloomberg) — Katie Lahey, chief executive of the Business Council of Australia, an association of CEOs of Australia’s top 100 companies, talks about the country’s federal election. Tony Abbott’s Liberal-National coalition led Prime Minister Julia Gillard’s Labor Party 72 seats to 70, four short of an absolute majority, according to figures on the Australian Electoral Commission website as of 8:45 a.m. today. Two independent lawmakers who may hold the balance of power say they disapprove of Gillard’s mining tax, which she has refused to scrap. Lahey speaks from Sydney with Bloomberg’s Susan Li. (Source: Bloomberg)

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Video: Atlas Iron’s Flanagan Says Mining Tax `Discriminatory’: Video

August 22, 2010

Aug. 23 (Bloomberg) — Atlas Iron Ltd. Chief Executive Officer David Flanagan talks about this past weekend’s Australian election and its implications for a proposed tax on mining companies. Tony Abbott’s Liberal-National coalition led Prime Minister Julia Gillard’s Labor Party 72 seats to 70, four short of an absolute majority, according to figures on the Australian Electoral Commission website as of 8:45 a.m. today. Two independent lawmakers who may hold the balance of power say they disapprove of Gillard’s mining tax, which she has refused to scrap. Flanagan speaks from Perth with Bloomberg’s Susan Li. (Source: Bloomberg)

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Block Island Wind Farm Proposal Approved By Rhode Island Energy Commission

August 11, 2010

WARWICK, R.I. — The Rhode Island Public Utilities Commission on Wednesday approved a power purchase agreement for a proposed wind farm off the coast of Block Island, ruling over the objection of critics who slammed the arrangement as a sweetheart deal meant to benefit one developer. Attorney General Patrick Lynch vowed to appeal the decision to the state Supreme Court, saying in a statement that the deal makes ratepayers buy “grossly overpriced electricity.” The agreement between Deepwater Wind, LLC, a New Jersey-based developer, and National Grid, the state’s dominant utility, involves a proposed eight-turbine pilot project connected by a transmission cable to the mainland. The three-member commission, a quasi-judicial body, approved the agreement after weighing economic and environmental benefits and whether the terms were reasonable for ratepayers. The 20-year agreement calls for National Grid to buy the energy generated from the wind farm at 24.4 cents per kilowatt hour. Deepwater Wind CEO Bill Moore said in a statement that the company was pleased with the decision, which he said solidifies “Rhode Island’s leadership position in offshore wind development.” The commission unanimously agreed that wind energy could reap an environmental benefit but split 2-1 on other issues. Commissioner Mary Bray repeatedly voiced skepticism, saying the agreement would prove a long-term detriment to the economy by hurting ratepayers and small businesses that are already struggling. “Would any reasonable person invest a substantial amount of money into something they know will at best cost three times what they will possibly get out of it?” Bray asked. “That is what we have here.” The commission in March rejected a similar agreement as too costly for ratepayers. The decision led the General Assembly to come up with new legislation, passed at the end of the legislative session and signed into law by Gov. Don Carcieri, aimed at speeding the regulatory approval process. The law requires the commission to issue a written decision approving the agreement within 45 days of it being filed, provided that the deal was commercially reasonable for ratepayers, contained economic and environmental benefits and included provisions allowing for a decrease in pricing. Critics say the bill essentially mandated the approval of the agreement without giving the utility commission enough time to review it. “I think the commission did exactly what the Legislature dictated it to do,” said Tricia Jedele, a vice president of the Conservation Law Foundation and director of its Rhode Island Advocacy Center. Lynch said the project was unfair and anti-competitive. “The dreadful impact that this will have on the state is not something that I will take lying down,” he said in an interview after the vote. The federal government in April approved plans for the nation’s first offshore wind farm – a 130 turbine project in Nantucket Sound. National Grid has agreed to pay 18.7 cents per kilowatt hour, starting in 2013, for half the power produced by the project. That deal, which has the backing of Attorney General Martha Coakley, still needs to be approved by Massachusetts regulators.

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Video: Bloomberg’s Shields Discusses Net-Neutrality Battle: Video

August 3, 2010

Aug. 3 (Bloomberg) — Bloomberg’s Todd Shields discusses efforts by the Federal Communications Commission and technology company executives to resolve a dispute over U.S. Internet regulation. Executives from Google Inc., AT&T Inc. and Verizon Communications Inc. met with FCC officials over the weekend in an attempt to reach a compromise on net-neutrality rules. Shields talks with Scarlet Fu on Bloomberg Television’s “In the Loop.” (Source: Bloomberg)

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New Rule Cracks Down On Debt Settlement Industry

July 29, 2010

NEW YORK — Companies that promise to reduce or eliminate credit card balances and other debt for customers will no longer be allowed to charge an upfront fee. The Federal Trade Commission said Thursday that the new restrictions are a crack down on the debt settlement industry, which flourished during the economic downturn as borrowers struggled to pay bills. Debt settlement companies will now only be able to charge a fee once a customer’s debt has been reduced, settled or renegotiated. The rule goes into effect Oct. 27. Since the start of the recession, the Better Business Bureau has received more than 3,500 complaints about debt settlement companies. Customers complained that they ended up deeper in debt or were sued by creditors after failing to make payments. The bureau did not separately track complaints against the industry prior to the recession. Debt settlement companies often charge an upfront fee, typically a percentage of the customer’s outstanding balance. In exchange, the company promises to negotiate with creditors to reduce or eliminate the debt, sometimes by as much as half. The new FTC regulations also require debt settlement companies to disclose to customers how long it will take to get results, how much it will cost, and any negative consequences that could arise from the process. For example, customers can go deeper into debt when they hire a debt settlement company. This is because customers stop making payments on their loans, and late fees and interest charges continue piling up. Customers are also often required to start setting aside money in a separate account maintained by the debt settlement company. This money is intended to eventually pay off any remaining debt. Under the new rule, however, companies will only be able to require such an account if it’s maintained at an independent financial institution under a customer’s name. The customer must also be able to withdraw the money at any time without penalty. The amendments to the FTC’s telemarketing sales rule apply to any debt relief companies that sell services over the phone. They do no apply if the initial contact is in-person, or if the services are rendered entirely online. The new rule will cover the vast majority of the debt settlement industry, however, because most companies use TV and radio ads to advertise toll-free phone numbers for customers to call, said Allison Brown, an attorney with the FTC. Debt settlement companies that step outside the rules will be subject to a $16,000 fine per violation. The Federal Trade Commission’s rules only apply to for-profit companies. The agency warned that it will go after companies that pose as nonprofits. The Better Business Bureau cautions customers to be wary of any organization that charges steep upfront fees and makes promises that sound too good to be true. The group also suggests that struggling borrowers first try contacting lenders directly to negotiate debt. Alternatively, borrowers can seek help from nonprofit credit counseling centers, which typically charge small nominal fees for help managing debt. Nonprofit credit counselors can be located on the National Foundation for Credit Counseling’s website at . http://www.nfcc.org

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Joe Minarik: The Trust Fund and the Baby Boom

July 23, 2010

Recently, I suggested a legislative deal in which repair of Social Security’s finances would motivate Congress to enact economic stimulus. Surprisingly to me, given the fragile state of the economy, there was little reaction to the need for stimulus — and part of what reaction there was, was skeptical. Most of the reaction was negative toward repairing Social Security. The number of arguments raised would fill a book, and many will be worth discussing later. But one kept recurring: The Social Security trust fund was built up by the 1983 law to finance the retirement of the baby-boom generation. That trust fund can be redeemed to pay benefits through 2037. There is a lot of misunderstanding of both Social Security’s history and economics here. Let’s review both. Was the Social Security trust fund beefed up to pay for the retirement of the baby boom? Well, no. Here are the words of Robert J. Myers, who was the Executive Director of the National Commission on Social Security Reform (the “Greenspan Commission”): This false premise is that in 1983, the financing provisions were developed to build up a mammoth fund to take care of the baby boomers. This is not so at all. Rather, the major effort in 1983 was to solve the short-run problem by using pessimistic assumptions for the financing provisions. Then to solve the long-range problem, on the average — and I emphasize on the average — you might ask why didn’t Congress and the National Commission do a more thorough job in 1983? Well, the situation was that the ship was about to hit the iceberg. At that time, you worried about dodging the iceberg not how to redecorate the dining salon, namely, long-range funding procedure. I would challenge anybody to find anything in the Report of the National Commission on Social Security Reform that said the intention of developing the financing of the program was to build up a mammoth fund to take care of the baby boomers. Nor will you find any of this in any of the Congressional discussions, the debates, the Committee reports. All the fabric has been made up subsequently. [Language inaccuracies are in the official transcript ). In terms of the ship-and-iceberg metaphor, the Social Security Amendments of 1983 were enacted on April 20, and the previous year’s estimate was that Social Security could not write benefit checks in July. So given the uncertainties and delays inherent in the legislative process, it is no surprise that the Commission and the Congress were rushed. So the Greenspan Commission did not intend to build up a large trust fund that could be used to finance the retirement of the baby boom, nor did it design its proposals to do that. Still, could they work to achieve that result? Well, again, the answer is no — unfortunately. As noted perhaps too briefly in my original post, the problem with the federal budget is that we need to borrow far too much money for the health and safety of our economy. Anything that increases the amount of money that we need to borrow makes that problem worse. This year, and again in 2016 and thereafter, Social Security will need to redeem its Treasury securities to pay benefits. The Treasury has no cash because of the massive budget deficit, and so to raise the cash for Social Security, it must borrow. This means more total borrowing, which threatens the economy. (This problem obviously would not apply if we had a surplus, or only a small deficit.) Does Social Security have the legal right to that cash? Absolutely. But will it have adverse consequences for the economy? Sadly, that too. That is why, once they had the chance to digest the unexpected trust-fund implications of the 1983 law, economists quickly concluded that the trust fund accumulation could not be drawn down in large amounts to maintain the program after its revenues started falling short of the program’s benefits – which they are doing right now. For part of the time when I was working in the executive branch, the head of my office was a very bright non-economist who was charged for a time to work on Social Security. Like most normal people (that is, non-economists), he believed that Social Security could draw down its trust fund in any large amount. When I told him why economists had concluded to the contrary, he at first did not believe me. The next day, he came to me and told me that having thought more about it, I was clearly right. Not long thereafter, he had a private meeting with one of the lead members of the Greenspan Commission. I suggested to my boss that he ask the commissioner what he thought about this question now, and what the Commission had thought at the time. This member of the Greenspan Commission also had subsequently concluded that Social Security could not make an unlimited draw on the trust fund. As to what the Commission thought at the time? “You know, we never thought about it.” (So it turns out that Robert J. Myers was right about that.) There were many more questions and arguments. Can we exempt current and near-term retirees from any change and still make Social Security’s financing sound? (Yes.) Can we protect low-wage workers? (Yes.) Can we raise the ceiling on the payroll tax to finance Social Security? (Yes, but it won’t be enough.) Should we cut defense to reduce the deficit? (We will have to cut everything .) More on all of those questions later. But can we, or should we, run the Social Security trust fund into the ground? Unfortunately, no.

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David D. Caron: The Claims of Two Gulfs

July 14, 2010

Kenneth Feinberg, the “claims czar” for the BP catastrophe in the Gulf, reportedly looks to how to adapt his experience with the claims process he devised following the 9/11 attacks.  Another mass claims process provides a more apt analogy, however:  the very successful mass claims process following the 1991 Persian Gulf War oil well blowouts, fires and oil spills unleashed by then-president Saddam Hussein.  In the wake of that disaster, then the largest oil spill in history, a claims commission processed claims from individuals and corporations and also public authorities regarding the environment and health.  19 years later, the experience offers at least four lessons as we confront our current disaster: A claims process may distort, or even hinder, recovery.   It is a mistake to divorce the possibility of later compensation from decisions made to initiate clean-up, assessments and restoration today.  In the Persian Gulf, local governments’ efforts to address environmental damage slowed as they awaited funds.  Eventually, authorities situated along the Gulf of Mexico coast will be compensated, at least in part, but providing interim payments now will ensure that their work continues.  Vague guidelines as to which efforts will be remunerated, and when, may lead to hesitation at the starting gate.  The ongoing harm to the environment must be addressed.   It’s no secret that environmental damage is accumulating.  Recently, President Obama declared the Gulf spill the worst environmental disaster America had ever faced.  A proactive claims process will aid the response in the Gulf and limit damage.   Local, state and federal government officials have a responsibility to ascertain, within reason, the extent of harm.   Compensation follows environmental damage.  But suppose a public authority spends funds to ascertain the extent of the damage.  And having spent a significant amount of public funds does not find damage in a particular area.  What then?  An important lesson from the Gulf War claims process is that the presence of a large oil spill creates risks of future harm which a government has the responsibility to take reasonable steps to assess as quickly and efficiently as possible. And the costs of those efforts should be compensated. A claims body can streamline the recovery effort.  Courts typically focus on individual claims.  Mass claims processes do, too, but also cast an eye on the larger situation.  The Feinberg claims commission will receive a tremendous amount of information on the damage wreaked by oil on coasts, wildlife and businesses.  It will also influence decision-makers at all levels tasked with compensating victims.  The commission thus occupies a key berth from which it can encourage assessments that answer questions shared by many claimants.  In light of the giant data collection effort that will occur, the commission can coordinate data about the region which will further our long-term understanding of what occurred, how the environment of the Gulf was damaged, and how it can, we hope, be restored.    As Kenneth Feinberg knows from his experience with the 9/11 Compensation Fund, a key element of a mass claims process is that the lawyers must think not only like lawyers with one client.  They must focus simultaneously on the individual claimant and on the region as a whole, for the recovery of the region is an important part of the true recovery of each individual. David D. Caron is President of the American Society of International Law and served as a Member of the Precedent Panel of the U.N. Compensation Commission for the 1991 Gulf War. 

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FTC Urges States To Rein In Frivolous Debt-Collection Lawsuits Overwhelming Courts

July 12, 2010

Throughout the financial crisis and deepening recession, debt collectors have been harassing Americans, often under false pretenses, in order to scare up a quick buck. Frivolous debt-collection lawsuits have now become so pernicious and prevalent that they’re drowning the court system , leading the Federal Trade Commission to call Monday for new state legislation that would staunch the rising tide of baseless debt claims. Given the current balance of power in debt-collection cases, it’s easy to scare people. As The New York Times outlines , some firms with a skeleton crew of lawyers now routinely file tens of thousands of debt-collection lawsuits a year via a largely automated process. These suits are generally filed merely on the basis of Social Security number, address and date of birth, but this can be enough to freeze the defendants’ bank accounts — default judgment are common given that defendants’ address information is often outdated or erroneous, and so the complaint doesn’t reach them until after their court date — and they can then be more easily pressured into paying something, anything, to make the problem go away. Lawsuits are sometimes filed against the wrong people, critics say. Other times, they say, the amount owed is incorrect or includes questionable fees and interest that has been added to the balance. In addition, it is not always clear if the debt buyer filing suit legally owns the debt, since debt portfolios are often sold several times. Often, they don’t own the debt — they or someone along the line has just made it up, as McClatchy outlined in a report last week. This is to some extent a consequence of the outsourcing of credit card debt, now routinely sold for pennies on the dollar to third-party debt-collection companies who specialize in hounding people, rightly or not , for whatever they can pay. More and more often, they seem to resort to forms of bullying that prompt their targets to speak out, and the FTC took notice. The FTC recorded 67,550 complaints of harassment by debt collectors in 2009, a whopping 50-percent spike over the prior year, and they’re on track to jump another 13 percent in 2010, according to CNN Money . In its report Monday, the FTC deems the current system of debt-collection litigation and arbitration “broken.” In fact, the commissioners named the report itself “Repairing A Broken System.” Based on nationwide “discussions” resembling town hall meetings and the Commission’s own experience, the FTC report calls on states to require more detailed claims from debt collectors, limit the freezing of alleged debtors’ bank accounts, and encourage more defendants to show up and defend themselves, among other reforms largely focused on procedural transparency. The FTC has said previously that complaints regarding “third-party and creditor debt collection” ranked second only to identity theft last year.

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Video: Holtz-Eakin Discusses AIG’s Internal Risk Management: Video

June 30, 2010

June 30 (Bloomberg) — Douglas Holtz-Eakin, a member of the Financial Crisis Inquiry Commission, talks with Bloomberg’s Megan Hughes about former American International Group Inc. executive Joseph Cassano’s testimony before the commission. AIG, once the world’s largest insurer, received a 2008 bailout designed to protect banks that bought $62.1 billion in swaps from the firm. The FCIC is reviewing decisions that led to the New York-based insurer’s rescue. (Source: Bloomberg)

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Homeowners Score Points With Countrywide Fine, Wells Fargo Case

June 12, 2010

While the wheels of justice have turned very slowly in the years since our nation’s financiers and regulators nearly cratered our economy, the Federal Trade Commission’s settlement last Monday with Countrywide Home Loans suggests that they haven’t entirely ground to a halt.

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Video: Holtz-Eakin Says Goldman Slow to Cooperate in FCIC Probe: Video

June 11, 2010

June 11 (Bloomberg) — Douglas Holtz-Eakin, a member of the Financial Crisis Inquiry Commission, talks about the Goldman Sachs Group Inc.’s response to the FCIC’s request for records, outlook for the commission’s final report and prospects for financial-rules legislation. Holtz-Eakin talks with Peter Cook on Bloomberg Television’s “In the Loop With Betty Liu.” (Source: Bloomberg)

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