consumer

Gary Shapiro: Revenge of the Geeks: The Day Washington Reversed Course

by Gary Shapiro on January 19, 2012

Huffington Post…

We’ve all heard of the geeks — Jobs, Bezos, Chambers, Ellison, Gates, Jacobs, Zuckerberg. But political Washington has never much concerned itself with the geek community. Yesterday, that changed. Yesterday, American geeks roared at establishment Washington, and Washington listened and acted. In 2010, it was healthcare; 2011 was all about spending and the deficit. On both issues, the establishment won. But 2012 has started off on a different footing: the American people told Congress in one clear voice to keep its hands off their Internet. With sites like Google and Wikipedia leading the charge, Americans overwhelmed congressional phone lines demanding that their senator or congressman oppose the House’s Stop Online Piracy Act ( SOPA ) and the Senate’s PROTECT IP Act ( PIPA ). These twin bills were well-intentioned efforts to stop overseas rogue websites from pirating copyright content, like music and movies. But they were also the creatures of the content lobby and were designed as one-sided nuclear missiles to destroy any website that hosted illegal content or linked to an illegal site. In a stunning shift, this week more than 40 members of Congress withdrew their support for or announced their opposition to SOPA and PIPA. How did this happen, especially when the Senate bill sailed through the Judiciary Committee last spring in a unanimous vote? Last week, the focus was the International CES, where over 150,000 tech leaders visited over 3,100 innovators introducing some 20,000 new products, many of them connected to the Internet. The CES was an exhilarating display of innovation and convinced all who attended that these technologies are the future and the engine for our economy. From the keynote stage I called on an “army of geeks” to oppose this anti-innovation legislation. Rep. Darrell Issa (R-CA) and Sen. Ron Wyden (D-OR) contributed to the cause by hosting a joint press conference at CES to voice their opposition to the bills and offer an alternative (the OPEN Act ), which would still shut down foreign rogue web sites – but through an existing government agency, the International Trade Commission. By the weekend, House Majority Leader Eric Cantor said he would not bring the PIPA legislation to the House floor while the White House said it would not support the PIPA or SOPA legislation as drafted. Then, on Monday and Tuesday, members began breaking ranks and announced their opposition to PIPA and SOPA. Finally, yesterday our website along with thousands all over the U.S. went black and urged users to contact their members of Congress. They did. Politico reported that on Wikipedia more than 5.4 million people began the process of contacting their politicians, and Google said it received four million signatures on its petition. Anyone on Capitol Hill Wednesday in any Congressional office heard phones ringing off the hook. By the end of the day, Politico also reported that at least six of the original 40 Senate co-sponsors had removed their names from the SOPA bill and another 22 had agreed to changes. This for a bill that passed unanimously out of Committee! On the House side, scores of members tweeted, posted their opposition on Facebook or told calling constituents they would not support the SOPA bill. In over 30 years of fighting in the Washington trenches, I have never witnessed such a mass exodus of support for legislation happen so quickly. I have spent an entire career fighting on behalf of innovation and often against the copyright owners, and too often the copyright owners won based on lobbying power rather than what was best for the nation. But not this time. Despite overwhelming their opposition in lobbying dollars, the copyright industry lost the American public. What made the fight against SOPA and PIPA the issue that finally awoke the fire of the American people on both sides of the aisle? Three good reasons. First, Americans are fed up with Congress. The RealClearPolitics average shows more than 80 percent of Americans have an unfavorable opinion of Congress. Second, Americans are tired of moneyed interests controlling Congress. The American public saw a well-heeled industry attempt to force its selfish will no matter the consequences, and they revolted. If you have any doubt about that Hollywood thinks it can buy support read how it responded to the White House weekend announcement; headline says it all: ” Hollywood Moguls Stopping Obama Donations Because Of President’s Piracy Stand: ‘Not Give A Dime Anymore .’” Third, Americans feel that no one can control the Internet, least of all an entrenched business lobby, and they certainly don’t want Congress messing with it. Thus, members of Congress are abandoning the sinking ship of this legislation. But it’s not over. Senate Majority Leader Harry Reid has promised a Senate vote on SOPA next week. The content community will agree to an amendment on the technical Internet shutdown provisions and declare the bill fixed. But that is only one objection to the bills. They will still allow anyone to sue a fledgling website; it will still allow a private right of action against entrepreneurs; and it will still make it illegal to hyperlink to a website copyright owners don’t like. Yesterday the geeks won and took their revenge on an industry that has long had Congress take its money and do its bidding to expand copyright laws, terms and penalties. Although the copyright owners haven’t surrendered yet, they know that the will of people is against them — and now the will of Congress has followed. But it wasn’t just the geeks; all of America, left, right, red and blue, rose up and said, “Hands off our Internet!” This is a national victory. Gary Shapiro is president and CEO of the Consumer Electronics Association (CEA), the U.S. trade association representing more than 2,000 consumer electronics companies, and author of the New York Times bestselling book, ” The Comeback: How Innovation Will Restore the American Dream .”

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Gary Shapiro: Revenge of the Geeks: The Day Washington Reversed Course

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Major Phone Maker’s Profits Affected By Natural Disaster

by AP on January 19, 2012

Huffington Post…

STOCKHOLM (AP) — Mobile phone maker Sony Ericsson, which is soon to be wholly-owned by Sony Corp., on Thursday reported a fourth-quarter loss due to costs related to restructuring as well as lower sales amid the financial crisis. The London-headquartered group posted a loss of euro207 million ($265 million) in the quarter, compared with a profit of euro8 million in the same three months a year ago. Aside from weaker sales, which dropped 16 percent to euro1.29 billion, the LM Ericsson and Sony joint venture said margins were also squeezed severely by intense pricing competition on the smartphone market. The gross margin shrank to 24 percent from 30 percent, while operating costs soared to euro538 million from euro427 million. “Our fourth quarter results reflected intense competition, unfavorable macroeconomic conditions and the effects of a natural disaster in Thailand,” CEO Bert Nordberg said. The group, which shipped 9 million units in the quarter — 20 percent less than a year earlier — said it expects the global smartphone market for 2011 to have increased by 60 percent and estimates “strong growth” in that market in 2012. In 2001, Sony and Ericsson combined their unprofitable handset ventures in the Sony Ericsson joint venture. Although enjoying some early success with its Walkman and Cyber-shot phones, the company later suffered from the competitive climate in the smartphone market. In October, the two companies announced that Ericsson would sell its 50 percent stake to Sony for euro1.05 billion. The deal is expected to close in the first quarter. Despite the weaker earnings results for Sony Ericsson, shares in wireless network maker Ericsson rose 1.7 percent to 68.10 kronor ($9.88) in early Stockholm trading.

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Major Phone Maker’s Profits Affected By Natural Disaster

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Programmer Charged With Stealing Software Worth Millions From NY Fed

January 18, 2012

NEW YORK (Reuters) – U.S. prosectors charged a computer programmer with stealing software code valued at nearly $10 million from the Federal Reserve Bank of New York. They charged Bo Zhang, who worked as a contract programmer at the bank, with illegally copying software to an external hard drive, according to a criminal complaint filed in U.S. District court on Wednesday. Both the New York Fed and the Federal Reserve Board in Washington declined requests for comment. Authorities said the software, owned by the U.S. Treasury Department, cost about $9.5 million to develop. It was not immediately clear if Zhang was in custody. But the complaint, signed by an FBI agent, said Zhang had admitted to copying the code onto a drive and taking it back to his home. Zhang told investigators he took the code “for private use and in order to ensure that it was available to him in the event that he lost his job,” the complaint said. Zhang was hired as a contract employee in May by an unnamed technology consulting company hired by the Fed to work on its computers, the complaint said. It appears that investigators uncovered the suspected breach only after one of Zhang’s colleagues told a supervisor that Zhang had claimed to have lost a hard drive containing the code, the complaint said. It was not immediately clear if Zhang had retained an attorney. (Reporting By Basil Katz; Additional reporting by Pedro da Costa; Editing by Gary Hill and Tim Dobbyn)

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Overdraft Fees Reach A New High

January 18, 2012

The cost of not having enough money just got steeper. The median overdraft fee banks charge customers surged to $30 from $27.50 last year, according to a study released Tuesday by Moebs Services , an economic research firm that tracks pricing at financial services companies. The survey looked at overdraft fees from more than 2,500 banks and credit unions of all sizes across the country. Mike Moebs, an economist and CEO of Moebs Services , said the jump was the largest one he has seen in 30 years of collecting data. He said that banks are trying to make up for money lost due to regulatory changes. “We went to banks themselves, and first thing they told us was that the regulatory cost is so onerous they have to offset it with higher fees,” Moebs said. Credit unions had not increased their fees, he added. Until new regulations were put in place in July 2010, banks enrolled debit card users automatically into overdraft protection, which provides short-term loans when a bank account falls below zero. Often, bank customers were unaware their accounts were in negative territory and kept using their debit cards. Fees quickly piled up — in 2009 banks cleared an all-time high of $37.1 billion in overdraft fees, according to Moebs. A 2010 rule enacted by the Federal Reserve called Reg E requires customers to actively choose to enroll in overdraft protection. Those who do not opt into the program learn when they are over their limit on funds the old-fashioned way: Their card is declined. The regulation has cost banks billions . Last year, banks made “just” $30 billion from overdraft protection. Nearly half of the drop came from decreases at Bank of America, which lost an estimated $3.3 billion in the first year under the regulation, according to research from a Credit Suisse analyst published last month. Wells Fargo and JPMorgan Chase each lost more than $1 billion. Losses may get steeper. More recently, the Federal Deposit Insurance Corporation issued guidelines around what types of transactions can trigger overdraft fees and how the banks process transactions. The FDIC recommends, for example, that banks do not charge overdrafts on small-ticket items, so a card holder who overdrafts his or her checking account for a $4 latte won’t be on the hook for a $30 fee. Banks have also seen a drop-off in the amount of money they make from debit card swipe fees, which merchants pay every time a customer makes a purchase . The so-called Durbin Amendment, part of the Dodd-Frank financial overhaul, caps the amount banks can charge merchants for debit swipes. Banks have been scrambling to make up for the decline in revenue. In addition to raising overdraft protection fees, banks are also making a push to get customers using credit cards more often. And it’s worked, in the last week JPMorgan Chase and Citibank reported that credit cards are a growing area of business.

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Andrew Robertson: The Real Story at CES

January 18, 2012

A speaker at one of the panels I attended, quipped that CES should probably now stand for “Connecting Everything Seamlessly” not “Consumer Electronics Show.” And there is no question that the story from the floor was about just that. The vision of a connected world (and a connected “me”) that we have been talking about endlessly is now a reality. The hardware, operating systems and software are there to make it possible. And we can all live happily after… As long as — and this was the blinding “aha” for many of those I talked to — as long as we have fast, secure, mobile broadband. None of the breathtaking potential of all of those gadgets and gizmos, and none of the magic of all those happening apps, works without it. And as impressive as all the OLED, the 4K, the Crystal LED, the Ultra HD, what mesmerised me most was listening to Tom Hanks talking about storytelling. About the way he likes to ask something of the audience. About the element of surprise, the ending you never saw coming but which makes all the sense in the world, because it is rooted in a human truth. About the fact that every time you start to tell a story you are taking a big risk — for yourself, for the investors. Because you don’t know if it is going to work. You can’t. About how much more important great storytelling was becoming precisely because of all the ways, places, and times in which people can choose to be part of it. Or not. Economics is defined as the science of allocating scarce resources. We are not living in a technology economy, or an information economy, or a knowledge economy. Those are all abundant and becoming more so every day, as everything gets connected seamlessly. What’s scarce is attention. We are living in the attention economy. And the only way to survive, or better still to win in, it is with better storytelling. With more creativity. That’s the real story at CES. (And, if you have got this far…thanks for your attention.)

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Phil Simon: The Paradox of CES 2012

January 16, 2012

I just returned from CES 2012 and have had time to digest my first trip to the industry’s dog and pony show. In a word, it was a little overwhelming. After a few days of reflection, though, my mind seems stuck on one thing — specifically, which companies weren’t in attendance (at least as exhibitors, anyway). Yes, Apple is a perennial no-show at CES. No surprise here. But what about Amazon, Facebook, and Google? These four companies are, in their own ways, each driving the current technology revolution. As I write in The Age of the Platform , today everyone’s talking about the Gang of Four — and for good reason. By everyone , I don’t just mean attendees. I mean the other exhibitors as well. Consider a few examples. TV manufacturers were bragging that their new units will ship with Facebook integration so you can “watch” TV with your friends in far away places. Ditto being able to view YouTube videos with just a click or two. Amazon’s Kindle Fire is hardly the only tablet that lets you instantly easily purchase a movie, book, or album from its massive selection. Even cars will soon allow you to download apps for them. (Frequent question at the event: So, it’s like iTunes, right?) And let’s not forget the myriad iExhibitors that made iStuff: extensions, hardware, and other add-ons for Apple products. iShower and iGrill  were my two personal favorites. Perhaps there’s something to be said for not being at CES. Why else would stalwart Microsoft announce that 2012 was the last year that it would maintain a physical presence ? And I’m hardly the only one noticing this trend. On Facebook,  Walt Mossberg  and some others exchanged thoughts over the elephants not in the room. Whey weren’t the really important companies there? Simon Says Samsung, Microsoft, Qualcomm, and the others attend CES because they have to attend. They have to be noticed. They have to get the word out. The benefits of attending exceed their considerable costs, even when considered against the backdrop of a crowded, expansive venue with competitors hawking their wares — often right beside them. Amazon, Apple, Facebook, and Google could easily justify descending upon Las Vegas, but why bother? These companies have long benefitted from their ubiquity. They are always on people’s minds and don’t need to drop $100,000 or so on a tricked-out booth with reality stars to prove it. As attendees walked around, they were no doubt adding new friends on Facebook, tweeting, taking pictures on their iPhones, etc. In other words, just because Amazon, Apple, Facebook, and Google weren’t there doesn’t mean that they weren’t there.

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Could Your Next Lover Be Your Phone?

January 15, 2012

A friend’s father recently traded in his prehistoric Motorola flip phone for Apple’s iPhone 4S. In no time, his family was forced to open its arms to a new member of the family: Siri, the iPhone 4S’s voice-controlled personal assistant She was an active participant in conversations. She cracked jokes, offered suggestions for things to do, settled arguments, and entertained an eight-year-old during a quiet afternoon. The spouse of the proud new iPhone owner realized she now had to compete for her husband’s attentions. “He talks to Siri now more than to me,” she said wryly. Siri is merely a crude harbinger of what’s to come: the phone as friend. Gadget makers, from car manufacturers to smartphone sellers, are at the beginning of a race to develop devices that satisfy a desire even more primal than the need for convenience, communication and constant connectedness: the desire to feel loved. They are harnessing new technology, such as voice recognition, to create more personable gadgets that we can relate to and we feel relate to us. We are being asked, and shown how, to fall in love with these devices because they can talk to us, care for us, and anticipate our needs — even more effectively, in some cases, than a close friend. Siri can already be sarcastic, unpredictable and even flirtatious, giving the impression that our phone is not merely a phone, but a companion. As specs, those unwieldy, acronym-laden descriptors of a device’s speed and storage capabilities hold less sway over our choice of phone or PC, and companies are seeking out new ways to distinguish their products from the competition. In recent years, hardware-peddlers such as Apple and Amazon have succeeded by marketing devices that tap into an ecosystem of apps, music, movies and other content, understanding that much of the appeal of the device resides in what you can do on it. The products on display at this year’s Consumer Electronics Show, the world’s largest consumer tech expo , suggest that the next competitive advantage lies in developing the gadget that doubles as a companion. The device with impressive specs is being supplanted by the gadget that can sympathize. We’ll love our phone not because it has a great camera or terrific processing speeds, but because that Siri is just so darn fun to be around and boy, she really gets me. And it’s not just about the gadgets that fit in the palms of our hands. As I previously reported , Ford’s global manager of health and wellness research, Gary Strumolo, stated in explicit terms his hope that drivers will feel they have a relationship with a vehicle that looks after their well-being and takes care of them by tracking their health. “The more that you talk to a car that understands you, understands your needs, and maybe even anticipates your needs, the more you’ll have an emotional bond with the car,” Strumolo said during a keynote at the Consumer Electronics Show. “You’ll think, ‘This car is really concerned with my well-being. I feel it understands me, it’s helping me.’ It’s essentially a personal assistant.” Gadget-makers are exploring a litany of ways to seduce us into sensing an emotional relationship with our devices. For example, equipped with the right kind of software, our gadgetry could use our personal information, as well as data about our past behavior, to anticipate our needs and offer the kind of considerate suggestions we’d expect from a spouse. Our tablet would not only be the tool that helps us accomplish an activity, but also the playmate that suggests what to do in the first place. When I sit down in front of my TV, the set will recognize me and remember that I’ve watched three seasons of “Law and Order” and every hour of the “Sopranos,” but I couldn’t get past the first episode of “Community.” “Bianca,” the television might say, “maybe you’d be in the mood for ‘CSI’? I’m pretty sure I saw the first season on Netflix.” With information from Facebook, which is also being integrated into TV sets and smartphones, our devices could reference our network of family and friends, giving the impression that they’re just one of the gang. “Matt and Jesse have been raving about ‘Boardwalk Empire’ in their status updates,” the set top box would tell me. “And Mallory, Eric and Andrew all ‘liked’ it. That could be a good one for tonight.” Our homes are not so far away from this omniscient reality. Later this year, Samsung will release TVs outfitted with facial recognition systems that enable the set to scan the viewer’s face and display customized entertainment options depending on who sits down in front of the boob tube. Google executive chairman Eric Schmidt also envisioned a household of inter-connected gadgets , all powered by Google’s Android software, that would recognize and react when you entered the room, displaying, say, your text messages on a TV screen. Companies like Amazon and Foursquare already propose recommendations based on the books or venues we’ve enjoyed in the past. Given that computers can process more data and recognize patterns more efficiently than us mere mortals, our smartphones, tablets and TVs might even be able to predict a friend’s needs better than we can. I thought my cousin would go wild over the Don DeLillo book I gave him for his birthday. Amazon, on the other hand, knows he’s already bought it. What will make these personalized suggestions so powerful is the fact that they’re being coupled with new hardware that allows gadgets to respond in more human ways. Machines are making an effort to connect with us in the same way we connect with each other. We can now talk to our TVs or carry on conversations with our smartphones. Microsoft’s Kinect, coupled with its Xbox gaming system, can pick up on our body language and respond to our voice. You can flip through movies just as you’d brush aside the offer of tea from a host, or issue it commands as you might speak to a young child. Other companies like SoftKinetic and PrimeSense are also working on gesture recognition technology that requires waving at TV as you might an old friend and they aim to embed their sensors into everything from PCs to smartphones. I’m not predicting a world in which humans are made obsolete by more caring, altruistic cyborgs. But it does portend a changing relationship with our devices, one that stands to see us forge more intimate bonds with our electronics and rely on them even more than we do now. Gadgets have always been a means of connecting to someone personable. But what happens if the means become personable themselves? Siri?

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The Best Of CES 2012: 9 New Products That Made Us Say ‘Wow’

January 13, 2012

LAS VEGAS — There were some things that happened here in Vegas that we hope don’t stay here: new technologies and gadgets and devices that deserve an audience larger than the reported 150,000 industry folk who swarmed the Las Vegas Convention Center this week hoping to see the next big thing at the Consumer Electronics Show. Some came from the usual suspects: Hewlett-Packard outed one of the most beautiful laptops that one you’ll ever touch . LG continues to make breathtaking new televisions . And Samsung’s entire show floor might as well have received a blue ribbon for uniform excellence. While others came from disruptive startups, like Exopc from French Canada, and Microvision, a 100-employee outfit in Microsoft’s backyard in Washington state. While there were many, many dozens of products that I saw that are worthy of larger recognition, I’ve honed in on nine here for your enjoyment and appraisal. These represent unique technologies, mastery of design, intriguing concepts and noteworthy innovation in their respective fields. Mostly, they just made me say, “Wow.” These are my choices for the very, very best gadgets I saw at CES 2012. There will be a larger post to follow this weekend (a mega wrap-up) with the best of the rest. But for now, you can put a gold star on these, the best gadgets of CES 2012. For more from the Las Vegas tech extravaganza, check out our roundups of the nine worst gadgets from CES , seven new smartphones that stole the show , nine wild gadgets for music lovers , and seven Ultrabooks that could take on the MacBook Air . Then, visit our CES 2012 Big News page for everything in between.

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Jason Alderman: Boosting Your Retirement Plan Contributions

January 13, 2012

For the first time since 2009, the IRS has increased the amount people can contribute to their 401(k) and other defined contribution plans. Effective Jan. 1, 2012, the maximum annual contribution grows by $500 to $17,000, thanks to an increase in the Department of Labor’s Consumer Price Index for Urban Consumers (CPI-U), a common measure of inflation the IRS uses to determine whether or not to increase dozens of tax-related numbers from year to year. That’s good news for people who want to boost their tax-advantaged retirement savings but have been unable to in recent years. Here’s an overview of what will and won’t change in 2012 with the more common retirement savings plans: Defined contribution plans . In addition to increasing the maximum allowable annual contribution to 401(k), 403(b), 457(b) and federal Thrift Savings plans to $17,000, these additional factors apply: People over 50 can also make an additional $5,500 in catch-up contributions (unchanged from 2011). The annual limit for combined employee and employer contributions increased by $1,000 to $50,000. Because your plan may limit the percentage of pay you can contribute, your maximum contribution may actually be less. (For example, if the maximum contribution is 10 percent of pay and you earn $50,000, you could only contribute $5,000.) Company-matching contributions do not count toward your maximum contribution. Individual Retirement Accounts (IRAs). The maximum annual contribution to IRAs remains unchanged at $5,000 (plus an additional $1,000 if 50 or older). Maximum contributions to traditional IRAs are not impacted by personal income, but if your modified adjusted gross income (AGI) exceeds certain limits, the maximum amount you can contribute to a Roth IRA gradually phases out: For singles/heads of households the phase-out range is $110,000 to $125,000 (up from $107,000 to $122,000 in 2011). Above $125,000, you cannot contribute to a Roth. For married couples filing jointly, it’s $173,000 to$183,000 (up from $169,000 to $179,000 in 2011). Keep in mind these rules for deducting IRA contributions on your federal tax return: If you’re single, a head of household, a qualifying widow(er) or married and neither spouse is covered by an employer-provided retirement plan, you can deduct the full IRA contribution, regardless of income. If you are covered by an employer plan and are single or a head of household, the tax deduction phases out for AGI between $58,000 and $68,000 (up from $56,000 to $66,000 in 2011); if married and filing jointly, the phase-out range is $92,000 to $112,000 (up from $90,000 to $110,000 in 2011). If you’re married and aren’t covered by an employer plan but your spouse is, the IRA deduction is phased out if your combined AGI is between $173,000 and $183,000 (up from $169,000 to $179,000 in 2011). For more details, read IRS Publication 590 . Defined benefit plan limits. The annual limit on the maximum annual benefit you can receive from a traditional pension (defined benefit plan) increases by $5,000 to $200,000. SIMPLE plans . The employee contribution limit for these small-employer plans, which resemble 401(k) plans, remains at $11,500. Those over 50 can make up to $2,500 in catch-up contributions. Simplified Employee Pension (SEP) IRA plans . In these plans, your employer (or you, if self-employed) contributes directly to an IRA on your behalf. The annual minimum wage for participation remains at $550 and the maximum contribution allowed is a percentage of pay (25 percent for companies; 20 percent if self-employed) up to an annual pay limit of $250,000 (a $5,000 increase from 2011). Retirement Saver’ Tax Credit. As an incentive to help low- and moderate-income workers save for retirement through an IRA or company-sponsored plan, many are eligible for a Retirement Savers’ Tax Credit of up to $1,000 ($2,000 if filing jointly). This credit lowers your tax bill, dollar for dollar, in addition to any other tax deduction you already receive for your contribution. Qualifying income ceiling limits for the Retirement Savers’ Tax Credit increased in 2011 to $57,500 for joint filers, $43,125 for heads of household, and $28,750 for singles or married persons filing separately. Consult IRS Form 8880 for more information. A few other noteworthy tax-related numbers that change in 2012 include: The Social Security taxable wage base is increasing to $110,100 in 2012, up from $106,800 in 2011. This is the maximum income amount subject to Social Security taxes. The value of each personal and dependent exemption available to most taxpayers on their federal income taxes increases by $100 to $3,800. The new standard deduction for single taxpayers/married filing separately increases $150 to $5,950; for heads of household it increases $200 to $8,700; and for married couples filing jointly, it increases $300 to $11,900. This article is intended to provide general information and should not be considered legal, tax or financial advice. It’s always a good idea to consult a legal, tax or financial adviser for specific information on how certain laws apply to you and about your individual financial situation. To participate in a free, online Financial Literacy and Education Summit on April 23, 2012, go to Practical Money Skills .

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Warren Buffet Definitely Not Keeping Up With The Kardashians

January 13, 2012

Warren Buffett is definitely not keeping up with the Kardashians. When asked by Time Magazine if he was versed in the storied exploits of reality star Kim Kardashian, the billionaire businessman/philanthropist said, “I’ve seen her name, but I wouldn’t be able to tell what she does but put her name in the paper.” He may want to do some research; investing in her star could actually help his latest social justice campaign. Buffet has been leading the charge to pressure Congress to increase tax rates on America’s richest citizens , insisting that it is the responsibility of those with the most to help rebuild the nation for the less affluent and working classes. His effort coincides with the efforts of California’s Courage Campaign, which has publicly called on Kardashian , who made $12 million in 2010, to endorse a millionaire’s tax that would put her in a higher bracket; currently, the campaign says she pays just 1% more than middle class Californians. For his part, Buffett has been concentrating on the incomes of the richest members of Congress. Republicans in the Senate proposed an option be added on tax forms that would allow people to pay more than required, a shot at Buffett and those calling for higher rates. On Thursday, Buffett said he was calling their bluff , and would match all extra tax donations made by Republican lawmakers, including a 3-to-1 match on anything Senate Minority Leader Mitch McConnell donated.

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Krugman: Businessmen Don’t Have Any Special Insight Into Crafting Economic Policy

January 13, 2012

“And greed — you mark my words — will not only save Teldar Paper, but that other malfunctioning corporation called the U.S.A.” That’s how the fictional Gordon Gekko finished his famous “Greed is good” speech in the 1987 film “Wall Street.” In the movie, Gekko got his comeuppance. But in real life, Gekkoism triumphed, and policy based on the notion that greed is good is a major reason why income has grown so much more rapidly for the richest 1 percent than for the middle class.

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Major Grocery Chain To Close More Than 100 Stores, Slash Thousands Of Jobs

January 13, 2012

BRUSSELS — A Belgian supermarket chain that owns Food Lion said Thursday it will close more than 100 struggling stores, mostly in Florida, Georgia, South Carolina and Tennessee. The company will also shutter the Bloom brand, a sister grocery chain that had been launched as a higher-end alternative to Food Lion. Pierre-Olivier Beckers, CEO of Delhaize Group, said in a statement the company was dealing with tight consumer spending and increased competition. He said that the store closings, most of which will come in markets where the company has a low penetration, will allow it to focus on better-performing stores where the chain has greater market share. The store closings will result in about 4,900 job cuts in the U.S., the company said. Beckers said the decisions were difficult but “were in keeping with our responsibility to our shareholders to deploy resources where they will achieve the highest return.” Delhaize will close 113 Food Lion stores in Florida, Georgia, Kentucky, North Carolina, Pennsylvania, South Carolina, Tennessee, Virginia and West Virginia. It will close seven Bloom stores in Maryland and Virginia, and convert the remaining 42 Bloom stores to Food Lions. It will also close six Bottom Dollar Food stores in North Carolina and Virginia, and convert 22 others into Food Lions. A distribution center located in Tennessee will also be closed. But while Delhaize is retiring the Bloom brand, it says it sees promise for Bottom Dollar Food. It said the chain had enjoyed “considerable success” in the Philadelphia area, and that it planned to open its first stores in the Pittsburgh area early this year. Delhaize also reiterated that it plans to add “hundreds” of Bottom Dollar Food stores in the next five years. Delhaize has about 1,650 stores in the Eastern U.S.

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Jerry Ashton: Demand That Collection Agencies Keep "The 5 New Year’s Resolutions for the Conscious Bill Collector"

January 11, 2012

If there is one thing that most Americans might agree upon is that the debt collection industry and the work it performs ranks in status somewhere below that of a Wall Street Banker and slightly above that of a U.S. Congressman. To a person, this industry laments this bad press and lack of appreciation. However, they don’t do much as individuals or agencies to change this viewpoint. Perhaps, just perhaps, they need motivation. As a 30-plus-year veteran of this industry, I invite my readers to campaign with me on this platform: that bill collectors must make — and keep — “5 New Year’s Resolutions for the Conscious Collector.” Whoooa, the “conscious” collector I can hear my own associates in that industry say? And coupling this up with making resolutions — those annual proclamations that people don’t keep? Am I setting up a false dichotomy? Perhaps, even insulting? Considering the track record, maybe, maybe not. Third-party agencies and debt buyers are coming off a banner year for collections made it possible by the hard work of the guy and gal on the front lines, the ones directly interfacing with the consumer or debtor. But, how could the worker bees be to blame for the hive’s reputation? After all, they’re just doing their job… To paraphrase Shakespeare….. “The fault… is not in our stars, but in ourselves, that we are underlings.” 2011 has been a Record Year for Collection Lawsuits . Lawsuits citing FDCPA violations reached 11,359 from 1/1/11 through 12/15/11 — exceeding last year’s 10,914. Here are a few examples of how you have earned your place on the popularity scale. *The President of an Erie, PA collection agency is accused of using a fake courtroom to intimidate debtors… (debtors were ‘summoned’ to a fake meeting room and ‘counseled’ to pay their debts or face consequences) and invokes the Fifth Amendment in a more authentic courtroom. *A San Diego based debt buyer and its subsidiaries employ collection approaches which investigators claim had “very little information about the debt… provided no supporting documentation… and included no proof that they actually acquired the debt from the original creditor… and also sometimes targeted the wrong individuals for collection and attempted to collect debts that had been fully or partially paid.” Wisely, the company had “set aside an additional $500,000 in anticipation of a settlement.” *A federal court ordered an individual behind a payday lending scheme and two companies he controls to pay $294,536 for illegally trying to garnish borrowers’ wages… along with other illegal collection practices. *There are 30 states that will allow imprisonment for unpaid debt — even though this has been illegal in the U.S. since 1833 — and underhanded agencies are taking advantage of loopholes to see the debtor land in the slammer. Even in the case of incomplete or false documentation… And, a news piece hot off the Newsweek Press on January 1, 2012, ” America’s Abusive Debt Collectors ” by journalist Gary Rivlin, best-selling author of Broke, USA . To read it is to weep. So, that’s the “reality” of debt collection as others see it. Where, exactly, can consciousness or “resolution” come in for a bill collector? It is one thing to be conscious of our circumstances, but an entirely a different thing to have the resolve (resolution?) to change things. And, why bother? You want positive change as a debtor, collector, creditor? Then, make it possible for the collector to put into effect the resolutions that can turn things around. Resolution #1 — I will not work for an agency or debt buyer which employs or encourages duplicity in its collection efforts, i.e., phony courtrooms. Resolution #2 — I will only work accounts which have supporting documentation as to proof of debt. If my agency, or its client, cannot provide that proof — that account is returned with a “write it off” recommendation. Resolution #3 — I will refuse to attempt collections on OOS (out of statute) accounts. Resolution #4 — I will refuse to collect on personal loans (the infamous “payday” loan as example) which include “bumps” or fees and collection charges in tandem with egregious interest rates. Basically, I will exercise the Golden Rule. The result of this would be a Conscious Collector who is aware of the applicable laws, knows the originator (and legitimacy) of a debt, and acts ethically and professionally. Oh yes, and Resolution #5 ? That one belongs to the employers — the creditor, the agency and/or the debt buyer — the ones who set the bar: “I will hire only collectors who have made — and live by — the above four resolutions.” Hard working, ethical and conscientious bill collectors. Now, that should grab the headlines in 2012 .

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AllThingsD: Myspace — Yes, Myspace — Says It’s Going to Sell You Web TV

January 10, 2012

Lots of folks are waiting for Google, or Apple, or Verizon or someone to offer a Web video subscription service that would rival cable TV. None of those guys have announced their plans for that, yet. But Myspace has: It says it will offer an “over the top” service in the first half of this year.

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Will This Windows Phone Reclaim Mojo for Microsoft, Nokia?

January 10, 2012

LAS VEGAS — Apple has its iPhone, Android has its Galaxy Nexus, and now, Windows Phone has the Nokia Lumia 900. Nokia CEO Stephen Elop took the stage at the Consumer Electronics Show here Monday and unveiled the Lumia 900, the premier smartphone running Microsoft’s Windows Phone mobile operating system and perhaps the greatest hope of redemption for Microsoft’s struggling mobile software. Badly trailing Apple’s iOS, Google’s Android and BlackBerry in the U.S., Windows Phone 7 was released in 2010 and has not yet been a hit with American consumers, despite glowing reviews from critics . When handset giant Nokia announced that it would begin manufacturing phones running Microsoft’s mobile OS , it was widely viewed as an excellent chance for Windows Phone to become a meaningful player in the U.S. and for Nokia to reassert its former dominance of the mobile marketplace. And so here is the Nokia Lumia 900, the top-of-the-line Windows Phone from Nokia that arrives almost a year after Microsoft and Nokia first teamed up. The Lumia 900 will go on sale “in the coming months,” according to a press release, and will be available exclusively on AT&T to begin. Elop emphasized the Lumia 900′s 4.3-inch AMOLED display screen, an 8 megapixel rear-facing camera with Carl Zeiss optics and a front-facing 1MP camera with built-in video calling capability. The Lumia 900 will ship with ESPN, CNN and Nokia Drive apps and features a built-in GPS that can be used for navigation without a SIM card. Along with the announcement and a press release, Nokia made available a YouTube video showcasing the newest member of the Nokia Windows Phone family: The Lumia 900 is not the first Nokia device to run the Windows Phone OS. Previously, Nokia outed the Lumia 710, an entry-level, $50 device that will be available on T-Mobile and AT&T, and the Lumia 800, a premium device not yet available in America (It’s coming soon, according to Nokia representatives). The Lumia 900 is, however, the first Nokia Windows Phone with 4G LTE, the faster mobile network that American carriers are racing to build. “The introduction of the Nokia Lumia 900 with AT&T is another significant milestone in the ongoing rollout of Nokia’s global smartphone strategy,” said Chris Weber, president of Nokia Americas, in a statement. “The Nokia Lumia 900 is designed specifically with the U.S. in mind and the announcement of this collaboration with AT&T, in addition to other recent announcements, signifies a new dawn for Nokia in the U.S.” Neither a price nor a release date were announced. Though the Lumia 900 represents to AT&T a powerful bit of ammunition for its budding 4G LTE campaign, the stakes may be much higher for Microsoft and Nokia. Microsoft is pledging hundreds of millions of dollars in advertising for its flagging Windows Phone OS, which currently sits at under 5 percent adoption in the U.S., trailing Android devices, the iPhone and BlackBerry handsets by wide margins. Nokia, meanwhile, announced in February 2011 its intentions to drop the Symbian and Meego operating systems from its phones in favor of an exclusive multi-billion dollar partnership with Microsoft. The Lumia 900 is the first real jewel of that partnership, a blue-ribbon smartphone tasked with competing with the likes of the iPhone 4S and the Samsung Galaxy Nexus in a crowded, well-entrenched smartphone market. If Nokia is to regain the massive market share it enjoyed in America in the early-2000s, or if Microsoft is to grab the mobile market share it currently enjoys in the PC business, then Nokia’s newest batch of Windows Phones handsets will have to catch the attention (and wallets) of Americans in a way that previous attempts have not. The Nokia Lumia 900 is perhaps the most significant attempt yet at gaining (or regaining) those crowns. Though the Lumia 900 will not be the final shot at denting the market, it will certainly be one of the loudest. For full product specifications for the Nokia Lumia 900, see the official Nokia website .

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Americans May Be Getting Back Into A Pre-Recession Habit

January 9, 2012

WASHINGTON — Americans are feeling confident enough in the economy to go back to a time-honored tradition – taking on a little extra debt. Consumer borrowing surged in November by $20.4 billion, the Federal Reserve said Monday. It was the third straight increase and the largest monthly gain in a decade. The jump in borrowing was largely because people took out more loans to buy cars and swiped their credit cards frequently to purchase holiday gifts. In November, total consumer borrowing rose to seasonally adjusted $2.48 trillion. That’s nearly at pre-recession levels and up from a post-recession low point of $2.39 trillion reached in September 2010. Borrowing had tumbled for more than two years during and immediately after the recession. Since then, consumers have increased their borrowing in 13 of the past 14 months. Americans are taking on more debt after seeing the unemployment rate drop and the economy improve, albeit modestly. Many are also leaning on their credit cards and loans to make up for wages that haven’t kept pace with inflation this year. Holiday sales were solid in November, and the U.S. auto industry had its two best sales months for the year in November and December. The Fed’s credit report appeared to reflect those sales. The category that measures credit card debt rose in November by $5.6 billion, the most since March 2008. The gauge that tracks auto loans and student loans increased $14.8 billion, nearly matching July’s gain that was the biggest since February 2005. Sung Won Sohn, an economics professor at the Martin Smith School of Business at California State University, said many consumers were likely persuaded by incentives that retailers and auto dealers offered to boost sales. Still, Paul Edelstein, director of financial economics at IHS Global Insight, expressed concern that consumers may have relied on their credit cards to finance holiday purchases. The rise in borrowing comes as many consumers are seeing little to no growth in their paychecks. Inflation-adjusted, after-tax incomes shrank by nearly 2 percent in the July-September period. To make up the difference, many consumers have reduced the amount they save. The savings rate fell in November to 3.5 percent – the lowest level since the recession began. The savings rate jumped in 2008 to 5 percent and stayed above that level until early last year. Sohn said he expects the savings rate to level off near November’s level. He also said the increase in consumer demand should prompt businesses to hire more workers. Those gains would allow consumers to finance their spending with rising incomes. In December, employers added 200,000 jobs and the unemployment rate fell to 8.5 percent, the government said Friday. It was the sixth month in a row that the economy had added at least 100,000 jobs, the longest streak since 2006. And the unemployment rate dropped to its lowest level in nearly three years. With more jobs and better pay, consumers could step up spending even further. That could lead more companies to add workers, which ultimately drives more spending and more hiring. Economists call that a virtuous cycle. Still, a recession in Europe could dampen demand for U.S. exports and weaken financial markets. The Federal Reserve’s borrowing report covers auto loans, student loans and credit cards. It excludes mortgages, home equity loans and other loans tied to real estate.

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Larry Magid: 5 Hot Trends at CES 2012

January 8, 2012

I’ve just arrived in Las Vegas for the Consumer Electronics Show to hang out with 140,000 of my closest friends. This show — the mother of all tech trade shows — is where people find out what many companies plan to release at some point during 2012. Not all products shown at CES will make it to market and many of the ones that do will be flops. But there have also been some successful products and product categories launched at CES including the VCR in 1970, the Commodore 64 personal computer in 1982, the Nintendo Entertainment System in 1985, HDTV in 1998, Tivo in 1999, Blu-Ray in 2003 and that wildly successful (not) Palm Pre in 2009. CES is also where many people first saw 3D TVs in 2009 and a parade of tablets in 2011. Check out this chart at Sortable. So here are a few things we can we expect at CES 2012. 3D TVs without glasses . We saw that in 2011 but we’ll see more of them and larger ones in 2012. We’ll also see lots of 3D TVs that use inexpensive passive glasses instead of the $300 a pair active ones that were common just a couple of years ago. These new developments are a good sign, but I’m still not convinced that people will want to spend more on 3D TV. As CES chief Gary Shapiro said in a podcast interview posted at CNET, 3D is a feature, not a new category of TV. Ultrabooks : Apple has done very well with its thin and lightweight MacBook Air but the so-called Windows “netbooks,” never did catch on big time. That’s because they were under-powered and often had skimpy keyboards. Ultrabooks are thin and light but they’re not cheap and they don’t skimp on power. Expect Lenovo, Dell, HP and others to feature them at CES and expect Ultrabooks to be the hot category of PCs in the coming year. OLED and Connected TVs : OLED stands for Organic Light Emitting Diode and unlike other technologies, there is no need for a backlight so it’s more energy efficient. It also allows for thinner TVs and for richer colors, better contrast and resolution. LG has already blogged that it will be showing the “world’s largest OLED,” a 55-inch model. It should come as no surprise that the hottest thing on TV has nothing to do with an antenna or even a cable or satellite connection but the ability to bring in streaming video from the likes of Netflix, Hulu, Amazon and others. As with previous years, there will be plenty of TVs with built-in Internet connectivity. I wouldn’t be surprised if it emerges as an almost standard feature. Connected Cars : There will be keynote speeches from the CEOs of both Ford and Mercedes and plenty of connectivity solutions for cars. There will also be mobile apps to control cars, such as Ford’s MyFord Mobile App to help owners of its electric cars find charging stations. iStuff : As usual Apple won’t be at CES but there will be plenty of vendors with apps, cases and accessories for the iPhone and iPad. There will even be an “iLounge,” with 300 exhibitors who are focused on supporting Apple products. This post is adapted from one that appeared on Forbes.com and LarrysWorld.com

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Bank Mistake May Cost Foreclosure Lawyer Her Home

January 6, 2012

Christine Jackson’s three-bedroom wood-frame home in Indianapolis is in danger of foreclosure. It’s not because she can’t afford her mortgage, but because of a bank error, she said. While millions of U.S. home loans have sunk into default or foreclosure since 2007 because owners can’t keep up with payments, Jackson’s situation is different. Thousands of homeowners from all walks of life have complained that the major banks that service their mortgages have made frequent errors in calculating their loans. These errors include slapping unnecessary inspection fees onto accounts, misapplying payments in violation of Fannie Mae and Freddie Mac guidelines and “force-placing” expensive insurance on homes that are already insured. Jackson knows all this all too well because she is a lawyer who represents homeowners trying to stave off foreclosure. Often, those clients have claimed that their bank or mortgage servicer made a mistake in tabulating the cost of their loan, triggering a wrongful default. Jackson, 54, a former fraud investigator for the Internal Revenue Service, now understands firsthand the frustration that her clients feel. JPMorgan Chase & Co., the bank that services Jackson’s mortgage, has declared her loan in default, blocked access to her online account and threatened foreclosure if she doesn’t pay late charges that she said are unwarranted. Her once sterling credit is ruined and she could lose her home if the mess isn’t resolved, Jackson said in a recent interview. Jackson blames her situation on an extra annual insurance premium that she said Chase deducted from her account in 2009 on top of her usual payment. The overcharge triggered a series of account miscalculations, eventually leading to default, according to Jackson. “I’m disgusted with the whole thing,” she said. “My credit is trashed. I have nothing at all to finance my business. I might have to file for bankruptcy.” Banks’ servicing arms manage all aspects of a borrower’s home loan, from collecting payments for the owners of the mortgage to pursuing a foreclosure if a loan is in default for too long. Since the housing market crashed in 2007, banks and some standalone mortgage servicers have struggled to keep up with an unprecedented wave of foreclosures, without much success. A group of state attorneys general is trying to craft a blanket settlement with several large financial institutions following allegations that these banks filed false and “robo-signed” affidavits in foreclosure proceedings. Also, the biggest banks and independent servicers agreed in November as part of a consent order with federal regulators to give homeowners with residences involved in a foreclosure action from Jan. 1, 2009, to Dec. 31, 2010, the option of an independent audit of their loan account to resolve cases like Jackson’s. Regulators have boasted that the move could grant more than 4 million borrowers a chance to have their accounts examined by qualified auditors. But Jackson doesn’t qualify for such a review because her troubles don’t fit within the designated time frame and her home hasn’t been foreclosed on. That’s also the case for many of the estimated 3 million U.S. homeowners whose loans are in default or some stage of foreclosure. Jackson, who with her husband had their house built in 1997, said in February 2009 the mortgage servicing arm of JPMorgan Chase withdrew $1,422 from her escrow account to pay her annual homeowners insurance premium. The next month, Chase withdrew $838 from her escrow — again to pay her annual insurance premium; the second amount was the correct amount, Jackson claimed. At the end of 2009, Chase recalculated the amount needed to fund the following year’s insurance premium, adding $1,422 and $838 together and incorrectly increasing Jackson’s required monthly payment, Jackson claimed. Since Jackson’s monthly payment was automatically deducted from her bank account, she did not notice until the end of 2010 that she was paying an extra $108 each month, she said. Jackson finally noticed the mistake when she logged onto her account online, she said, noting that she called a Chase representative who promised to fix the problem. Instead, things got worse. In January 2011 she received eight letters from Chase stating that her previous month’s payment was insufficient and that her loan was now in default. Jackson, whose clients have had similar problems, has coined a term for her situation: phantom default. Jackson has spent dozens of hours on the phone and sending letters in an attempt to resolve the problem with Chase, to no avail, she said. She is now ready to pay home loan payments she has withheld over the past year, provided the bank repair her credit, reimburse her for damages and costs, and waive all the late and default fees, which she estimated total several thousand dollars, she said. Thomas Kelly, a Chase spokesman, said that while he could not comment on the details of Jackson’s situation, “we work with customers individually when there is confusion or dispute about payments.” Other homeowners have also complained of banks making errors with insurance premium. In 2010, a Mississippi federal bankruptcy judge ordered American Home Mortgage Servicing to pay Glen Cothern’s legal expenses as a result of the “obvious mental anxiety, stress, and frustration” he suffered when the servicer charged him for insurance he didn’t need, triggering two wrongful foreclosures and a customer-care experience termed “Kafka-esque” by the judge. New Orleans bankruptcy attorney Greta Brouphy saw her monthly mortgage payment balloon after Chase deducted two $3,200 annual insurance premiums in one year and imposed costly forced-place insurance on top of that. Brouphy spent a year trying to get the situation sorted out at her local Chase branch. “The loan officer should invite me to his kid’s birthday party because I spent so much time with him,” Brouphy said. Finally, a federal judge intervened. “I’m about to choke somebody,” Brouphy recalled saying to New Orleans bankruptcy judge Elizabeth Magner after court one day. Magner, who has developed a national reputation for sanctioning servicers for their behavior, gave Brouphy the phone number of a Chase lawyer, who quickly cleared things up. Jackson hasn’t been as fortunate. “Regardless of my knowledge of the law and my connections, my account has not been corrected, all my credit has been reduced, and I cannot get any operating loans for my business, which is fatal when you work on a contingent basis,” she said. Bank of America Corp. and other lenders cancelled lines of credit for Jackson totaling more than $100,000 that she needs to finance cases. She closed her law office and moved into her home. She even canceled her $260 subscription to a legal research website. Jackson, who worked for the IRS for 18 years, said she has paired down her client roll to just 10 and is considering moving with her husband to Mexico and abandoning law altogether. That’s bad news for any Indiana homeowner who might have wanted to tap her experience in navigating this type of bureaucratic nightmare. The little apartment on Lake Chapala near Guadalajara that Jackson has rented several times for a few hundred dollars a month beckons, she said. “The stress has made me ill,” she said. “I don’t need this.” Here are some other awkward foreclosure stories from last year:

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White House, Dems: If Congress Isn’t In Recess, Why Isn’t It Working?

January 5, 2012

WASHINGTON — With Republicans complaining that President Obama made recess appointments while Congress is not in recess, House Democrats Thursday suggested that if Congress really is in session, perhaps members should be working. “We’re here, we’re going back to work, we’ll be in session for as long as it takes,” said House Minority Leader Nancy Pelosi (D-Calif.), announcing that her members would start working to prepare for a joint House-Senate conference committee on extending payroll tax cuts for the rest of the year. “But we also would like to have our colleagues come back, have a real session,” Pelosi added. “They have the appearance of a session so it blocks what the president can do, but not a productive session to get the job done for the American people.” Congress began holding “pro forma” sessions before the last Memorial Day weekend after a group of Republican legislators said they wanted to prevent Obama from making recess appointments — especially for Elizabeth Warren to head the Consumer Financial Protection Bureau, before she launched a campaign for Senate in Massachusetts. They were able to do that by convincing House Speaker John Boehner (R-Ohio) to refuse to grant a “concurrent resolution” allowing the Senate to take time off. Such resolutions are required under the Constitution to adjourn. Ever since, both chambers have gaveled themselves in and out for a few seconds at least every fourth day, to maintain a technical session, even if when nothing was being done. Democrats last year did not want to challenge the practice by showing up for work. But ever since the pre-Christmas payroll tax battle, they’ve settled on coming into work as a key strategy , and they hailed Obama for putting Richard Cordray in charge of the CFPB and naming three people to the National Labor Relations Board, in spite of the phony working sessions. “Fortunately, or unfortunately for us, we do not have a role in the confirmation process, but we’re glad that the President took the lead, went out there, was bold and made the appointments,” Pelosi said, although Boehner had carved out a defacto confirmation role by blocking Senate recesses. “We can’t wait. We have work to do. We’re going to work right now,” Pelosi said at the Thursday Capitol Hill news conference, designed to start putting pressure on the GOP before the current two-month 2 percent payroll tax cut expires. White House Press Secretary Jay Carney took a similar tone in his daily briefing, noting that the Senate hasn’t done any actual work since before Christmas, and that the members are not in town. “I think all of you should run up to Capitol Hill, check out the House and Senate, and see if you can find a single member of Congress; and then tell me, on this working day for most Americans, whether or not Congress is in session,” Carney said. “You might find them in very warm places or snowy places having fundraisers, but you won’t find them in Capitol Hill because they are in recess.” “Only in Washington would not being in the office, not even being in the town where your office exists qualify as being on the job,” he added. “If Congress is in session, they’re supposed to be, you know, somewhere, like, close to the Capitol.” Don Stewart, spokesman for Senate Minority Leader Mitch McConnell (R-Ky.), countered that the Senate used a pro forma session on Dec. 23 to pass that temporary payroll tax cut extension. Stewart also noted that Democratic senators have not claimed to be in recess.

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Obama’s Latest Moves Face Legal Questions

January 5, 2012

By Jeremy Pelofsky WASHINGTON–President Barack Obama’s appointment of Richard Cordray to head the Consumer Financial Protection Bureau could become entangled in a legal battle over its legitimacy, though history and the Constitution appear to favor him, experts said. The White House said on Wednesday Obama would use his constitutional authority to install Cordray while Congress was not in session, drawing anger and criticism from rival Republicans who insisted Congress was not in formal recess. While the Senate resumes lawmaking only on January 23, it has been holding brief non-legislative “proforma” sessions every three days to try to keep Obama from making recess appointments without its consent. The last, on Tuesday, was for a minute; the next is on Friday. Infuriated Republicans denounced Obama’s action on Wednesday as unprecedented, but history shows similar appointments were made during the presidencies of both Democrat Harry Truman and Republican Theodore Roosevelt. White House lawyers determined the Senate was in recess as long as it was not conducting legislative business and Obama could therefore move ahead with Cordray’s appointment under the Constitution, presidential spokesman Jay Carney said. He said this was also the view during the George W. Bush administration. Also on Wednesday, Obama announced plans to “recess-appoint” three members to the National Labor Relations Board, potentially raising issues for that agency as well. While Republican Senate Minority Leader Mitch McConnell assailed the “uncertain legal territory” of the presidential action, it seemed unlikely the issue would be resolved anytime soon in the courts. Legal challenges of agency decisions often take months, if not years. But the U.S. Chamber of Commerce, which fiercely opposed creation of the consumer protection bureau, said it would not rule out a legal challenge to Cordray’s appointment and it could weigh heavily on future actions by the watchdog. “One of the lawyers we consulted on this said ‘if you are bringing a suit on a rule against this agency and you didn’t raise this issue you could be charged with legal malpractice,’” said David Hirschmann, head of the group’s Center for Capital Markets Competitiveness. Cordray told Reuters he was ready to get down to work and would not be distracted by possible legal challenges. “I can’t be distracted by that,” he told Reuters after flying to Cleveland on Air Force One with Obama. NOMINATION BATTLE The battle over nominations dates back to the Bush administration when Democrats kept the Senate in similar “proforma” sessions to try to block recess appointments by the Republican president, not leaving for more than three days. Under the Constitution, the House of Representatives and Senate must agree on any recess lasting longer than three days. Republicans who control the House have blocked any longer breaks in hopes that would prevent appointments by Obama. The nonpartisan Congressional Research Service said in a report last month the Constitution did not specify how long the Senate must be away for recess appointments to be made but Republicans pointed to a 1993 Justice Department legal brief that said they had to be away longer than three days. One law professor said that brief wrongly referred to the constitutional requirement that the two chambers have the approval from one another to break for more than three days and that the courts will likely be hesitant to intervene now. “There is no minimum time needed to trigger the president’s recess appointment authority,” said Catholic University Columbus School of Law professor Victor Williams, adding that he doubted the courts would look favorably on a legal challenge. “The courts are very reluctant to second guess the political branches when a duty has been given to political branches, explicitly, textually by the Constitution,” he said. The congressional report found two examples of appointments made during recesses of less than three days, though they were done after Congress completed a session and before they began the next one. President Theodore Roosevelt made some 160 appointments in 1903 when Congress was gone for less than a day, and the Truman administration made one appointment in 1949 when the Senate was gone for two days, the report said. “As far as can be determined, no succeeding president has made recess appointments under similar circumstances,” the CRS report said. “The shortest recess during which appointments have been made during the past 20 years was 10 days.” Republicans also pointed to an Obama administration official referring to the three-day recess precedent in a legal argument before the Supreme Court, but the justices did not address that issue and were rather focused on the legitimacy of decisions by a government agency that did not have a quorum of members. One banking industry consultant noted that with Cordray’s appointment, it may speed legal challenges to the financial regulatory reform law known as Dodd-Frank. “The issue is not so much Cordray, or whoever is the director, but the CFPB itself and some of the powers it has been given under Dodd-Frank,” said Bert Ely. (Additional reporting by David Henry in New York, Matt Spetalnick aboard Air Force One, Alexandra Alper and Richard Cowan in Washington. Editing by Howard Goller and Todd Eastham) Copyright 2012 Thomson Reuters. Click for Restrictions .

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David Arkush: President Obama Appoints Cordray to Head CFPB Over Republican Obstruction

January 4, 2012

This morning President Obama appointed former Ohio Attorney General Richard Cordray to head the Consumer Financial Protection Bureau. It’s was the right move, and it’s about time. In December, Senate Republicans blocked a vote on Cordray , who has majority support. In an unprecedented move, Republicans said that Cordray was a fine candidate, but they were holding his nomination hostage because they wanted to change the underlying law and weaken the agency. In another unprecedented move, Republicans claimed that the House of Representatives (which is Republican-controlled) could hold the Senate (controlled by Democrats) in session to block recess appointments. Today, Obama used his constitutional power to make a recess appointment and cut through all this nonsense. The big banks and their allies in Congress are in a tizzy. They’re steamed. But not for the reasons they say. They claim the president didn’t have authority to appoint Cordray, but he did. For example, they say a three-day recess is too short for a recess appointment. But this is really a five-week recess, with some phony gavel-banging thrown in by a single Senator once every three days. In reality, the Senate is out of town. Even if it’s a three-day recess, Cordray’s appointment is legal. The only court to have looked at the question recognized the obvious : the Constitution “does not establish a minimum time that an authorized break in the Senate must last to give legal force to the President’s appointment power under the Recess Appointments Clause.” Two past presidents — Harry S. Truman and Theodore Roosevelt — made recess appointments during recesses of three or fewer days. And let’s not forget: The Republicans didn’t have the power to keep the Senate in pro forma sessions anyway. What’s the real reason the big banks and the Republicans are so mad? Because they lost this battle in the war over America’s economy. They want big banks to be above the law, to write their own rules, and to compete, if at all, principally on the basis of who scams their customers the most. (The consumer financial sector rotted several years ago, plain and simple.) They want the same system we had before 2008 — in which big banks raked in billions in profits and government handouts while the economy crashed and millions of people lost their jobs and were thrown out of their homes. The CFPB and Cordray’s appointment are victories for those who have something else in mind. Most people want to get the financial sector back on track, to build a fair economy in which everyone plays by the rules and — call us old-fashioned — to have businesses compete to provide consumers value. If you’re one of those people, you won a big victory today.

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MF Global Fallout Fueling Calls For Reforms In One Trading Sector

December 27, 2011

CHICAGO (Reuters) – Agricultural bankers and other players in the world’s grain markets say fallout from the collapse of giant broker MF Global is changing cash grain trading and fueling calls for alternatives and reforms. Trading changes include more “back to back” transactions and more direct contracting by farmers to end users, eliminating middlemen like MF Global, merchandisers say. Bankers and traders also say anger with lack of oversight by the Chicago Mercantile Exchange’s clearing house regarding MF Global’s supposedly secure customer accounts is rampant, spurring calls for more regulation of a traditionally close-knit, clubby and “self-regulating” industry. Proposals have included the idea of setting up a separate “insurance fund” to hold the so-called “segregated” accounts that futures commission merchants (FCM’s) now hold and account for with the exchange clearinghouse, which is supposed to “mark to market” every trade every day to assure adequate capital. Up to $1.2 billion in such segregated customer funds are still missing eight weeks after MF Global collapsed into bankruptcy after a revelation it had made a $6 billion bet on European sovereign debt that went sour. “I don’t think people are satisfied with CME’s response. What the banks thought was rock solid isn’t as rock solid any more,” said Lance Holden, senior vice president with Wells Fargo Bank, the largest private lender to agribusiness that had customers who lost funds with MF Global. CME Group chief operating officer Bryan Durkin told a packed meeting of the National Grain and Feed Association this month, echoing earlier testimony by CME executives to Congress, that MF Global was the culprit, not CME’s clearing house. “This was the failure of a firm. A firm that broke the rules, not the failure of any clearing house. At CME, we met our obligations,” Durkin told the gathering of 700 farm bankers, grain traders, brokers and farmers in Chicago. “We believe all customers affected should have their full balances and property returned by MF Global. Until then, we will not consider the process complete,” Durkin said. CME, looking to line up with its futures-trading customers and the banks like Wells Fargo who finance them, has pledged at least $550 million to the court trustee now sorting out the MF Global mess to help make good customers who were victimized. But CME will need to do more, grain traders said. “We want to get the confidence back and restore confidence with the lenders too,” said Diana Klemme, vice president of Grain Services Corp in Atlanta, which advises grain buyers and sellers on marketing and risk strategies. “In the end the loss of even a dime by users of the system will have a chilling impact,” said Jeff Hainline, president of Advance Trading, an Illinois brokerage with many farmer and farm cooperative clients. VOTING WITH THEIR FEET As the CME’s regulator, the Commodity Futures Trading Commission, as well as Congress and the bankruptcy court try to sort out accountability for the missing funds, many farmers and grain traders have backed off using CME’s grain futures, the world pricing and risk-management benchmark for decades. “We are watching closely how these events play out to figure out what do we need to ask more of from a counter-party risk standpoint,” said Sam Miller, senior vice president of agricultural banking at M&I Bank in Appleton, Wisconsin, who had customers who lost money with MF Global. Miller said he’s seeing more interest among bank customers to sell commodities directly to end-users but they are looking at all their choices — over-the-counter privately negotiated deals, options markets, and back-to-back deals where purchases and sales are done simultaneously. “We do see more contracts between a seller and somebody who is actually going to use the product,” Miller said. “There are some real concerns about figuring out just what happened and how we make sure the situation never repeats,” said NGFA Treasurer and director of marketing Todd Kemp. “Of course, the number one issue among customers right now is return of supposedly segregated funds to customers.” Kemp said NGFA members, which include more than 1,000 firms who buy and sell grain, will find it hard to market grain without the CME. But confidence has been deeply shaken in the CME and the FCM’s who hold customer funds, he said. “Our task in that respect is to re-establish confidence and examine changes that might help ensure safety of customer funds in the future,” he said. “Some have suggested that we might look at changes in which entity holds customer funds. “Instead of the FCM, should the clearinghouse or exchange, or maybe some independent third party, hold the funds? Should we look at extending some form of insurance to commodity accounts?” Kemp said. “Our Risk Management Committee will begin those discussions soon.” Oversight and accountability must be addressed, he added. “NGFA historically has not been an organization that believes in more government regulation. However, it’s clear that in some way customer protections need to be improved,” Kemp said. Even bankers may seek more regulation — of brokers. “Futures trading is supposed to be riskless from the transaction side. If you’ve got outside risk, people may use different types of products,” said Holden of Wells Fargo. Grain elevators, farmers and others using futures markets to hedge price risk often borrow 90 percent or more of the value of their crops or livestock to finance futures trades. The government-linked Farm Credit System (FCS), for example, lent some $6 billion to make sure grain elevators could make margin calls when grain prices plummeted in 2008. So grain traders are closely watching the stance of CoBank, the Denver-based FCS bank with $62 billion in assets and one of the biggest lenders to U.S. grain elevators. “CoBank has not changed its credit policies in light of the events at MF Global.” Lori O’Flaherty, chief credit officer for CoBank, told Reuters in an interview. “But the failure of this institution highlights the need for close monitoring of counterparty risk, both by banks and their customers, during these volatile economic times.” Bankers said CME will also remain squarely in the grain industry’s sights, as an institution that must re-earn trust. “CME — all of the exchanges have been focused on contracts, more growth, all these hedge funds, private equity funds that are getting into these markets. They are focused on that instead of their base business,” Holden said. “That something like missing segregated funds could happen — that’s a big miss.” (Editing by Peter Bohan, Leslie Gevirtz) Copyright 2011 Thomson Reuters. Click for Restrictions .

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China Arrests Executives For Insider Trading As Part Of Wider Crackdown

December 26, 2011

SHANGHAI (Reuters) – China has arrested former executives at two brokerages on charges of insider trading, the securities watchdog said, as part of a crackdown on market malpractice that the new head of the agency has said will be one of his top priorities. The China Securities Regulatory Commission (CSRC) detailed on its website four cases of market manipulation and insider trading that it has investigated, including two that led to the arrests of former executives at Southwest Securities Co Ltd and Northeast Securities Co Ltd . The cases are the latest in an increasingly high-profile campaign by CSRC chief Guo Shuqing to stamp out rampant wrongdoing in the country’s stock market, which has languished despite the country’s nearly double-digit economic growth. In one case, Qin Xuan, a Northeast Securities manager who advised on the restructuring of a Shenzhen-listed pharmaceutical firm, used the information he obtained in that process to trade the company’s stock, and also leaked the information to a friend. In another case, Ji Minbo, former vice president at Southwest Securities, gained 20 million yuan ($3.2 million) by using information that was not publicly disclosed to trade more than 40 stocks from 2009 to 2011, the CSRC said. “No matter how concealed illegal practices are, inside traders will eventually be punished by law,” the CSRC said in the statement that detailed Qin’s case. The other two cases on which the agency published details involved securities consultants using commentators, research reports and media to talk up stocks they own before selling the securities to make a profit. China has been stepping up its crackdown against illegal trading activities and tightening supervision against fund managers, brokerages, consultants and executives of listed companies in a bid to build confidence in a stock market where illegal trading activities have been rampant. In August, former stock analyst Wang Jianzhong was sentenced to seven years in prison and fined 125 million yuan, on top of having illicit earnings of the same amount confiscated, becoming China’s first convicted stock market manipulator. Guo, the former China Construction Bank chairman who became CSRC chief in late October, said in a speech in early December that the regulator would adamantly crack down on accounting fraud, insider trading and other illegal activities. Earlier this month, the agency exposed the country’s biggest-ever case of stock market manipulation that involved an investment company, Guangdong Zhonghengxin, orchestrating “pump-and-dump” schemes related to 552 stocks, out of which it made 426 million yuan. The CSRC has also recently published rules that would require listed companies to keep records on anyone who may have access to price-sensitive information. ($1 = 6.3364 Chinese yuan) (Reporting by Samuel Shen and Jason Subler; Editing by Kazunori Takada) Copyright 2011 Thomson Reuters. Click for Restrictions .

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End Of Year Job Growth Boosting Hopes For Spending Next Year

December 24, 2011

WASHINGTON — Consumer spending and incomes barely rose last month. Business investment has slowed. New-home sales remain dismal. Despite all that, some economists say a brightening job market is lifting their hopes for 2012. More aggressive hiring, the thinking goes, would fuel enough spending to boost the economy. Economists point to another drop reported this week in applications for unemployment benefits, the third straight decline. Applications are now at their lowest level since April 2008. The trend is signaling that layoffs have all but stalled and that employers may be ready to step up hiring. Unemployment, after hovering around 9 percent for more than two years, dropped in November to 8.6 percent. Employers have added at least 100,000 jobs each month from July through November. It’s the best such streak since 2006. Ian Shepherdson, chief U.S. economist at High Frequency Economics, said he expects the economy to grow at a 2.5 percent annual rate in the current October-December quarter. That would be the best performance in a year. More jobs would mean more income. More pay tends to raise consumer spending, which makes up about 70 percent of the economy. Companies then have reason to increase hiring to meet stronger demand. “We are hopeful that the plunge in jobless claims signals exactly that,” Shepherdson said in a research note Friday. Chris G. Christopher Jr., senior economist at IHS Global Insight, noted that many households are still struggling with slight or no pay increases. “But gasoline prices have been falling, and that is giving them more money to spend on other items,” he said. The government said Friday that consumer spending rose just 0.1 percent in November, matching the increase in October. Incomes also rose a scant 0.1 percent. Modest as they were, economists said the figures at least signaled that incomes and spending aren’t stalling. Healthier economic data in recent weeks have helped make the prospect of another U.S. recession seem more remote – as long as Europe’s debt crisis doesn’t trigger a catastrophe that infects the global economy. Some economists trimmed their forecasts for growth based on the weaker-than-expected consumer spending data for November. But they said they still expected the economy to expand at a solid annual rate of 3 percent in the current October-December quarter. It would be the best showing since the spring of 2010. “We are seeing some momentum going into the new year,” said Stuart Hoffman, chief economist at PNC Financial. “At least we are not in a tight spot where we are still worried about relapsing into recession.” Hoffman said that a major source of uncertainty for 2012 was removed this week with Congress’ agreement to extend a Social Security tax cut for 160 million workers – for two months, anyway. As part of the deal, Congress also renewed benefits for the long-term unemployed. If that hadn’t happened, millions of unemployed people would have begun to lose weekly checks averaging about $300 – the main source of income for most of them. And if the payroll tax cut and the long-term unemployment benefits hadn’t been renewed for 2012, economists said the modest growth of around 2.5 percent they expect next year would have been a full percentage point lower. On Friday, the government also released a cautionary report on U.S. manufacturing. Companies’ demand for long-lasting manufactured goods rose by the most in four months in November. But so-called core capital goods, a gauge of business investment spending, dropped for a second straight month. Still, analysts said that with demand for items such as autos still strong, they expect further gains in factory orders and production. In a third report, sales of new homes rose 1.6 percent in November to a seasonally adjusted annual rate of 315,000. Even with that small gain, 2011 is likely to end up as the worst year for new-home sales on records dating to 1963. More significant for the economy was Friday’s report on incomes and spending in November. The scant income gain reflected a decline in wages and salaries. They are the biggest component of incomes. The sluggish rise in spending was held back by a 0.3 percent drop in spending on non-durable goods such as food, clothing and gasoline. Spending on durable goods rose 0.8 percent. The gain reflected solid auto sales in November. Spending on services rose a modest 0.1 percent. This category includes such items as medical treatments and rent, The consumer spending report covers all items that households buy, including services, which make up about two-thirds of spending. After-tax incomes showed no growth in November. The savings rate dipped to 3.5 percent of after-tax incomes, the lowest rate since late 2007. That shows consumers are having to tap their savings to finance their spending because of the weak income growth. The best antidote for that would be an increase in hiring now that fewer people are being laid off. “The jobless claims data point to stronger jobs growth emerging,” said John Ryding, an economist at RDQ Economics. ___ AP Economics Writer Derek Kravitz contributed to this report.

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Healthcare Giant Recalls Motrin Pills That May Work Too Slowly

December 22, 2011

TRENTON, N.J. — Healthcare giant Johnson & Johnson has issued another recall of Motrin pain relievers, at least the sixth in two years. It’s part of a string of more than two dozen recalls of consumer health products, prescription drugs and medical devices over 2 1/2 years. This time, it’s because Motrin IB pills may not dissolve and begin working as soon as intended as they approach their three-year expiration date. That could delay relief of pain. The recall covers Motrin IB coated caplets and coated tablets, in packages with either 24 pills or 30 pills. A company spokeswoman said Thursday that J&J is only recalling packages from retailers, not consumers, because there’s no safety concern. “It’s 59 product lots. It’s about 12 million bottles,” said spokeswoman Bonnie Jacobs. Consumers with questions can call J&J’s Consumer Call Center at 1-888-222-6036, Monday through Friday from 8 a.m. to 8 p.m. Eastern Time. The packages were manufactured between February 2009 and July 2011. Some were produced by an outside contract manufacturer and others were manufactured at J&J’s factory in Las Piedras, Puerto Rico. That’s one of three J&J factories that have been under extra scrutiny by the U.S. Food and Drug Administration over a variety of problems with manufacturing quality. Johnson & Johnson’s McNeil Consumer Healthcare factory in Fort Washington, Pa., has been closed since spring 2010 because of serious problems there. The company is in the process of completely gutting and rebuilding the factory. Since September 2009, J&J has recalled a host of prescription and nonprescription medicines, as well as replacement hip joints, contact lenses and diabetes test strips. Among the recalls were tens of millions of bottles of children’s and adult Tylenol and Motrin, Benadryl, Zyrtec, Rolaids and Simply Sleep pills. The prescription drug recalls have included HIV medicine Prezista and epilepsy pill Topamax. Reasons for the recalls have ranged from contamination with metal shards and class particles, to nauseating odors and inaccurate levels of active drug ingredients. The recalls have cost the company $900 million in 2010 alone in lost revenue from products not being on store shelves, on top of costs for upgrading factories and legal expenses. Along with the FDA, Congress has been investigating the handling of the manufacturing problems and recalls by executives at Johnson & Johnson, which stresses in its corporate credo its responsibility to the doctors, patients and parents who use its products.

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Restaurant Stock Declines May Portend Economic Doom

December 20, 2011

An article in Bloomberg today argues that restaurant stocks , which have seen some steep declines in recent months, may be the “canary in the coal mine” of the economy, portending economic doom down the line. The piece notes that the Bloomberg U.S. Full Service Restaurant Index, a proprietary measure of the performance of restaurant stocks, has fallen 17% in the past five months, while the S&P 500 has dropped just 9%. The author’s theory is that consumers may be cutting back on high-end restaurant spending because their pocketbooks are just starting to be hit anew — and that the full brunt of their pullback in spending is yet to come. But when it does, as the argument goes, the economy could fall back into recession. This strain of thought positions full service restaurant spending as a leading indicator of overall economic prosperity. It’s an argument that has some merit, but it’s not foolproof. For starters, the chief example cited in the piece is Darden Restaurants, the company behind Olive Garden and Red Lobster — but Darden has been underperforming the S&P for some time , indicating that its issue may have as much to do with consumers’ breadstick fatigue as with any underlying trends in the industry. Moreover, even if it’s true that full service has taken a hit, other parts of the restaurant biosphere have remained strong — namely, quick service . Sure, fast food’s strength doesn’t necessarily bode well for overall consumer optimism. But the fast food companies whose stocks have done well, like Chipotle and Panera , have been relatively high end. So it’s possible that the restaurant trends we’re seeing have more to do with consumers’ shifts away from long, heavy meals and toward quick, snacky but delicious bites from places like Smashburger . Then again, maybe we’re just headed towards apocalypse. 2012 is coming, after all.

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Leslie Hendry: Occupy Christmas

December 15, 2011

I love Christmas, but I don’t love shopping. I used to, but I grew out of it. I became less influenced by pressure and less insecure as a person. I don’t know how the change occurred, but I think traveling made a big difference. It takes time and money to travel and see the world, but it also takes time and money to be a consumer. A consumer-driven economy demands many roles and responsibilities from the consumer: make, buy, manage, update and dispose of the product, and put the economy back in gear. Wow, we consumers must be living in the North Pole with a lot of elves at our feet! But we’re not. We’re real people with families and jobs, hopes and desires. Which makes me wonder how it’s my responsibility, or within my power, as a consumer, to bump up the economy, like we’ve been told. We’ve been in an economic holding pattern. Corporations, banks and the 1 percent have treasure chests of cash not being pumped into the economy. Banks and corporations are waiting for consumers to open their wallets, or add to existing debt, before they hire or lend or do anything. The 1 percent give to charity and get tax breaks; how does this stimulate job growth or help small businesses? Around Christmas the pressure on the consumer is even greater. But this year, I am Occupying Christmas by not giving in to the pressures of purchase. I will voluntarily use my time doing something I value. I decided this when, over a course of three days, three scenarios presented themselves to me, and you know if things come in threes it means the universe is telling you something. First, my MacBook Pro’s battery charger stopped working after 18 months of use; second, I noticed cigarette burn-sized holes had appeared in the bum of three of my Hard Tail Forever yoga pants; and lastly, I discovered the certified pre-owned Audi I bought a year ago had the original 2007 tires when I thought the car was equipped with “certified” new(ish?) tires. The cherubic Genius I spoke with at the Apple store said it was “highly unusual” for the battery wires to fray in little over a year, but since I didn’t have Apple Care I would have to purchase a new battery suite for roughly $80. Companies increase their margins via overseas suppliers with cheaper products and then market product insurance because they’re on the hook when the supplier fails to perform. If you don’t take the insurance, they get another sale. It makes as much sense (and money) as the insurance sold in relation to the disastrous mortgage back securities , called credit default swaps . That scam made a slew of money for the insurer AIG (or, more specifically, for a small division of AIG) but led to a financial meltdown for the rest of us. After several calls and email discussions with Hard Tail Forever, the $70 plus yoga pants with holes in the bottoms have been sort of replaced and not without lingering feelings of self-consciousness, like I was scamming them out of new product. I simply thought the pants should live up to their price and tag line: Hard Tail Forever. My mother, who was raised on a farm, taught me to buy quality items to last. In fact, certain brands stick with me when remembering my mother: Clinique, Daniel Green slippers, Neiman Marcus. Now we have planned obsolescence or just crappy products at the same, or higher, prices. Not to mention products sold, which by corporate design, have so many corporate outs if they don’t work out. The balance of power is just, out of balance. Today I try to own less. I find the fewer things I own, the more time I have. I don’t have to clean, dust, update, fix, move, relocate, box, store, repair, finance, or think about things, when I own less. This is the way Gandhi lived, with little. This also conjures up loincloths and John Lennon glasses . When we think of our lives, few aspire to be so simple or take on such fashion. But many of us wish we had more time. The reason I want more time is not simply to lounge around watching TV. The less time I have, the less I know who I am. We identify ourselves by our job position, our role in society, our relationship to others, but when we’re encouraged to work harder, spend more, we think about less, and experience less, of the things that matter to us as individuals. Since corporations have a bottom line to serve, their ethos push individuals to act less as humans and more as strategic company soldiers. In professional settings, I oftentimes wondered who I’d become. We take on certain roles and act outside of what intuition tells us. I’m sure Danny Sparks , former head of the Mortgage desk at Goldman Sachs thought a number of times that the Mortgage Back Securities he sold on the street were strangely and absurdly lucrative, but closed off his intuition, and intelligence, that this might not be so good for homeowners at large. Back at Apple, something about the “system” wouldn’t allow the Genius to make any concessions for my defective battery and “a manager would only say the same thing.” I looked deep into the Genius’ eyes. He knew the battery should be replaced, but because this was a consumer to Genius conversation, the “system” overruled any logical outcome. The Audi dealership offered to pay 25 percent of the purchase of two new tires. That’s nice, but what about not selling me a certified pre-owned car with tires lasting only another 7k miles? All this consumerism wears a girl out. There’s so much more I could’ve done with the time I spent hustling these companies for answers, not to mention time spent buying the stuff — that’s another story. We hear so much about growth, economic growth, continued growth, forecasted growth. Apparently, we are supposed to never stop growing in a tangible way. Yet as I buy less, I suffer less economically, and I grow in other ways. I spend weekends putting energy into my environment, friends and family. Instead of digging the economy out of its hole via the old shopping paradigm (remember George W.?). In ” The Great Reset “, Richard Florida states the next economy will be based on experiential value, i.e. doing things instead of owning things. If companies continue to take more and more from the consumer in substandard products, ancillary insurance products, guilt trips and educational blind spots, then consumers will continue to be unhappy. I’m not advocating zero profits or dismantling capitalism. I do advocate a new hat for the consumer. Ho Ho Ho.

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Adam Levin: Memo to American Consumers: You Just Got Screwed… Again

December 9, 2011

The too-big-to-fail boys and their GOP handmaidens — the Hon. Richard Shelby, the Hon. Mitch McConnell and the other 43 legislative dwarves in the U.S. Senate — have struck again. Senate Republicans blocked the confirmation of Richard Cordray as Director of the Consumer Financial Protection Bureau, which is the first federal regulator charged with enforcing consumer financial protection laws. Plain and simple — just like we experienced a few months earlier with Elizabeth Warren (whose potential nomination was derailed by the same band of robber barons) — Mr. Cordray is the newest roadkill on the conservative superhighway, and the American people have been hosed yet again. Now, you might not realize this, because you’re about to witness a cable news cycle full of Republican senators prattling on as to why their vote was really about accountability and good government. Don’t buy it, my friends. Thursday’s vote was a simple win for greed and gridlock. Republicans didn’t need to win (actually they lost, 45 to 53). To secure their next round of campaign contributions from their financial patrons, all they needed to do was stall. And in that respect, they hit the ball out of the park. Thursday’s vote assures that a whole host of banks and other non-banking financial services companies won’t have a real cop on the beat until at least November 2012, when the next presidential election is decided. Furthermore, the GOP is counting on the fact that when the smoke clears in January 2013, they will be running the show so that they can stamp out all of this consumer protection rubbish once and for all. Guess who lost? Consumers — obviously. But other folks lost, as well. Take, for instance, honest companies (including some of the nation’s largest banks), and anyone who cares about doing business on a level playing field in an environment of integrity. First, a little background. Congress created the Consumer Financial Protection Bureau, which launched last summer, as part of the Dodd-Frank financial reform package. A lynchpin of the legislation is the CFPB, which represents the first federal agency exclusively devoted to the protection of the consumer in the financial services area. Consumer law enforcement responsibility previously scattered among seven other financial regulatory agencies has been consolidated under the CFPB. Whereas other regulators are primarily concerned with promoting the safety and soundness of the American economy (which all too often they confused with protecting the profits of big banks and Wall Street investment firms), the CFPB is a one-stop shop for consumer education, advocacy, research and enforcement. This is vitally important work. Here’s the most obvious reason why: the late-stage mortgage boom of the mid-2000s, and the crisis it caused, was fueled by greed, ignorance, irresponsibility and fraud. After years of historically low interest rates, lenders and the Wall Street firms that funded them had largely run out of qualified people to whom they could lend money. But the banks and investment houses were too addicted to the easy money they made from mortgage fees to change course. Lines were blurred, rules were broken and facilitators were rewarded for creating exotic and risky bundles of securitized loans — which were then off-loaded to uninitiated and unsuspecting investors. According to insider testimony, brokers at companies like Countrywide Financial, the largest subprime lender during the boom, tricked people into taking on loans they couldn’t afford. And then the big boys went about enticing everyone from pension funds to Scandinavian fishing villages to buy those junky loans. When the whole thing fell apart, 99.25 percent of the people were decimated. (You don’t really believe that the entire 1 percent escaped scot-free, do you?) People with mortgages that never should have been written in the first place found the banks too overwhelmed with bad loans to help. Everyone else suffered, too, since the average value of all our homes has dropped by a third since the boom time peak. Guess who also lost out? Honest bankers and any other business that tried to stay free from the mess. Many financial institutions actually tried for years avoid the subprime market. But non-banks like Countrywide were making so much money that eventually, virtually every major bank had to get into the business just to preserve market share. The Consumer Financial Protection Bureau has the power to level the playing field for consumers and honest bankers, but only if and when it has a permanent director. It can educate, do research and enforce existing legislation, but when it comes to the important, innovative work for which it was created, it is seriously hampered. Like an embryo permanently trapped in the womb of the Treasury Department, without a director, it has no power to prevent “unfair, abusive or deceptive practices,” which, of course, is the core of its being. It can’t even write new rules to enforce existing laws designed to protect consumers from mortgage fraud, payday loans charging 400-percent interest, and student loans that consumers can never escape, even if they declare bankruptcy. Republican leaders would have you believe that they blocked this important work because they fear the CFPB has “unprecedented” power and is “unaccountable” to voters and Congress, in the words of Senator Richard Shelby. Who does the Honorable Gentleman from the Great State of Alabama think he’s kidding? Nobody. The CFPB actually has less power than any other financial regulator. (The other seven can even veto any bureau decision.) This isn’t a fight about accountability, transparency, or any such noble cause. It’s a fight about who will win in our economy. It’s a fight between consumers and honest businesspeople on one side, and predators, charlatans and snake oil salesmen on the other. By doing the bidding of their Wall Street contributors, Republicans aren’t just hurting consumers. They’re actually hurting the companies and values they claim to represent. Real bank profits don’t require devious schemes. Real innovation in the financial markets doesn’t involve fraud. Stable banks and a stable middle class depend on everybody playing by the same rules. Senate Republicans, meanwhile, continue to play by an older set of rules, one that already sent our economy down the path of crisis and ruination. “Congress has remained a collection of two-cent politicians who could serve well enough in simpler days,” TIME magazine wrote in 1942. “But the ignorance and provincialism of Congress renders it incapable of meeting the needs of modern government.” Truer words were never spoken. We need the minority party in the Senate to get with the program. We need a CFPB with the firepower, the funds and the fangs to do its job. Until we get that, honest American consumers and businesspeople will continue to get pulverized.

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‘This Makes Absolutely No Sense’

December 8, 2011

WASHINGTON — President Barack Obama says there’s no reason why his nominee to lead the new consumer protection bureau shouldn’t be confirmed by the Senate. Obama spoke shortly after Senate Republicans blocked the nomination of Richard Cordray. Only one Republican joined Democrats in voting for him. Obama says he’s still considering all available options to get Cordray on the job protecting consumers. He didn’t rule out the possibility of using a recess appointment while Congress is on break as a way to circumvent Republican opposition. Republicans say the Consumer Financial Protection Bureau has too much power and too little accountability. The agency is designed to protect consumers from some of the lending and mortgage practices that led to the financial crisis.

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Consumer Advocates Blow Whistle On Starbucks’ Gift Cards

December 2, 2011

A Starbucks gift card seems like a solid, if not exactly personal, present for a caffeine-loving person in your life. But a major complaint from several consumer advocacy groups make make you want to think twice before you plunk down the cash to buy your loved one a couple weeks worth of Frappuccinos. According to the complaint , the terms of service on Starbucks gift cards make customers settle any legal claims that may arise when using the cards in a private arbitration process rather than a court of law. The complainants argue that such a process “would deny customers their access to justice should they seek to pursue legal claims against the company.” The complaint asks Starbucks to amend the terms of use on the gift card to allow full access to courts before the holidays . ABC News notes that one important facet of the complaint is that the arbitration system prevents customers from banding together to launch class-action suits against Starbucks, in the event that multiple customers experience the same problem. Christine Hines at Opposing Views writes that arbitration clauses like this are becoming more common in many terms of use contracts. But for comparison’s sake, it’s worth pointing out that anotherr major gift card sellers, Amazon explicitly allow customers to appeal to courts in the event of a complaint. In-N-Out Burger, though, has a long arbitration clause much like Starbuck’s.

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NBA Won’t Have To Jump Through Hoops To Win Back Fans

November 29, 2011

NBA attendance could catch up to pre-lockout numbers faster than it takes LeBron James’ pregame chalk toss to settle. That’s because fans seem to easily forget sports labor disputes. Fans are so willing to pardon, they almost give banks hope that customers will erase the memory of that little meltdown in 2008. “It’s always a quick recovery,” said Dave Berri, a Southern Utah University sports economist and author of the book and blog, ” The Wages of Wins .” “Fans do not hold a grudge.” Now that the NBA owners and players have reached a tentative agreement to end the lockout and begin a shortened 66-game season on Christmas Day, the question emerges how quickly recession-beaten and disenchanted spectators will return to the game. Despite an average of $48 a ticket and a wave of bad press about both sides during the bargaining, the comeback is expected to be swift. The last three major-league stoppages show that the relief of seeing our favorite sports after an absence overwhelms any sense of betrayal. It’s no contest, really. The National Hockey League’s locked-out, canceled season of 2004-05 generated an immediate surge in attendance the next year players took the ice. In 2005-06, 25 of 30 teams reported increased attendance, with the Pittsburgh Penguins’ patronage growing by more than 33 percent, the Pittsburgh Post-Gazette reported. “My own personal observation is that hockey never even broke stride,” said Rod Fort , a University of Michigan sports economist who wrote extensively about hockey’s rapid recovery. The NHL will have to count on its loyalist base again when its contract with the players expires before next season. “Fans are rightfully indignant during the lockout, and we hear nationwide claims they are finished spending another dollar on the sport they love,” Fort said. “And as soon as play starts, they’re back in full force.” If the NBA’s last play interruption in 1998-99 is any barometer, fans won’t be gone long. The 1997-98 season, featuring the Chicago Bulls’ last NBA title with Michael Jordan, produced a per-game crowd average of 17,135. The lockout-shortened season’s average shrank slightly to 16,738 and began climbing again to 16,870 in 1999-2000. The one permanent loss the NBA suffered was in the broadcast arena. Driven by Jordan’s cross-culture appeal, the 1997-98 finals earned an all-time high Nielsen rating of 18.7, meaning it was viewed by 18.7 percent of American households with television. The ratings plummeted to 11.3 for the championship series between the Knicks and Spurs during the lockout-shortened 1998-99 season, and have never recovered. Much of that, however, could be attributed to Jordan’s second retirement. A public relations expert whose firm once represented former Knicks players Allan Houston and Jalen Rose predicts less spectator resistance this time around for the NBA. Ronn Torossian , president of the 5W agency, gives fans 60 days — tops — to fully resume their patronage. “Pro sports in this country is a religion, and it’s not going anywhere anytime soon,” he said. We asked the NBA how quickly it expected to restore its attendance, but a spokeswoman said the league could not comment until the new agreement was officially ratified. At least the NBA didn’t jettison its postseason, like Major League Baseball did in 1994. After a labor impasse wiped out the World Series, some historians declared that national pastime was saved by the home run race between Mark McGwire and Sammy Sosa in 1998. Berri and Fort dismiss that as a myth of Casey at the Bat proportions. Many observers make the mistake of comparing post-strike attendance to 1993 (70,257,938 total, 30,964 per game), but that was the year the Colorado Rockies and Florida Marlins entered the league. The novelty and additional games in made-for-football stadiums resulted in the biggest crowd surge since 1946, Berri explained, so any season soon after would pale in comparison. The truth is, per-game attendance in 1996 (26,510), the first full season after the strike, had climbed back to 1992 levels (26,529). Baseball has lingering attendance and TV ratings problems, but tracing them to a board-room standoff 17 years ago may be a little far-fetched. (The sport reached a five-year collective bargaining agreement last week to avoid lockouts and strikes for the time being.) To end its latest labor war, the NBA will have the advantage of opening on Christmas Day, a holiday the league has adopted as its regular-season showcase. That means an expectant national TV audience. Fans will be able to open gifts and watch a triple-header featuring a rematch between 2011 NBA finalists Miami and eventual champion Dallas. Berri said he believes the ratings will soar higher than last year’s Christmas telecast. For the record, ABC’s airing of the Lakers and Kobe Bryant against the Heat and James on Dec. 25, 2010, attracted a 6.4 rating, a 45 percent increase over the previous season. An improvement will be a slam dunk. “America is a very forgiving place and Americans don’t have a long memory,” Torossian said.

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

November 29, 2011

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

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Al Checchi: We Have Met the Enemy and He Is Us

October 24, 2011

We hear a lot these days about those evil corporations and their pernicious effect on America. Should we hunt down these malefactors of malice? Perhaps, but on examination, they would be us. Off with our heads? Every one of us who is not employed by the government but engages in some commercial endeavor, be it giving manicures or building bridges, conducts these activities either as a sole proprietorship, partnership, or corporation. The differences: unlike proprietorships and partnerships, corporations are taxed twice, once at the corporate level and again at the individual stockholder level, but their owners (shareholders) are insulated from personal liability. For example if I own a restaurant as an individual proprietor, I can be sued personally by an accident victim. A corporation like McDonald’s may be sued for the same accident but its individual shareholders cannot. Without the protections of limited liability, very few individuals would be willing to invest in any enterprise and subject themselves to defending against potentially unlimited liability. Our very first corporate charters were granted by the states to induce private individuals to join together to build large infrastructure projects like bridges and turnpikes. What do American corporations do today? They do the same thing that any proprietor does, e.g. make and deliver goods and services. They succeed or fail based on the difference in the value that consumers put on their products and the cost of producing them – that ugly thing called “profits”. The formula for running a successful business is quite simple: combine human and material resources as efficiently as possible to create the greatest amount of value for the consumer. Most corporations like Apple, Microsoft, Federal Express, Marriott, and Proctor and Gamble obey the rules and strive and succeed at developing and producing popular products and services that create value (what some call corporate greed). Others like Enron and WorldCom break the rules. Corporations are only as good or bad as the people who run them. Just as most people are honest and do not break the law, most people through their actions as (proprietors, partners, and corporate employees) are honest and conduct themselves within its bounds. Some obviously don’t and they should be removed and punished. Most behave ethically; too many don’t. That is human nature. And as in any endeavor, half the people running business enterprises are below average. Only a minority are exceptional. Corporations are our principal providers of employment but that is decidedly not their objective. Their objective is to maximize profits (more corporate greed). They seek ways to make investments and increase value (provide more goods and services at a profit). To do this generally requires that they employ more people. Employment is the byproduct of investment. Governments have a role in this process too. While they don’t create employment directly, they are a major influence on the ability and willingness to make investments that increase employment. Case in point: As recently reported in the Wall Street Journal, California based CKE which operates 3000 restaurants nationwide is no longer opening restaurants in California but is opening 300 in Texas. One of the reasons: In California the regulatory process can take two years versus only 6 weeks in Texas and as a result, the cost of opening a restaurant in California is $200,000 greater. Similarly, America will import approximately $350 billion of oil this year. While we have many proponents of “green energy”, until we develop viable alternatives to fossil fuel, we must continue to consume oil. We have ample untapped oil reserves of our own to replace all imports. If not restricted by government, we would invest in extracting them. This would create jobs in the oil industry. The $350 billion increase in domestic income and spending would produce more jobs. And the increase in supply and resulting decrease in the cost of oil would allow consumers to spend their savings on other things and increase jobs even more. The lesson, if you want to create jobs, shape public policy to attract private investment. America and indeed the world have no shortage of individuals or enterprises that want to make a buck. Off with their heads?

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Gary Shapiro: Business Must Step Up to Solve the Budget Challenge

October 14, 2011

Almost every sentient American now understands that our political leaders have done nothing to address the challenges of our growing debt, other than to kick the can down the road to yet one more committee. Certainly, Standard and Poor’s, the stock market and the American people have expressed a vote of no-confidence in Washington’s ability to find a solution. Indeed, a recent CBS News survey found that 73 percent of Americans believe the country is heading in the wrong direction. The budget-cutting Supercommittee faces a Sisyphean challenge as the “no entitlement cuts” Democrats must confront the “no new taxes” Republicans and somehow agree before Christmas on a deal. So we face another meltdown scenario in late 2011 when mandatory and arbitrary cuts kick in, absent the bipartisan committee solution adopted by both Houses of Congress. The meat cleaver approach of these cuts would surely be unacceptable to almost every one remotely affected and the uncertainty itself of this approach is unhealthy, disruptive and inconsistent with competent government. We are on a speedy train to a disaster with a vacuum in national political leadership. Like nature, the economy abhors a vacuum. In fact, this vacuum represents a huge opportunity for those who create jobs to take leadership and provide a solution. Specifically, American business leaders have an unprecedented opportunity to present a way out of this morass that will not only solve the certain impasse, but also boost the economy and create jobs. Any grand plan business proposes must address both spending and revenue. On the spending side, who better than business to look systemically at entitlements and make tough calls on raising the retirement age, means-testing benefits and competitive sourcing for health care? No business would spend money like the federal government does today on, say, drugs, where the government pays sole source supplier drug companies any price they ask. Businesses would also address the disincentives for Americans to pay taxes through the cash economy and seek meaningful work. And business will be able to suggest ways that new businesses and jobs can be created and formed. A business-led solution, not subject to party constraints and pledges, would address revenue (or what we used to call taxes). A business-led plan could be modest and enhance revenue by simply advocating that all the Bush tax cuts expire. With American youth fighting two wars, I suspect most Americans would pay more in taxes if business and political leaders agreed it was appropriate and if they knew that the money was well spent. More ambitiously, business could suggest a complete overhaul of the tax code, eliminating favored credits and deductions and moving toward a fair tax, flat tax or simply lower rates to make U.S. companies competitive world wide and individual taxpayers more equal. Business favorites such as the R&D tax credits, accelerated depreciation, and even charitable deductions would be eliminated. Also, the mortgage interest deduction could fade away, and suddenly renters would be as favored as home buyers. Time is running out on the United States as the world’s economic leader. That’s why we need a business-led grand plan. Facing the possibility of decline, most Americans will sacrifice if properly inspired with real leadership. Red-blooded Americans want a strong, healthy America and a real future for their children. Our generation may be the first that fails to give its children a better country from what we inherited. So we can no longer let our political leaders define the future. They have been defined by their left and right wings while the American people are increasingly declaring themselves independents. With the recent and growing Occupy Wall Street anti-business demonstrations, corporate leaders would be wise to be constructive with shared sacrifice solutions today, rather than face a larger more hostile public sentiment tomorrow. It is time for business leaders to step forward. and stand up to offer a vision and a plan for a national future which focuses less on filling our short term desires and more on our children’s right to inherit a better country. Gary Shapiro is president and CEO of the Consumer Electronics Association (CEA), the U.S. trade association representing more than 2,000 consumer electronics companies and author of the “New York Times” bestselling book, “The Comeback: How Innovation Will Restore the American Dream.”

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Week Ahead: Bank Earnings and Inflation Data

October 14, 2011

Earnings reports, in particular from a handful of big banks, will draw investors’ attention next week. Tech giant Apple’s ( NASDAQ : AAPL) earnings are also due, the report arriving in the immediate aftermath of the untimely death of co-founder and long-time chief executive Steve Jobs . Industry leaders Bank of America (NYSE: BAC), Goldman Sachs (NYSE: GS), Citigroup (NYSE: C), Morgan Stanley (NYSE: MS) and Wells Fargo (NYSE: WFC) are all scheduled to report earnings. Each bank has its own story, none more compelling perhaps than Bank of America, which is facing problems on a number of fronts, not least backlash from customers angry about the bank’s plan to apply a $5 monthly fee for using debit cards. The rest, with the ever-dominant Goldman a likely exception, could be hampered by the difficult economy, which has dampened enthusiasm for the kind of big corporate deals for which these banks earn big fees. Apple’s new chief executive, Tim Cook , if he participates in the company’s earnings conference call, could face questions on the direction he intends to take Apple as competition in the consumer gadgets sector gets ever more intense. Earnings from bellwether companies IBM (NYSE: IBM) and Coca-Cola (NYSE: KO) are also due. Inflationary data comes out with the Producer Price Index released Tuesday and the Department of Labor’s September Consumer Price Index out Wednesday. The Federal Reserve has said repeatedly that inflation is a potential concern in the near future, but is not currently a high priority. Gas and food prices have leveled off somewhat since rising sharply earlier this year primarily due to catastrophic events worldwide. Data on September housing starts is due Wednesday. Many economists believe a broad and sustained economic recovery will begin with the housing sector. A glut of inventory and skittish buyers have hurt demand for months. Those dynamics aren’t likely to have changed in September. Existing home sales figures are due Thursday. Also on tap for next week is a report from European fiscal leaders on how to deal with Greek’s overwhelming debt. Any news out of Europe regarding the Greek debt crisis has drawn an immediate response from Wall Street , with good news prompting rallies and bad news prompting sell-offs.

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Fed Launches Stimulus To Abate ‘Continuing Weakness’ In Labor Market

September 21, 2011

WASHINGTON (Reuters) – The Federal Reserve on Wednesday dialed up its aid to the beleaguered U.S. economy, launching an effort to put more downward pressure on long-term interest rates over time and help the battered housing sector. The Fed said it would launch a new $400 billion program that will tilt its $2.85 trillion balance sheet more heavily to longer-term securities by selling shorter-term notes and using those funds to purchase longer-dated Treasuries. It will now also reinvest proceeds from maturing mortgage and agency bonds back into the mortgage market, an acknowledgement of just how weak conditions in the sector have remained. “Recent indicators point to continuing weakness in overall labor market conditions, and the unemployment rate remains elevated,” Fed said in its statement. Faced with a lofty 9.1 percent jobless rate, consumer and business confidence sapped by a troubling U.S. credit downgrade, and an escalating sovereign debt crisis in Europe, Fed officials have signaled they would seek to prevent already sluggish U.S. growth from weakening further. But even as Fed Chairman Ben Bernanke has indicated the central bank’s reluctance to stay on the sidelines, Fed activism has become a punching bag for politicians as an election year nears. Top Republican congressional leaders wrote to Fed Chairman Ben Bernanke this week urging the central bank to desist from further economic interventions, echoing criticism voiced by Republican presidential candidates in recent weeks. Fed officials, however, believe that by shifting their bond holdings they could encourage mortgage refinancing and push investors into riskier assets, such as corporate bonds and stocks, without stoking a run-up in consumer prices. The U.S. central bank is not alone in its concerns. The Bank of England on Wednesday signaled it was ready to pump more money into the weakening British economy, potentially as soon as October. Similarly, the Norwegian central bank held its main interest rate unchanged and signaled it might refrain from rate increases for longer than previously expected due to a weaker global economy and the euro zone debt crisis. The U.S. economy grew at less than a 1 percent annual rate over the first half of the year and analysts have warned of a heightened risk of recession. A report showing U.S. employers added no new jobs on net in August provoked widespread fear growth could stall. The Fed has already embarked far down one of the most aggressive monetary easing paths on record. It cut overnight interest rates to near zero in December 2008 and then moved to more than triple its balance sheet to $2.8 trillion through a series of bond purchases. After its last meeting on August 9, the Fed said it expected to hold rates at rock-bottom levels at least through the middle of 2013, a decision that drew three dissenting votes. BROOKING DISSENT The International Monetary Fund warned on Tuesday that the United States could fall back into recession if the government tightened its budget too quickly. It recommended the Fed consider a further easing of monetary policy as long as there was no sign an inflationary psychology taking root. The Fed has already embarked far down one of the most aggressive monetary easing paths on record. It cut overnight interest rates to near zero in December 2008 and then moved to more than triple its balance sheet to $2.8 trillion through a series of bond purchases. After its last meeting on August 9, the Fed said it expected to hold rates at rock-bottom levels at least through the middle of 2013, a decision that drew three dissenting votes. Critics claim the easing campaign has failed to produce results and warn it could actually cause damage. “We have serious concerns that further intervention by the Federal Reserve could exacerbate current problems or further harm the U.S. economy,” Republican congressional leaders wrote in the letter to Bernanke, which they released on Tuesday. The central bank’s policies have become a topic on the presidential campaign trail as well. Texas Governor Rick Perry, a leading Republican candidate, said any further Fed money printing would be “almost treacherous, treasonous.” Copyright 2011 Thomson Reuters. Click for Restrictions .

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Geithner To Float Leveraging Euro Rescue Along Lines Of U.S. Program

September 15, 2011

WROCLAW, Poland (Reuters) – Treasury Secretary Timothy Geithner is likely to suggest to European finance ministers on Friday that they leverage their bailout fund along the lines of the U.S. TALF program, EU officials said. “Geithner will probably insist on the importance of leverage to have more funds to ringfence the big Europeans, Italy and Spain, and to find a solution for Greece,” one EU official said. “The leveraging of the EFSF — I think this is something that he will put on the table,” the official said. “There could be some openness to the proposal.” TALF — the Term Asset-Backed Securities Loan Facility — was set up by the U.S. Federal Reserve and the U.S. Treasury during the global financial crisis in 2008 to jumpstart the frozen Asset Backed Securities (ABS) market. Under TALF, the New York Fed would lend out up to $200 billion, taking ABS as collateral with a haircut and the Treasury offered $20 billion credit protection for the Fed. In this way, a little bit of public money leveraged a much larger central bank contribution and the same idea could work for the European Financial Stability Facility, which has 440 billion euros at its disposal, to offer credit protection to, for example, the ECB to buy euro zone sovereign bonds. “One of the difficulties is that leverage may be seen as a potential liability,” a second EU official said. “But it deserves to be looked at in detail.” A third euro zone official said that Canada has made the same suggestion for Europe. “It could help those countries where the sovereign bond market is still curable,” the third official said. Such a solution would help ease market concerns that the EFSF does not have enough money to bail out Greece, Ireland Portugal and also help Spain and Italy. “Of course you would have to see if on the basis of the EFSF mandate you can do something similar,” the first official said, adding the solution had not been free of hurdles in the United States either and in Europe they could be even bigger. “From an economic point of view it is a reasonable idea,” the first official said, noting however that the ECB would have to play along with such a scheme. “The issues are more on the institutional and legal side and of course political — you have to find a way for the ECB not to, de facto, finance fiscal policy, but on the other hand you need to have resources that the ECB has and the EFSF has not.” Leveraging the EFSF, however, would not take place before the fund’s new powers of intervention on bond markets, extending precautionary credit lines or lending for bank recapitalization were ratified by the end of September, the official said. “Once the EFSF becomes more flexible, you can see if there are ways similar or different to try to leverage more the EFSF or find other ways to have a critical mass to ringfence Italy Spain and the others,” the official said. “You can also think about leveraging on other actors, not necessarily just the ECB,” the official said. (Additional reporting by Tim Ahmann in Washington) (Reporting by Jan Strupczewski, editing by Patrick Graham) Copyright 2011 Thomson Reuters. Click for Restrictions .

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Elizabeth McVay Greene: New Agriculture Needs Out from Under the Corporate Thumb

September 14, 2011

Last week, Walmart announced a $1-million grant for Growing Power , a Milwaukee- and Chicago-based organization started by Will Allen that focuses on equal access to healthy food for all communities. The Good Food Revolution was aflutter with reactions. Should Growing Power accept Walmart’s support? Can big corporations really be part of the transformation in farming and food, or are they merely participating to rack up do-gooder points? In a reaction to Will Allen’s Facebook message explaining the decision to take the funding, Zac Henson declared, “The revolution will not be grant-funded.” Henson’s perspective raises a crucial and unresolved question: can New Agriculture succeed without the financial and operational support of the corporate network it aims to subvert? The problem with Growing Power accepting Walmart funding or pursuing the PepsiCo grant they’re after is not whether powerful corporate interests and dollars ought to be part of shifting the food system. They should. The agriculture movement is not exclusive; it has emerged from concerns shared by citizens, nonprofits, governments and multinationals alike. The deeper problem the funding decision exposes is that if New Agriculture relies on money and support from Industrial Agriculture (and I call it that very intentionally; I am talking here, as I have before , about those corporations that apply traditional notions of efficiency, economies of scale, and operational rigidity to an agricultural system that performs anything but linearly and predictably), then the paradigm of agricultural production and food consumption does not change. Instead, the predominant market system prevails and organizations like Growing Power that fuel the new model in fact exist within the dominant system as a subject of corporate efforts to participate in the cutting edge. We need a more profound shift than that to sustain the agricultural resurgence we’re witnessing. In New Agriculture, decisions and information do not need to be centralized in the hands of a few powerful companies. Rather, a diverse base of producers and consumers is beginning to coordinate the production, marketing, purchase and consumption of wholesome food with alternative markets, new tools and inclusive approaches. It looks like Windowfarms providing farming kits to citizen growers. It looks like Plovgh giving farms a way to earn more for their crops by reaching their customers en masse. It looks like hundreds of thousands of farms in this country reclaiming their economic fate by putting their land into food crops instead of commodities and selling that food directly to the people who eat it. Growing Power is part of the reason New Agriculture finally feels accessible, but their decision to take support from a corporate giant places them squarely within the corporate framework. Negative reactions to the organization’s decisions express the disappointment that a leader on the alternative path just nestled itself into the hierarchy it aims to change. Its values and mission just became a line item within Walmart’s annual report (or, worse, its Corporate Social Responsibility report) instead of a call for an entirely different way. It reminds us that we’re stuck. To have the lasting impact that the world needs, New Agriculture needs to stand on its own. To do so, it has to be profitable. New Agriculture does not need a re-funneling of corporate money, money that, because of the dominant structure it perpetuates, won’t give us the market changes that will keep farmers on the land, improve the quality of our soil, and yield healthful food crops and relationships across our agriculture. We need new business models that are built for New Agriculture, that reward the producer and the consumer, that value decisions that are optimal economically as well as environmentally and ethically, that give influence back to the people who grow the food and the people who eat it. Only when the companies that are clearing a truly alternative agricultural path are prepared to upend and eventually replace the old paradigm of the agricultural sector with connectivity, community and environmental stewardship will we have a chance of sustaining the revitalization of our farms and food. This piece also appears on Plovgh .

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Barney Frank Blasts GOP ‘Arsonists’ For Blocking Obama Nominees

September 2, 2011

Rep. Barney Frank (D-Mass.) sharply criticized Senate Republicans Friday for blocking President Barack Obama’s nominees to head government agencies. “It is the legislative equivalent to an arsonist having set a fire and objecting to a building’s inhabitants using the fire exit,” Frank writes in an op-ed for The Washington Post . Frank presents the case of Richard Cordray, a former state attorney general who was nominated by Obama in July to head the Consumer Financial Protection Bureau. Senate Republicans vowed to block Cordray’s nomination — or that of any nominee — without changes designed to weaken the new agency. Cordray is just one in a long line of Obama nominees that Republicans have blocked in order to protect financial institutions, Frank writes. In June, Peter Diamond withdrew his nomination for Federal Reserve governor after failing to gain support from Senate Republicans. Richard Shelby (R-Ala.), the top Republican on the Senate Banking Committee, was just one GOP leader who criticized the nomination, saying Diamond — who won the Nobel Prize in economics in 2010 — lacked monetary policy experience. Shelby also had a hand in ousting Joseph Smith, who was nominated by Obama to be the director of the Federal Housing Finance Agency. While Frank notes that the Republicans’ ability to object to the independence of the consumer agency is “entirely legitimate,” he does disagree with what he sees as a misuse of power. “Senate Republicans are not entitled to use the confirmation power as a bludgeon to get their way when they cannot do so through the normal legislative process,” Frank writes. As for Cordray, Frank expresses disappointment in the 44 Senate Republicans who have vowed they won’t consider him to head the CFPB. “We’re going to see an extraordinarily qualified administrator of an important consumer protection agency be trashed by the Senate Republican minority because their primary goal is to ensure that financial institutions are not troubled by what they may see as an excessive concern for consumer fairness,” Frank writes. Related video:

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Scott Shamberg: More Anything? More Everything! — Millennials & The More Movement

August 30, 2011

What do you expect? Ask someone that question and I think what you will find is that expectations are on the rise. I want more out of my marriage, my career, my car, and my investments. I want my employer to care about the community as much as they care about profit. I want The Bachelorette to pick JP and not Ben (Go ahead and click. You know you want to.). I want my president to be Green. I want my president to single-handedly lower the price of oil. You know, expectations within reason. Are we entitled to want more? Of course we are. That’s the American way and will continue to be even after we become part of China. This movement though, this “More Movement” that is underway as a parallel path to capitalistic ideals, is being driven by millennials and, in particular, by two of their characteristics: 1. They want to feel good about what they’re doing and where they’re spending. Employees are entering the workplace and are w illing to make a sacrifice to get more value and rewards outside of monetary return. “What is the CSR strategy at the company?” is a question hiring managers are hearing almost daily from Gen Y. They want to be part of something different in an environment that makes them feel good . This includes working from home, quick advancement and salary increase, but also charitable contributions, community outreach and flat out recognition for what they have done. 2. They want control. It is in their role as consumer that Generation Y is truly changing expectations and how these are managed. In a stud y by Ford in association with Twitter, millennials’ expectations as consumers were sliced and diced. Millennials want brands to enable self-expression, connectivity, gamification, access and brand as content. Price and relevancy are the table stakes. This consumer wants skin in the game; they want a say in what they buy, when they buy it, and, of course, how much they pay. To say that the consumer is in control is an understatement along the lines as the statement that congressional bickering is a small roadblock. Smart brands understand that the consumer is in the driver’s sear and embrace it — Apple, American Express, and Starbucks are great examples. Hell, even Obama knew. Access? Self-Expression? Connectivity? Yes we can , but only if we use Facebook and YouTube. The daily deal sites, however, are an X Factor. They are rolling across the more movement, overwhelming consumers with constant advertising and a tidal wave of offers not seen since permission based email was all the rage. The problem? They understand pricing, sure, but what about the model says access, connectivity or self-expression? Quirky emails and copywriting don’t go far enough for Generation Y, which can see past the mental image of the world’s most interesting man taking tango lessons to the true end game: real value, reward and recognition. Those are the pillars of what brands and, not surprisingly, politicians, need to deliver to this audience. There is more research on this topic already than can be read. But is it really that hard? Isn’t it just common sense that people want as much as they can get out of any relationship they commit too? Of course it is. But as people demand more they seem to be getting less. Would you expect any differently?

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Pamela Yellen: What’s Great for the American Consumer Is Bad for Our Nation’s Economy

August 22, 2011

Three cheers for the American consumer. While our leaders in Washington pay little more than lip service to the need to reduce our nation’s debt addiction, Americans by the millions are working harder than anytime in the past 40 years to live within their means. Far fewer consumers are carrying credit card balances these days and, better yet, those who still owe money on their cards owe less than they used to. According to TransUnion, the average consumer credit card balance as of March 31 st was just under $4,700, a ten-year low. That’s down 19% from 2009 levels. Overall, the sum of U.S. consumer debt — including home mortgages and home equity credit lines — fell almost 16% since the onset of the recent recession. This so-called “deleveraging,” most economists say, is either a reflexive response to the collapse of Wall Street and housing prices, or it’s a sea change in the spending habits of the American people. “Our analysis shows that consumers have made a concerted effort to pay down their credit cards during these uncertain economic times,” Ezra Becker, a TransUnion executive, recently told the ABA Banking Journal. This new discipline among consumers is forcing politicians, policymakers, economists, bankers, financial services executives and most Fortune 500 CEOs to sit up and take notice. Why? Put simply, when consumers borrow less they also spend less. And when they spend less, they consume less. Given that roughly 70% of the U.S. gross domestic product (GDP) relies on household consumption, when consumers reign in their borrowing, it spells near-term trouble for our economy, job creation, corporate profits and tax revenues. Think of the irony… American consumers — after years of excessive borrowing — finally buckle down, reduce their personal debt and improve their household balance sheets. Yet such responsible behavior turns out to be a serious drag on our nation’s economic engine. “Deleveraging is easier to say than do,” writes Alen Mattich, a senior reporter for Dow Jones Newswires. Much of what fueled economic growth in America and other developed countries over the past 20 years was consumer borrowing, he explains. So now, Mattich points out, not only have individuals ceased to lop on more and more debt, their priorities have shifted to paying off what they borrowed for yesterday’s consumption. Such behavior constitutes a praiseworthy fiscal fitness diet for consumers – but also places a serious damper on our economic growth. Take one example. In his 2010 book, The Age of Deleveraging , economist and Wall Street pundit A. Gary Shilling says many American companies — and hence their shareholders and employees — stand to pay the price of consumers’ newfound monetary pragmatism. “Leisure airline trips, ocean cruises, new household appliances and vehicles are expenditures consumers will postpone or avoid as the ongoing saving spree persists for years,” Shilling cautions. Dow Jones’s Mattich echoes Shilling’s foreboding. “It seems clear we’re only at the beginning of a very long, rocky road. Which investors will, like penitents, walk on their knees.” I genuinely wish there were an alternative for our country. But rebounding from any addiction and the excesses it fosters is never easy. Our economy may, indeed, be in for a painful period of deleveraging-driven restraint. But let there be no doubt that consumers have finally got it right It’s high time we pay down — and ideally pay off — our irresponsible debt, fortify our savings and re-inflate our retirement portfolios. Then, as proud owners of a pristine household balance sheet, we can once again purchase appliances, buy new cars and take luxury vacations. Only next time, we won’t be paying for these discretionary goods and services with someone else’s borrowed funds. Growth that is paid in full — rather than recklessly borrowed — will in time make our American economy infinitely stronger and far more durable. Next : In the second of three columns on the topic of consumer debt, I’ll discuss ways that credit card providers and retailers can lure back wary consumers and provide a fresh spark to America’s stagnant economy. And I’ll show you how you can become your own source of financing using a method that’s actually better than debt free. Update : Eliminating personal deficit spending is the first stage in my 5-step program that empowers each and every one of us to become effective citizen soldiers in the battle to fix our nation’s economic woes and political gridlock. To learn more, I recommend you read my August 2011 Bank On Yourself website Cover Story, “A Do-It-Yourself Fix For The Economy, Deficit, Social Security and Unemployment. ” New York Times bestselling author Pamela Yellen is the founder of www.BankOnYourselfNation.com , a website dedicated to helping people achieve lifetime financial security and self-reliance. As president of www.BankOnYourself.com , she’s helped hundreds of thousands grow their wealth safely and predictably.

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Dan Frommer: HP Made the Right Moves: It’s No Apple, So It Shouldn’t Try to Be

August 19, 2011

HP made several bold moves Thursday, announcing plans to spin off its PC business and shut down its struggling phone and tablet unit. While these decisions are controversial, I believe they are the right ones. In all of these markets, the company that HP is chasing is Apple. The Mac is capturing the high end of the consumer PC market, the iPhone is capturing the majority of the mobile industry’s profits, and the iPad is the only tablet that matters. But HP is no Apple, and CEO Leo Apotheker knows that he is no Steve Jobs. So he is smart to cast off the past and look for a future more within his and HP’s competency — such as its $10 billion acquisition of enterprise software firm Autonomy, also announced Thursday. First, let’s look at the PC business. With leading market share, why would HP spin it off or sell it? Because everything about HP’s view of the PC industry is undesirable, even though it’s on top today. It faces strong competition from iPads. The industry is either barely growing or shrinking , depending on the quarter and exact segment. It is becoming further commoditized, and Asian companies are in better position to deliver lower prices for similar products. (The fastest growing segment is Chinese piracy boxes.) And with all those factors in mind, margins are sure to head south. So it’s better to sell now, before things get ugly. HP can get a decent price for the business, either fully divesting it or keeping a minority stake in a company that someone else can run. There just isn’t a compelling reason for HP to own it anymore. But what about tablets and smartphones? That’s where the industry is going, so shouldn’t HP be playing there? The answer is: Only if it can do a good job and make a profit. But HP clearly doesn’t have the leadership or products to do a good job right now, and there is no clear road to success or profitability. So why should HP waste it’s money trying? Demand for HP phones and tablets isn’t just low; it’s almost nonexistent. Former Palm CEO Jon Rubinstein — a former Apple engineering exec — has already shifted roles , and hasn’t gotten the job done. And even if HP poured billions of dollars into the segment, there’s no guarantee that it will turn itself around or thrive. It’s a huge risk, with the wrong team in charge. So here, too, HP is probably in a better position to let someone else run with WebOS, and either rid itself completely or somehow retain a stake. But HP just bought Palm, you may say. That’s true. But not having an emotional attachment to sunk costs is a true sign of a good leader. (And anyway, HP is a different company today than it was when it bought Palm.) If anything, Apotheker’s willingness to cut where it hurts is a good sign for the future. Ultimately, these look like the right moves. Yes, it might mean HP is smaller, and its future addressable markets aren’t as big or as cool. But the alternative is worse: Running a money-losing tablet and phone business into the ground, watching a PC business suffer through a shrinking market, and not having the capital and time to focus on promising, new opportunities when they present themselves. HP isn’t Apple. So it shouldn’t try to be. Related: ” Amazingly, Microsoft Might Not Miss the Boat on Tablets .”

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Robert Levin: Washington Is Kicking Small Businesses While They’re Down

August 15, 2011

When I review my employees’ performance, one of the things I give them feedback on is the degree of “owner’s mentality” they have toward the business and their work. Or, said another way, are they treating the business like it was their own? I wish that our elected officials in Washington had some owner’s mentality toward their work. While they are campaigning, every politician talks about the importance of small business to the health of the economy. Unfortunately, for most of them, that is where their interest in small business stops. As business owners, we’re accustomed to laws and policies at the federal, state, and local level that make it harder to conduct and succeed in business. However, the debt deal reached earlier this month, as well as its after-effects, brings Washington’s “assistance” for small businesses to a new low. Everyone knows that the nation’s debt situation is a ticking time bomb, and Washington essentially kicked the can down the road once again. Disappointingly, they turned down opportunities to pass better debt deals that would have reduced the deficit to a much larger degree. Had they passed those stronger deficit reducing deals, my bet is that S&P wouldn’t have downgraded our country’s debt. Now the country — no, the world — is dealing with the US government debt downgrade, which has already affected consumer confidence. U.S. consumer sentiment has fallen to its lowest level since May 1980 , according to an early August reading of Thomson Reuters/University of Michigan’s index. Even before the downgrade, business owners had negative growth expectations . Most business owners that I speak with say that maintaining or increasing sales is the biggest obstacle they have been facing . Danielle Seltzer, executive director of the Executives’ Association of New York City (EANYC), a networking organization of independent businesses, said that it’s too soon for most of her members to know exactly what the effect of the downgrade will be, but they are clearly concerned. “Several of our members have expressed their disappointment with Washington because the downgrade creates uncertainty and the perception that the economy will worsen, which discourages businesses from spending and investing in growth,” said Seltzer. She added, “They feel the downgrade could have been avoided had the government acted in a timely, responsible manner — not in the last minute of the 11th hour.” The bottom line is that the political shenanigans that led to the current debt deal are essentially kicking small businesses while they are down. When the recession hit in 2007, we business owners realized that we had to do business differently. We made painful decisions to do the right things that resulted in jobs being kept and our businesses staying afloat. Those that didn’t make those tough decisions are not in business today. Now, Mr. President, senators, and congressmen, we need you to make some painful decisions (i.e., decisions that some of your more extreme constituents might not love) and do the right thing for the country and for those small businesses that you claim to value. While a more meaningful debt deal may not be on the table until after the 2012 election, at the very least make sure the process to be undertaken by the debt deal super committee goes smoothly. Said another way, our businesses need you to take some ownership.

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Apple And America’s Other Most Valuable Companies

August 10, 2011

From 24/7 Wall St. : Apple became the most valuable company in America yesterday when its market cap passed Exxon Mobil’s. The move draws attention to what market capitalization means, and why it is important. The total value of a company is driven by market forces as investors fight over the value of a company’s assets, earnings, and future business prospects. The market cap of each company is skewed by how quickly the stock trades and within what range. At any time, one of the companies on this list could pass another if a stock moves enough. The list, therefore, is hardly permanent Read The Ten Most Valuable Companies In America 24/7 Wall St. assembled a list of the ten most valuable companies in the U.S. We asked why they are on the list and whether their overall direction is up or down. Here are the top ten most valuable companies in America according to 24/7 Wall St :

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Democratic Senator Comes Out Against Further Unemployment Benefits

August 10, 2011

During a Tuesday visit to a factory in St. Charles, Mo., Democratic Sen. Claire McCaskill said she opposed extending federal unemployment benefits. “I’m not for extending the unemployment benefits any further,” McCaskill said in response to a question from local TV station KMOV before saying she would support a continued payroll tax cut. It’s not clear from McCaskill’s statement whether she is opposed to giving the unemployed additional weeks of benefits or if she opposes renewing the existing extra weeks of aid. Members of Congress have frequently been confused on unemployment legislation. McCaskill’s office did not immediately respond to a request for clarification. [ UPDATE: McCaskill's office says additional context omitted from KMOV's report would show that she was responding to a question about giving the unemployed extra weeks of benefits. Her office said she supports preserving the existing extended benefits. "Claire continues to fully support unemployment benefits for people who have lost their jobs by no fault of their own as a result of the struggling economy. This includes up to 99 weeks of unemployment benefits. Unfortunately, expanding benefits beyond 99 weeks -- as some suggest -- is unaffordable and unrealistic because of staunch opposition in the House."] Further extensions of unemployment insurance for the long-term jobless will need all the congressional support they can get. The federal benefits, which can last up to 73 weeks for workers who exhaust the standard 26 weeks of state benefits, are scheduled to expire at the beginning of 2012. Republicans oppose keeping the benefits because of their significant cost to the government — as much as $60 billion a year. President Obama has said he wants Congress to reauthorize the benefits and also a Social Security payroll tax cut, both of which were included in a December deal that preserved Bush-era tax cuts for two years. The unemployment benefits were included in the failed so-called Grand Bargain Obama crafted with House Speaker John Boehner (R-Ohio), but they were left out of the debt deal Congress passed earlier this month. Under current law, people who’ve lost their jobs after July 1 are ineligible for extra weeks of benefits because their state aid will run out after the federal benefits expire in January. Nearly 4 million unemployed currently receive federal benefits. McCaskill said she supported keeping the tax cuts: “The payroll tax cuts — I’m always for tax cuts for working folks because I think that helps our consuming economy.” The progressive Economic Policy Institute has estimated that dropping the payroll tax cut and the extended unemployment insurance as planned in 2012 would cost the economy more than a million jobs next year, as the two policies are rated by economists as among the most stimulative.

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Robert Reich: The Hostage Crisis Continues: Why Obama Can’t Pivot to Jobs and Growth

August 2, 2011

With the hostage crisis behind him, the president is now ready to talk about the nation’s real problem. Nine paragraphs into his remarks today announcing the nation has paid most of the ransom the radical right demanded as a condition for maintaining the full faith and credit of the United States (he didn’t use these exact words), the president pivoted to the agenda he should have been talking about all along: “And in the coming months I’ll continue also to fight for what the American people care most about: new jobs, higher wages, and faster economic growth.” But what precisely will he fight for now that the debt deal has tied his hands? He says he wants to extend tax cuts for middle class families and make sure the jobless get unemployment benefits. Fine, but the new deal won’t let him. He’ll have to go back to Congress after the recess (five weeks from now) and round up enough votes to override the budget caps that now restrict spending. What are the odds? Maybe a little higher than zero. He says he wants an “infrastructure bank” that would borrow money from private capital markets to pay private contractors to rebuild our nations roads, bridges, airports, and everything else that’s falling apart. Fine, but the new deal he just signed may not let him do this either — if the infrastructure bank relies on federal funds or even federal loan guarantees to attract private money. The only way he could create an infrastructure bank without sweetening the pot would be by privatizing all the new infrastructure. That means toll roads and toll bridges, user-fee airports, and entry fees everywhere else. Apart from its potential unfairness to lower-income people, such a privatized infrastructure would have the same effect as a tax increase. After paying more for roads and bridges and all other infrastructure, Americans would have less cash for to spend on goods and services. That means no boost to the economy. The president also wants to complete trade deals and reform the patent process. These may make the economy slightly more efficient, but they’re not going to have any perceptible positive impact on the lives of the 26 million Americans who are now either looking for work, working in part-time jobs but needing full-time ones, or have given up looking. More importantly, the deal he just signed makes it impossible for the president and Democrats to launch any major jobs program — no WPA or Civilian Conservation Corps, no major lending program to cash-starved states and locales, no new help for distressed homeowners, and so on. Nada. “We’ve got to do everything in our power to grow this economy and put America back to work,” the president says, now that the hostage crisis is over. But the sad truth is he and the nation remain hostage to the ideology of right-wing Republicans who won’t let the government spend more money. Yet if the government can’t spend more — at least this year and next, until the pump is primed and the economy is growing again — we won’t see job growth. And without job growth, the economy will remain anemic. That’s why even the stock market is reacting badly to the end of the hostage crisis. If you hadn’t noticed, the number of people unemployed or underemployed keeps growing. (We’ll know Friday how many it added in July, but remember it needs to add 125,000 a month just to keep up with the growth of the labor force. Anything below 125,000 means we continue to slide backward.) The reason: Consumers, who are 70 percent of the economy, haven’t been able to pick up the slack. That’s because they’re still deep in debt. Their homes have plummeted in value. They can’t borrow. Their jobs are on the line and their wages are dropping. So where will the demand come from if not government? The radical right points to the alleged “failure” of the stimulus program as evidence that government spending doesn’t work. The fact is it did work — it saved at least 3 million jobs, and would have saved far more if the stimulus was on the scale needed and directed to job creation. To be sure, pump-priming is more difficult when the well is almost dry, as it is now. And widening inequality — the rich taking home an increasing share of the nation’s total income and wealth — has left the vast middle class with even less purchasing power. But the pump still needs to be primed. And the well has to be filled: The nation must also push for real tax reform that reverses the surge toward inequality — raising taxes on the wealthy, cutting them for the middle, and expanding the Earned Income Tax Credit for the poor. To do this, though, requires that Americans understand the truth. But where will they learn it? The radical right has not only captured the federal budget. In convincing so many Americans the problem is the size of government rather than their shrinking paychecks and growing economic insecurity, the radical right has also captured the American mind. 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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Debt Ceiling Deal A Major Setback For American Labor Market

August 1, 2011

For American workers — both those employed and those looking for work — the deal reached over the weekend to stave off an American default could spell disaster, labor economists say. The deal struck between Obama and congressional leaders, announced Sunday night, may have averted a historic U.S. default, but the $917 billion dollars in cuts planned for the next decade could worsen an already stagnant labor market . While many of the specifics of the planned cuts have yet to be settled, with less government spending to lift the labor market, employed workers, full- or part-time, could enjoy less job security and increasingly stagnant wages, economists say. And those without a job will face an ever more difficult route back to employment. An extension of federal unemployment insurance for the long-term unemployed, discussed in negotiations as late as July, was not included in the final plan . And cuts to government and state spending will likely mean that following months of decreases in public sector employment, even more government workers will be laid off. “This deal represents a consensus of policymakers to look the other way at America’s persistent high unemployment,” said Lawrence Mishel, president of the liberal think tank Economic Policy Institute. “The deal ensures that unemployment will stay high. It will do nothing to help the labor market and the labor market is deeply distressed right now.” In June, a scant 18,000 jobs were added to the American economy, while the unemployment rate ticked up to 9.2 percent. More troubling still, economists say, is that the rise in unemployment was driven primarily by layoffs in May and June, rather than companies’ reluctance to hire. With American manufacturing stalling out in July and GDP growth slowing to a crawl, there is little to suggest that a jump in job creation is on the horizon. The weekend’s deal to prevent debt default will not change this picture. In fact, experts say, it will likely make it worse. Economic historians liken Sunday’s deal to Roosevelt’s decision in 1937 to try to balance the budget after a robust recovery brought on by New Deal spending, dropping the United States back into the Great Depression. “Despite years and years of study by economic historians that we shouldn’t repeat the mistakes of 1937, we seem to be doing it again,” said Lawrence Katz, a professor of economics at Harvard University. The debt deal, as many economists see it, is the opposite of a stimulus: Instead of putting money into the economy to generate jobs and increase demand, money is being taken out. “There’s the classic mantra: When the consumer is not spending and business is not spending, then government needs to get in and spend,” said John Challenger, the chief executive officer of Challenger, Gray & Christmas, an outplacement consultancy group in Chicago. But now, the effects of the government’s package of spending measures aimed at stimulating the economy are becoming exhausted and the debt deal practically ensures that nothing will soon be on the way to replace it. Challenger thinks the first areas of the labor market hit by the deal will be government employees and the businesses that depend on government spending. State and local governments have already been slashing payrolls for months, and companies that depend on government contracts — like Lockheed Martin, a Maryland-based defense contractor that has already begun rounds of layoffs — will likely cut many more positions. “A lot of those billions of dollars that will be cut in the deal goes to pay people’s salaries,” Challenger said. In the private sector, he thinks that the effects won’t be as immediate, and said some employers may be feeling relief that the threat of default has passed. “Private sector businesses are saying, ‘Let’s hope that this means that the country is going to be on sounder footing: that we’re going to get more access to loans that we need to grow our business, that the economy will be more competitive with the rest of the world.’ The big fear is that it’s going to take a long time for that to work.” But economists point out, even if employers are feeling relief that the threat of default is passed, that relief may not translate to increased hiring. The majority of hiring decisions are based on consumer demand and sales prospects, not anxiety over a default. And with U.S. consumer confidence dropping to the lowest level since the recession’s official end last week, an increase in demand may not come anytime soon. “To the typical American, in any meaningful way, we are still in a great recession,” said Katz, the economics professor. Once you account for population growth, Katz added, “the labor market has shown no recovery at all since the recession’s supposed end. We clearly need the federal government, in the short run, providing some kind of demand for labor. This deal signals that there will likely be no attempts at that forthcoming.”

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Elizabeth Warren’s Farewell Note: ‘I Leave This Agency, But Not This Fight’

July 29, 2011

WASHINGTON — Elizabeth Warren, rebuffed by the White House, today leaves the consumer agency she conceived of and created to return to academic life at Harvard Law School. Her unit, the Bureau of Consumer Financial Protection, is charged with protecting borrowers from abusive lenders. Created in the wake of the most punishing financial crisis since the Great Depression, which Warren has said began “one bad mortgage at a time,” the agency is one of President Barack Obama’s most notable accomplishments in attempting to reform the nation’s financial system. But after hostile sniping from Congressional Republicans, and some Democrats, the White House was able to duck questions about its commitment to Warren and her desire to lead the agency, and instead nominated one of her deputies, former Ohio Attorney General Richard Cordray, to be the unit’s inaugural chief. Experts largely agreed Warren was the best candidate for the job. Community bankers, though initially fearful of increased oversight, grew to accept her. Unions and community groups enthusiastically supported Warren, and repeatedly urged the White House to nominate the noted consumer advocate. In the coming days, Warren will leave Washington, take a vacation with her family to the Legoland theme park in California, and return to Cambridge, Mass., where she’ll decide whether to challenge Republican Senator Scott Brown in the 2012 election. Warren sent a farewell note to the nearly 500 staffers she hired and inherited from other federal agencies. “I leave this agency, but not this fight,” Warren wrote. “The issues we deal with — a middle class that has been squeezed and business models built on tricks and traps — are deeply personal to me, and they always will be.” READ Warren’s full note: From: Warren, Elizabeth Sent: Friday, July 29, 2011 1:18 PM To: Subject: A new chapter Team, Four years ago, I submitted an article to Democracy Journal that argued for a new government agency called the Financial Product Safety Commission. I threw myself into that piece because I felt strongly that a new consumer agency would make the credit markets work better for American families and strengthen the economic security of the middle class. In 2007 and 2008, I wrote about the new consumer agency in a number of places, and I talked about the idea with anyone who would listen. And then in 2009, something amazing happened. In June of that year, the President invited a few hundred people to the White House as he unveiled his initial outline for financial reform. It was the first time I had ever been invited to something like this. Just before the President stepped out, aides passed around a summary of the proposed reforms. I grabbed a copy and started tearing through it. As I skimmed over derivatives and capital reserve requirements, I turned a page and saw it—a proposal for a consumer agency. Until that moment, I wasn’t certain whether the new agency would be part of the reform package or not. Under the leadership of Secretary Geithner, Michael Barr, Eric Stein, our own Peggy Twohig, and so many of our other colleagues, the Treasury Department began to refine and improve the initial idea, preparing a proposal to submit to Congress. With strong support from the President, early leadership from Barney Frank and Chris Dodd, and grassroots efforts launched by many consumer groups, the agency began to gather momentum. Despite repeated declarations from the financial services industry and some in Congress that the agency was “dead on arrival” or “going nowhere,” the proposal moved through two nail-biting committee votes, four nail-biting floor votes, and one nail-biting conference committee. It was a hard fight, but the result was a strong and independent new Consumer Financial Protection Bureau with the tools needed to make a real difference for American families. And then something even more amazing started to happen. Good people started turning the idea into a reality. With Wally Adeyemo as Chief of Staff to keep it all organized, we were underway. Smart people with a wide variety of backgrounds—banking, consumer advocacy, government, business, teaching—focused their energy and enthusiasm and creativity on building something new—something that would work for American consumers. All along the way, the pieces came into place. We set critical priorities for the new agency, including streamlining mortgage disclosure and making credit cards easier to understand. We focused our efforts on the challenges facing military families. We organized the most aggressive and effective outreach effort anywhere in government to make sure that our goals were clear and we got as much input as possible from those who will be most affected by the agency’s work. We designed a high-speed, effective HR system, and we figured out how to get in place necessary procurements to support our work. We developed legal concepts to guide our work and procedures to make sure we always honored the law. We created an innovative supervision program. We generated rules of the road to guide our enforcement and fair lending programs. We designed the systems necessary to meet our statutory deadlines and to complete ongoing rule-writing passed from other agencies. We organized an approach for connecting with consumers all across the country through our website, consumer response system, and more. And we did it all in full view, working with Congress and the media every step along the way to make sure the American people are engaged in our work and able to hold us accountable to our mission. That is only a small summary of what we have accomplished together. We did it—and we did it well. And we have some independent verification of that: Two weeks ago, our inspectors general — a tough and independent pair of judges — wrote a glowing report about our stand-up period. Whether you have been here for long months or only a few days, I want to thank you for choosing to be part of this agency. I know that every one of you had other options. I also know that we chose you because we believe you have something special to add. I am grateful that you came here to make a difference. Today is my last day at the Bureau. I leave this agency, but not this fight. The issues we deal with—a middle class that has been squeezed and business models built on tricks and traps—are deeply personal to me, and they always will be. I will cheer as you open a new chapter in our ongoing push for a strong and independent CFPB. You can realize the vision of a 21st century government that holds law-breakers accountable and that enforces basic rules that make markets work honestly. An honest market will give companies that provide fair value to their customers a chance to flourish, free from competition with cheaters. And an honest market will give American families better information, better prices, and better products—and a chance to achieve real economic security. Now it’s up to you -– and I couldn’t be more hopeful about what lies ahead. ew ***** Shahien Nasiripour is a senior business reporter for The Huffington Post. You can send him an email ; bookmark his page ; subscribe to his RSS feed ; follow him on Twitter ; friend him on Facebook ; become a fan ; and/or get e-mail alerts when he reports the latest news. He can be reached at 1-917-267-2335.

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Holly Patraeus: Veteran Advocate At Consumer Protection Bureau

July 21, 2011

Sometimes, catastrophes can lead to changes that better protect us — and by “us,” I mean the residents of Main Street — average Americans whose voices often get lost among the lobbyists and corporate interests.

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Dory Rand: Consumers and Lenders Both Better Off With Fully Functioning CFPB

July 21, 2011

I tend to be a “glass half full” optimist, so I’m pretty happy about the launch of the Consumer Financial Protection Bureau (CFPB) on July 21. Having a regulator that looks out for the interests of consumers is definitely something to celebrate. When talking about “risk” with the old school banking regulators, such as the Office of the Comptroller of the Currency, the Federal Reserve Board or the FDIC, the conversation was usually about “safety and soundness,” or risk to the financial institution’s bottom line and ongoing stability, or about “reputation risk,” or fear of being sued or getting bad press that might affect market price and assets. When dealing with predatory consumer products such as exploding adjustable rate mortgages and tax refund anticipation loans, advocates and regulators often had to frame the problems through that risk lens in order to indirectly obtain fair results for consumers. Those risky products were very profitable to lenders, at least in the short term, but very harmful to consumers and to our economic stability in the longer term. As we have learned now, I hope, allowing risky financial products to be marketed to some consumers ultimately hurts us all. So, when I attended a meeting at CFPB this month to discuss with advocates and industry representatives how CFPB should define the other “larger market participants” over which CFPB has jurisdiction (besides depository institutions, mortgage lenders and payday lenders), it was quite refreshing to hear the CFPB representatives speak about their oversight, enforcement, research and education duties mandated by the Dodd Frank Wall Street Reform and Consumer Protection Act in terms of risk to consumers. In meeting and talking with many of the new CFPB staff, I have been impressed with the high quality and diversity of people that Professor Elizabeth Warren has recruited. Warren is Assistant to the President and Special Advisor to the Treasury for standing up the independent bureau that was her idea. The CFPB has intentionally recruited staff from diverse backgrounds and viewpoints, including financial and labor industry representatives, consumer advocates, researchers and policymakers. The CFPB has embraced its commitment to diversity and transparency in the way in which it conducts outreach. Instead of meeting separately with consumer advocates and industry folks, for example, the CFPB has hosted joint meetings in which opponents can air their differences and find common ground. The CFPB’s use of its website and email outreach to solicit comments from the public on draft mortgage disclosure forms generated over 10,000 comments, likely many more than would have occurred through old school notice and comment processes, although these are still being used. The “half empty” part that tempers my celebration is the fact that, due to Senate Republican statements that they will refuse to confirm any person nominated by the president to head the CFPB, the president delayed his nomination until this week and passed over Elizabeth Warren, nominating Richard Cordray instead. Cordray, a highly qualified former Ohio Attorney General, is a great choice to head the Bureau and deserves to be confirmed quickly. Failure to confirm him quickly would mean that the CFPB lacks enforcement authority over non-depository financial institutions and cannot level the playing field between banks and other industry players. American consumers and financial firms will both be better off when the CFPB levels the playing field by fairly and consistently regulating all providers of financial products and services with the primary goal of protecting consumers. The sooner the Senate confirms Richard Cordray as director of the CFPB, the sooner we can all benefit from better oversight and consumer protections.

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