The scandal-plagued chairman of the DC Council, Kwame Brown, best known for asking city taxpayers to pay for a “fully loaded” Lincoln Navigator worth $2,000 a month, is joining with other GOP-style Democrats to slash city services for the poor. At the same time, they’re opposing the mayor’s proposal to raise $35 million in added taxes from Washington’s richest residents — and, amazingly, the council is moving to give away $19 million in revenue through repealing some taxes for the rich altogether. With the vote scheduled Wednesday, The Washington Examiner reports that a backroom deal was apparently struck Monday evening with Brown when Marion Barry, the former crack-smoking mayor and still a councilman, agreed to reverse his support for tax increases on the rich in exchange for property tax abatements for some churches in his district. The pending budget deal could still cut over $100 million from critical services for the poor, disabled and homeless from the social services budget, roughly two-thirds of all proposed cuts. The safety-net is already so tattered that homeless mothers with infants in tow have been given bus fare to ride the buses all night rather than shelter. As a result , Save Our Safety Net , a group leading a loose coalition of progressive safety-net advocacy organizations, called for protests Tuesday at noon at DC’s City Hall, the Wilson Building. And in the day before the event, they unleashed a series of last-minute videos targeting Kwame Brown, most on the City Council and an otherwise liberal council member, Mary Cheh, for opposing raising taxes on the rich and risking the well-being of the city’s neediest. What wasn’t mentioned publicly is that these same city council members also pay themselves and their staff the most lavish salaries and expenses in the country when measured on a per-seat or per-taxpayer basis: $1.5 million per council seat. The biggest target remains Kwame Brown and his lavish lifestyle contrasted with the poor children, disabled and homeless who could be denied services. The latest video ends with an SUV heading for a crash and the tag line: “Don’t let Kwame run over our most important public services.” Brown has offered what critics see as vague promises to restore $25 million in proposed cuts, but as the S.O.S. group pointed out, following protests last week : After our Wednesday action, we had 7 confirmed Council votes in support of the Mayor’s income tax proposal, enough to pass it. But yesterday we got word that Marion Barry (Ward and Tommy Wells (Ward 6) have decided they no longer support the Mayor’s proposed income tax! We have also heard that Kwame Brown is proposing $25 million in restorations. That is certainly a step in the right direction, but it is not nearly enough. Safety net services are still underfunded by $32 million. By getting rid of the income tax proposal, Chairman Brown, Barry, Wells and other Councilmembers would take away $19 million in resources that could be used to restore funding to critical services. Even though at least 85% of the city residents in a recent poll back raising taxes to preserve social services, most city council members reject that stance and instead are supporting other accounting schemes and alternative revenue measures, including some that the council has rejected in earlier years — such as ending DC’s unique tax break for those who buy out-of-state municipal bonds helping other cities. What’s especially striking is the way these formerly liberal Democrats, echoing a national right-leaning trend in the party, adopt right-wing talking points and even cite the Chamber of Commerce as “evidence” for their views. As recounted in emails about a tense meeting with constituents held by council member and law professor Mary Cheh, who represents the richest and whitest area in the city, Ward 3, liberal voters there aired their complaints that she was abandoning the principles of the Democratic Party and her campaign promises. For instance, as Jessie Sigel, a Ward 3 resident, wrote angrily to Cheh after the meeting: The tax issue aside, I was, quite frankly, shocked to hear someone who professes to be a Democrat, suggest, as her “philosophy,” that anyone one on TANF [Temporary Assistance for Needy Families ] for more than five years doesn’t want to work; that their children don’t have proper role models, followed by righteous professions about the “dignity of work.” The language you used is akin to the old Reagan demonizing of the poor as “welfare loafers” and of the poor “coming to collect their welfare checks in Cadillacs.” If one is going to take a hard line that people should get a job, they need to ascertain that there are jobs — jobs that enable people to pay the rent and feed their children — to be had. When I asked you about jobs programs, child care programs and job training, you didn’t seem to know to what degree they exist in the district. (and, obviously, revenue would be needed to support these sorts of programs)… But embracing a “philosophy” — or as I would call it, a stereotyping of people, without making an inquiry into the group’s situation and options is reprehensible. It is something I would expect of right wing Republicans who have a particular agenda in mind and who are determined not to let logic or others’ needs get in the way. Cheh, like some other leading Democrats who are moving to slash services, used to be considered a progressive, innovative member of the City Concil. Kesh Ladduwahetty, an activist with DC for Democracy , also recounted: Cheh is adamantly against the tax increase, and there’s nothing more substantive in her reasoning than “sending the wrong signal” and small [businesses]. When pressed about small biz, she doesn’t have any data (she’s just repeating Kwame’s rhetoric). Mary Beth Tinker [another DC4D member] called her on the fact that she kept citing the Chamber of Commerce, although nothing specific. Mary Beth also heard her say something to the effect that in order to get some things that she wants done, she has to do some other things (sounds like a blatant statement about trading favors with Kwame). Bottom line: she’s not budging for this vote (not that we can see), but she got the message loud & clear that her progressive base is shocked and disappointed in her. On Tuesday, groups like Save Our Safety Net hope that some in the city’s progressive base will turn out and start calling members of the City Council to support fully funding city services. To that end, some of her young progressive supporters even created a mocking rap video calling on Cheh to respond to the wishes of her constituents on taxes and the safety net:

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Finance Professionals See Business Opportunity In Strapped Michigan Cities

May 12, 2011

NEW YORK — As Michigan cities grapple with budget deficits and spending cuts, their troubles amount to an attractive opportunity for financial industry players, who are eyeing individual localities for state-sanctioned takeovers. Thanks to a new Michigan law , the governor can appoint an emergency manager to have total control over a municipality or school system deemed to be in dire financial straits. Such officials currently run three Michigan cities and the Detroit school district. Many more, from private and public industries, are waiting in the wings, boning up on municipal governance in case one of them is called upon to turn a city around. Hundreds have already been trained. In Detroit , the largest city in the state, the upcoming budgeting process carries an implicit threat: If local politicians can’t convince the state they have what it takes to repair the city’s finances, the state could appoint an outside official to do the job for them. The city has already hit several of the triggers to initiate the process that could install an emergency manager, say local politicians, who are scrambling to keep the city government out of receivership. But would-be emergency managers say they can succeed where elected officials have failed. They stand to draw six-figure salaries from the local governments under their management, but some talk about this work as if it were a civic duty. “We feel very strongly that not only is there a business opportunity here, but we want to be part of a solution for the greater good,” said Michael Imber, a principal in Grant Thornton LLP’s corporate advisory and restructuring services practice in New York. “We’re absolutely ready to help.” Imber is not alone. In February, he was one of about 50 graduates of a training course for Michigan emergency managers, a two-day program promoted in Crain ‘s business magazine. The course was popular, with a waiting list exceeding 100 people, said Eric Scorsone, an economist at Michigan State University, who helped organize the session with the Turnaround Management Association, a corporate restructuring industry group. More than two-thirds of the participants in February were from the private sector, Scorsone said. At the next training program, held in April, public sector professionals were more heavily represented, and about 400 people participated. That course, too, had a long waiting list. “There’s constant chatter going on about this,” said bankruptcy attorney Harley Goldstein, a partner at the law firm K&L Gates. “Everybody wants to make a buck.” Michigan has had an emergency manager statute on its books for 20 years, but Public Act 4, signed by Republican Gov. Rick Snyder in March, endows these officials with expanded powers over the localities where they’re dispatched. Emergency managers now can suspend collective bargaining rights for unions. They can terminate worker contracts. They can strip the mayor and the city council of all their power. These officials were once called “emergency financial managers.” Now they’re called just “emergency managers.” “That’s to emphasize that it’s not just about finances,” Scorsone said. “It’s more like a CEO rather than a CFO.” But even “CEO” doesn’t fully capture the extent of emergency managers’ authority. In the city of Benton Harbor, Joseph Harris has been the emergency manager for a year . Elected officials have resisted his rule, but thanks to Harris’ new powers, he is able simply to âput them in the timeout chair,â state Rep. Al Pscholka (R) told Bloomberg Businessweek . For Detroit, the coming two months are a crucial period, a time in which the local elected officials must prove to the governor that they can take care of the city on their own. The fiscal year ends June 30, and a new budget, which local officials are now in the process of writing, will take effect the following day. Mayor Dave Bing’s proposed budget includes cuts totaling nearly $100 million from a $1.3 billion general fund. The actual cuts could be even greater, city council members say. But it might take more than a balanced budget to convince the state to leave Detroit alone. Local politicians are also writing a plan to eliminate the city’s accumulated deficit, which exceeds $200 million, according to the mayor’s estimate. The goal is to give the city a budget surplus in five years. But for all the planning, the city’s finances could remain tenuous. For one, Detroit’s deficit-reduction plan depends on the state’s allowing the city to collect certain taxes, and to raise others. The latest Census data showed Detroit’s population had declined by a quarter over the last decade, falling below a legal threshold and preventing the city from collecting a utility tax. To get this revenue, and to raise its income tax, Detroit needs approval from the Republican-controlled state legislature — the same body that passed the new emergency manager law. Already, the city has made deep spending cuts to compensate for its depleted coffers. Workers have absorbed furlough days that amount to a 10 percent pay reduction. But city officials say they’re prepared to cut even more. The mayor has proposed shrinking the workforce by nearly 200 positions to help achieve that $100 million in savings. Other layoff counts discussed around City Hall reach as high as 1,000 workers, Council Member James Tate said. The pension and health care systems, too, are frequently cited targets for cuts. Between June 2008 and June 2010, the assets in Detroit’s General Retirement System pension plan lost nearly 40 percent of their value as the financial crisis struck, an auditor’s report shows . In his budget address last month, Mayor Bing said he wants to replace the city’s defined benefit pension plan with a 401k-style defined contribution plan for future hires, and to reduce the value of future employees’ pensions. But the city’s organized labor has resisted. In the end, budget savings might depend on whether the elected officials can successfully negotiate with unions. “We have to make those unpopular decisions,” Tate said. “I truly believe that this particular city council and this mayor will probably go down as one of the most unpopular groups of city leaders in the history of this city. We’re talking about massive change, massive sacrifice.” Outside the city, prospective emergency managers say they can do better. “There’s no question that an outside party can move things along faster,” Imber said. “Whatever the constituencies are that are resistant to change need to recognize what the reality is. If they don’t, they’re going to lose the right to choose.” While some prospective emergency managers have little or no experience in the public sector, they say their private sector experience has prepared them for this job. “We run a process to solve the financial issues of the enterprise,” said Michael Boudreau, a director at the financial firm O’Keefe and Associates, who has 20 years of experience in private industry, and who attended the February training session. “That process works in one industry as well as another industry. In this case, I’m going to say that it works just as well in private as in public.” Like elected officials, emergency managers are paid by the municipality they serve. But private sector turnaround artists are accustomed to salaries far larger than what these cities would offer. A “typical” salary for an emergency manager is about $11,000 a month, according to Terry Stanton, spokesperson for the Michigan Treasury Department. For Detroit, the salary would likely be more, said Scorsone, the economist who helped organize the emergency manager training sessions. He estimated that the annual pay for managing Detroit could reach as high as $400,000. The Detroit Public Schools’ Emergency Manager, Robert Bobb, earns about $350,000 annually . Compensation for private sector restructurings is often many times that. But clients in the private sector tend to have deeper pockets than Detroit taxpayers, who would foot the bill for an emergency manager. The city could end up paying several salaries, since the emergency manager can appoint advisers. But Goldstein, the bankruptcy lawyer, said in an email that he would consider working on Detroit on a pro bono basis. “I strongly believe that restructuring professionals should give something back to the community,” he said, adding, “Detroit’s situation is a noble cause that is deserving of altruism.” Stanton, the Michigan Treasury spokesperson, refused to speculate about whether an emergency manager is in Detroit’s future. State officials are “not waiting with bated breath to send EMs into different local units of government,” he said. What’s more, the purpose of the new law is preventative, he said. “The goal here is not to name emergency managers,” Stanton said. “The goal is to avoid having to name emergency managers.” Indeed, the new law seems to have inspired a fresh sense of urgency in Detroit city hall. A state takeover would be “tragic,” said Council Member Kwame Kenyatta. Local officials are avoiding it “like the plague,” Council Member Tate said. “It would be the end of the democratic process as Detroiters know it,” said Gary Brown, the council president pro tem. “You’d basically have a dictator that’s not accountable to the citizens of the city of Detroit.” “I appreciate people getting their training, but we won’t need them,” Council President Charles Pugh said. “I hope that that training was in vain. I hope that they wasted their time.” But not all city leaders show such confidence in the way the city is currently run. Al Garrett, president of the local division of the American Federation of State, County and Municipal Employees, said the city council members have a vested interest in avoiding emergency receivership — to protect their own jobs. Garrett expressed frustration with the way local politics works. He strongly opposes an emergency manager takeover — “it’s just a host of bad things,” he said — but he also said the current city leaders aren’t exactly ideal. “There are decisions that are made daily that make no damn sense, that lead to our fiscal crisis,” he said. “Part of what we want to see, when we go to the table, is how are you going to deal with the other issues.” “I’m not willing to voluntarily take a bad deal,” he added, “just to get the city out of receivership.”

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Scott Gerber: Startup Bibles: Top Entrepreneurs Pick Their Favorite Books

May 3, 2011

Q: What is your favorite business book and why? –Sally, Arizona The following answers are provided by the Young Entrepreneur Council . Founded by Scott Gerber , the Y.E.C. is a nonprofit organization that provides young entrepreneurs with access to tools, mentorship, community and educational resources that support each stage of their business’s development and growth. The organization promotes entrepreneurship as a solution to youth unemployment and underemployment.

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Video: Tyson Says Current U.S. Tax System Is `Very Inefficient’

April 15, 2011

April 15 (Bloomberg) — Laura Tyson, an economics professor at the University of California at Berkeley and a member President Barack Obama’s Council on Jobs and Competitiveness, discusses Obama’s proposal to overhaul the U.S. tax system and narrow the budget deficit. Tyson, speaks with Margaret Brennan on Bloomberg Television’s “InBusiness.” (Source: Bloomberg)

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Video: Tyson Says Current U.S. Tax System Is `Very Inefficient’

April 15, 2011

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Libyan Opposition Strikes Oil Deal

April 1, 2011

BENGHAZI, Libya — A plan to sell rebel-held oil to buy weapons and other supplies has been reached with Qatar, a rebel official said Friday, in another sign of deepening aid for Libya’s opposition by the wealthy Gulf state after sending warplanes to help confront Moammar Gadhafi’s forces. It was not immediately clear when the possible oil sales could begin or how the arms would reach the rebel factions, but any potential revenue stream would be a significant lifeline for the militias and military defectors battling Gadhafi’s superior forces. Rebel units were pushed back about 100 miles (160 kilometers) this week along the Mediterranean coast, but still held parts of oil-rich eastern Libya and the key city of Benghazi. In recent clashes, rebels displayed more firepower including mortars and rockets, but remain significantly outgunned. Ali Tarhouni, who handles finances for the opposition’s National Transitional Council, said that Qatar has agreed to market oil currently in storage in parts of southeastern Libya. He said one sticking point is how to truck the oil out of the country. Tarhouni said money from oil sales will be put into an escrow account the opposition will use to pay for weapons, food, medicine, fuel and other needs. He said the rebels had asked visiting U.N. and French envoys to have sanctions lifted on the parts of Libya controlled by the rebels. He said that if transport issues are solved, the rebels could immediately start exporting 1 million barrels per week. When asked, he said the rebels would certainly use oil revenues to buy arms. “People are dying,” he said. He said the council was exploring “buying arms, any kind of arms that we can get to. We have a list of the arms we need and we’re trying some different fronts to buy them. There was no immediate comment from officials in Qatar, one of the few Arab states taking part in the international military contingent enforcing a no-fly zone in Libya. Qatar is also assisting a rebel satellite TV operation that began broadcasts this week from Qatar’s capital Doha and has agreed to host a meeting of Libyan opposition groups. A spokesman for Qatar Petroleum, the state company responsible for selling the Gulf nation’s oil, declined to comment. In London earlier this week, Britain’s foreign secretary, William Hague, said Qatar had offered to “facilitate” oil sales that are consistent with international law. Hague did not provide details about who would be supported, how the facilitation process would work, or how Qatar’s offer has been received by diplomats. It has been unclear how exactly such an arrangement would work. The effort to get oil out is hampered by several factors, including the rebels’ ability to hold eastern oil production and export facilities, the departure of skilled foreign oil-field workers and international sanctions that technically apply to the country as a whole. OPEC member Libya produced about output of 1.6 million barrels per day of oil before the conflict, just under 2 percent of world production. Qatar – host of the U.S. Army’s Middle East command hub – has significantly boosted its international profile in recent years with diplomatic initiatives and top-level sporting events, including being picked to host the 2022 World Cup. The 22-member Arab League was critical in winning U.N. Security Council support for the no-fly zone. But only Arab League members Qatar and the United Arab Emirates have contributed aircraft to the mission. Qatar also has agreed to host the first meeting of an international contact group aimed at coordinating political action and opening channels with Libya’s opposition. No date for the meeting has been set. A Qatari aid plane carrying 30 tons of relief supplies including medicine, medical equipment and blankets landed in the Libyan city of Tobruk on Wednesday, according to the official Qatar News Agency. Last month, Qatar sent ground troops to join a Saudi-led force aiding the rulers in Bahrain, which has been wracked by anti-government protests and violence for more than six weeks. In the Arab world, however, Qatar may be best known as the headquarters for the powerful Al-Jazeera broadcasting network, which was founded by the country’s rulers in 1996. A Libyan rebel spokesman, Mahmoud Shamam, said a satellite channel, Libya TV, began broadcasts from Doha earlier this week with financial and logistical support from Qatar. A top rebel official, Mustafa Abdul-Jalil, offered a cease-fire Friday if Gadhafi pulls his military forces out of cities and allows peaceful protests against his regime. ___ Associated Press writers Adam Schreck and Brian Murphy in Dubai, United Arab Emirates, contributed to this report.

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AT&T CEO: T-Mobile Deal Won’t Raise Cellphone Bills

March 30, 2011

By Kenneth Li NEW YORK (Reuters) – AT&T Inc (T.N: Quote, Profile, Research, Stock Buzz) Chief Executive Randall Stephenson disputed the commonly held belief that consumer bills would rise if there were fewer competitors in the U.S. wireless market. AT&T’s defense comes as it girds for a tough regulatory review of its $39 billion deal to snap up Deutsche Telekom AG’s (DTEGn.DE: Quote, Profile, Research, Stock Buzz) T-Mobile USA, the No. 4 U.S. mobile operator known for its lower prices. The deal would create a new industry leader. The combined company and Verizon Wireless, the current largest U.S. provider, would hold nearly 80 percent of the market. Stephenson, who spoke to a New York event sponsored by the Council on Foreign Relations on Wednesday, referred to a government report that showed prices on average fell 50 percent over the last decade despite five wireless mergers over the period. Concerns over surrendering too much control to few players prompted New York Attorney General to conduct a thorough review of the deal. Asked in an interview with Reuters global editor-at-large Chrystia Freeland about the need for price restrictions as a condition to garner regulatory approval, Stephenson said, “I’m not sure of the relevance of it. The U.S. market “is the most highly competitive in the world.” Stephenson said AT&T consumers once paid around $1.90 per megabyte of wireless data and now pay around 16 cents. The benefits of the merger would be nearly immediate, he said. In New York, where users of the Apple (AAPL.O: Quote, Profile, Research, Stock Buzz) iPhone have complained about dropped calls and slow wireless data speeds in certain areas, capacity would rise by 30 percent. AT&T expects the acquisition to raise its infrastructure spending by $8 billion over a seven year period. Among other benefits of the deal, Stephenson said AT&T also planned to work with Deutsche Telekom on lowering roaming charge costs, which cellphone users are required to pay when using their phones outside of the subscriber’s market. Shares of AT&T traded up 73 cents, or 2.4 percent, to $30.78 on the New York Stock Exchange. (Reporting by Kenneth Li, editing by Dave Zimmerman) Copyright 2011 Thomson Reuters. Click for Restrictions .

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Video: Mankiw Says Economists Agree on U.S. Deficit Reduction: Video

March 24, 2011

March 24 (Bloomberg) — Gregory Mankiw, who chaired President George W. Bush’s Council of Economic Advisers, talks about the importance of reducing the U.S. budget deficit. He speaks with Carol Massar and Matt Miller on Bloomberg Television’s “Street Smart.” (Source: Bloomberg)

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Bank Dividend Increases Would Give Wall Street Chiefs Millions

March 17, 2011

The Wall Street pay practice that has been described as a way to make banks safer is now set to enrich top executives. When banks are allowed to increase shareholder dividends, the New York Times reports today , chief executives who are paid in stock will see massive rewards. The nation’s biggest banks have enjoyed a remarkable recovery, even as key elements of the broader economy, including many small banks, still falter from the downturn. When results of the most recent bank “stress tests” are released to banks Monday, the big banks will likely get high marks, which would mean they’d be allowed to pay higher dividends to shareholders. Some chief executives, who receive large portions of their compensation as company stock, would get millions of dollars’ worth of payment.JPMorgan chief Jamie Dimon could eventually get nearly $6 million a year in dividends, and Capital One chief Richard Fairbank could get nearly $3 million yearly, the New York Times reports. Government officials scrutinized executive compensation in the wake of the financial crisis. Big bonuses for executives, which rewarded short-term gains and didn’t encourage chiefs to consider the long-term health of their institutions, led banks into reckless deals, experts say. To remedy this situation, lawmakers and regulators have pressured banks to pay executives in company stock. Executives would think like owners, the logic went, and they’d have a personal stake in making sure their company survived beyond the next quarter. Many institutions have re-structured executive compensation to include more stock. In some cases, executives’ base salaries increased, to offset smaller bonuses. Stock payments , moreover, haven’t actually caused banks to behave differently, concluded a report released late last year by the Council of Institutional Investors. The stock awards are so large, the report said, that executives don’t treat them with the delicacy regulators expected. Now, those amplified stock payments are expected to get even sweeter. After the financial crisis seemed to threaten the survival of Wall Street’s most profitable institutions, regulators have required banks to cut their dividend payments, to bolster their defenses against losses. But as bailout money gets repaid, and as banks post profits , the government has allowed them to increase the money they pay shareholders. The most recent “stress test,” which uses simulations to determine the financial health of the nation’s 19 largest banks, is concluding. A government seal of approval would open the door to big dividend payments. That would be a boon for shareholders, which often include investors like pension funds. It would be a larger boon for chief executives, who are often some of the biggest shareholders. Pay at Wall Street firms rose 5.7 percent to set a new record last year, the Wall Street Journal reported. Regulators haven’t finished writing rules that would govern bank executive pay . At a House hearing in September, officials from the Federal Reserve, the Securities and Exchange Commission and the Federal Deposit Insurance Corp. declined to identify what constituted “inordinately large” pay. “It’s very nuanced,” Federal Reserve general counsel Scott Alvarez said at the time. “There is no number.”

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Video: Danin Says Setting Libya No-Fly Zone May Be `Too Late’

March 16, 2011

March 16 (Bloomberg) — Robert Danin, a senior fellow for Middle Eastern and African studies at the Council on Foreign Relations, discusses the U.S.’s policy toward Libya. Danin speaks from Washington with Erik Schatzker on Bloomberg Television’s “InsideTrack.” (Source: Bloomberg)

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Obama’s Small Business Plan To Come Up Short, White House Concedes

February 15, 2011

NEW YORK — After spending much of last year relentlessly touting the benefits of a proposed $30 billion fund that would jumpstart bank lending to small businesses, the Obama administration forecasts the initiative will fall far short, spending just a little over half of the intended allotment, according to the White House’s spending plan for 2012. The proposal, known as the Small Business Lending Fund, originally would have taken $30 billion from the Troubled Asset Relief Program and diverted it to smaller banks. The move was supposed to stimulate lending by lowering the cost of funds as loan totals rise. The more a bank lends, the cheaper the funds become. The program has faced an uphill climb. Banks are wary of taking government funds for fear of after-the-fact program changes; demand for loans remains tepid; and there’s no guarantee banks would lend the money once they receive it. The White House spending plan for next year reflects those challenges. The administration projects it will allocate just $17.4 billion of the funds, or just 58 percent of its original goal. All of the money will be disbursed by Sept. 30, according to Treasury Department projections released Monday. The proposal was a centerpiece of the administration’s pre-election plans to boost small businesses, which have been among the hardest-hit sectors since the onset of the financial crisis. Unlike large corporations, small businesses don’t have access to the capital markets. They don’t issue debt to investors nor do they raise capital on stock exchanges. Instead, they rely on banks for their funding. Small community lenders and regional banks are their primary source of credit. But bank lending froze as consumer spending fell, business investment slowed and banks faced growing losses on bad loans. Inside the Treasury Department, a small team worked to counter the slowdown. By January of last year, Obama was able to pitch the plan that would help smaller firms get credit and help stabilize small lenders. The plan was to inject taxpayer funds into community banks in hopes they’d lend it to small businesses. It worked like TARP: Banks borrow cash from Treasury, and pay a small fee for the privilege. The program, though, was limited to banks with less than $10 billion in assets. Republican critics derided it as “TARP 2.0,” or a reincarnation of the deeply unpopular bank bailout. In fact, banks in TARP can refinance out of the program and into this new one, escaping the restrictions that accompanied TARP like limits on executive compensation. Administration officials and Democrats in Congress, though, pitched it as much-needed help for small businesses. The administration spent nine months pounding Republicans for their objections to the proposal. Last September, a little over a month to the election, Obama signed it into law. During a speech last March to economists in Washington, Christina D. Romer, the then-chairman of the White House Council of Economic Advisers, said the $30 billion fund “will translate into several times that amount of additional lending and could help create hundreds of thousands of new jobs.” Based on administration projections released Monday, it’s unclear whether the fund will achieve its original objectives. The White House declined to comment. Officials insist they have $30 billion to lend. The Treasury Department is in the midst of trying to sign up banks for the fund, but bankers have said they’re reluctant to accept any more taxpayer money. Meanwhile, the government watchdog overseeing the bailout, the Special Inspector General for the Troubled Asset Relief Program, said earlier this month it would immediately audit the program. ************************* Shahien Nasiripour is a business reporter for The Huffington Post. You can send him an e-mail ; bookmark his page ; subscribe to his RSS feed ; follow him on Twitter ; friend him on Facebook ; become a fan ; and/or get e-mail alerts when he reports the latest news. He can be reached at 646-274-2455.

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Video: Romer Says U.S. Must Forge a Budget Solution `Now’

February 14, 2011

Feb. 14 (Bloomberg) — Christina Romer, former chairman of U.S. President Barack Obama’s Council of Economic Advisers, discusses Obama’s $3.7 trillion budget proposal submitted to Congress today. Romer, a Bloomberg News contributor, speaks with Tom Keene on Bloomberg Television’s “Surveillance Midday.” (Source: Bloomberg)

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Republicans Out Front Of Obama On Regulations

February 7, 2011

WASHINGTON — When President Barack Obama asked businesses for advice on creating jobs, he might have anticipated that more than 200 responses would quickly be headed his way courtesy of Rep. Darrell Issa, a Republican who once called him corrupt. A month before Obama reached out to businesses, the new chairman of the House Oversight and Government Reform Committee sent 171 letters to various businesses and their trade associations. He asked for help in “identifying existing and proposed regulations that have negatively impacted job growth.” This Thursday, Issa is giving business representatives an opportunity at a hearing by his committee to vent their frustration with government requirements issued by unelected bureaucrats. He wants Obama to include their responses in a review of government regulations the president ordered last month in the administration’s effort to find rules that cost Americans jobs. Issa and Obama don’t have to look far. Last month, The Associated Press reported that the Interior Department’s Office of Surface Mining and Reclamation estimates the administration’s proposal for protecting streams from coal mining would strip away about 7,000 of the industry’s nearly 81,000 jobs. Large and small businesses and trade associations told Issa, R-Calif., that they want to change or eliminate more than of 100 regulations – more than half related to the environment and others governing financial rules, the workplace and transportation. The president’s initiative opened the door for Issa to walk through, as Obama looks to improve a frayed relationship with business before the 2012 election. In addition to the regulatory review, the president enlisted the help of two powerhouse executives to advise him on job creation and competitiveness: AOL co-founder Steve Case and General Electric chief executive Jeff Immelt. Obama on Monday defended government regulations in a speech to the U.S. Chamber of Commerce, even as he promised to eliminate those that are too burdensome. Politically, it would appear that Issa and Obama are on the same page for the moment, even though the congressman once called him “one of the most corrupt presidents in modern times.” Issa later clarified the comment, saying he was referring to wasteful spending, not criminal corruption. Issa said Monday, “The president has recognized the value in examining the regulatory barriers impeding private sector job creation.” In addition to his letters, Issa has launched a new website, that allows businesses to describe their problems with government regulations. www.americanjobcreators.com But with both parties looking toward the 2012 election, the traditional political divisions could emerge when it’s time to act on the responses. Republicans want Obama to throw his EPA secretary, Lisa Jackson, under the bus as she tries to set strict air pollution standards including regulating greenhouse gases. Democrats passed a bill to do the same thing two years ago when they controlled the House, but the measure never got a vote in the Senate. House Republicans have scheduled a vote this week on broadening a congressional review of regulations. A resolution would direct 10 committees to identify federal requirements that impede job creation, discourage innovation, hurt economic growth and investment, harm global competitiveness and limit access to credit and capital. Issa says he’s just trying to help the administration get a more comprehensive view of the impact of its regulatory proposals, and is not making judgments on the proposals themselves. “As the Obama administration begins the process of complying with the president’s directive, we are putting forward the other half of the conversation – input directly from job creators,” he said. “This effort is meant to complement what the president has ordered and should be a starting point for the broader discussion that will unfold about the regulatory barriers to job creation.” Rep. Fred Upton of Michigan, the Republican chairman of the House Energy and Commerce Committee, isn’t waiting for a regulatory review. Upton has already drafted legislation that would require a two-year delay of EPA’s plan to make power plants, refineries and other industrial facilities reduce their emissions of greenhouse gases blamed for global warming.. At a recent hearing chaired by Rep. Cliff Stearns, R-Fla., chairman of Energy and Commerce’s investigative subcommittee, Republicans summoned Obama’s chief regulation official, Cass Sunstein. GOP members launched into tirades against the EPA and other regulatory agencies. Stearns and other Republicans often cut off Sunstein’s responses as he tried to explain administration policies. Many of the responses Issa got simply echo what businesses and their trade associations formally told the administration during the formal public comment periods for regulatory proposals. Gary Bass, executive director of OMB Watch, a private group that monitors federal regulatory actions, said Issa’s hearing and the letters he solicited just give corporate interests more opportunities to insist that the administration’s regulatory proposals are job killers, a claim he says is unproven. “These letters are designed around building momentum on putting pressure on the administration to cut back on federal regulations,” Bass said. If the Obama administration takes the responses to Issa seriously, it will have a lot of reading to do. The Aircraft Owners and Pilots Association objected to special flight restrictions for Washington, D.C., airspace. The group said they were “hastily established during a weekend in February 2003, and . intended to be a temporary security measure imposed in preparation for the then-pending Iraq war.” Possible penalty for noncompliance: “pilot certificate revocation or even being ‘shot down.’” The association pegged the cost to the private sector as $628 million over 10 years. The American Beverage Association, the voice for the non-alcoholic drink industry, said an example of “government overreach” is the spending of stimulus dollars by the Centers for Disease Control. The CDC doled out grants “that unfairly single out beverages containing sugar for denigration, including campaigns encouraging the imposition of special taxes on these products.” The group highlighted its collaboration with first lady Michelle Obama in calling for innovative initiatives to end obesity. The American Chemistry Council contended that proposed EPA regulations for industrial boilers and heaters jeopardized 60,000 jobs, but it said the regulation was a symptom of a wider problem: inadequate measurement of the financial and employment impact of proposed rules. The American Meat Institute complained that 100,000 jobs could be lost in the meat, livestock and related industries by a proposed livestock and poultry marketing rule that “goes well beyond the mandate” in the 2008 farm bill. Members of nonprofit credit unions would be harmed by a proposed Federal Reserve rule that would allow the institutions to collect only 12 cents per debit card transaction when their costs amount to 44 cents, according to the National Credit Union Administration. The rule could force credit unions to impose monthly checking account fees of $15 to $20, the group said. The National Mining Association said EPA “guidance” for surface and underground coal mining in Appalachia amounted to “a de-facto moratorium on the issuance of coal mining permits.” The group said EPA acted “in complete disregard of existing federal law and procedure” and would cost the industry “thousands of jobs and hundreds of millions of dollars” in West Virginia alone. ___ Online: http://www.americanjobcreators.com

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Raymond J. Learsy: Risks to the Suez Canal Set the Stage for Falsely Hyping the Price of Oil

February 6, 2011

Over the past days, the airwaves and talking heads have been frightening us with somber predictions of what would happen to the price of oil should current events in Egypt shutter the canal. The oil boys and their allies can barely contain themselves in their appearances of concern and like minded predictions of calamity, such as today’s Reuters report quoting Imad al-Atiqi, member of Kuwait’s Supreme Petroleum Council — “I expect oil to reach $110 during the first half of 2011… A huge amount of oil passes through the Suez Canal…” thereby ever nudging oil prices skyward with Brent Crude already surpassing $100 a barrel. Yet has anyone stopped to determine what the closure of the Suez Canal would actually mean to the oil market in dollars and cents? In the shipping world the type of vessel that can transit the Suez Canal has its own designation, named a “Suezmax” category. The typical deadweight of a Suezmax oil tanker is about 240,000 tonnes. Now, approximately 7.1 barrels of oil make up one metric tonne. Therefore a 240,000 tonnes deadweight tanker carries some 1.7 million barrels of oil. According to the New York Times , “Taking cargo around Africa would add about 16 days time to delivering oil to world markets.” Calculating a per diem charter rate for a Suezmax tanker at $50,000 per day (and probably less), brings the additional cost of transporting a cargo of oil, lifting 1.7 million barrels around Africa to $800,000 per voyage. More to the point, the additional cost per barrel of oil would be 47 cents per barrel. And these 47 cents would apply only to the some 1.8 million barrels of crude oil that are transported through the canal (an additional 2mm plus barrels can be transported through Egypt overland via the Sumed pipeline). The additional cost of $800,000 for transporting these 1.8 million barrels around the horn of Africa, distributed over the world’s daily consumption of oil of 85 million barrels, would settle out at just under a penny per barrel. All said, the additional 16 days would be a problem if the oil market were in a state of hand to mouth. Fortuitously, oil stocks are bulging throughout the world and the sixteen days additional steaming time can be easily accommodated with ample leeway to alter delivery schedules factoring in these changed logistics. Clearly, the closing of the Suez Canal to the oil trade would be a hindrance but hardly the disaster portrayed in the media and our friends at OPEC.

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Egypt Unrest May Cause Big Rise In Oil Prices: Kuwait Official

February 6, 2011

Global oil prices could exceed $110 a barrel if political unrest in Egypt continues, a member of Kuwait’s Supreme Petroleum Council said on Sunday. Oil prices have spiked due to tension in Egypt. Brent crude hit $100 per barrel for the first time since 2008 on fears instability could spread through the Middle East, which together with North Africa pumps over a third of the world’s oil. “I expect oil prices to reach $110 during the first half of 2011, however, it could go above that level if Egypt’s current crisis continues,” Imad al-Atiqi, a member of the OPEC member’s highest oil policy body, told Reuters in a telephone interview. “A huge amount of oil passes through the Suez Canal and the country’s stability is essential for the Middle East’s stability, particularly Israel,” he said. Egypt is a small oil and gas exporter and the main danger of the unrest is seen as the closure of the Suez Canal or the Suez-Mediterranean (SUMED) oil pipeline which passes near Cairo. The canal ships 1.5 million barrels per day (bpd) of crude and the pipeline carries 1 million bpd. Together they account for nearly 3 percent of daily global oil demand. On Thursday, Egypt’s Prime Minister Ahmed Shafiq said the Suez Canal was operating normally despite the unrest. Some oil-focused bankers and fund managers say that even if unrest in Egypt cuts flows along the strategic pipeline and the Suez Canal, the oil price spike would likely be short-lived and flows would resume quickly, regardless of whoever is in power. OPEC members are comfortable with an oil price ranging between $90 to $100 a barrel, Atiqi said, adding the group could meet before their scheduled meeting in June if prices continued rising quickly above $110 a barrel. OPEC ministers and consumers will discuss oil output policy on the sidelines of an international energy conference in Saudi Arabia on February 22, but a formal decision there was unlikely, the OPEC secretary general had said. OPEC says it has spare capacity of 6 million barrels to meet lost output but would do it only when it sees a shortage in the market rather than speculator-driven rallies. (Reporting by Kuwait newsroom; Editing by Rania El Gamal; Editing by David Holmes) Copyright 2010 Thomson Reuters. Click for Restrictions .

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David Kroodsma: 40 Interviews in Davos

February 4, 2011

Cross posted on Hub Culture . For five days last week I was a fly on the wall in Davos, watching CEOs and leaders discuss the planet’s major issues at the World Economic Forum. I attended the conference as a social media producer for Hub Culture , producing short video interviews of thought leaders. Hub Culture is a social network of “global urban influencers,” and in Davos we occupied a building that served as a center for work, collaboration, and evening events . At the Hub Culture Social Media Center we interviewed forty influential leaders. These five-minute interviews, conducted by our executive editor Edie Lush, let individuals share why they were at Davos. CEOs of major corporations, directors of global non-profits, and other thought leaders sat in the Hub Culture “hot seat” and shared their concerns. The following is an attempt to distill some of the major themes of these interviews. Obviously, the forty interviews don’t fall neatly into the categories below, and many people touched on multiple themes in their few minutes. All of the links below lead to videos of the individuals; click to hear the full stories. Did Davos Have a Theme? Every World Economic Forum has a stated “theme,” which sometimes relates to the actual theme of the conference. Last year, as the world was emerging from the global recession, the theme was “Improve the State of the World: Rethink, Redesign, Rebuild.” This year the theme was “Shared Norms for the New Reality,” which made everyone scratch their head. What is the “new reality” of the world, and what are the norms? The former Prime Minister of Australia, Kevin Rudd , said he would rather state the goal as “shared values for common challenges.” (Off camera he asked, “Who are these guys named Norm that we are sharing?”) Rudd said that in the sessions he attended there was active debate over whether different countries of the world shared values or not. In one session the audience was split 50/50 on whether or not the West has common values with China with respect to global challenges. Justin Blake, a managing director at Edelman , has now attended nine World Economic Forums, giving him a unique perspective. He said that this was the first Davos where there was no clear focus or theme, as if the world appears more splintered as it becomes more connected. Moreover, outside news–notably the chaos in Egypt–over shadowed any news from the conference. Ian Bremmer, the President of the Eurasia Group , a firm that consults with businesses on political risk, expounded on what he thought was the “new reality.” He said that we are seeing a new type of globalization as the emerging markets flex their muscles and no longer take orders from the western powers. His major concern is what he called the “G-0″ (as opposed to the G-20)–the fact that there is no effective global governance. He cited the failures of climate and trade negotiations. Some claimed that a major focus of this year’s Forum was social inequality, which is on the rise in many parts of the world. Jasmine Whitbread, the CEO of Save the Children , felt that in previous years her comments on social inequity were ignored; this year she gained more attention. The Way Workers Interact with the Economy has Fundamentally Changed. Malcom Frank, the Senior Vice President of Cognizant Technology Solutions , said that we are seeing the “future of work” because the generation now entering the workforce won’t accept the rigid hierarchies common in corporations. Businesses will need to be more flexible. In the information age, work no longer has to be done “at work,” but can be performed remotely and at any time. This message was echoed by Jeffery Joerris, the CEO of Manpower , who even argued that we are no longer in the “Information Age,” but instead in the “Human Age.” In the “Human Age” ( see article here ), the focus is on individual talent instead of the corporation. He also remarked that companies have been reluctant to hire during this economic recovery because they’ve realized they can be just as productive with fewer people. Arianna Huffington, the chief editor of the Huffington Post , talked about the explosion in unemployment, and how many in the United States’ middle class have experienced “downward mobility” as individuals have dropped into poverty. She implored governments to do more. Media and Social Media are Rapidly Changing One career that has changed dramatically in the past few years is journalism. We talked with Mike Perlis, the President and CEO of Forbes . Perlis described how Forbes’s online media has succeeded because it has adapted quickly to the changing ways that people consume information. Likewise, Justin Blake of Edelman (mentioned earlier), said that a few years ago everyone was surprised when the first blogger showed up at the Forum. Forum meetings were supposed to be “off the record.” Now, because of twitter and blogging, everything is shared and no one expects secrecy. Robert Scoble, a Rackspace Innovation Journalist and blogger on the popular site Scobleizer.com , described how twitter gave him his own little news feed on the world, giving him updates every second. “It’s like having a CNN news feed on my screen. I’ve always wanted that!” The Global Gender Imbalance A number of our interviews highlighted the need to empower women in business. Rachel Kyte, the Vice-President of the International Finance Corporation , told us that women run sixty percent of the world’s small businesses, but in some countries only five percent of the bank credit is awarded to females. She also cited numerous studies revealing that companies do better if women are on the corporate boards. Wendy Clark, the senior Vice President of Integrated Marketing and Communications for The Coca-Cola Company , talked about Coca-Cola’s efforts to empower women franchise owners. Coca-Cola has a goal of empowering five million female entrepreneurs by 2020. Currently, many female entrepreneurs lack sufficient training, networks, or access to capital. Clark admitted that these efforts are good business practice for Coca-Cola, because small beverage outfits run by women tend to do better than those run by men. Laura Liswood, the Secretary General of the Council of Women’s Leaders , lamented the slow progress in getting women into corporate boardrooms. She also gave a cultural anecdote to explain why corporate boardrooms ate still dominated by western males. And while we did see female executives (Indra Nooyi, the CEO of PepsiCo spent time at Hub Culture, and we also interviewed Beth Comstock, a senior Vice President of GE ), Davos remains a mostly male affair. Only 16 percent of the roughly 2,500 fully accredited attendees were women. Consumer Empowerment We interviewed the heads of two organizations that are attempting to empower consumers. Joost Martens, the Director-General of Consumers International (a global umbrella organization that includes U.S.-based Consumer Reports), said that the world is becoming more globalized but there are not yet global standards for the quality and safety of products. His organization hopes to change that. Dara O’Rouke, the founder of GoodGuide , described how his company researches the social and environmental impacts of various products and makes the information freely available. In the interview he showed us a new iPhone app that allows consumers to scan a product’s barcode and get vital statistics about the social, health, or environmental consequences of the item. Sustainability Has Become Popular and Profitable, But Will It Be Enough? To promote collaboration and climate solutions, Hub Culture hosted Climate Deal Day during the World Economic Forum ( watch a Wall Street Journal video about the event ). Consequently, we interviewed many individuals concerned with climate and other environmental issues. These conversations gave us many reasons to be hopeful; the question is whether our solutions will be sufficient. Peter Lacy, the Managing Director of Sustainability Services for Accenture , said that businesses now understand the importance of sustainability. In a global survey of CEOs, Accenture found that 93% of company leaders say that environmental sustainability is key to their long-term success. Just three years ago, this figure was twenty percent lower. Lacy also said that the challenge is no longer recognizing the issue, but instead figuring out how to embed sustainability in the companies. He then added that more organizations see sustainability as “an opportunity” instead of a burden or a risk. We interviewed the founders of two companies who believe in this opportunity. Kevin Surace, the CEO of Serious Materials , spoke about the high tech windows and walls that his company has developed to improve building efficiency. Nearly all of his company’s products have a payback time of less than two years, making them great investments for consumers. Likewise, Graham Andrews, the founder of Andrews Power , talked about his extremely high efficient air conditioners that dramatically reduce energy use. The challenge is to get people to use these new technologies. Peggy Liu, the chairperson of JUCCCE (The Joint U.S-China Collaboration on Clean Energy), talked about the difficulties of getting knowledge to the right places. “There is no lack of interest to go green in China,” said Liu. The problem is access to technology, and Liu announced an innovative new plan to allow Chinese investors and U.S. research institutions to cooperate and develop clean technology. Dr. Han Seung-soo, the former Prime Minister of South Korea and the current Chairman of the Global Green Growth Institute , partially echoed Liu’s ideas. Seung-soo’s country developed rapidly in the past few decades, converting itself from a poor country to a rich one in less than half a century. Dr. Seung-soo said that the rest of the world can’t develop in the same intensive way that South Korea did, and the Green Growth Institute will help developing nations grow their economies more sustainably. Ian Cheshire, the Group Chief Executive for Kingfisher , Europe’s leading home improvement store, talked in depth about his company’s efforts to provide sustainable, efficient products for home owners and builders. We also spoke with Ann Davlin, the Director of Development for the Carbon War Room , who told of a number of other companies who are also stepping up and taking action. One of Hub Culture’s partners in Davos was the Renault-Nissan Alliance, which has developed the electric cars the Nissan Leaf and Renault Fluence. At Hub Culture we had two charging stations for these cars, and we spoke with a number of people involved in the marketing or design of these vehicles. Nissan’s Head of Marketing, Simon Sproule , said that in 2011 the electric vehicle has finally come of age. Gilles Gautherot, the Communications Manager of the Renault-Nissan Alliance , told us that the real breakthrough has been making these cars “just like any other ordinary car, except much quieter.” Jack Hidary, the Global Electric Vehicle Leader for Hertz , talked about making electric cars available through Hertz, and he described innovative new car sharing programs for electric cars. We felt we saw the future when Hidetushi Kadota, the Chief Engineer for the Nissan Leaf , walked us outside and proudly showed off his company’s car. Unfortunately, the environmental challenges that we face are acute. Christiana Figueres, the Executive Secretary of the UNFCCC (United Nations Framework Convention on Climate Change), said that the global agreement reached in Cancun last December was “A big step forward for the community of nations, but a small step for the planet.” In other words, even though substantial progress was made, the progress still falls far short of what is needed to stop climate change. The Executive Director of Greenpeace International, Kumi Naido , agreed, saying that “time is running out,” and cited various scientific reports. Carl Ganter, the founder of Circle of Blue , a firm focused on freshwater issues, pointed out that water shortages could also limit our energy use. Finally, the President of the Environmental Defense Fund, Fred Krupp , talked about the dire state of the world’s fisheries and his organization’s efforts to change the way we fish. — A few of our interviews couldn’t be lumped into these categories, but they provided important insights nonetheless. Beth Comstock, General Electric’s Senior Vice President and Chief Marketing Officer , talked about innovation around the world and her company’s “Innovation Barometer.” Malini Mehra, the founder and CEO of the Centre for Social Markets , discussed the need to look at climate issues, food security, and water issues as an integrated set. Johnathan Reckford, the CEO of Habitat for Humanity International , talked about providing micro financing to help people build homes around the world. Simon Zadek, the founder of AccountAbility , talked about the challenge of taking ideas generated during meetings in Davos and then applying them. Atsutoshi Nishida, the Chairman of Toshiba , talked about many issues related to innovation, and he also convinced us that we needed a 3D television. Bernardo Guillamon, the Manager of the Office of Partnerships at the Inter-American Development Bank , talked about the bank’s efforts to help Haiti and invest in education there. Salil Shetty, the Secretary General of Amnesty International , explained how the growing power of corporations had changed his organization’s strategy. Amnesty International has traditionally pressured governments to protect human rights. Now, as corporations become more powerful and more global, Amnesty International need to increasingly engage with companies in order to protect the rights of people around the world. As these interviews have shown, the world is a rapidly changing place. The way we work is changing, as is the way we consume media and interact. Although environmental challenges are getting much more attention, it is not yet clear if that attention will translate into sufficient action. Likewise, more are aware of the need for gender equality in business, but we need to move from awareness to action. The global community faces countless issues, and as many of these leaders said in these interviews, it will take much more than just talk to solve them.

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US instos battle for proxy rights on boards

February 2, 2011

The ongoing saga of US investors’ right to have a say in corporate elections continues with the Council of Institutional Investors (CII) refuting the Business Roundtable’s (BRT) claims that the proxy rule will injure shareholder interests. The Securities and Exchange Commission (SEC) approved a rule in August granting certain long-term

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Chuck Schumer: GOP Risking ‘A Depression’ With Budget Antics

January 30, 2011

WASHINGTON — Senator Chuck Schumer (D-N.Y.) warned on Sunday that if House Republicans, in an effort to flex their fiscal conservative muscles, held up passage of a budget this coming March, it could send the United States into a deep recession and possibly a depression. The New York Democrat, appearing on CNN’s “State of the Union,” said that the GOP was “playing with fire” by threatening either to not fund the government or not raise the debt ceiling unless they were first placated with deep spending cuts. “On March 4 the government-funding resolution expires and it seems that a lot of Republicans in the House want to risk a shutdown of the government if they don’t absolutely get their way,” said Schumer. “That was a mistake when [former House Speaker] Newt Gingrich tried it in 1995. It would be a bigger mistake now. It is really playing with fire…. you can risk the credit markets really losing some confidence in the United States Treasury and that could create a deeper recession than we had over the last several years or, god forbid, even a depression.” “It is playing with fire to risk the shutting down of the government just as it is playing with fire to risk not paying the debt ceiling,” he added. The raising of the rhetoric and associated stakes surrounding the budget and debt ceiling debate is something Democrats have been doing for weeks. Austan Goolsbee, the chairman of the Council of Economic Advisers, set the trend when he called the idea of a self-imposed default “insanity.” To a certain extent, the tack has worked, with GOP leadership showing little of the willingness for a political showdown that the younger, predominantly Tea Party members exhibit. “That would be a financial disaster not only for our country but for the worldwide economy,” House Speaker John Boehner (R-Ohio), said of a U.S. default on its debt, during an appearance on Fox News Sunday. “Remember, the American people on Election Day said, we want to cut spending and we want to create jobs. You can’t create jobs if you default on the federal debt. Listen, there has been a spending spree going on in Washington these last couple of years beyond control and the president is going to ask us to increase the debt limit then he has got to be willing to cut up the credit cards. We have got to work together by listening to the American people and reducing these obligations that we have.” “I don’t think [defaulting] is a question that is even on the table,” he added.

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Oregon Commits 525M To KKR Fund

January 30, 2011

The Oregon Investment Council has allocated 525 million to KKRs new buyout fund

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Jim Wallis: Values at Davos

January 27, 2011

Yesterday was the first day of the World Economic Forum in Davos, a little mountain village in Switzerland, where each January corporate CEOs, heads of state and leaders of nonprofit organizations from around the globe gather to reflect upon the state of the world. I had been to Davos before the financial crisis of 2008, as part of a group of religious leaders who came to discuss interfaith cooperation, but who also began to dialogue with the other participants at Davos about moral values and the economy. Quite honestly, these conversations about moral values and the economy often felt like an extra-curricular activity, with sessions at 7 a.m. on the third floor. But after the economic crisis hit, our values conversations felt more like a necessity, Â and we were quickly moved to prime time in the main hall. At Davos 2008, the World Economic Forum convened a plenary session for all its participants on “Values and the Market.” I was on the panel and said that asking when the crisis will end was the wrong question; the right question was,Â how will the crisis change us? Looking out over a huge hall full of business and political leaders (not my usual audience), I suggested that too often people didn’t believe they had to bring virtue and values to bear on economic decisions — that the market would automatically take care of those things. But, as the economic crisis has shown, this was the wrong mentality. The panel caused a buzz, and its questions resonated through that week, leading to many “pastoral” conversations with CEOs who told me they had “lost”Â some important values. The positive response I felt at Davos eventually led me to write a new book, Rediscovering Values: A Guide for Economic and Moral Recovery . I began to speak at business schools, and found business leaders coming to talk to me like Nicodemus at night. A year later, at Davos 2009, there were 17 sessions with the word “values” in the title. I found myself on a plenary panel with Muhammad Yunus, founder of the Grameen Bank in Bangladesh, addressing the subject of “Rethinking Values in the Post-Crisis World,” and talking about business with a moral purpose — even as a tool for eliminating poverty. But some of us began to feel the danger of just holding values seminars as a response to a devastating economic crisis. Behaviors created this crisis, and unless our values talk led to changed behaviors, it all wouldn’t mean very much. Out of that conference a Global Agenda Council on Values was formed, and I now find myself unexpectedly as its chair. This Council on Values has been given the task of shaping what the World Economic Forum is calling the “Moral Economy Dialogue” — a multi-year process that will develop serious tools for personal, organizational, corporate and national values assessments that focus on changing behaviors. This week at Davos 2011, new metrics like “human flourishing” and “the common good” are being lifted up. Again, I have had many personal conversations with business executives who feel alone in their soul-searching for values. Furthermore, business ethics professors at some of the country’s leading business schools have also told me that their courses are over-subscribed, yet they still feel marginal to the curriculum. All day yesterday, in many of the sessions here at Davos , we wrestled with feeling “stuck” in trying to implement values-change at big corporations and banks. We are now moving from just a conversation on values to a conversation on behavioral change. For example, we had a session yesterday on “Defining Shared Norms.” We spoke of the need for both external regulation and self-regulation; both external accountabilities and the internal moral compass which comes from embedding values in a business . This is all good news to Klaus Schwab, the founder and executive chairman of Davos who, as a young Swiss economist many years ago, wrote about the need for business to not only take into account the interests of shareholders, but also of the many other stakeholders — including employees, consumers, the poor, the environment and future generations. That Davos would take these issues very seriously, and would turn to faith community leaders for help, is good news to me. But the headline in yesterday’s International Herald Tribune — “The Super-Rich Pull Ever Farther Ahead” — indicated we still have a long way to go. Many of those super-rich are at Davos, and I indicated yesterday that the only people whose lives seem to have got back to “normal” since the financial crisis began are those whose behaviors caused it in the first place. They are back to record profits, while a seminar I attended yesterday showed how dramatic and devastating unemployment still is around the globe — especially for young people. But the conversations here lasted far into the night, and I woke up this morning with a full day of more work before us, including one session where I will speak on “Mindful Leadership.” Indeed, leadership — moral leadership — is clearly the issue now, and our session today is already overbooked. And that’s a good sign. I find myself spending time at Davos every year now with an exciting group of about 50 young entrepreneurs called the Young Global Leaders, who are asking some of the most important questions that are before us. The snow keeps falling here, but there are signs and hopes for spring. Jim Wallis is the author of Rediscovering Values: On Wall Street, Main Street, and Your Street — A Moral Compass for the New Economy , and CEO of Sojourners . He blogs at www.godspolitics.com . Follow Jim on Twitter @JimWallis . Click here to get email updates from Jim Wallis

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David Isenberg: PMSC and Trafficking: Room for Improvement

January 27, 2011

One of the unpleasant aspects of the private military and contracting world concerns the way employees, especially Third World country nationals, are sometimes treated. Note that I wrote “sometimes.” What I am about to write about does not reflect the actions of the majority of contractors but it happens enough to warrant continuing concern. What I am specifically talking about is “trafficking in persons”; something done both by contractors and regular military forces. Over the past decade, Congress passed legislation to address its concern regarding allegations of contractor and U.S. Forces’ involvement in sexual slavery, human trafficking, and debt bondage. Prior to 2000, allegations of sexual slavery, sex with minors, and human trafficking involving U.S. contractors ( as in Dyncorp ) in Bosnia and Herzegovina led to administrative and criminal investigations by U.S. Government agencies. In 2002, a local television news program aired a report alleging that women trafficked from the Philippines, Russia, and Eastern Europe were forced into prostitution in bars in South Korea frequented by U.S. military personnel, which resulted in an investigation and changes to DoD policy. In 2004, official reports chronicled allegations of forced labor and debt bondage against U.S. contractors in Iraq. Needless to say these incidents were contrary to U.S. Government policy regarding official conduct. In 2000, the president signed into law two statutes responding in part to identified contractor and U.S. Forces’ misconduct in Bosnia and Herzegovina: Public Law 106-386 on October 28, and Public Law 106-523, “Military Extraterritorial Jurisdiction Act of 2000,” on November 22. The stated purposes of the first statute are “…to combat trafficking in persons [CTIP], a contemporary manifestation of slavery whose victims are predominantly women and children, to ensure just and effective punishment of traffickers, and to protect their victims.” The second statute established “Federal jurisdiction over offenses committed outside the United States by persons employed by or accompanying the Armed Forces, or by members of the Armed Forces who are released or separated from active duty prior to being identified and prosecuted for the commission of such offenses.” Congress specifically extended this extraterritorial jurisdiction over trafficking in persons (TIP) offenses committed by persons employed by or accompanying the Federal Government outside the United States in Public Law 109-164, “Trafficking Victims Protection Reauthorization Act Of 2005,” January 10, 2006. Additional reauthorizations expanded the scope and applicability of the first statute. Public Law 108-193, the “Trafficking Victims Protection Reauthorization Act of 2003,” December 19, 2003, gave the Government the added authority to terminate grants, contracts, or cooperative agreements for TIP-related violations. That law says: The President shall ensure that any grant, contract, or cooperative agreement provided or entered into by a Federal department or agency under which funds are to be provided to a private entity, in whole or in part, shall include a condition that authorizes the department or agency to terminate the grant, contract, or cooperative agreement, without penalty, if the grantee or any subgrantee, or the contractor or any subcontractor (i) engages in severe forms of trafficking in persons or has procured a commercial sex act during the period of time that the grant, contract, or cooperative agreement is in effect, or (ii) uses forced labor in the performance of the grant, contract, or cooperative agreement. In 2006, the Civilian Agency Acquisition Council and the Defense Acquisition Council agreed on an interim rule implementing the above stated requirement, adding Federal Acquisition Regulation Subpart 22.17, “Combating Trafficking in Persons.” There are other regulations and laws on the subject but the above should suffice to demonstrate the U.S. government recognizes this is a serious issue. To their credit many, even perhaps most PMSC, do as well. For example, the International Code of Conduct for Private Security Providers , signed last November, has, a section that says: Signatory Companies will not, and will require their Personnel not to, engage in trafficking in persons. Signatory Companies will, and will require their Personnel to, remain vigilant for all instances of trafficking in persons and, where discovered, report such instances to Competent Authorities. For the purposes of this Code, human trafficking is the recruitment, harbouring, transportation, provision, or obtaining of a person for (1) a commercial sex act induced by force, fraud, or coercion, or in which the person induced to perform such an act has not attained 18 years of age; or (2) labour or services, through the use of force, fraud, or coercion for the purpose of subjection to involuntary servitude, debt bondage, or slavery. While the sex aspect gets people attention it is the second part, “labour or services, through the use of force, fraud, or coercion for the purpose of subjection to involuntary servitude, debt bondage, or slavery” which is the more common offense. Try searching online for “TCN (stands for Third Country National] trafficking AND Iraq” and you’ll see what I mean. So with that as background how well are both governmental personnel and contractors doing in policing themselves in this area? They could be doing better, according to a new report from the Department of Defense Inspector General. It found: â¢ While three quarters of the contracts sampled contained a Combating Trafficking in Persons clause, only little more than half had the required Federal Acquisition Regulation clause. â¢ DoD contracting offices lack an effective process for obtaining information pertaining to trafficking in persons violations within the DoD. On the plus side: â¢ DoD and other Federal law enforcement organizations were developing procedures to identify trafficking in persons incidents in criminal investigative databases. â¢ Several organizations demonstrated Combating Trafficking in Persons awareness and quality assurance best practices. The Federal Acquisition Regulation (FAR) requires that all Federal solicitations and contracts contain clause 52.222-50, “Combating Trafficking in Persons,” (CTIP) or the clause with Alternate I modification for contracts with performance outside the U.S. The team reviewed 368 DoD service or construction contracts for work in the Republic of Iraq, the Islamic Republic of Afghanistan, the State of Kuwait, the State of Qatar, and the Kingdom of Bahrain awarded in FYs 2009 and 2010. The report found 53 percent of the contracts (195 of 368) contained a proper version of the mandatory FAR CTIP clause, and 26 percent of the contracts (95 of 368) contained an incorrect citation. 21 percent of the contracts (78 of 368) did not contain any form of the FAR clause. Noncompliance with the requirement to include the CTIP clause in contracts has two negative effects. First, contractors remain unaware of the U.S. Government’s “zero tolerance” policy and self-reporting requirements regarding CTIP. Second, contracting offices were potentially unable to apply applicable remedies to correct contractor violations when the CTIP clause was not properly present. The number of contracts without any form of a CTIP clause indicates that additional effort is still necessary to ensure compliance.

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Robert E. Scott: Exports and Jobs: Less Than Half the Story

January 26, 2011

President Obama talked about doubling exports in the State of the Union Address last night as a strategy to create jobs. It’s a great sound bite, but woefully incomplete economics. While exports support American jobs, imports displace them ; when imports grow faster than exports, our trade deficit expands and American jobs are lost. Between 2001 and 2007 (both business cycle peaks), we lost 3.4 million U.S. manufacturing jobs, and the fact that the trade deficit as a share of GDP rose by roughly one third is a key reason why. Lately, when the President has talked about jobs and trade, he mentions the jobs associated with exports but ignores those lost due to growing imports. It’s like watching baseball, but only counting runs scored by the home team — lots of fun but it won’t tell you anything about how well they are doing. Last week, the President talked a lot about expanding exports to China . But he rarely mentioned imports or the trade deficit. We heard a lot about unfair trade and job losses during Obama’s primary campaign, but those words disappeared after the election. One reason may be that President Obama has surrounded himself with advisors from multinational companies, who have more to gain from outsourcing than from domestic job creation. For example, just this week, the President appointed GE CEO Jeffrey Immelt to head his new Council on Jobs and Competitiveness. Our exports to China did increase rapidly last year — by about $23 billion, and this did support job creation. But imports increased about three times as fast, by $71 billion, which cost the U.S. many more jobs than exports supported. On balance, the growth in our trade deficit with China cost the United States at least one half million jobs in 2010 . We have huge trade deficits with China because of massive currency manipulation and many other unfair trade practices. Currency manipulation acts like a subsidy on all of China’s exports to the United States, and puts an identical tax on U.S. exports to China, and to every other country in the world where we compete with China, which is our most important trade competitor. The U.S. could recover at least a million jobs by forcing China to revalue its currency now . We will have a record trade deficit of nearly $275 billion with China in 2010. President Obama is unlikely to acknowledge that trade with China cost us a half million jobs in 2010; the U.S. China trade deficit is growing rapidly and job displacement will worsen in the future unless something is done to end China’s currency manipulation and other unfair trade policies. The Obama administration’s trade policies are failing because corporate executives are designing them. Many key staff members have close ties to multinational corporations and Wall Street, such as new White House Chief of Staff Bill Daley (former executive of JPMorgan Chase), former Treasury official Gene Sperling, recently appointed head of the National Economic Council in the White House (formerly worked for Goldman Sachs); and recently departed NEC director Lawrence Summers, who received $5.2 million from a Wall Street hedge fund between stints in the Clinton and Obama administrations. Summers, Sperling and Treasury Secretary Timothy Geithner (also from Wall Street) played key roles in opposing efforts within the Obama administration to impose tariffs on Chinese goods if the Chinese Government continued to manipulate their currency. Multinational corporations are responsible for outsourcing millions of U.S. jobs. What’s good for their corporate profits (and executive pay) often conflicts with the national interest of the United States to maximize job creation and production in this country. Even U.S.-based MNCs sometimes profit enormously from China’s unfair trade and industrial policies and currency manipulation. China spent $199 billion last quarter alone buying foreign currency reserves (primarily treasury bills) in order to keep its currency artificially low. They now hold $2.85 trillion in foreign currency reserves. The best estimates suggest that the Chinese yuan (RMB) is at least 30-40% undervalued. That amounts to a subsidy of 30%-40% on all the goods imported by GE and other MNCs from China. These companies would lose billions in profits if China revalued the yuan (RMB) and made these goods more expensive, so they are actively opposing efforts to compel China to revalue. Multinational corporations don’t need government assistance — they are sitting on $2 trillion in cash that they are investing in financial securities, rather than real capital that would create new jobs. They have all the cash they need to invest in R&D and to expand their factories. They can also afford to file trade cases to protect their fair trade and patent rights, which can cost millions of dollars for a single case. Instead, however, while they hoard their cash at home, they are investing abroad. China is giving hundreds of billions in subsidies to MNCs to move factories from the U.S. and other countries and locate them in China. For example, Evergreen Solar announced last week that it will close its solar cell factory in Massachusetts , which opened in 2008 with $43 million in state subsidies. Chinese banks offered Evergreen financing for two-thirds of the cost of its new plant at rates “as low as 4.8 percent” with no principal payments or interest payments due until the end of the loan in 2015. Even cheap labor is beside the point. U.S. clean energy loan guarantees can’t compete with the Chinese loan subsidies. This is another reason why MNCs will oppose (overtly or covertly) efforts to enforce fair trade laws by the Obama Administration. Americans who work for a living should be outraged that the President has appointed an executive of a firm that has offshored tens of thousands of jobs to serve as one of his key advisors. G.E.’s Immelt, the President’s newest CEO advisor, says that he wants to create jobs in the United States. But as Scott Paul of the Alliance for American Manufacturing showed last week , Immelt and GE have been leading the charge of the outsourcers. He notes that GE has “slashed their American workforce to fewer than 150,000, [and] dramatically expanded its global presence, now employing over 300,000 workers worldwide.” The President visited Immelt at a GE Plant in Schenectady, New York, last week where they celebrated $45 billion in new trade deals with China, like the joint venture GE just signed with China AVIC, an avionics firm that supplies components to both civilian and military jet makers in China. GE claims that the deal will create jobs in the US, but they are giving away the keys to their kingdom by transferring key avionics technology to China AVIC. GE put $200 million and its technology in the deal and the Chinese partner is putting up $700 million. GE is effectively selling its treasure for beads and trinkets. This is supposed to be a 50 year deal, but the way these deals usually work, the Chinese partner will appropriate GE’s technology and then kick them out in a few years. Within ten years China AVIC will be a global leader in avionics, and GE will be out of the business. This, in essence, has been the result of China’s indigenous innovation policies, which have forced foreign companies to transfer technology to Chinese firms, according to the National Association of Manufacturers . The deal may boost short term profits and Jeffrey Immelt’s bonuses, but thousands of American jobs will disappear. Who in our government is representing those workers? The deal will supposedly be limited strictly to domestic avionics, but it would be unwise to blindly trust the Chinese partner — this deal will give their military aircraft access to cutting edge US technology; two weeks ago, when Defense Sectary Gates visited China, their military conducted the first test flight of a new stealth fighter — they are catching up fast. Small and medium sized manufacturers create most of the jobs in the U.S. — not the giant corporations. Unlike the big companies, small and medium sized firms cannot get access to enough capital to finance working capital or expansion needs. President Obama should have appointed someone like Laurie S. Moncrieff — President, Adaptive Manufacturing Services and Schmald Tool & Die, Inc., a dynamic business leader who speaks for small and medium sized firms. (Moncrieff appeared at an EPI currency forum last March ). She would make an outstanding Chair for the new White House Council on Jobs and Competitiveness. In his State of the Union Address last night, the President proposed some new investments in infrastructure and measures designed to boost competitiveness. We do need to invest hundreds of billions of public and private dollars each year for the next few years to rebuild our aging infrastructure and lay the foundations for new clean energy industries and for conservation. And those investments can support millions of new jobs. But their effectiveness will just be blunted if we shy away from fixing our trade problems with China and other countries that use unfair trade policies to take away jobs and production from U.S. workers and domestic companies. Without effective trade policies, too much of the boost to U.S. jobs that can be gained from our rebuilt highways and railroads will leak away in the form of rising imports. The President needs to address both imports and exports. He needs to tell us how he plans to end currency manipulation this year, and his plans for ending unfair trade. Eliminating the U.S. non-oil trade deficit would support over five million U.S. jobs, and generate hundreds of billions of dollars in new tax revenues and reduced spending on unemployment and other social services over the next few years. It’s time to end illegal currency manipulation and unfair trade practices, and to do that the President needs a new crop of advisors who care more about American job creation than outsourcing and MNC profits.

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Bevis Longstreth: Obama’s Phoenix: The Council on Jobs and Competitiveness

January 22, 2011

President Obama today named GE Chairman Jeffrey Immelt to head the White House Council he has served on over the past two years under the leadership of former Fed Chairman Paul A. Volcker. This advisory body, originally named the Economic Recovery Advisory Board, lacked traction with the White House and, as a consequence, declined in political significance even as the stature of Mr. Volcker soared among those in the country who value sound and independent thinking over political calculation and sail-trimming. As author of the major element in the Financial Reform legislation enacted last year that would directly address, in part, the huge risks to our financial system caused by proprietary activities of large banks — the eponymously named “Volcker Rule” — Mr. Volcker might easily have been seen by Wall Street as a formidable foe. At the outset of President Obama’s term, the White House surely would have known him to be seen that way, for his record of putting national welfare ahead of private interest is a long and distinguished one. Somehow, in one of the most remarkable PR tricks in this writer’s memory, Republican leadership convinced the press, and through it, a large share of our nation’s citizens, that the President had been deliberately, and effectively, anti-business. Many business leaders joined in this libel, including Jeffrey Immelt, in a speech last summer in Rome. In fact, this claim is patently false. However, in the nation’s Capitol, where mirrors enlarge clever fallacies until they appear to be true, the President has chosen to respond by seeking to endear himself to business. To that end, he has undertaken a number ofsteps that carry him into an ever-tighter embrace of all to which the U.S. Chamber of Commerce, that lowest common denominator of the business community, aspires. And so, rising like a Phoenix, the defunct Economic Recovery Advisory Board is reconstituted with Big Business at its helm, new membership in support and a new name to capture the President’s emerging affection for job creation. It could work. It might work under Jeffrey Immelt’s leadership, although he is better known for creating jobs off-shore than onshore. Since 2005 GE has shed 27,000 jobs, shrinking from 161,000 to 134,000 in 2009. And, of course, Big Business is not the place that economists would naturally think of first as the most promising place to generate jobs. When Franklin D. Roosevelt entered the White House in 1933,there were some 18 million destitute Americans needing help. To address this problem, and the growing number of those out of work, he was quick to bring to Washington not a leader of big business but Harry Hopkins, a social worker whose mission in New York State had been to provide relief for the unemployed. The principal vehicle for addressing these problems was the Works Progress Administration, or WPA as it became known, an agency that under Hopkins’ leadership and FDR’s vigorous support, achieved lasting monuments to its success in meeting human suffering with the offer of work. It is hard to imagine a WPA II becoming a priority of Mr. Immelt’s Council, although that is precisely what, as a matter of first and highest priority, it should do. Alas, any examination of the history of our Government’s handling of the unemployment problem under President Herbert Hoover between the Great Crash and FDR’s inauguration, reveals parallels to what President Obama did today that are unnerving to the extent they predict how the phoenix-like Council on Jobs and Competitiveness will behave under the leadership of Big Business. In 1930, President Hoover appointed Colonel Arthur Woods to head a committee on unemployment known as the “President’s Emergency Committee for Employment.” Woods was a distinguished public servant, not of the size of Paul Volcker but formed from the same mold of personal integrity. He had served with distinction as Police Commissioner for New York City. His Committee functioned from October, 1930 to August 1931. During that time it investigated the plight of the unemployed and the degree to which states and municipalities could cope. It recommended Federal relief in a highly textured report to the President. Hoover spoke to Congress soon after receiving that report, on December 2, 1930, rejecting its findings and blaming foreigners for the depression. “The fundamental strength of the Nation’s economic life is unimpaired,” he announced. Economic conditions worsened. Unemployment grew. On August 19, 1931, President Hoover appointed Walter S. Gifford, President of the American Telephone and Telegraph Company, to head a new advisory committee titled the “President’s Organization on Unemployment Relief”. At the time, ATT was of equal or greater stature than GE is today, and Mr. Gifford was a model representative of Big Business. Mr. Gifford proved as steadfast as President Hoover was to the principle that the problems of unemployment were to be solved, if at all, by states and municipalities. These men feared national responsibility more than they feared national unemployment. Only time will tell whether this past is the tragic prologue to our future.

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GE CEO To Replace Volcker On Obama’s Economic Team

January 21, 2011

Early Friday morning, Obama announced a significant shift for the White House economic team: the war against Wall Street greed has lost a major player, and corporate America has gained an advocate. General Electric CEO Jeffrey Immelt will be the new head of a Council on Jobs and Competitiveness. This panel will replace Obama’s Economic Recovery Advisory Board, formerly headed by Paul Volcker. The two men have significantly different backgrounds. Immelt is a lifelong Republican and, as Bloomberg put it, “a corporate heavyweight who can help burnish Obama’s pro-business credentials.” Volcker, a Democrat, was the creator of the eponymous rule in last year’s financial regulation bill which was designed to limit banks’ ability to use taxpayer-backed funds to make investments on their own behalf. In John Cassidy’s excellent New Yorker profile , he describes Volcker’s tenure in the White House as “a campaign to curb greed and speculation on Wall Street.” This news follows the appointment of Gene Sperling as the new top White House economic adviser and William Daley , a top JP Morgan executive, as the new White House chief of staff. Sperling, while he has never worked full-time in the financial sector, made millions on Wall Street in an advisory capacity even as the economy tanked. Daley, for his part, opposed Obama’s consumer protection agency. In a statement, Obama said that Immelt’s mission will be to help boost up the private sector to speed up economic growth and promote competition. “As we enter a new phase in our recovery, I have asked the new council to focus its work on finding new ways to encourage the private sector to hire and invest in American competitiveness,” the President wrote. The Washington Post characterized this move as a shift towards a focus on job creation and economic improvement: “The council’s new leadership and mission reflects the administration’s shift from trying to halt the recession to broader efforts to improve the U.S. economy and create jobs.” In an Op-Ed in t oday’s Post , Immelt outlined some of his goals. The piece is short on details but focusses in on three areas: manufacturing and export, free trade, and innovation. He writes: “My hope is that the council will be a sounding board for ideas and a catalyst for action on jobs and competitiveness. It will include small and large businesses, labor, economists and government.” In Peter Baker’s lengthy NYT feature looking at the frustration brewing inside the Obama administration’s efforts to fix the economy, Baker notes: “[Obama] surely knows that if he cannot figure out in the next two years how to create jobs, he may lose his own.” Now, he is changing the players. Baker tracks the changing personell and agenda: “The path from crisis to anemic recovery was marked by turmoil inside the White House. The economic team fractured repeatedly over philosophy (should jobs or deficits take priority?) and personality (who got to attend which meetings?), resulting in feuds that ultimately helped break it apart. The process felt like a treadmill, as one former official put it, with proposals sometimes debated for months before decisions were reached. The word commonly used by those involved is “dysfunctional,” and in recent months, most of the initial team has left or made plans to leave, including Larry Summers, Christina Romer, Peter Orszag, Rahm Emanuel and Paul Volcker. With Geithner as its anchor, a new economic team is being built around Bill Clinton-era figures like William Daley, Gene Sperling and Jack Lew, a group assembled to joust with Republicans instead of one another. Rather than responding to crises or putting into motion grand macroeconomic theories, they will focus on pushing the recovery into higher gear while at the same time figuring out how to reduce the deficit — two goals that some see as incompatible in the short term. And along the way, they need to convince Americans that the president is focused on jobs, jobs, jobs.”

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Robert Lenzner: Pete Peterson’s Crusade to Cure the Global Debt Bubble

January 8, 2011

Peter G. Peterson, founder of Blackstone, the private equity giant, and former chairman, Lehman Brothers, backed by the support of 55 former US officials, is calling on president Obama to instantly organize a bipartisan effort to deal with the nation’s debt and bloated federal budget. In a personal interview with me in late December, Peterson, chairman of his own foundation, admitted, “What I fear is that we need a crisis to educate the public on the seriousness of the problem. What I hope is that the president will decide this is a major national issue, spell out what needs to be done, and what kind of a future we want.” Peterson is adamant; “We need a positive view of the kind of America will emerge,” he told me. “We need an elevated national dialogue leading to a bipartisan agreement.” If not, the former secretary of commerce in the Nixon administration warns, “The implication if we dont do something is clear. The interest costs will begin to consume the budget.” Indeed, a study commissioned by the Peterson Foundation shows that by 2027 interest on the federal government’s debt will be the largest item in the budget — far more than the amounts spent on education, infrastructure and research and development. By 2055, if there is no reform, the interest expense for servicing U.S. Treasury debt will require 100% of the US government’s tax revenues, according to figures supplied by the Peterson Foundation. Peterson is plainly worried about the nation’s debt weakening its influence in global politics. “If the current trends continue, the exploding amount of U.S. debt owned by foreign lenders leaves us vulnerable to their economic and political demands,” his latest report suggests. Peterson recently polled 55 former treasury secretaries, former members of the Council of Economic Advisers, former Federal Reserve Board governors and previous directors of the Office of Management and Budget — and was heartened that to a man they agreed wholeheartedly with him that the long term structural financial outlook of the United States is not sustainable unless there are major cuts in the federal budget as well as tax increases. Now, he is trying to organize a global pressure group made up of other nations with too much debt and too large an elderly retired population to tackle solutions for this widespread quandry in a unified fashion. The Peterson Foundation is preparing projections for debt servicing across the globe and trying to estimate the total costs for funding the aged everywhere — to show that the rising cost of medical care and social security plagues more than just the U.S. The painful lesson; to underscore there are going to be far fewer taxpaying citizens and that as a result — social insurance programs all over the world are not being funded sufficiently.

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Eric Schoenberg: Zombie Economics and Just Deserts: Why the Right Is Winning the Economic Debate

January 7, 2011

Economist Paul Krugman recently decried “zombie economics,” policies advocated by “free-market fundamentalists [who] have been wrong about everything yet now dominate the political scene more thoroughly than ever.” I share his chagrin, but suggest that the problem is that Krugman was wrong to also assert that “economics is not a morality play.” In fact, I believe that defeating the zombie-like resilience of laissez faire capitalism will require directly refuting the moral belief in the inherent fairness of free market outcomes. Consider a recent suggestion by Harvard economist Greg Mankiw, former Chairman of George W. Bush’s Council of Economic Advisors, that tax policy should be based on a ” Just Deserts Theory ” under which “people should get what they deserve.” This principle, a restatement of Equity Theory, proposed by psychologist John Adams in 1963 to explain how people evaluated distributional fairness, has long played a central role in tax debates , and is one that I, like many liberals, heartily endorse. Indeed, I think that widespread support for free markets is based more on belief in their inherent morality than on belief that they promote economic growth, potentially explaining the religious fervor of free-market fundamentalists defending their faith despite the considerable counter-evidence provided by recent events. Mankiw concisely summarizes the theory underlying the ethical argument for market capitalism: “under a standard set of assumptions… the factors of production [i.e., workers] are paid the value of their marginal product… One might easily conclude that, under these idealized conditions, each person receives his just deserts.” Mankiw’s long-standing opposition to higher taxes on the wealthy suggests that he thinks these conditions usually pertain in the real world, too. Consider me skeptical. The list of “standard assumptions” open to question is long, but two are particularly problematic (Northwestern economist Jonathan Weinstein has critiqued several others). First, how can we be sure that marginal productivity is the same as social contribution? A safe cracker in a criminal gang may indeed receive loot equal to his marginal productivity, but this doesn’t mean that he is creating social wealth. Thus, financial industry profits accounted for over 40 percent of all corporate profits in 2004-5 , but does anyone seriously contend that Wall Street created (rather than redistributed) 40 percent of wealth during that period? The second problem is one that Mankiw himself acknowledges when he comments that the dramatic growth in income at the very top of the economic pyramid might be thought of as a lottery, with a few lucky winners reaping the lion’s share of rewards. As economists Robert Frank and Philip Cook point out in their book The Winner Take All Society , technological change and ever-larger markets have caused small differences in ability, effort or luck to translate into large differences in income. Economic theory says that such “tournament rewards” create an incentive for individuals to exert maximal effort, consistent with just deserts as long as you don’t mind that “losers” get much less despite trying nearly (or just) as hard. But theory also says that tournament rewards create an incentive for people to sabotage the efforts of others and to take on as much risk as possible. Given the role that excess risk played in Wall Street’s meltdown, this is hardly a ringing endorsement for the fairness (or efficiency) of free market outcomes. So Mankiw’s “easy” conclusion that markets deliver just deserts depends critically on his own moral intuition about what is just. Given humanity’s well-known ability to convince ourselves that what is in our own self-interest is fair, it is hardly surprising that wealthy conservatives like Mankiw would believe that free market capitalism delivers fair outcomes. But it is noteworthy that in one real-world situation with tournament rewards — lotteries — society typically imposes taxes in excess of 50 percent, since winners pay regular income taxes on earnings already halved by the governmental sponsor’s share of the pot. Moreover, a large body of laboratory research investigating moral intuitions regarding the division of a pool of money has demonstrated the powerful appeal of an equal split , a preference consistent with anthropological evidence that hunter-gatherer groups are remarkably and consistently egalitarian. While a handful of studies have demonstrated that preferences for equality in the laboratory are (slightly) reduced when subjects have to earn the money at stake, this involves experimenters (who provide the money in the first place) making it clear that they consider the earner to have made a commensurate contribution in the laboratory setting. So, sure, people like just deserts when there is compelling evidence that they are indeed just. But the egalitarianism of hunter-gatherers, whose groups undoubtedly included considerable and obvious variation in individual abilities, suggests that the standard of proof for justifying inequality can be quite high. I therefore think it likely that conservative icon Joe the Plumber favors lower taxes not simply because his own personal experience suggests that smarter and harder-working plumbers (granted, he isn’t actually a plumber ) tend to provide better services and to have proportionately higher incomes as a result, but also because authorities like Mankiw assert that a complicated mathematical theory says that this intuition is true throughout the economic system. To be sure, populist Joe might claim to disdain elite theory, but as Keynes once observed, “practical men, who believe themselves to be quite exempt from any intellectual influence, are usually the slaves of some defunct economist.” Thus, Tea Party advocates sustain their belief in the market’s fairness by blaming the government for bailing out Wall Street and interfering with the market’s ethical magic , explaining why their initial targets were Republicans who supported the bailout ( like Mankiw ). Meanwhile, Democrats have completely failed to link higher taxes on the wealthy to populist anger at those who prospered while driving the economy into a ditch. To regain the initiative, I believe, progressives must directly challenge the claim that unfettered markets create just deserts. This won’t be easy. Free market fundamentalists have the advantage of a simple message — ending bailouts will deliver just deserts — and of nearly limitless funds from rich folks who benefited from the bailout but are happy to claim that it should never happen again. Let me therefore suggest one way to start: replace the estate tax with an inheritance tax. Republicans use the term “death” tax to imply that society is confiscating a lifetime of just deserts wealth. But if taxes are to be based on Mankiw’s proposal that those “who contribute more to society deserve a higher income that reflects those greater contributions,” then inheritors who have contributed nothing themselves should pay substantially higher rates (full disclosure: I am myself an inheritor). I believe a debate about inheritance taxes will allow us to distinguish two arguments that appear similar but are critically different. The claim that people should get their just deserts is tricky to implement, but offers a valid moral principle to guide public debate. But the closely related argument that government should “keep its hands off my money” represents pure selfishness by people who refuse to acknowledge that public goods like education and defense are essential for the creation and protection of private wealth. Progressives have to make clear that the attempt to eliminate taxes on inheritors suggests that conservatives believe that all-you-can-eat socialism is fine for the rich as long as there is just-deserts capitalism for everyone else.

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Debtris: Animation Captures The Scale Of U.S. Debt (VIDEO)

January 3, 2011

The Sunday talk shows this week sparked fresh anxiety over the U.S. debt puzzle this week, with Austan Goolsbee, the chairman of the White House’s Council of Economic Advisers pushing back hard against GOP refusal to raise the debt ceiling . If the debt ceiling isn’t extended this spring, the U.S. government could be effectively shut down, as it defaults on its obligations, a possibility that Austan Goolsbee, the chairman of the Council of Economic Advisers, calls “the first default in history caused purely by insanity.” In an interview on ABC’s This Week Goolsbee hit the “game” rhetoric hard. “This is not a game… I don’t see why anybody’s talking about playing chicken with the debt ceiling … There would be no reason for us to default other than that would be some kind of game. We shouldn’t even be discussing that.” The animators at Information Is Beautiful , however, have turned U.S. debt into a game of Tetris. Viewed below in relation to the cost of the credit crisis , the global cost of obesity related illness and total African debt to the West , our current debt problems don’t seem too severe. Behold, Debtris: The Game:

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WATCH ‘Debtris’: Animators Turn U.S. Debt Into A Puzzle

January 3, 2011

The Sunday talk shows this week sparked fresh anxiety over the U.S. debt puzzle this week, with Austan Goolsbee, the chairman of the White House’s Council of Economic Advisers pushing back hard against GOP refusal to raise the debt ceiling. If the debt ceiling isn’t extended this spring, the U.S. government could be effectively shut down, as it defaults on its obligations, a possibility that Austan Goolsbee, the chairman of the Council of Economic Advisers, calls “the first default in history caused purely by insanity.” In an interview on ABC’s This Week Goolsbee hit the “game” rhetoric hard. “This is not a game… I don’t see why anybody’s talking about playing chicken with the debt ceiling… There would be no reason for us to default other than that would be some kind of game. We shouldn’t even be discussing that.” The animators at Information Is Beautiful , however, have turned U.S. debt into a game of Tetris. Viewed below in relation to the cost of the credit crisis, the global cost of obesity related illness and total African debt to the West, our current debt problems don’t seem to severe. Behold, Debtris: The Game:

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Video: Gibbs Says Obama May Name Summers Successor Next Month

December 27, 2010

Dec. 27 (Bloomberg) — A successor to National Economic Council Director Lawrence Summers will probably be named next month, White House press secretary Robert Gibbs said on CNN’s “State of the Union” program yesterday. Summers is keeping his position through the end of the year, and President Barack Obama wanted to “take some time to make a good decision,” Gibbs said. Bloomberg’s Peter Cook reports. (Source: Bloomberg)

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Extell’s Riverside Center Project Clears Hurdle

December 27, 2010

The New York City Council has unanimously approved Extell Development Co.’s proposed Riverside Center, a 3.1-million-square-foot mixed-use project on the Upper West Side. The eight-acre project will span West 59th Street to West 61st Street between West End Avenue and the West Side Highway. It will consist of 2,500 apartment units in five high-rise towers and retail space — along with a school, as negotiated as part of the agreement approved…

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Michael Likosky: Top 10 List for 2010: Infrastructure

December 25, 2010

1. Top Huffington Post Blog Chris Matthews: “Infrastructure as Monument” 2. Top Presidential Speech President Obama: “Our Generation’s Sputnik Moment is Now” 3. Top Infrastructure Journalist Rachel Maddow 4. Hardest Working Man in Infrastructure Pennsylvania Governor Ed Rendell 5. Best Statement in Support of an Infrastructure Bank Senator Kerry to Banking Committee 6. Best Report on the Stimulus Act & Infrastructure President’s Council of Economic Advisors Fourth Quarterly Report 7. Most Effective Consensus Builder Congresswoman Rosa DeLauro (Conn.-3) 8. Best Advocates for a Bi-Partisan Approach Building America’s Future 9. Best Infrastructure Statesman Ambassador Felix Rohatyn 10. Top Infrastructure Philanthropist Bernard Schwartz

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Smart Card Alliance Identity Council Announces New Officers, Plans for Educational Resources on Trusted Identities

December 22, 2010

PRINCETON JUNCTION, NJ–(Marketwire – December 22, 2010) – Guiding the creation of strong identity management foundations for citizen and government identity programs is the focus for the coming year, the Smart Card Alliance Identity Council said recently. The Identity Council also announced new officers and a steering committee, and recently held a workshop on the Personal Identity Verification (PIV) Interoperable (PIV-I) card at its 9th Annual Smart Cards in Government: Identity, Security & Healthcare Conference in November in Washington D.C.

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Hedge Funds May Skirt Direct Fed Security

December 20, 2010

WASHINGTON (By Rachelle Younglai and Dave Clarke) – The Federal Reserve does not believe any one hedge fund can topple the financial system and therefore the private pools of capital may escape direct supervision by the central bank, an industry source familiar with the Fed’s position said. The newly created Financial Stability Oversight Council, which includes the Treasury secretary and 14 U.S. supervisors, including the Fed, are in the early stages of determining which non-bank firms pose a threat to the financial system. Firms labeled as “systemically important” will be subject to rigorous oversight by the Fed but will also have access to the central bank’s emergency lending facilities. The indication that hedge funds might escape this designation is sure to send a huge sigh of relief through the $1.7 trillion industry, which has long avoided the tighter controls imposed on mutual funds, for example. In exchange for looser regulations, hedge fund firms promise to allow only wealthy and sophisticated investors like pension funds and endowments into their portfolios. The Fed’s view will carry considerable weight among the Financial Stability Oversight Council, which was created by the Dodd-Frank legislation to monitor risks to the financial system in the aftermath of the 2007-2009 credit crisis. The source said the Fed does not think any one hedge fund can be “systemically important” but believes that information about the funds’ positions could give the council insight into potential risks. The source requested anonymity while discussing talks held with the Fed. The Fed did not immediately return a call seeking comment. INDUSTRY SAYS NO Already a number of financial industry firms, ranging from insurers to mutual funds, are trying to convince regulators they are do not pose a threat. Mutual funds tend to manage much more money than hedge funds. The world’s biggest mutual fund, Pimco Total Return Fund, managed by Bill Gross, oversees $250 billion. By comparison, John Paulson’s hedge fund firm Paulson & Co, ranked among the world’s largest hedge funds, oversees about $30 billion. The Managed Funds Association, which lobbies for the hedge fund industry, argues that individual funds do not pose a systemic risk. It told regulators that the industry made risk management changes after the 1998 collapse of Long-Term Capital Management roiled financial markets and prompted a bailout by other industry players at the urging of the Clinton administration. “The resulting changes may be one of the reasons that hedge funds were not the focus of the recent global financial crisis,” the group said in a November 5 letter to Treasury Secretary Timothy Geithner, who chairs the Financial Stability Oversight Council. The council, which also includes the heads of the Securities and Exchange Commission and the Federal Deposit Insurance Corp, is seeking input on what criteria to use to decide which non-bank firms and clearinghouses should be considered “systemically important.” It is unclear when they will start designating firms. NEW RULES FOR HEDGE FUNDS ANYWAY Even if hedge funds are not labeled “systemically important,” they will still face increased supervision and forced to be more transparent because of the Dodd-Frank legislation and recent SEC actions. “They have been able to exploit inefficiencies in the marketplace, by mining information that is not readily known to others,” said Daniel Crowley, a partner at law firm K&L Gates, who represents financial services firms including hedge funds. “Their job will become harder when they have to register. Their trading strategies will become public,” he said. The SEC now has the power to regulate the trillion-dollar industry. Many of the world’s largest hedge funds have already registered with the SEC, agreeing to divulge certain details about how they run their businesses and how much money they oversee. The funds’ activities have also been curtailed with the SEC’s recently adopted short sale rule, which restricts short selling in a company’s stock if the stock falls more than 10 percent. Hedge funds, unlike mutual funds, have long relied on short selling, or betting that a stock price will fall, to make money even in down markets. Under Dodd-Frank, hedge funds, banks and others that deal in the estimated $600 trillion over-the-counter derivatives market will be forced to set aside extra funds to trade the financial instruments. The Commodity Futures Trading Commission’s plan to limit speculation in energy and metals will also impact certain funds’ activities. (Additional reporting by Svea Herbst-Bayliss in Boston; Editing by Leslie Adler) Copyright 2010 Thomson Reuters. Click for Restrictions .

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Wall Street To Regulators: No Need To Rush

December 20, 2010

CHICAGO/WASHINGTON (By Ann Saphir and Dave Clarke) – As U.S. regulators race to write rules that will put Wall Street reform legislation into action, some industry groups are trying to apply the brakes, latching onto linguistic loopholes in the law to bolster their case. The new law, which aims to prevent a repeat of the 2007-2009 financial crisis, requires regulators to potentially write hundreds of rules, many under a tight time-frame. But in cases where the Dodd-Frank reform law leaves a bit of wiggle room on deadlines for final rules or effective dates, industry groups are urging regulators to take a deep breath and adopt a go-slow approach. The argument is being made across the financial industry in areas such as derivatives market oversight; plans for liquidating large, failing financial institutions, and a crackdown on debit card fees. “We appreciate that Dodd-Frank imposes short and strict deadlines by which each agency must adopt various rules,” says a December 6 letter from 11 industry groups to the Securities and Exchange Commission and the Commodity Futures Trading Commission, which are busy writing rules that will impact how the $600 trillion derivatives market is traded. “We respectfully note that the CFTC and SEC have discretion in determining when new regulatory measures will become applicable,” the letter said. The industry groups who penned the letter include the Futures Industry Association and the Investment Company Institute. In one key passage, the letter notes, Dodd-Frank requires swaps rules to take effect “not less than 60 days” after they are finalized, a phrase which suggests, according to the letter, that the gap can certainly be more. The efforts may already be getting traction. CFTC Chairman Gary Gensler last week delayed issuing a draft rule on commodity position limits designed to curb speculation. The draft rule ran into objections both from commissioners who want the agency to act quicker and those who fear moving too fast will damage the market. But Dale Rosenthal, a professor at the University of Illinois, Chicago who has studied derivatives trading, senses desperation in industry’s focus on language. “So they are resisting, but they are running out of tools, which is why they are starting to go to semantics,” Rosenthal said. “You are literally starting to fight over small words because you are not winning the larger battle.” FDIC, FED ALSO LOBBYING TARGETS Gensler’s ear is not the only one being bent — the go-slow argument is being made to several agencies. The American Bankers Association is urging the Federal Deposit Insurance Corp to take its time in crafting rules that will determine how large, failing financial firms seized by the government will be liquidated. The group notes the law does not specify a deadline for these regulations to be in place. “The nation’s financial system would be well served if the FDIC used the flexibility granted by Congress to adopt a measured and deliberate approach to the development and implementation of its authority,” the group wrote in a November 18 letter to the agency. Both Bank of America and Visa have urged the Federal Reserve to use as much time as it can to implement a rule slashing debit card fees and forcing more competition among networks used to process transactions. Some are arguing regulators just aren’t ready to move. The Chamber of Commerce is questioning why the new systemic risk council is busy writing rules on how to determine which non-banks will be subject to increased scrutiny by the Federal Reserve when the panel does not yet have all its members. The Financial Stability Oversight Council is headed by the Treasury Department and includes other major regulators. The Chamber of Commerce notes, however, that the seat reserved for an insurance expert has not been filled and that the head of the council’s research office has not been selected. “The current narrow focus of the Council may skew the discussions and decisions of the Council, potentially harming the economy with unintended consequences,” the Chamber of Commerce wrote regulators in a November 5 letter. Republicans have been highly critical of the new law and their gains in Congress may have emboldening industry to step up their calls for slower — and lighter-handed — rulemaking, some suggest. “It’s better to get this right than to get it done quickly,” John Damgard, president of the Futures Industry Association, told Reuters in an interview. “Even people on both sides of the aisle have indicated that some of these deadlines aren’t realistic, and the next Congress may very well take a good long look at the implementation issues.” (Reporting by Ann Saphir in Chicago and Dave Clarke in Washington with reporting by Jonathan Spicer in New York, Editing by Tim Dobbyn) Copyright 2010 Thomson Reuters. Click for Restrictions .

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Financial Crisis Panel In Turmoil As Republicans Defect; Plan To Blame Government For Crisis

December 15, 2010

The four Republicans appointed to the commission investigating the root causes of the financial crisis plan to bypass the bipartisan panel and release their own report Wednesday, according to people familiar with the commission’s work. The Republicans, led by the commission’s vice chairman, former congressman and chair of the House Ways and Means Committee Bill Thomas, will likely focus their report on the explosive growth of subprime mortgages and the heavy role played by the federal government in pushing mortgage giants Fannie Mae and Freddie Mac to purchase and insure them. They’ll also likely focus on the Community Reinvestment Act, a 1977 law that encourages banks to lend to underserved communities, these people said. The Republicans’ report is expected to conclude that government policy helped inflate the housing bubble and that prices weren’t expected to crash because the government pushed homeownership so aggressively. They say that the report will note that once the bubble burst, a financial panic followed because firms weren’t adequately prepared. Frustrated in part by the Financial Crisis Inquiry Commission’s chairman, Phil Angelides, and the tenor of the panel’s preliminary findings, the Republicans are choosing to ignore the five Democrats and lone independent and issue their document ahead of the commission’s Jan. 15 release. Angelides is described as a demanding boss who’s said to be difficult to work for. Both Thomas and Angelides pledged in January that they’d strive to reach bipartisan consensus. The Republicans’ move indicates that the highly-partisan nature of Washington has infiltrated the commission’s work and threatens to derail it. With four commissioners now essentially going around the panel to describe their thoughts on the roots of the financial crisis, the public may not get the full picture when it comes to understanding how the actions of a few led to the worst economic downturn since the Great Depression. Instead, the public will receive a report that could be discredited as being partisan, and another that is expected to largely conform with a Wall Street-friendly view that blames government for the crisis. During a private commission meeting last week, all four Republicans voted in favor of banning the phrases “Wall Street” and “shadow banking” and the words “interconnection” and “deregulation” from the panel’s final report, according to a person familiar with the matter and confirmed by Brooksley E. Born, one of the six commissioners who voted against the proposal. “I think a number of us had really pulled for” bipartisan consensus, said Born, a Democratic commissioner who famously tried to regulate certain derivatives as head of the Commodity Futures Trading Commission. “But this action by the Republicans indicates they have decided to go their own way.” Born said the Republicans had not informed the commission of their plans, nor had they shared their report. She said she was “disappointed” because the views of her Republican colleagues would have been “useful.” The other Republicans on the panel are Peter Wallison, a fellow at the American Enterprise Institute, a conservative Washington research organization, who once served as general counsel at the Treasury Department; Keith Hennessey, who formerly served as George W. Bush’s senior economic adviser while heading the National Economic Council and now works as a fellow at the Hoover Institution, another conservative research organization; and Douglas Holtz-Eakin, who formerly led the Congressional Budget Office and now heads the American Action Forum, a policy institute in Washington. The shadow banking system refers to the part of the financial system in which investors and other nonbanks like hedge funds and investment firms provide credit to borrowers, as opposed to more traditional banks. Interconnection refers to the links that bind financial institutions to one another, like derivatives, borrowings, and investments. “I certainly felt, and I think the majority of the commission felt, that deleting those phrases would impair the commissioners’ ability to give a full and fair and understandable report to the American people about the causes of the financial crisis,” Born said. “Certainly, it’s hard to imagine Wall Street wasn’t involved,” she added. Born said that the Republicans wanted to ban two other phrases “of the same ilk,” but she said she couldn’t remember what they were. Thomas and Wallison didn’t immediately respond to e-mails sent after regular business hours. Hennessey and Holtz-Eakin declined to comment. The Republicans’ move puzzled some observers. Thomas displayed populist outrage during public forums at the excessive compensation paid to top bankers. Holtz-Eakin is a respected economist who asked probing questions during the commission’s hearings. Born said that the commission only recently experienced such partisanship. “There was a lot of consensus on the nature of the investigation,” Born said. “All 10 [commissioners] participated in discussions about subjects we should investigate, what our hearings should be about. They all were involved in planning the hearings.” Wallison, though, was expected to dissent. He exhibited sympathy for Wall Street during the panel’s public hearings, declining to grill some executives, an activity some commissioners appeared to relish, and focused instead on the role played by Fannie Mae and Freddie Mac. According to Wallison, as many as half of all home mortgages were given to borrowers with poor credit or who didn’t provide proper documentation, like tax forms and income statements, he said during an April 7 hearing. He attributes this to Fannie and Freddie’s insatiable demand for subprime mortgages, something he blames on the federal government and its desire to stimulate lending to the poor. Experts agree that while Fannie and Freddie and the federal government’s push to encourage homeownership played a significant role in causing the crisis, actions by Wall Street magnified the fallout and caused a crisis that led to the Great Recession. Economists from the Federal Reserve, as well as bank regulators first appointed by Republicans, agree that the Community Reinvestment Act played virtually no role in causing the financial crisis. But the Republicans’ report will largely focus on the role played by the federal government. It will note that a crisis was averted after the government bailed out Bear Stearns and facilitated its absorption by JPMorgan Chase, according to people familiar with the matter. The crisis roared back after the government allowed Lehman Brothers to fail, scaring nervous investors. A bigger and more protracted downturn was avoided when policy makers essentially bailed out the entire financial system. Yet while the commissioners knew of Wallison’s views, the final report would have benefitted from input by the Republicans, Born said. Other than Thomas, the Republicans slowly began limiting their participation in the panel’s activities starting in early August. Hennessey and Holtz-Eakin, for example, have missed about half of the commission’s meetings since then, according to a person familiar with the panel’s activities. And other than Thomas, the Republicans have provided only limited feedback on drafts of the final report’s sections that have been circulated by the panel’s staff, this person said. “All of the commissioners have had the opportunity to review and provide feedback,” said Tucker Warren, the crisis panel’s spokesman. He said he wasn’t aware of any commissioners complaining about a lack of opportunity to address draft findings. The Republicans are expected to complain that the Democrats on the panel are not giving them sufficient options to air their views. Each commissioner is allotted nine pages in the book version to express alternative or dissenting views, should there be any, Warren said. That’s part of the reason why the Republicans are angry, according to people familiar with the matter. However, commissioners will have unlimited space on the panel’s Web site and in the government-printed version of the report that will be delivered to Congress and President Barack Obama, said Warren. Thomas is expected to hold a news conference tomorrow. ************************* Shahien Nasiripour is a business reporter for The Huffington Post. You can send him an e-mail ; bookmark his page ; subscribe to his RSS feed ; follow him on Twitter ; friend him on Facebook ; become a fan ; and/or get e-mail alerts when he reports the latest news. He can be reached at 646-274-2455.

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Richard (RJ) Eskow: Blind Trust: Holder’s Bogus "Operation" and Obama’s Wall Street Justice

December 10, 2010

Here’s something the administration may want to take to heart: Trust is a lot like money. If you spend more than you earn, it could be gone when you need it the most. Consider the Attorney General’s highly-touted announcement of a “crackdown” on financial fraud. Americans have been waiting for this ever since bank crimes shattered the economy, leaving them with millions of lost jobs and billions in lost savings. Finally, after years of inaction against the fraudsters, the Justice Department began dropping hints that a big Wall Street bust was coming. And this week Eric Holder announced that a probe launched in August has already led to more than two hundred arrests and dozens of other investigations. “Where are all the big names?” wrote one observer, who added: “The ‘too big to fail’ are also the ‘too big to prosecute.’” Another commentator called it “Too much form. Too little substance. Too many government officials elbowing for the spotlight. Too little, too late.” A third said “It’s bad enough that there have been no criminal convictions of any of the executives who helped bring the banking system and our economy to its knees. Now the Justice Department is touting trumped-up numbers …” And that was just the business media. (The comments are from a Forbes columnist, another Forbes columnist, and Jonathan Weil from Bloomberg .) The Columbia Journalism Review rounded up some other press reactions in a piece called ” The Obama Administration’s Financial-Fraud Stunt Backfires .” Their citations include a New York Times report which found that Holder’s figures were artificially inflated. As Weil at Bloomberg observed: “First they tracked down every small-fry Ponzi scheme, affinity fraud and penny-stock pump-and-dump they could find that had advanced through the courts since mid-August. Then they totaled them up and called it a sweep …” The Columbia roundup concludes with the hope that “the Obama administration’s laughable attempt to show it’s tough on financial fraud will cause enough of a backlash in the press that it forces them to actually do something …” This mythical sweep, a trumped-up bag of unrelated cases which the administration tried to present as a coordinated crackdown on financial crime, was called “Operation Broken Trust.” The punchline writes itself. Not that unemployed Americans or households with an underwater mortgage are likely to laugh. Meanwhile one of Obama’s key economic advisors just joined Citigroup , and the president’s reportedly interviewing another Wall Street kingpin to run his Council of Economic Advisors. The President promised during his campaign to ” close the revolving door ” between government and big business, but it’s revolving as always. And as bankers pass through it, America’s cops just tip their caps and say “Good morning, sir.” Wild in the Street (Wall Street, that is) The “Broken Trust” target list resembles that of the President’s “Interagency Financial Task Force,” which has concentrated on minor criminals while studiously avoiding the big (and still deadly) fish (see ” A Banker Can’t Get Arrested In This Town “). Most of the Task Force’s indictments involved a category of financial criminal we call “ABB” — “anybody but bankers.” There were software entrepreneurs, family investment firms, some Florida retirement advisors … even a fraudulent psychic who claimed he could predict stock performance! (And no, it wasn’t Jim Cramer .) Holder’s list of alleged “Broken Trust” victories is a similarly Faginesque assemblage of small-time grifters. It would make an ideal cast of characters for a Damon Runyon story or a Bertolt Brecht musical: There’s a Miami-based Ponzi schemer who used his loot to buy basketball tickets and make yacht payments, a retired Ohio cop who scammed fellow police officers and some firefighters, and the New Jersey hustler who scammed people so he could buy three luxury cars and two country club memberships. Throw in a hooker with a heart of gold and you’ve got yourself a show, baby! But there were no indictments for the AIG deceptions that precipitated the worldwide crash (we described the prima facie evidence that a crime had been committed here and here ). There were no indictments at Goldman Sachs. And there were none for Citigroup’s $40 billion subprime lie . It’s true that the CFO was fined $100,000 — but that’s after taking home $19.4 million the same year the crime was committed. Citi’s crooks didn’t just get a free pass. We bailed out their bank, too. That’s good news for former Obama advisor Peter Orszag, who cashed in just this week with a high-paying Citi job as a “senior global banking advisor.” It gets worse. Banks criminally laundered billions in drug money from Mexican drug cartels. Wachovia Bank alone laundered $374 billion, in what was called “a virtual carte blanche” for “cocaine cartels.” Number of criminal indictments: Zero. As a Senate investigator observed: “There’s no capacity to regulate or punish them because they’re too big to be threatened with failure.” That policy holds, even when banks conspire with drug dealers who have killed 22,000 people. The free ride for Wall Street criminality helps explains the public outcry earlier this year when a top Morgan Stanley broker committed hit-and-run and left a wounded bicyclist lying in the street with spinal cord and brain injuries. He wasn’t indicted … because of his high income . Even the even-tempered Felix Salmon called that decision “shocking.” A local DA’s terrible decision came to symbolize the immunity crooked bankers are routinely given in Washington. Sure, bankers can probably get indicted for something . The law would presumably still crack down if, say, some Wall Street hotshots wore Satanic robes and ate a live baby in Times Square. But there’s still the nagging suspicion that Washington would indict some nannies in Ohio instead and call it “Operation Baby Wipe.” Right now, somewhere in this country, a banker is committing a crime. And guess what? He’s not worried about going to jail. Your home, their castle Historians now say that droit de seigneur — the right of a Lord to invade any home on his estate to take a young woman’s virginity — never really existed. But our banking lords can invade the sanctity of a private home to screw their serfs in other ways. The “your home is your castle” principle has been around since the Magna Carta and was the foundation for centuries of property rights law – until now. As we and others have reported, bankers have used the MERS system and other tools to systematically violate property rights laws and procedures around the country. So far, the Obama administration’s response to this systematic criminality has been to say that it’s not interested in looking at past abuses , and to deny the existence of systematic abuses while publicly insisting that shady foreclosure practices must be declared legal “to get the market moving again.” Meanwhile the Attorneys General of all fifty states have gotten into gear. These Democratic and Republican AGs alike (bipartisanship at last!) have combined their efforts in a joint probe designed to bring this criminality under control. But the 51st Attorney General — the most powerful of them all — is barely visible. After getting pressure from House Democrats and Nancy Pelosi, he finally announced a foreclosure investigation in October. There’s been no movement since then. Don’t worry, though. The guy with the boat in Miami is gonna face the music, and that ex-cop in Ohio is going down . Full Faith and Credit This week we saw the President become visibly angry when his good intentions were doubted as he announced the tax deal. Yet this was also the week Orszag took that Citi job. And it was also the week his Attorney General bragged about the results of an “operation” that began August 16 — “results” that included an arrest in 2009 and others in May and July. With announcements like that, the administration better get used to being doubted. It’s wrong — and a terrible blunder — to dishonestly present a smattering of small-time cases as the fruits of some bold new Federal initiative. But the real breach of trust is the government’s unwillingness to go after the Wall Street fraudsters who ruined the economy. Once again we’re seeing the administration’s approach to financial crime: Target petty hoodlums and let the capos go free. If the White House wants to restore the public’s faith it needs to get serious about investigating bank fraud — real bank fraud, the kind that brought down the economy once and could do it again. Administration officials seem perpetually surprised when they’re not taken at their word, and this week was no exception. They should have known that a skeptical, burned public would see through “Operation Broken Trust.” If they didn’t see that coming, then they shouldn’t have busted that Wall Street “psychic.” They should have hired him. _______________________________________________________ Richard (RJ) Eskow, a consultant and writer (and former insurance/finance executive), is a Senior Fellow with the Campaign for America’s Future. This post was produced as part of the Curbing Wall Street project. Richard also blogs at A Night Light . He can be reached at “rjeskow@ourfuture.org.”

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William K. Black: The Effort to Claim That Economists Support Obama’s Capitulation on Tax Cuts for the Wealthy

December 10, 2010

You know the administration is desperate when it creates a web page citing economists who support its capitulation on taxes. The web page cites the support of five economists. Peter Cardillo, the Bank of America, Greg Mankiw, and Wells Fargo (are the second through fifth economists on Obama’s list). Who are these supporters and why is the administration proud of their support? Cardillo is an economist for an investment firm, Avalon Partners. Avalon’s web site states that it specializes in “wealth management” for “affluent investors” “to meet the unique needs of high net worth individuals….” Yes, the wealthiest one-hundredth of one percent of Americans — the truly, uniquely needy. The administration’s web site gives pride of placement to Avalon Partners’ support of Obama’s decision to support the extension of Bush’s dramatic reduction in the taxes its ultra wealthy clients will pay. That tax reduction will make Cardillo and his senior colleagues at Avalon Partners, themselves among the wealthiest Americans, even wealthier. Obama’s capitulation on tax breaks for the richest one percent of Americans is worth tens of thousands of dollars personally to Cardillo and hundreds of millions of dollars to Avalon’s clients. Mr. Cardillo does not support Obama’s capitulation — he rejoices in it. Indeed, he has said in a recent interview that the reduction in taxes for the elites has helped fuel a “Santa Claus” rally in stocks. Obama played St. Nick for the wealthiest of Americans to the tune of tens of billions of dollars. The reasons that Cardillo supports the bill are obvious. The mystery is why Obama fails to realize that his support demonstrates why Obama’s capitulation is so harmful to the nation. At a time when income inequality has reached record levels in modern America and crippled our democracy Obama has given in to bullies who made increased inequality their central goal. Obama claims that he capitulated to the Republicans on taxes for the wealthiest in order to reduce unemployment. Here’s what Cardillo said about Obama and unemployment just before the midterm elections. “As far as corporate America hiring again it’s basically dependent on what happens in Washington,” says Peter Cardillo, chief economist at Avalon Partners in New York. “If the opposition party should gain enough seats to perhaps reverse the present administration’s policies somewhat, then I think you’ll see a big pickup in employment.” Obama has promoted the views of one of his virulent opponents, who gloried in and profited from Obama’s and the Democrats’ recent electoral and legislative defeats. Simultaneously, Obama launched another petulant attack on his strongest supporters. The administration’s daily floggings will continue until morale improves among progressives. Generations of political scientists will marvel at this administration’s self-destructive reflexes. The Bank of America (BoA) is next on the administration’s list of supporters. BoA’s senior leadership will personally save millions of dollars in taxes and its wealthy clients will save billions of dollars in taxes because of Obama’s decision to support the continuation of the Bush tax cuts for the wealthiest Americans. Their support for Obama’s agreement to support extended tax cuts for the wealth should have warned Obama that he was making a mistake. The Bank of America is one on the major funders of the Chamber of Commerce’s war on financial regulation, the administration, and Democrats. The Bank of America is a perfect example of why the “three strike” laws never apply to corporations. The Bank of America has run a massively unlawful foreclosure system based on perjured affidavits. It purchased two notorious financial institutions (Countrywide and Merrill Lynch) that were destroyed by policies of deliberately making and purchasing fraudulent “liar’s” loans. The Bank of America has recently admitted to a widespread policy of defrauding states and localities. It even has an openly racist senior advisor in Germany who claims that the U.S. mortgage crisis was caused by outlawing “red lining” — refusing to loan to blacks. It’s not often that senior bank officials openly stress their nostalgia for the good ole’ days of open racism. I’ve repeatedly brought this racist to the attention of the administration and BoA in the U.S. and in Germany without ever prompting even a response. My colleague Randy Wray and I have explained why BoA should be placed in receivership for its serial crimes and unsafe and unsound practices. Instead, the Obama administration prominently displays its endorsement. Professor Mankiw, Chairman of George W. Bush’s Council of Economic Advisors, is the next supporter that the Obama administration highlights. Mankiw was a leading apologist for the Bush tax cuts for the wealthy. He even defends the wealthy when they become wealthy through fraud. He infamously responded to George Akerlof and Paul Romer’s paper demonstrating the dominant role that “looting” by S&L CEOs (accounting control fraud) played in causing the debacle, by opining that “it would be irrational for operators of the savings and loans not to loot.” Looting: the Economic Underworld of Bankruptcy for Profit (1993). Mankiw blamed the S&L debacle on excessive regulation and was one of the architects of the desupervision that permitted the current crisis to occur. The administration thinks it says good things that the Bush administration’s principal apologist for its tax cuts for the wealthy supports Obama’s agreement to extend those tax cuts. The mind boggles. Wells Fargo is next on Obama’s roll of honor. Wells Fargo’s senior leaders, like BoA and Avalon Partners’ senior leaders, have personal and professional interests in supporting tax cuts for the wealthy. Wells Fargo is overjoyed by Obama’s agreement to extend tax cuts for the wealthy. All of these endorsements simply emphasize the extent to which Obama was taken to the cleaners. It’s bad to be bullied, but it’s pathetic to cite the testimonials of those that got even wealthier through the bullies’ triumph as evidence of your success. Bill Black is an associate professor of economics and law at the University of Missouri-Kansas City. He is a white-collar criminologist, a former senior financial regulator and the author of The Best Way to Rob a Bank is to Own One.

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David Bank: Scoring a Fiscal and Social Win-Win

December 2, 2010

It’s safe to say the debt commission’s proposal to raise Social Security’s retirement age to 69 has more to do with trimming finances than it does with a compelling vision of longer working lives. But there is a bountiful fiscal and social harvest to be reaped by accelerating the growing trend toward working longer — by choice not fiat. It’s not a stretch to say encore careers could help drive the kind of economic prosperity and job creation needed to make the debt more manageable. The potential windfall from longer working lives wasn’t factored into the calculations presented to the fiscal commission, but it should be. An initiative to enable people to work longer could eliminate cuts to Social Security that penalize those who cannot work and do nothing for those who can. Encore careers are a good investment. Americans working an average of just three years longer than they do now — raising the median age from just over 62 years now to just over 65 years — would give the economy an $800 billion a year boost, according to a model developed for Andrew Biggs of the American Enterprise Institute. That would generate $1.2 trillion in tax revenues between 2015 and 2024, Biggs says. ( Note: Biggs favors raising Social Security’s early-eligibility age, but says similar returns are possible with any combination of sticks and carrots that boost the median retirement age .) Economists agree that higher labor force participation drives higher economic growth. A model developed by the McKinsey Global Institute projected a GDP windfall of nearly $13 trillion over the next three decades by raising the median retirement age in 2015 to 64.1 years. McKinsey’s team, led by Diana Farrell, now deputy director of the White House’s National Economic Council, said the labor market innovation and flexibility needed to enable boomers to work longer could fuel even stronger productivity growth and job creation. Baby boomers are anticipating such changes. MetLife’s most recent annual human resources survey found that 59% of employees say they plan to work past 65, up from 53% a year ago; the increase in expectations was even more dramatic among workers now in their 50s. The draft debt-reduction plan does pay lip service to the transformation underway, promoting “smart retirement decisions” with education “to encourage greater personal savings, delayed retirement and phased retirement” and greater flexibility in how Social Security benefits are claimed. But the draft assigns no debt-reduction credit, or “score,” to the trend toward longer working lives, making it easy to ignore as a serious policy direction. Rhetorically, the alternative debt-reduction plan by former White House budget director Alice Rivlin and former Sen. Pete Domenici is even stronger on the need to encourage longer working lives, calling it “one of the most important components” of the whole proposal. “With workers spending more years in the labor force, production will rise and more retirees will have adequate savings and standards of living,” write Rivlin and Domenici. They add, “Policies influencing behavior are preferable to those that force people to delay retirement.” But that report likewise fails to give credit where credit is due and recognize the economic windfall represented by the working-longer trend. Simple reforms and modest investments could make encore careers more accessible. Expanded retraining program, financial aid and “encore fellowships,” could help older workers transition to new fields and less strenuous jobs. Making Medicare the first-payer for health coverage for workers over 65 could eliminate employers’ main concern about hiring older workers. Modernized pension rules could encourage phased retirement and flexible work arrangements. Disincentives to work in Social Security could be replaced with streamlined income-planning features that help people better manage the next stage of their lives. But it will take an intergenerational job-creation initiative to overcome the stark reality that economic stagnation and age bias mean there are too few encore career opportunities for older adults. Unemployment among older workers is at historic highs and the average length of unemployment for older workers is far higher than the national average. A third budget plan , from the Economic Policy Institute, Demos and the Century Foundation, calls for ambitious public investment to meet key national challenges, create jobs — and generate tax revenues. The report musters research demonstrating high rates of return on investments in early childhood education and childcare; roads, bridges and water systems; public transit and rural broadband connectivity; and basic science and R & D. The talent and experience of people seeking encore careers could help ensure the success of public investments in these and other critical areas — and strengthen efforts to create jobs for younger workers as well. As policymakers tackle the national debt, they should invest in a national asset: the talent of older adults seeking to put their experience to work in their encore careers.

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Steve Clemons: The Impact Today and Tomorrow of Chalmers Johnson

November 21, 2010

Next week, Foreign Policy magazine and its editor-in-chief Susan Glasser will be releasing its 2nd annual roster of the world’s greatest thinkers and doers in foreign policy. I have seen the list — and it’s impressively creative and eclectic. There is one name that is not on the FP100 who should be — and that is Chalmers Johnson , who from my perspective rivals Henry Kissinger as the most significant intellectual force who has shaped and defined the fundamental boundaries and goal posts of US foreign policy in the modern era. Johnson, who passed away Saturday afternoon at 79 years, invented and was the acknowledged godfather of the conceptualization of the ” developmental state “. For the uninitiated, this means that Chalmers Johnson led the way in understanding the dynamics of how states manipulated their policy conditions and environments to speed up economic growth. In the neoliberal hive at the University of Chicago, Chalmers Johnson was an apostate and heretic in the field of political economy. Johnson challenged conventional wisdom with he and his many star students — including E.B. Keehn, David Arase, Marie Anchordoguy, Mark Tilton and others — writing the significant treatises documenting the growing prevalence of state-led industrial and trade and finance policy abroad, particularly in Asia. Today, the notion of “State Capitalism” has become practically commonplace in discussing the newest and most significant features of the global economy. Chalmers Johnson invented this field and planted the intellectual roots of understanding that other nation states were not trying to converge with and follow the so-called American model. Johnson for his seminal work on Japanese political economy, MITI and the Japanese Miracle was dubbed by Newsweek ‘s Robert Neff as “godfather of the revisionists” on Japan. Neff also tagged Clyde Prestowitz, James Fallows, Karel van Wolferen and others like R. Taggart Murphy and Pat Choate as the leaders of a new movement that argued that Japan was organizing its political economy in different ways than the U.S. This was a huge deal in its day — and these writers and thinkers led by the implacable Johnson were attacked from all corners of American academia and among the crowd of American Japan-hands who wanted to deflect rather than focus a spotlight on the fact that Japan’s economic mandarins were really the national security elite of the Pacific powerhouse nation. In the 1980s when Johnson was arguing that Japan’s state directed capitalism was succeeding at not only propelling Japan’s wealth upwards but was creating “power” for Japan in the eyes of the rest of the world, Kissinger and the geostrategic crowd could not see beyond the global currency and power realities of nuclear warheads and throw-weight. The revisionists were responsible for injecting the economic dynamics of power and national interest in the equation of a nation’s global status. To understand China’s rise today, the fact that China has become the Google of nations and America the General Motors of countries — the US being seen by others as a very well branded, large, underperforming country — one must go back to Chalmers Johnson’s work on the developmental state. Scratch beneath these Johnson breakthroughs though and go back another decade and a half and one finds that Chalmers Johnson, a one time hard-right national security hawk, deconstructed the Chinese Communist revolution and showed that the dynamic that drive the revolutionary furor had less to do with class warfare and the appeal of communism but rather high octane “nationalism.” Johnson saw earlier than most that the same dynamic was true in Vietnam. His work which was published as Peasant Nationalism and Communist Power while a UC Berkeley doctoral student launched him as a formidable force in Asia-focused intellectual circles in the U.S. Johnson’s ability to launch an instant, debilitating broadside against the intellectual vacuousness of friends or foes made him controversial. He chafed under the UC Berkeley Asia Program leadership of Robert Scalapino whom Johnson viewed as one of the primary dynastic chiefs of what became known as the “Chrysanthemum Club”, those whose Japan-hugging meant overlooking and/or ignoring the characteristics of Japan’s state-led form of capitalism. Johnson was provocatively challenged graduate students in the field to choose sides — to work either on the side where they acquiesced to a corrupt culture of US-Japan apologists who wanted the quaint big brother-little brother frame for the relationship to remain the dominant portal through which Japan was viewed or alternatively on the side of those who saw Japan and America’s forfeiture of its own economic interests as empirical facts. When Robert Scalapino refused to budge despite Johnson’s agitation, Johnson who then headed UC Berkeley’s important China Studies program abandoned the university and became the star intellectual of UC San Diego’s School of International Relations and Pacific Studies . There is no doubt that Johnson but UCSD’s IRPS on the map and gave it an instant, global boost. But as usual, Johnson — incorruptible and passionate about policy, theory, and their practice — eventually went to war with the bureaucrats running that institution. Those who had come in to head it were devotees of “rational choice theory” — which was spreading through the fields of political science and other social sciences as the so-called softer sciences were trying to absorb and apply the harder-edged econometrics-driven models of behavior that the neoliberal trends in economics were using. Johnson and one of his proteges, E.B. “Barry” Keehn, wrote a powerful indictment of rational choice theory that helped trigger a long-running and still important intellectual divide that showed that rational choice theory was one of the great ideological delusions of the era. I too joined this battle and wrote extensively about the limits of rational choice theory which I myself saw dislodging university language programs, cultural studies, and more importantly — the institutional/structural approaches to understanding other political systems. Johnson once told me when I was visiting him and his long-term, constant intellectual partner and wife, Sheila Johnson, that the UCSD School of International Relations and Pacific Studies no longer either really taught international relations or pacific studies — and that a student’s entire first year was focused on acultural skill set development in economics and statistics. To Johnson, this tendency to elevate econometric formulas over the actual study of a nation’s language, history, culture and political system was part of America’s growing cultural imperialism. Studying “them” is really about “us” — as “they” will converge to be like “us” or will fall to the way side and be insignificant. It was that night that Chalmers Johnson, Sheila Johnson and I agreed to form an idea on had been developing called the Japan Policy Research Institute . Chalmers became President and I the Director. We maintained this working relationship at the helm of JPRI together for more than 12 years and spoke nearly every week if not every other day as we tried to acquire and publish the leading thinking on Japan, US-Japan relations and Asia more broadly. We became conveners, published works on Asia that the official journals of record of US-Asia policy viewed as too risky, and emerged as key players in the media on all matters of America’s economic, political, and military engagement in the Pacific. Today, JPRI is headed by Chiho Sawada and is based at the University of San Francisco. However, this base of JPRI gave Chalmers Johnson the launch pad that led to the largest contribution of his career to America’s national discourse. From his granular understanding of political economy of competing nations, his understanding of the national security infrastructure of both sides of the Cold War, he saw better than most that the US had organized its global assets — particularly its vassals Japan and Germany — in a manner similar to the Soviet Union. Both sides looked like the other. Both were empires. The Soviets collapsed, Chalmers told me and wrote. The U.S. did not — yet. The rape of a 12 year-old girl by three American servicemen in Okinawa, Japan in September 1995 and the statement by a US military commander that they should have just picked up a prostitute became the pivot moving Johnson who had once been a supporter of the Vietnam War and railed against UC Berkeley’s anti-Vietnam protesters into a powerful critic of US foreign policy and US empire. Johnson argued that there was no logic that existed any longer for the US to maintain a global network of bases and to continue the occupation of other countries like Japan. Johnson noted that there were over 39 US military installations on Okinawa alone. The military industrial complex that Eisenhower had warned against had become a fixed reality in Johnson’s mind and essays after the Cold War ended. In four powerful books, all written not in the corridors of power in New York or Washington — but in his small home office at Cardiff-by-the-Sea in California, Johnson became one of the most successful chroniclers and critics of America’s foreign policy designs around the world. Before 9/11, Johnson wrote the book Blowback: The Costs and Consequences of American Empire . After the terrorist attacks in 2001 in New York and Washington, Blowback became the hottest book in the market. The publishers could not keep up with demand and it became the most difficult to get, most wanted book among those in national security topics. He then wrote Sorrows of Empire: Militarism, Secrecy and the End of the Republic , Nemesis: The Last Days of the American Republic , and most recently Dismantling the Empire: America’s Last Best Hope . Johnson, who used to be a net assessments adviser to the CIA’s Allen Dulles, had become such a critic of Washington and the national security establishment that this hard-right conservative had become adopted as one of the political left’s greatest icons. Johnson measured himself to som e degree against the likes of Noam Chomsky and Gore Vidal — but in my mind, Johnson was the more serious, the most empirical, the most informed about the nooks and crannies of every political position as he had journeyed the length of the spectrum. Chalmers Johnson served on my board when I worked at the Japan America Society of Southern California. He and I, along with Sheila Johnson — along with Tom Engelhardt one of the world’s great editors — created the Japan Policy Research Institute. Johnson served on the Advisory Board of the Nixon Center when I served as the Center’s founding executive director. We had a long, constructive, feisty relationship. He helped propel my career and thinking. In recent years, we were more distant — mostly because I was not ready, as he was, to completely disown Washington. Many of Johnson’s followers and Chal himself think that American democracy is lost, that the republic has been destroyed by an embrace of empire and that the American public is unaware and unconscious of the fix. He may be right — but I took a course trying to use blogs, new media, and a DC based think tank called the New America Foundation to challenge conventional foreign policy trends in other ways. Ultimately, I think Chalmers was content with what I was doing but probably knew that in the end, I’d catch up with him in his profound frustration with what America was doing in the world. Chalmers and Sheila Johnson saw me lead the battle against John Bolton’s confirmation vote in the Senate as US Ambassador to the United Nations — but given the scale of his ambitions to dislodge America’s embrace of empire, Bolton was too small a target in his eyes. He was probably right. Saying Chalmers Johnson is dead sounds like a lie. I can’t fathom him being gone — and with all of the amazing times I’ve had with him as well as the bouts of political debate and even yelling as we were pounding out JPRI materials on deadline, I just can’t imagine that this blustery, irreverent, completely brilliant force won’t be there to challenge Washington and academia. Few intellectuals attain what might have been called many centuries ago the rank of “wizard” — an almost other worldly force who defied society’s and life’s rules and commanded an enormous following of acolytes and enemies. Wizards don’t die — and I hope that those who read this, who knew him, or go on reading his works in the decades ahead provoke, inspire, jab, rebuke, applaud, and condemn in the way he did. In one of my fondest memories of Chalmers and Sheila Johnson at their home with their then Russian blue cats, MITI and MOF, named after the two engines of Japan’s political economy — Chal railed against the journal, Foreign Affairs , which he saw as a clap trap of statist conventionalism. He decided he had had enough of the journal and of the organization that published it, the Council on Foreign Relations . So, Chalmers called the CFR and told the young lady on the phone to cancel his membership. The lady said, “Professor Johnson, I’m sorry sir. No one cancels their membership in the Council in Foreign Relations. Membership is for life. People are canceled when they die.” Chalmers Johnson, not missing a beat, said “Consider me dead.” I never will. He is and was the intellectual giant of our times. Chalmers Johnson centuries from now will be seen, I think, as the intellectual titan of this past era, surpassing Kissinger in the breadth of seminal works that define what America was and could have been. My sincere condolences to Sheila, to others in his extended family — particularly among all of his students and colleagues who were part of the Johnson dynasty — and to his friends in San Diego who were a vital part of the texture of the Johnson household. — Steve Clemons publishes the popular political blog, The Washington Note . Clemons can be followed on Twitter @SCClemons

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Video: Altman Said to Be Leading Choice to Replace Summers: Video

November 17, 2010

Nov. 16 (Bloomberg) — Roger Altman, founder of Evercore Partners Inc. and a former deputy Treasury secretary, has emerged as a leading candidate to replace Lawrence Summers as director of President Barack Obama’s National Economic Council, according to two people familiar with the matter. Bloomberg’s Hans Nichols reports. Todd Harrison, chief executive officer of Minyanville Media Inc., and Bloomberg’s Pimm Fox also speak on Bloomberg Television’s “Taking Stock.” (Source: Bloomberg)

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Timothy Karr: Who Will Head MSNBC if Comcast Takes Over?

November 9, 2010

And Why That Poses an Even Bigger Threat to Keith Olbermann Keith Olbermann is back, and for his many fans, including the 300,000 who petitioned MSNBC to reinstate him, it would seem a return to form. But Olbermann’s dispute with the brass at MSNBC may only serve as a prelude to more troubled times. MSNBC’s parent company, NBC Universal, is likely to be taken over by cable giant Comcast, should regulators sign off on the $30 billion deal. If history is any guide, this merger poses an even bigger threat to the future of MSNBC personalities like Olbermann and Rachel Maddow than the recent dustup that temporarily sidelined the host. That’s why tens of thousands have already urged the Federal Communications Commission and Department of Justice to stop the merger. They cite a multitude of reasons the takeover would bring them harm, including higher prices and fewer choices in programming and services. Indeed, such concentration of media power leads to a less vigilant news media, a muted marketplace of ideas and fewer consumer options at a time when are demanding more. Add to this the dim but real prospect that MSNBC’s new boss will be even less welcoming than the current one to commentators that rock the boat. Just consider the candidates in line to take over MSNBC: Steve Burke, Comcast’s Chief Operating Officer According to The Street , Steve Burke will take NBC’s CEO spot from Jeff Zucker should the merger be approved. In an e-mail to colleagues , Zucker said: “Comcast will be a great new steward, just as GE has been, and they deserve the chance to implement their own vision.” That vision – in the hands of Burke – might not be to the liking of MSNBC’s stable of talent. Burke has deep ties to the Republican Party. According to Public Citizen , Burke raised at least $200,000 for the Bush-Cheney re-election campaign. Prior to that, he served on the President’s Council of Advisers on Science and Technology under Bush, at a time when the administration was undermining scientific consensus on topics including climate change, stem-cell research, and even the relationship between corn syrup and rates of diabetes in children. As a top science adviser to President Bush, did Burke condone administration efforts to bury scientific findings that challenged official policy? What would he do when comments or reporting by Olbermann or Maddow challenge Comcast’s corporate dogma? Peter A. Chernin, Former Second in Command at News Corp. Peter Chernin was a major fundraiser for Sen. Hillary Clinton, according to the New York Times , which also reports that he may be on the short list to take over NBC operations should Comcast get the nod. For years, Chernin has co-owned a restaurant on Martha’s Vinyard with Comcast Chief Executive Brian Roberts. More recently, he was tapped by Roberts to become a “special adviser” to Comcast on the potential merger. Chernin’s close ties to Clinton, Roberts and Rupert Murdoch indicate his biases may be more corporate than political. But it was during his tenure at Fox that the network looked the other way as many of its personalities actively — and financially — supported Republican candidates and Tea Party causes. Chernin once asked Roberts whether he planned to interfere in editorial content at MSNBC — a question that Roberts refused to answer. Eileen Dolente, Senior Director, Comcast Multimedia Content Development Odds are slim that Eileen Dolente would be picked to head MSNBC programming. But her record at Comcast offers a disturbing glimpse into the cable company’s mindset regarding speech that interferes with business as usual. As director of programming for Comcast’s news division, CN8, Dolente fired host Barry Nolan. His crime? Nolan had protested a major award being given to Fox News Channel’s Bill O’Reilly. Nolan was “appalled” that an award would be given to O’Reilly. He dashed off e-mails stating that O’Reilly’s “indiscretions, inaccuracies, and prejudices disqualify him for such a lofty honor.” Dolente was appalled that one of her hosts would share such an opinion, and within a week of the award ceremony, she showed Nolan the door. Documents filed in a subsequent lawsuit revealed that the mutual business interests of Comcast and News Corp., which employs O’Reilly, were a major factor in Nolan’s firing. What position would Comcast take should MSNBC personalities launch a similar attack on a valued business partner? If Dolente takes the helm, past may become prologue for MSNBC.

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Blythe McGarvie: Where the Action Is: Consumer Spending

November 8, 2010

I research and write about economic realities in the interconnected world and their implications for you and your business. I first discovered, in 1983, when I joined the Kellogg Alumni Council, that business school professors provide inspiration, analysis and thoughtful insight into the nature of business. You may be surprised that academia is relevant in these fast-paced and uncertain times. I have learned from them how to rely on quantitative and behavioral research to provide a deeper understanding of what I read in many media outlets. The headlines focus on conflict and controversy, not what happens during the rebuilding process. While professors research and consult, business men and women create and grow businesses. We all succeed by going where the action is. Let’s look at where the action is for consumer spending. Current Consumer Spending The largest component driving the U.S. GDP is consumption. In the last ten years, GDP has been comprised of roughly 70% consumer spending, 15% of exports to other countries, 10% of direct investments, and 5% of government purchases. Today, as some signs indicate an easing of the recession, U.S. consumers continue to hold back from spending. The most recent GDP information for the first half of 2010 shows that Exports increased 10% over last year. Direct Investments have increased 28%, Government Purchases increased by 1%; but, Consumption increased only 2%. Consumers will not be spending at their previous levels for a host of reasons. In fact, according to the President’s economic report in February: The growth that preceded the recession saw high consumption spending, low private saving, excessive housing construction, unsustainable run-ups in asset prices (especially for assets related directly or indirectly to housing), and high budget and trade deficits. That path was unstable — as we have learned at enormous cost — and undermined long-run prosperity. Thus, as the economy recovers, a rebalancing will be necessary. The model used in the report indicates that three factors drive the tradeoff between savings and spending. The higher the sense of wealth, the lower unemployment expectations, and the greater the ability to borrow (and pay back), the more people will spend. The recent stock market rallies and the lowest interest rates in decades suggest some optimism for spending. And, importantly, the GDP is growing at 2.7% and not contracting. Jobs will return in those areas that support exports and direct investments. But, the largest engine for the US GDP is stalled due to consumers’ sentiment about unemployment and their pressing need to pay down their current debt levels. According to a government report released November 1st, U.S. consumer spending rose by less than expected in September as income fell for the first time in 14 months. Inflation remained minimal. Other Countries’ Consumer Spending The news for major developing countries is quite different. Consumer confidence and purchasing behavior indicators in Brazil, Mexico, Taiwan, and Hong Kong are growing strongly (between 1 to 4%) and those of India and China are growing even faster (more than 5%). Each quarter, The Nielsen Company publishes the state of the global consumer and purchasing behavior. Included in this scorecard is the level of advertising spending, a leading factor in consumer spending. The key learning from this data is that the consumer is cautious; but, longer term, with 30 of 31 countries showing positive ad spending in the 2nd quarter of 2010, global consumer spending may receive a boost. Consumers respond to innovations and promotional activities. Tapping into Consumers Global companies continue to innovate. For example, DuPont launched more than 1400 new products in 2009, a 60% increase from 2008. The company filed more than 2,000 patents — its highest number in its history. Sales from emerging markets of $8 billion exceeded 2007 levels and are projected to grow at a 14% annual compounded growth rate to 2012. New companies also are discovering that consumers will spend money on items that they find innovative. The founder Robert Croak of the company selling Silly Bandz states: “I came across a product that a Japanese designer had created for an industrial design contest. I thought it would be really neat if we remolded it, made it thicker, larger and into a fashion accessory — and that’s how Silly Bandz was born.” Knowing “where the action is” helps management to focus on new business opportunities. One of my colleagues, Roger Schmid, recently gave a lecture and wrote about Brazil, where he works with consumer companies which you can find on our website LIFgroup.com . The only way to capitalize on this knowledge of which markets are growing is to be agile and nimble. This means knowing how to adjust your plans of action to find new consumers for your products. Of course, while you are in the markets, keep your eyes open for new competitors and innovative ideas.

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Steve Clemons: Lawrence Summers Needs to Retool his Wall Street Tilt

November 1, 2010

When Senator Jeff Bingaman was working diligently in the mid-1990s to get not only the White House but also Republican and Democratic Senators and House Members to focus on the large scale, structural deficits that were building between the United States on one hand and Japan and China on the other, he tasked his team with smartening up on what leading economists of the day were saying about global imbalances but also about the dynamics of a turbo-charged, stock churning equities market. Not only were policy makers on the whole not paying attention to trade and current account deficits, they were also ignoring the impact of hot, impatient money on the domestic sector. Bingaman, via his staff including yours truly and his then chief of staff Patrick von Bargen, began quoting economists Joseph Stiglitz and Lawrence Summers on their groundbreaking, compelling work on financial equities transaction taxes — minor taxes on major equities churning that could both help promote longer term decisions in the equities markets but which also could generate revenue to fund portable educational benefits for workers and investments in high tech R&D. Stiglitz and Summers both felt that such taxes would not only not hurt markets but could help prevent excesses. I remember getting a phone call from an Assistant Secretary of Treasury on some of Jeff Bingaman’s quotes of then Deputy Secretary of the Treasury Lawrence Summers and was told “Dr. Summers changed his mind on those excise taxes when he joined the Treasury Department.” Lawrence Summers has largely been a Wall Street-tilting force ever since. And today in the Washington Post , Summers is again referenced as now opposing taxes on various financial transactions as a way to possibly generate revenue to work on global climate change challenges. One friend wrote to me and said “once bought by the financial industry, always bought.” The report : A new dispute could flare up at the end of the week, when an international task force charged with showing how rich nations can mobilize $100 billion by 2020 for climate assistance will outline options for generating that money. Lawrence H. Summers, who chairs the White House National Economic Council, has served in the group and questioned some of the proposals, including imposing a new fee on some financial transactions. Perhaps there is more to this story than we are getting — and perhaps the particular framework for taxation in this case is a bad one. But what we aren’t getting to see much of is the Lawrence Summers who recognizes that reforms and change are needed in an economy that over-kowtows to the financial sector. Summers, no matter what some critics say, is a formidable intellectual heavyweight on economics policy — and will continue to be, long after he leaves the White House. However, he needs to retool. Films like Charles Ferguson’s Inside Job and important chronicles of DC-NY financial sector structural corruption with Summers as a lead protagonist like Michael Hirsh’s Capital Offense: How Washington’s Wise Men Turned America’s Future Over to Wall Street are going to define him if he doesn’t begin to recognize what George Soros, Joseph Stiglitz, Nouriel Roubini, and others have long understood — that this country will be ruined by further obsequiousness to “market fundamentalism.” Summers needs to get on the side where he can get back to what he believed ‘before’ he joined the Department of Treasury. — Steve Clemons publishes the popular political blog, The Washington Note . Clemons can be followed on Twitter @SCClemons

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Leonhardt: Obama Successes Outweighed by Job Losses

October 27, 2010

On the evening of Dec. 3 last year, the Bureau of Labor Statistics sent an advance copy of the next morning’s jobs report to the White House. It’s standard procedure for top White House and Federal Reserve officials to get an early look at the numbers, but there was nothing standard about this particular report. It showed that job losses had all but stopped in November, after nearly two years of big declines. White House aides exulted. Christina Romer, a top economist, brought a copy of the numbers to the Oval Office, and President Obama embraced her. A photograph of the moment, with a Christmas tree off to the side, was hung in the office of the Council of Economic Advisers. The good news — and the optimism — would continue for the next few months. Today, that brief period of optimism looks like one of the worst things that could have happened to the White House, other Democrats and, above all, the economy. The nascent recovery removed the urgency that the Obama administration and Democratic senators felt in early 2009. They still favored more action, like aid to states and tax cuts, but it was no longer their top priority.

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Leo Hindery, Jr.: Out of School, Out of Work, Out of Luck: The Youth Jobs Crisis

October 26, 2010

“For disadvantaged youth lacking basic education, failure to find a first job or keep it for long can have negative long-term consequences on their career prospects that some experts refer to as ‘scarring’. Beyond the negative effects on future wages and employability, long spells of unemployment while young often create permanent scars through the harmful effects on a number of other outcomes, including happiness, job satisfaction and health, many years later.” This language is from the 2010 report of the 33-member Organization for Economic Cooperation and Development, and while meant to be a coda for all the members, it seems to have special applicability today to the biggest OECD member of all, which of course is the United States of America, where fully 5 million out-of-school youth are now unemployed. In all, there are now 30 million real unemployed Americans — not just the 15 million “officially” being counted by the Bureau of Labor Statistics — and they are all entitled to every reasonable public, private, ‘public & private’, and organized labor-based effort to find them employment. But we know that a jobless recovery can seem even more “jobless” to some out-of-work Americans than others, and right now it is our nation’s African Americans, Latinos, blue collar males with high school diplomas and older workers who are facing much higher unemployment rates than other Americans. Side by side with these unemployed workers for whom the challenge of reemployment is particularly high, however, are, as I said, five million youth who are desperately seeking initial employment. And this is not by any measure a static number, for each year, in recessions and in good times alike, another 6.4 million or so young people graduate from high school and college. Five million is a huge, unprecedented number of unemployed youth — in recent past recessions it never exceeded 1.5 to 2 million — and the reason that this issue is so important is because a young person’s prolonged delay into his first job has career-long impacts which show up as more limited job skills, fewer subsequent promotions and thus much lower lifetime income. These unemployed young people are entitled to a new, broad-based, government-supported “Youth Employment Initiative” that draws from our previous experiences with Roosevelt’s CCC, Kennedy’s VISTA and Peace Corps programs, and Johnson’s CETA program and from newer programs like Teach for America and CityBridge Foundation’s Service Corps program. Unfortunately, because there are few extant agencies or initiatives which, even with immediate additional funding, could accommodate these five million youth, this new program will have to be instantly created. New Deal-like programs for workers whose earnings immediately cycle back into the economy were once our specialty — they should be again. The CCC under Roosevelt found hundreds of thousands of entry-level jobs for young people, and almost all of the costs of the CCC immediately flowed back into small businesses in local areas. VISTA placed young volunteers in deeply rural and poor urban communities working on uplifting poverty reduction efforts. The Peace Corps is of course the nearly fifty-year old international version of VISTA, but with the energy that the Obama administration and friends in the Congress like Nita Lowey it is now a trajectory of growth and impact never seen before in its history. This year there will be 8,600 Peace Corps Volunteers, up from the 7,500 when President Obama took office, and the goal is to reach 10,000 volunteers in 2011, the actual 50th anniversary of the founding of the Corps. These are worthwhile goals that should be supported, especially because the Peace Corps is now doing an amazing job of supporting career placement of its volunteers when they return home to the U.S., which ties in perfectly with the unemployed youth programs we need to create nation-wide. Of the two newer programs, Teach for America, on the Board of which I serve and was for several years its Chairman, each year takes 5,000 remarkable new college graduates — out of an applicant pool ten times as large — and finds them two-year teaching assignments in some of our nation’s most challenged public elementary and middle schools. Founded in 1990, 60% of TFA’s corps members have remarkably chosen to continue their careers in education after their initial two-year assignments. ServiceCorps’ three signature programs connect workers with compelling community projects that create a lasting, positive impact on both employees and their community, with a noteworthy emphasis on entry level positions. All of these programs have repeatedly proven their value over time, with many positive long-term benefits. The unemployed youth problem in this country today may be unprecedented in size, but solutions for it are not without models and past successes to emulate. Unemployed youth in 2010 are at once different and the same as the unemployed youth in the prior nine recessions since the end of WW II. Whatever differences do exist are mostly nuances that should not hold us back from acting. As complements to the Youth Employment Initiative, Congress should undertake community-based federal government job creation in general, which would bring immediate benefit especially to those employment-challenged African Americans, Latinos, blue collar males with high school diplomas, and older workers to whom I earlier referred. These efforts should be directed at restoring our environment, policing communities, providing child care and tutoring, cleaning up abandoned houses and buildings, maintaining parks and public spaces, and preserving historic buildings. President Obama’s recently announced transportation-based infrastructure initiatives for the next Congress to consider should also be expanded to recognize the special travails confronting the harder-to-place unemployed and to include energy conservation work in our schools and municipal buildings. These latter efforts would bring to the table an extraordinary combination of good energy policy, help to domestic manufacturers of green products, and initial and re-employment of deeply at risk workers. The federal government should also take steps within existing programs, including the Workforce Investment Act, to provide additional incentives for job creation and training in much needed areas such as nursing, engineering and math & science instruction. And we should create a Teacher’s Aid Corps to complement the Teacher’s Corps, which should include allowing reasonable amounts of time for job searches and added training. One of the greatest opportunities for the out-of-school unemployed youth and even many older unemployed workers, however, will always be found in apprentice programs. That same 2010 report from the OECD lauded such programs for allowing young workers to acquire much needed skills and work experience. It pointed out, as an example, that Germany, which has a long and proud history of high-quality apprentice programs, has an almost unbelievable low ratio of youth unemployment to adult unemployment of only 1.5 to 1, compared to 2.8 to 1 across the entirety of the OECD including the U.S. International research suggests that there are few more viable ways of making a difference in the short-term, in the absence of an improved economy and more dynamic labor market, than from apprentice programs. For example, a pan-European study by the European Central Bank found that direct interventions such as preferential hiring policies and greater wage flexibility have relatively little impact on improving job prospects for young people when markets are generally slow. However, the higher rates of youth employment in countries with apprenticeship systems suggest that the development of education and training programs linked specifically to labor market needs are the most promising longer-term option. More generally, we also know that policies intended to increase the academic attainment levels of all students in the United States clearly help to improve the job prospects of young people in the longer-term, and thus maximize the contribution of this group to economic growth. So, let me add another initiative to consider. Since 2006, long before the depths of this Great Recession of 2007 made many things suddenly seem automatic, I have proposed that all fixes to our nation’s education travails should start with improving the economic plight of our K-12 teachers, which we know would also have great ripple effects on the employment future of the country’s high school students and graduates. Specifically, it’s time for these teachers to be given federal income-tax relief, and we will all be the beneficiaries when they get it. Here’s why this makes sense. According to numerous surveys, both the public and teachers want an increase in teacher pay. Of course, there are other pressing issues, including better facilities, better curricula, better-trained administrators, and greater parent involvement. But responses to these needs, because they involve overcoming ingrained bureaucratic obstacles and instilling personal motivation, will take years to effect and move through the system. So, let’s start by giving refundable tax credits to K-12 teachers at all accredited schools based on their qualifications and teaching specialties, in order to increase the pool of teachers in critically important areas such as languages, math and sciences, and instructing students who are economically disadvantaged or have disabilities. Effective salaries would immediately rise to more livable levels, and improved quality would follow right behind. Our country has a long successful record of using the tax code to reward what we as a society determine are desirable social actions. We agree, for example, that it’s important to encourage homeownership, so we allow homeowners to deduct all sorts of related costs. And in the 1960s we gave income-tax relief to those VISTA and Peace Corps volunteers because their work was deemed so important — and today we give substantial relief to our courageous and patriotic active-duty military personnel. But teachers are just as patriotic and important, their contributions to our nation’s vibrancy and economic well-being are exceptional, and vis-Ã -vis all other municipal professions (police, fire, general services) they are far and away the most difficult public servants to recruit and retain. America has approximately three million K-12 teachers, which is a big number, yet their aggregate federal income taxes run only about $15 billion to $20 billion a year. This is only about six-tenths of one percent or so of the U.S. Treasury’s expected total receipts in any year — or a couple of months’ worth of our ongoing expenditures in Afghanistan. As with any material change to the tax code, we would need to “pay” for this benefit to teachers. But even in these budget-starved times there are many thoughtful ways to do this, starting with once and for all closing the entirety of the ‘carried interest’ tax loophole, which alone would just about cover the annual cost of the proposed teachers benefit. All informed citizens, starting with teachers themselves, want high teaching standards and accountability. Federal income tax relief for teachers of the sort I describe would be a powerful response to this demand, and a just as powerful step toward assuring the long-term vibrancy of our society, the health of our national economy, and our global competitiveness. Let me close by briefly going back to those five million out-of-school unemployed youth, for in so many ways they seem to be ground-zero indicators of the nation’s overall jobless plight and our solutions to that plight. Virtually all of the recommendations in this piece call for a greater role for the government, and I don’t apologize for any of that, for when the mountain of woe is as high as it is now, you call for Edmund Hillary, which in this case is the government. But it can’t be just the government, since, as our kids might say, we also need beaucoup amounts of enlightened private sector involvement in these efforts. Responsible business leaders with a pervasive sense of concurrent and equal corporate responsibility to shareholders, employees, communities and the nation are the logical individuals to kick-start these additional job-creation efforts, for it is they who should have the foresight to see the obvious benefits. But these problems are so great and such an overhang on our economy that we need the inspiration and perspiration of the leaders at every level of our national community. Leo Hindery, Jr. is Chairman of the US Economy/Smart Globalization Initiative at the New America Foundation and a member of the Council on Foreign Relations. Currently an investor in media companies, he is the former CEO of Tele-Communications, Inc. (TCI), Liberty Media and their successor AT&T Broadband. He also serves on the Board of the Huffington Post Investigative Fund.

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Cunningham Exits CREFC

October 23, 2010

Dottie Cunningham ceo of the Commercial Real Estate Finance Council has resigned

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Hannah Peaker: If Women Ran the World

October 23, 2010

What’s the one thing that could bring ExxonMobil, Harvard University, Pfizer, and the former Prime Minister of Canada together? I know this sounds like the start of a bad joke, but the answer is no joke: they came together to discuss how to tap into the now better-educated half of the population — women. Nearly 150 years since Elizabeth Cady Stanton warned at the Women’s Suffrage Convention in Washington that “society is but the reflection of man himself,” 150 people gathered at the Harvard Kennedy School this weekend to be told the very same thing. Although women outperform men in education, they continue to be under-represented in positions of power. Women make up 47% of the US labor force but only 3% of Fortune500 CEOs, and more than half of the US population but only 17% of elected representatives in Congress. Far from dwelling on the persistence of the global gender gap, however, this conference * sought to close it. Marie Wilson, founder and Director of The White House Project, called on participants to “come up with things that can be done.” With that she passed the baton from our slightly tired and weary change veterans to the men and boys in India who are ringing the door bells of their neighbors to interrupt the domestic violence they hear through the walls, and the female entrepreneur in Norway who is pairing experienced women with corporate boards. Against the backdrop of 90′s power ballad Wind of Change, Professor Iris Bohnet, Director of the Women and Public Policy Program at Harvard Kennedy School, asserted that the business case is ripe. She declared that we are now armed with an arsenal of interventions that go beyond the purely moral claim and focus instead on the social and economic value of diversity. This resonated with me. As a young student I have analyzed the Gender Gap from every available angle and carved it up into such small segments that I am in danger of trivializing it. Therefore, the opportunity to be able to say, simply, “there is a greater return on investment in women” is not to be taken lightly. At the least, it invites a new audience — the conference was packed full of private sector representatives, eager to hear how their businesses might access this emerging talent pool. The business case is comprised of social, political and economic evidence, and applies to individuals, groups and organizations. There are elements that are more intuitive — increased gender equality in households, markets and society leads to poverty reduction and economic growth for everyone. And some striking new evidence too — having women on boards is related to the financial performance of companies, and diversity can lead to better performance and decision-making in groups. Certainly, the research points quite clearly to a “diversity bonus” where companies and government alike can no longer afford not to hire the best talent — and that includes women too. The conference explored a range of new and innovative ways to help companies close their gender gaps. For example, a study by Iris Bohnet, Alexandra van Geen and Max Bazerman of Harvard showed that if you evaluate male and female candidates for a given job at the same time (rather than one at a time), interviewers are less likely to focus on gender than past performance. The result is that the more qualified candidate is selected, regardless of their gender. Gender equality nudges such as these have great appeal because they are cheaper and less intrusive than government or market interventions. A stickler for the moral argument, I admittedly found it hard to get into the flow of these almost callous efficiency arguments. Reluctant to surrender to those who want women because its smart institutional design rather than because it’s the right thing to do, I wondered what would happen to feminism if we departed from the ethical standpoint. But there was something in those women that took the stage and implored us to hurry history, who asked us not to be sitting here in three years time asking what we can do. Addressing the conference, Professor Rosabeth Moss Kanter of Harvard Business School asserted that “if women ran the world, the world would already have changed to allow women to run it.” We now have measurements that we didn’t have before, we have the success stories, we have the initiatives and are analyzing their impact. This year the US climbed 12 places to enter the top 20 in the Global Gender Gap Report for the first time. Our world is ever-changing, and it is up to us to “nudge” it in the right direction. * Closing the Gender Gap: The Business Case for Organizations, Politics and Society, hosted by the Women and Public Policy Program at Harvard Kennedy School in partnership with Council of Women World Leaders and World Economic Forum.

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