crime

Joshua Shulman: Rights Have to Be Enforced Somehow

by Joshua Shulman on April 18, 2012

Huffington Post…

There are two ways to enforce rights. A government agency can do it, or it can be outsourced to private contractors, which means plaintiffs’ lawyers. If we’re going to use a government agency, then we have to make sure they do it efficiently, because our tax dollars fund those agencies. If we’re going to use private lawyers, they’ve got to be able to make good money doing it, otherwise they’ll do something else instead. If neither of those systems works for us, then let’s not pretend that we care about the rights that we’re refusing to enforce. The New York Times presented a front-page article on April 17 about lawyers suing New York City businesses that don’t have good wheelchair access. The story is that the plaintiffs’ lawyers are finding violations — easy in New York City, with its many ancient buildings, narrow-aisled, with aging or nonexistent ramps — and then choosing a plaintiff from a cadre of disabled people. Then the lawyers threaten to sue the allegedly violating business, the plaintiff gets a few hundred dollars, the lawyer gets a few thousand, and it all seems like a shakedown to the poor business owner. Of course, this is not how it’s supposed to work. A wronged person is supposed to seek out the lawyer, not the other way around. So this article has provoked anger against the trial lawyers who are supposedly abusing the system for their own enrichment. Having lived in New York, I treasure the funky old out-of-compliance stores, where even a non-handicapped person has difficulty navigating the aisles. I love those places, and my personal belief is that a variance ought to be available to them so they can preserve their funky old character, even if it means that the “temporarily able-bodied” are the only people who can safely get in and out. But of course, that’s not the law. That’s not the choice that we as a country have made about this issue. The choice that we made, and the law that we passed to enforce that choice, is that almost all businesses open to the public have to be able to safely accommodate handicapped people. And then we as a country made another choice: the government would not be given the resources to enforce this law. Instead, we would give an incentive to private contractors (lawyers) to enforce the law, by forcing out-of-compliance businesses to pay the lawyers’ fees when the lawyer could prove that the business was out of compliance. So now we’re angry at lawyers for being too aggressive in their enforcement? Well, here’s a story about what happens when we choose the other path of having a government agency enforce the laws. The Equal Employment Opportunity Commission (EEOC) is supposed to investigate alleged employment discrimination, then if it finds a violation, negotiate with the violating business to fix it, and if that doesn’t work, then the EEOC may file a lawsuit against the business. Note that the EEOC is required to try to negotiate a workable solution before it files a lawsuit. Seems reasonable. But the EEOC is short of resources. They field about 100,000 complaints of discrimination every year. They recovered more than $450 million for employees last year, with a budget of $343 million. So you could say they’re running a profit, sort of. But they are still constantly understaffed, overworked, and simply don’t have anywhere near the resources needed to investigate every one of those 100,000 claims. So, like all government agencies, the EEOC has to decide how to most efficiently allocate their scarce resources. One obvious choice is to focus on companies that are practicing system-wide discrimination, so they can bring class-action suits. For example, CRST Van Expedited Inc. is one of the largest trucking companies in the United States. They have an “internship” program, in which women who want to become truck drivers are paired with male truck drivers, and left together unaccompanied for weeks at a time, with predictable results . By bringing a claim against a company like this, which has allegedly caused sexual discrimination and harassment against hundreds of women, the EEOC should be able to use its resources efficiently, right? Protect hundreds of women with just one big lawsuit, instead of trying to pick them off one at a time, which would take forever, and lots of agency resources. Well, the Eight Circuit Court of Appeals just slapped down the EEOC , saying that their lawsuit against the trucking company fails because the EEOC did not take the required step of trying to negotiate in good faith with the trucking company about each case individually . But doing that would eliminate the efficiency of having one big case instead of many small ones. The EEOC did negotiate with CRST about their (idiotic) program as a whole, but not about each individual case. Sure, in an ideal world, they would talk about each case separately. But in a world where efficiency matters, that’s a crazy requirement. It’s exactly the kind of requirement, in fact, that makes a government agency unable to perform its function of keeping the workplace free of discrimination. Which leaves it to whom, exactly, to to enforce our rights against workplace discrimination? Why, to the private lawyers, of course. In fact, one of the few women who opted out of the EEOC suit against this trucking company sued CRST privately. The jury awarded her $1.5 million . We as a country have to decide what rights we want to enforce, and whether to enforce them with government agencies, or with private contractors. But whipsawing back and forth is unfair. If we choose government agencies, then we’ve got to let them be efficient. Listen up, Eight Circuit. If we choose private contractors, then we’ve got to let the profit motive motivate them. Listen up, lawyer-bashers.

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Joshua Shulman: Rights Have to Be Enforced Somehow

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David Yarnold: Big Oil’s Arctic Bet: A Fool’s Risk

by David Yarnold on April 17, 2012

Huffington Post…

“Fool me once, shame on you; fool me twice, shame on me.” We’ve all heard it — and lived it — as individuals and collectively as Americans. We’ve all had to confront someone who has fooled or even misled us. But when Big Oil repeatedly tells us a monumental lie, we’re struck with collective amnesia. Marking the second anniversary of the BP oil disaster in the Gulf of Mexico, which occurred April 20, 2010, we can’t help but remember the rage and heartbreak we all felt when 11 men died and we saw images of oiled Brown Pelicans flattened to the wet sand. Scientists are just now reporting ominous disruptions in the Gulf’s underwater food chain and we still don’t fully understand the long-term impact on birds and other wildlife. It was a case of “shame on you” in 1989, when the Exxon Valdez ran aground in Alaska, spilling tens of millions of gallons of crude oil into the pristine and achingly beautiful southern Alaska landscape. But there was plenty of shame to go around two years ago as the BP oil disaster unfolded in the Gulf, spewing more than 200 million gallons into what, from a bird and human standpoint, is one of America’s most precious ecosystems. William K. Reilly, a lifelong conservationist and moderate Republican, co-chaired the commission investigating the BP disaster. Reilly was EPA administrator at the time of the Valdez, and he was flabbergasted to find that nothing much had changed since 1989. Reilly concluded that the BP spill “evidenced a failure of management, and good management could have avoided the catastrophe … We are not dealing here with a sick or failing or unsuccessful industry but with a complacent one.” Reilly reminds us that we in fact dodged a bullet two years ago: “…there was a point in the management of this crisis when industry experts feared the entire 120-million-barrel reservoir might seep through the ocean floor and wreak total havoc… What would we be talking about today if the well couldn’t be canned?… We’d be having an existential conversation about whether offshore drilling should ever be permitted in US coastal waters again.” Bill Reilly is no bomb-thrower. At the time he co-chaired the BP spill commission he was serving on the boards of ConocoPhilips and DuPont. As we mark this anniversary, two immediate challenges leap to mind: First, we must restore the Gulf Coast. The BP spill was a major blow to a region already under stress from urban sprawl, wetlands loss and pollution. Congress is now weighing a measure — called the RESTORE Act — that would divert most or all of BP’s penalties to gulf cleanup. Bipartisan versions of this measure have passed both the Senate and the House; it’s time for Congress to finish the job and send a final bill to the president. Second, even as you read this, a drilling fleet under contract to Shell Oil is making its way to a patch of seabed less than 15 miles from Alaska’s Arctic National Wildlife Refuge. Incredibly, Shell has secured nearly all the government permissions it needs to begin drilling operations in a body of water that is ice-covered much of the year, in a place where the sun does not shine for months on end, and where extreme weather is commonplace. The U.S. Government’s own non-partisan watchdog, the Government Accountability Office (GAO) thinks this is a terrible idea . We agree. Cleaning up a major spill in the Arctic would make the BP disaster look like child’s play. Last month the GAO issued a report raising fundamental concerns about whether a major spill could ever be managed in icy conditions. If there is a spot on Earth as sacred or as critical to the future of our wild birds as the Gulf of Mexico, it is probably the unspoiled Arctic. Here, hundreds of bird species arrive every spring from all four North American flyways — the superhighways in the sky that birds use to travel up and down the Americas. Here, they mate, lay eggs and raise their young. Here also, many of America’s remaining polar bears make their winter dens along the coasts. The potential harm from a BP-scale spill is almost beyond comprehension. And, there is growing evidence that we simply do not need to take risks like this to meet our nation’s energy needs. Oil imports are down. Oil production from domestic wells is up thanks to new technology. We’re driving farther on a gallon of gas and using less. Energy independence is becoming a real possibility. Since those who cannot remember history are doomed to repeat it, the price of social amnesia has become unacceptably high. A workable balance between powering the nation and protecting our natural bounty is within reach, but only if we remember, learn, and not be fooled again.

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David Yarnold: Big Oil’s Arctic Bet: A Fool’s Risk

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Sarah Damaske: Equal Pay Day: In the Wake of the So-Called "Mommy Wars" Renewal and Partisan Attacks on Equal Pay Bills

April 17, 2012

Equal Pay Day comes this year in the midst of the renewal of the so-called “mommy wars” on the one hand, and a blatant attack on equal pay rights bills on the other. Last week, Hilary Rosen set off a media maelstrom when she said that Mitt Romney’s wife, Ann, “has never actually worked a day in her life.” Just a week before (and to much less fanfare), Wisconsin Gov. Scott Walker repealed Wisconsin’s Equal Pay law and one of the state senate Republicans, Glenn Grothman, was quoted as saying, “You could argue that money is more important for men, anyways.” Both have serious implications for the equal pay cause. The National Committee on Pay Equity started Equal Pay Day in 1996 to bring more public attention to the gender wage gap, the difference between what an average full-time, year-round, male worker earned and what the average full-time, year-round, female worker earned. In 1996, the difference was 73.8 cents to the dollar and, today, the difference is about 77.4 cents. Not a terribly huge improvement over the last 16 years. Researchers have long noted that a number of factors can partially explain the gender wage gap. Notably, women and men tend to work in different industry sectors and different occupations within industry, which can explain a sizable portion of the gap. But differences in pay for various occupations may be due to whether jobs are associated with women or men. In other words, while occupational differences may explain some of the gender wage gap, the pay scale for different occupations is connected to whether or not the occupations are made up of mostly men or mostly women. And as sociologist Paula England and economist Nancy Folbre found in their research , women are more likely to work in caring fields, which offer relatively poor pay given the skill and education necessary for much of this work. Devaluing the hard work of acting as a primary caregiver of children not only dismisses the unpaid labor done in the home, it also contributes to the struggle of the millions of paid female laborers who work in caring fields and find that their work is neither recognized nor justly rewarded. Calling this past week’s maelstrom a renewal of the “mommy wars” dodges the real issue: Caregiving, whether done unpaid in the home or for pay outside of it, is not particularly valued in this country and women (whether in the labor market or not) suffer the brunt of this. Differences in pay are likely also connected to bias. Having children often increases men’s wages, according to research from sociologist Rebecca Glauber , but it often decreases women’s wages and women working in low-wage jobs face the toughest wage penalties for motherhood, as sociologists Michelle Budig and Melissa Hodges found . When Grothman argued, “Money is more important for men,” he may have been tapping a generally unspoken belief — that a woman’s salary is less necessary to her family than is her spouse’s. But, these beliefs are a remnant of times gone by in which men were primary breadwinners and women were primary homemakers (although as historian Stephanie Coontz has noted, even during the 1950s, this gender divide was never as big a phenomenon as we remember it to be). Today, only 20 percent of children are raised in families with a traditional breadwinning father and stay-at-home mother. Most children, then, live in families that depend on the wages of women, and one-third of children live in single-mother households and are most at risk of living in poverty. The National Women’s Law Center reports that bridging the gender wage gap would give the average full-time working woman’s family the money to pay for an additional 4 months’ supply of groceries, 5 months’ of childcare, 3 months’ rent and utilities, 5 months’ health insurance premiums, 4 months’ student loan payments, and 5 tanks of gas. Addressing the wage gap would go a long way in increasing women’s economic security, as well as the financial security of their families. In 2010, all Senate Republicans voted against considering the Paycheck Fairness Act. As both President Obama and presidential hopeful Governor Romney continue to vie for women’s votes, it would be nice to see some serious proposals from the candidates about how to bridge the wage gap.

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Ted Harro: 7 Kinds of Smart You Need to Look for When Hiring

April 17, 2012

I work with smart people all of the time. They are often products of the best schools in the world, have impressive accomplishments, and can do super mental gymnastics. If you haven’t watched a Harvard MBA do a mental triple somersault with a twist in the layout position, you really ought to. It’s stunning. And I confess that I love these people. But sometimes smart people do the darnedest things when hiring employees. Here’s one. When evaluating a job candidate, smart people often have a short-hand that sums up their thoughts. “She’s crazy smart!” They actually use a different adjective, but this is a family-friendly blog and I never know when my mom might drop in for a read. Or if they don’t like someone, they might say, “He’s not that smart.” This is the kiss of death. You can be awkward, ugly, or downright rude. But don’t be “not that smart.” There is plenty of evidence assembled by the smart people that intelligence is a key factor to success. But here’s the question I’m sometimes courageous enough to ask: “What kind of smart does this job require?” Anyone who has hired employees will recognize the pitfalls of trying to nail down what kind of smarts they need. I have a friend who has been very successful in the publishing world. Once, she was asked to do a first interview of a highly recommended candidate for one of the biggest news websites in the world. The kid launched into a speech on a 14th century French play and seemed so introverted that she recommended against hiring him thinking he was a bad personality fit as well as better suited to graduate school than a popular website. Fortunately, someone else saw his talents and he went on to become a star business reporter, known for his focused and thorough research. If you’ve hired more than one employee, you recognize that story. It’s easy to be imprecise about what kind of “smart” we are looking for when hiring. Asking, “is someone smart” is a smart thing to do. It’s a simple way to screen a candidate. Just be sure that you’re not going from being simple to being simplistic. Know what you need and where you need it. Ask what kind of smart. Here’s your starter list: Analytically/Technically Smart — These whizzes can weave magic with spreadsheets and numbers. They can model out a business with breathtaking elegance. They can take overwhelming data and turn it into meaningful information. They can discover the algorithm that will make your product do backflips for your customers. They’re smart. You want them in finance, R&D, and IT. Book Smart — These brainiacs know all of the right answers based on the established research. They can check and double-check and yes, triple-check your facts and figures to be sure your answer is supported in the literature. You want them on your legal team. They just might find that one thing cracks the case or covers your backside. People Smart — These geniuses are good at what a lot of academically gifted folks struggle with: dealing with people. They have a natural read for how others are interacting and they can find ways to connect with almost anyone. I have client who has made a considerable fortune largely based on being people smart. He says he’s not that smart. Actually, he’s a genius at making connections with people and being genuinely friendly and helpful to them. This means that he is probably two to three phone calls away from talking to virtually anyone of influence in our country. Now that’s smart. You want people like that on your Business Development team or your board. Quick-on-Their-Feet Smart — When I started in consulting, my first boss used to joke about how important it was to have a good pair (or three) of “dancing shoes.” He was pointing out that certain roles demand people who can think on their feet. They have to walk into situations and conversations with a general approach in mind, but then adjust on the fly with seeming ease. They need to be able to see around corners in a conversation and know what to say and what not to say. They’re smart. You want them on your sales or PR team. Politically Smart — We all know there are two realities: how organizations say things get done and how they really get done. Politically smart people know both but they’re experts at the latter. They can read where influence really lies in any situation and how to get powerful people moving in the same direction. They figure out what matters to different constituents and they can shape options that turn into deals that turn into action. They’re smart. You want them on your negotiation team and in any part of your company that drives significant change. (I’m looking at you, IT!) Organizationally Smart — Any fast moving organization manages far too many details. These people can cut through the clutter and bring order to the chaos. They sort out what matters and find ways to make tasks work. They’re realists and keep us honest about what can be done. They’re smart. You want them on your project management teams. And any executive lucky enough to have one as an admin will bite your hand off if you try to recruit theirs. Wisdom Smart — Some situations just require experience. You can be smart in any of the ways above, but without having seen it before you’re going to struggle. Having been a successful salesperson isn’t the same as having successfully run a regional sales team. Reading books about a startup just isn’t the same as having effectively dealt with the chaos of rapid growth with scarce resources. Having visited Europe on vacation just isn’t the same has having lived and done business there. These people are smart. You want a balance of people with battle scars along with your bright up-and-comers. One caveat: experienced and crusty don’t have to go together. Pick Wisdom Smart people who are humble enough to know that they can learn from those unburdened by experience.

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Andrea Sittig-Rolf: The Audacity of Nope: Why Hearing "No" Can Help Salespeople Get to "Yes"

April 16, 2012

You may often think, “How can I increase my number of face-to-face appointments when so many companies aren’t buying right now?” The problem lies in the question itself. If you’re scheduling an appointment just to sell something, you may have a tough time getting the appointment. If the perception of your prospect is that the very reason you’re calling is to either sell them something over the phone, or schedule a meeting to sell them something, you’ll likely hear things like “It’s not in our budget,” “We’re not making any purchases now,” “We don’t have any money,” “We’re not in the market,” and “Our budget has been frozen.” In other words, you may be setting yourself up to hear “no.” If, however, you position your introduction over the phone as an opportunity to meet in person so you can learn more about your prospect and their potential future needs, you may have better luck. After all, if your goal is simply to learn about the prospect, you may not have an opportunity to sell them anything at all, so there’s less resistance to setting up a meeting. If you still encounter “no” when asking for that first meeting to start the discovery, and potentially selling process, here are some tips to get the meeting anyway. First, if you have a good sense of humor, use it, and you’ll be half way there. Making someone laugh breaks down the barrier between two otherwise strangers. If the response to your question in asking for a meeting is, for example, “We don’t have any money,” say “Neither do I, that’s why I’m calling YOU!” Now of course, part of the humor in this is your delivery, so you may want to practice a few times before trying it live. Another response to the all too common, “It’s not in our budget” objection is “In that case, now is the perfect time to meet! We’ve found it very beneficial to discuss future needs and our solution early so that if you decide to proceed, we can be of help during your decision-making process.” Notice I said, “If you decide to proceed” which implies that you’re not going to shove the sale down their throat, but that the prospect will be making the decision to proceed or not. It’s also a good idea to present yourself as a resource to the prospect, regardless of whether they’re in the market at the moment or not. Then, actually BE a resource for them, even if it means meeting several times, providing valuable information that will help them and offering advice in your area of expertise even if it’s outside of the potential solution you may have to sell them. Another good rule of thumb is to give something of value to your prospect three times before asking for anything in return, like an order. Providing something of value might mean something as simple as sending an email with an article relevant to a recent discussion the two of you had about their needs, or introducing your prospect to another member of your team or resource within your company who can provide expertise, such as an engineer or project manager. If you’re genuinely interested in helping them with their plight, regardless of having the entire solution to sell yourself, your sincerity will become obvious to the prospect and it will only make sense they buy from you when they’re ready to make a purchase. Also, the rule of reciprocity is at play here. It’s human nature to give back to those who have helped us. By helping the prospect first, you set up the dynamic of the rule of reciprocity and they will be likely to reciprocate the favor you’ve done for them, by placing their order with you. Once you’re ready to close the sale, if budget is still an issue, you can discuss payment plans, leasing options, no money down, 90-day payment and other terms that may make your solution more appealing to your prospect. Your willingness to work with them and their budget will increase your chances of ultimately closing the sale. You can also reflect back with the prospect to your earlier discussions about what was important to them which will help build the value of your solution, framing the money issue more as an investment than as a cost. Finally, sometimes the answer is “no,” but you know what? That’s okay too. Part of learning to love hearing “no” is knowing that it’s only a matter of time before you hear the word “yes.” The more “nos” you get, the closer you get to “yes.”

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Terry Connelly: We Have Seen This Stock Market ‘Horror’ Movie Before

April 16, 2012

Here we go again. It’s the second quarter of the year, and once again — as in 2010 and 2011 — the hedge fund investors that missed the rally in the U.S. stock market have rebooted their “sky is falling” pitch to scare the rest of us out of our shareholdings. They do this so they can buy back into the market on the cheap and enjoy the rally that will occur in the second half of the year — just like the previous years. Two months ago, “a few” members of the Federal Reserve Board were favoring a QE. Now, they say it’s just “a couple.” So, one day it’s a strained reading of month-old Federal Reserve Board meeting minutes that concludes that the Board has taken additional monetary stimulus “off the table” because just “a couple” as opposed to “a few” have agreed that action may be necessary. (What if the “couple” happened to be Chairman Bernanke and Janet Yellen, his deputy?). In the end, a couple and a few are the same thing, but the market has overread “a couple.” Curiously, CNBC, the main market news outlet on cable, started promoting this thesis right away (presumably as part of its virulent anti-Obama campaign to talk down the market lest the President’s re-election campaign get any bounce from better stock prices and fatter 401(k)s and sure enough the market went down by triple digits. Then came the monthly jobs report showing only 120,000 net jobs created in March. Clearly a disappointing number compared with the more than 200,000 in February and January, except for the fact that these monthly estimates (which are based on a projection model for a set of interviews with employers, not an actual numerical “headcount”) are always wrong and corrected in subsequent months. On a corrected basis, the QUARTERLY jobs report — a more reliable indicator — shows a step up in hiring for each of the past THREE quarters, rising from 300,000 plus in Q3 2011 to 400,000 plus in Q4 2011 to more than 600,000 plus in Q1 2012. Of course, this data never made it onto CNBC. Then came the hedge fund hit to Spanish and Italian sovereign debt interest rates when the European markets opened Tuesday after the Easter holiday. Here’s how that happens: the hedgies don’t have to actually sell Spanish and Italian government bonds and take losses. All they have to do is bid up the price of credit-protection (the famous credit default swaps (CDS) that helped bring on the U.S. financial panic in 2008) on Spanish and Italian debt. The CDS contracts pay out only if the debt defaults, so a higher price implies a higher risk of default on the underlying debt. When that happens, investors tend to dump the underlying debt, sending the interest rates up. The hedge funds and other big investors know from the past two years of experience that such movements in the CDS markets move the European sovereign debt markets down and in turn, spook the U.S. stock markets into their now famous “chicken little posture.” Translation: you can manipulate the U.S. stock market down by 500 points or more over two or three days just by bidding up a few Euro debt CDS contracts on Italian and Spanish debt! But you won’t hear that on the supposedly informative CNBC. You just hear about the Spanish and Italian interest rate spikes, just like last year and the year before. You also hear about other European sovereign debt at just about this time of the year — after a run up in the U.S. market that some of the “big boys” missed out on. And so, on Tuesday after Easter, we went down 200 more points on the Dow. As CNBC cheers on the incipient “market correction” and puts on a series of chartists warning of free-fall. Just to top it off, the CNBC mavens chat incessantly about the coming downturn in corporate earnings on the first day of Q1 reporting season, quoting of course unnamed experts that earnings will actually fall for the quarter. Never mind that 3/4th of the early reporters — a small but at least “actual” sample — have already reported earnings that EXCEEDED estimate. Never mind that Alcoa, which was panned all day long by the cable Cassandras, actually reported earning revenues and earnings after Tuesday’s closing bell that also significantly exceeded estimates! Are we seeing a pattern here? It’s déjà vu all over again, as Yogi Berra would say. Fool me once, your fault; fool me twice, my fault; fool me three times, well, that’s the lot of U.S. equity traders, as they again fall for the hedge funds’ head-fake apocalyptic scenario in the second quarter, and take the rest of us down with them. What the hedgies and their shills at CNBC count on is the fact that average investors aren’t used to short selling, so they don’t understand that folks who come on TV and talk the market down might actually be “talking their book” just like the typical stock “promoters” they are justly suspicious of. Wise up, stock investors — you are being had, again — by some real pros that count on you having a short memory from the games they played the last two years, at just this time of the year. They, not you, made the money in the second half of the past two years. Wise up!

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Ben Hecht: Mainstreaming Social Innovation With the Public Sector

April 16, 2012

Social innovation has been a hot topic for a number of years now, but never more so than today. Conferences, awards, magazines, even a White House-led Social Innovation Fund, are dedicated to it. And for good reason. People have lost confidence in the institutions that they historically relied upon to solve our most pressing problems. Leaders have realized that if they want to change the status quo in their lifetimes, they need to stop waiting and start building their own solutions. More often than not, however, when we refer to social innovation, what we really mean is innovation sponsored by the social sector (“social sector innovation”). We’re talking about nonprofits created to fill gaps in a terribly broken system, such as connecting patients and their families with the basic resources they need to be healthy ( HealthLeads ) or providing urban young adults with the skills, experience and support that they need to reach their potential through professional careers and higher education ( YearUp ). Organizations like Echoing Green , Ashoka and New Profit , have accelerated the creation of a social sector innovation field by supporting the emerging leaders of these organizations with grants, business planning and connecting them to a network of similar ‘social entrepreneurs.’ As I stood atop the trading floor of the New York Stock Exchange (NYSE) last Wednesday however, I realized how incredibly self-defeating this narrow definition of social innovation is if large scale change is our goal. I was literally witnessing one of the most effective and lasting social innovations in the U.S. and it had been done by the public sector. The more I thought about it, the more I realized that public sector-led social innovation (“public sector innovation”) differs from social sector innovation in one absolutely fundamental way: it actually has a much better chance of having permanent, lasting impact from the outset. Many social sector innovations, like ones I’ve helped lead over the past 20 years, toil for years to build a successful model and then struggle for years thereafter to both get the attention of government and the adoption of the model by the public sector. In contrast, public sector innovation is undertaken with the assumption that if it is successful, it will go straight, “intravenously” into effect. No annual fundraising or advocacy necessary. The innovation and related funding will quickly displace the old way that government did business. For instance, what Linda I. Gibbs, New York City’s Deputy Mayor for Health and Human Services, has done in New York is one example of the extraordinary power of public sector innovation strategies. After her appointment, Gibbs created the Center for Economic Opportunity (CEO) to design and implement evidence-based initiatives to reduce poverty. On the policy side, the Center developed an updated poverty measure that it not only adopted but has also been adopted by the Obama Administration. On the program side, for example, CEO created Financial Empowerment Centers to help citizens take control of debt, improve credit ratings, deal with debt collection and learn to create budgets. After serving over 13,800 residents, helping them to reduce over $6.9 million in debt, build more than $900,000 in savings and achieve financial stability, the innovation went straight into the mainstream — it’s now the way the city does business. Not a pilot. Nice but that’s not all especially given how cities compete with their peers. In 2008, Mayor Michael Bloomberg of New York City and then-Mayor Gavin Newsom of San Francisco, two mayors committed to this issue, created the Cities for Financial Empowerment (CFE) Coalition . Since then, a dozen cities have come together to share promising approaches, build a unified policy program and adopt innovations into their mainstream operations. I was standing atop the NYSE because I was celebrating, with CFE co-chairs Jonathan Mintz, NYC Department of Consumer Affairs Commissioner, and José Cisneros, City of San Francisco Treasurer, the announcement of The Cities for Financial Empowerment Fund (CFE Fund) at Living Cities as part of NYSE’s Financial Literacy Week. The Fund will institutionalize this loose-knit collaboration of cities interested in financial empowerment. In essence, it will help cities to skip a generation of innovation and go right to intravenous adoption of what works. We need to do more to celebrate and replicate these types of successes. We need to honor the vision of public sector innovation trailblazers like Linda Gibbs, Jonathan Mintz and Jose Cisneros as much as we honor the extraordinary efforts of social sector innovation leaders like Wendy Kopp and Geoffrey Canada. The more the better.

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Bill Moyers: The Rich Are Different From You and Me — They Pay Lower Taxes

April 16, 2012

Benjamin Franklin, who used his many talents to become a wealthy man, famously said that the only things certain in life are death and taxes. But if you’re a corporate CEO in America today, even they can be put on the backburner — death held at bay by the best medical care money can buy and the latest in surgical and life extension techniques, taxes conveniently shunted aside courtesy of loopholes, overseas investment and governments that conveniently look the other way. In a story headlined, ” For Big Companies, Life Is Good ,” the Wall Street Journal reports that big American companies have emerged from the deepest recession since World War II more profitable than ever: flush with cash, less burdened by debt, and with a greater share of the country’s income. But, the paper notes, “Many of the 1.1 million jobs the big companies added since 2007 were outside the U.S. So, too, was much of the $1.2 trillion added to corporate treasuries.” To add to this embarrassment of riches, the consumer group Citizens for Tax Justice reports that more than two dozen major corporations — including GE, Boeing, Mattel and Verizon — paid no federal taxes between 2008 and 2011. They got a corporate tax break that was broadly supported by Republicans and Democrats alike. Corporate taxes today are at a 40-year-low — even as the executive suites at big corporations have become throne rooms where the crown jewels wind up in the personal vault of the CEO. Then look at this report in the New York Times : Last year, among the 100 best-paid CEOs, the median income was more than $14 million, compared with the average annual American salary of $45,230. Combined, this happy hundred executives pulled down more than two billion dollars. What’s more, according to the Times “… these CEOs might seem like pikers. Top hedge fund managers collectively earned $14.4 billion last year.” No wonder some of them are fighting to kill a provision in the recent Dodd-Frank reform law that would require disclosing the ratio of CEO pay to the median pay of their employees. One never wishes to upset the help, you know. It can lead to unrest. That’s Wall Street — the metaphorical bestiary of the financial universe. But there’s nothing metaphorical about the earnings of hedge fund tigers, private equity lions, and the top dogs at those big banks that were bailed out by tax dollars after they helped chase our economy off a cliff. So what do these big moneyed nabobs have to complain about? Why are they whining about reform? And why are they funneling cash to super PACs aimed at bringing down Barack Obama, who many of them supported four years ago? Because, writes Alec MacGillis in The New Republic — the president wants to raise their taxes. That’s right — while ordinary Americans are taxed at a top rate of 35 percent on their income, Congress allows hedge fund and private equity tycoons to pay only pay 15 percent of their compensation. The president wants them to pay more; still at a rate below what you might pay, and for that he’s being accused of – hold onto your combat helmets — “class warfare.” One Wall Street Midas, once an Obama fan, now his foe, told MacGillis that by making the rich a primary target, Obama is “[expletive deleted] on people who are successful.” And can you believe this? Two years ago, when President Obama first tried to close that gaping loophole in our tax code, Stephen Schwarzman, who runs the Blackstone Group, the world’s largest private equity fund, compared the president’s action to Hitler’s invasion of Poland. That’s the same Stephen Schwarzman whose agents in 2006 launched a predatory raid on a travel company in Colorado. His fund bought it, laid off 841 employees, and recouped its entire investment in just seven months — one of the quickest returns on capital ever for such a deal. To celebrate his 60th birthday Mr. Schwarzman rented the Park Avenue Armory here in New York at a cost of $3 million, including a gospel choir led by Patti LaBelle that serenaded him with “He’s Got the Whole World in His Hands.” Does he ever — his net worth is estimated at nearly $5 billion. Last year alone Schwarzman took home over $213 million in pay and dividends, a third more than 2010. Now he’s fundraising for Mitt Romney, who, like him, made his bundle on leveraged buyouts that left many American workers up the creek. To add insult to injury, average taxpayers even help subsidize the private jet travel of the rich. On the Times ‘ DealBook blog , mergers and acquisitions expert Steven Davidoff writes, “If an outside security consultant determines that executives need a private jet and other services for their safety, the Internal Revenue Service cuts corporate chieftains a break. In such cases, the chief executive will pay a reduced tax bill or sometimes no tax at all.” Are the CEOs really in danger? No, says Davidoff, “It’s a common corporate tax trick.” Talk about your friendly skies. No wonder the people with money and influence don’t feel connected to the rest of the population. It’s as if they live in a foreign country at the top of the world, like their own private Switzerland, at heights so rarefied they can’t imagine life down below. Moyers & Company airs weekly on public television ( check local listings ). See more features — including our all-new TAKE ACTION page — at BillMoyers.com

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David Burwell: Of Oil Prices and Elephants

April 16, 2012

Six wise men of Industan, of learning much inclined, went to see an elephant, though all of them were blind, that each by observation might satisfy his mind. The debate over gas prices, what causes them to soar and crash, and who is to blame, is a parlor game played out in Washington at the start of the driving season every spring, and even more so in presidential election years. It is a redundant, blind-leading-the-blind discussion. So, let’s see if we can parse the arguments made by the proponents of the various “truths” about gasoline prices to find the culprit. By analogy, we will track the arguments to the classic J. G. Saxe poem, “The Blind Men and the Elephant,” with oil being the “elephant” in the room. The first approached the elephant and happening to fall against his broad and sturdy side at once began to bawl, “This mystery of an elephant is very like a wall.” The wall of worry — that some natural (like a hurricane) or man-made (such as a terrorist act, a war, or an embargo ) disaster will cut off our access to oil and drive gasoline prices higher. This is a fear that oil exporters of any stripe diligently encourage. And it is partly true–Hurricane Katrina cut off both access to oil and caused refineries to shut down, causing a gasoline price spike. But the United States, like all net oil importing nations, have set up strategic petroleum reserves to safeguard access to oil in times of such interruptions. The U.S. strategic reserves already have more than 200 days of U.S. oil imports safely stored in salt domes in Texas. Absent an OPEC-like coordinated embargo, which would do more damage to OPEC than to oil importers (see below), these interruptions will be short term and the price hike mild. So risk of supply interruption can’t fully explain the problem. The second, feeling of the tusk, cried “Lo what have we here, so very round and smooth and sharp? To me ’tis mighty clear, this wonder of an elephant is very like a spear.” The spear of the gas tax — a tax that pierces the heart of every American driver. But the 18.4-cent federal gas tax is less than 5 percent of the price of a gallon of gasoline. It is also getting smaller as a percentage every day as gasoline prices rise. Add state and local gas taxes and the average is still only 12 percent of the total price per gallon — one of the lowest in the world. It also has not risen since 1993 — even though fully 60 percent of Americans think the gas tax rises every year. While this tax is supposed to keep our transportation infrastructure in good shape and performing efficiently, it is so inadequate to meet present needs that the quality of U.S. infrastructure has fallen, according to the World Economic Forum, from fifth in 2001 to twenty-third place globally. So gas taxes — while a minor contributor — can’t be the culprit either. The third approached the elephant, and happening to take the squirming trunk within his hands, thus boldly up and spake, “I see,” quoth he, the elephant, is very like a snake.” The snake of speculation — this argument appears to have some merit, especially if one compares global daily consumption of oil (89 million barrels) to actual oil traded on public commodity markets every day (over three billion barrels ). Clearly most oil traded is done by those who have no intention of ever taking possession of it. This argument is bolstered by commentators who note the existence of ” dark pools ” of oil traded privately between oil companies, banks, and investment companies as a kind of reserve currency. These private trades are estimated to be many multiples higher than publicly-traded oil stocks and can lock up inventories, thus causing prices to soar even in times of low demand and high supply. A recent study by the St. Louis Federal Reserve estimates that speculation accounts for about 15 percent of the oil price rise over the last ten years. But it also says that “fundamentals (supply and demand) continue to account for the long-term trend in oil prices.” This snake, if it has a bite, is not poisonous. The fourth reached out with eager hand, and felt above the knee, “what this most wondrous beast is like is very plain” said he, “tis clear enough the elephant is very like a tree.” The ever-growing tree of demand expansion — true, global demand for oil has risen over the last decade, from 76 million barrels per day in 2000 to 87 million in 2010 , but supply has kept pace. Moreover, OECD oil consumption has peaked and is now in decline , and new, unconventional oils have expanded potential supply to meet all needs far beyond the time their carbon emissions will push global temperatures to catastrophic levels. The simple fact is that the OPEC nations, with 77 percent of global proven oil reserves and 42 percent of production, have models that calibrate the exact amount of that oil to put on the market to secure maximum financial return. The United States, representing about 10 percent of global production but 20 percent of global consumption, cannot substantially affect the oil price — nor can more drilling. In fact, America already has more than 50 percent of all the in-use wells in the world. Canada, which produces 50 percent more oil than it consumes , has higher gasoline prices than the United States. The fifth, who chanced to touch the ear said, “E’en the blindest man, can tell what this resembles most — deny the fact who can; This marvel of an elephant is very like a fan.” The fan of inflation — the theory goes that as the U.S. continues printing money to cover its trillion-dollar deficits, inflation will rise and, with it, the price of oil, since it’s priced in dollars. Nice idea. But inflation remains tame while the price of oil has doubled since the depth of the Great Recession in early 2009. Inflation may be a future culprit, but it certainly is not pushing oil and gas prices up anytime soon. The sixth no sooner had begun about the beast to grope, than seizing on the swinging tail that fell within his scope; “I see,” said he, “the elephant, is very like a rope.” The rope of the resource curse — this is a little-understood contributor to the world oil price that may eventually hang the oil-exporting economies. These economies, primarily the OPEC countries, Norway, and Russia, are heavily dependent on export sales of their natural resources — especially oil — to fund their national budgets. Over 50 percent of the federal budget of the Russian Federation is from taxes on sales of exported oil, and this percentage is much higher in some Middle Eastern countries. These revenues are then disbursed to subsidize their social contracts with their citizens — cheap energy and low-cost housing, without which social unrest would accelerate. This requires ever-rising oil prices. Ten years ago, Russia could fund its social contract at a world barrel price of oil of $20. But by this year, Moscow’s budget needs an average price of $115 a barrel to break even. The Middle Eastern states are feeling the pinch as well: Barclay’s Capital recently estimated that the cost of the Arab Spring alone pushed the break-even point for Saudi Arabia’s budget from $78 a barrel to $91 a barrel — to fund the extra spending needed to prevent social unrest from threatening the regime. So, if gas prices are the elephant, did the six wise men find their answer? So six blind men of Industan disputed loud and long, each in his own opinion exceeding stiff and strong; though each was partly in the right, they all were in the wrong! As it is with elephants, so it is with oil prices — plenty of “wise men” talking about what drives oil prices and all are partly in the right — but mostly in the wrong. For the real answer on what is driving gas prices higher, let’s look into the mirror. We all hate high gasoline prices but we love the lifestyle that gasoline supports: the freedom of the open road — flat, straight, fast, and free (with no tolls). We buy up cheap land where you can “drive until you qualify” for a home mortgage (with interest deductible). We then expect the government to build and maintain the infrastructure that supports our 50-mile commute to work, even though we oppose the gas taxes that fund all the infrastructure that provides these very same lifestyle benefits. Until we grasp the reality that the price of oil is directly related to how we waste it, we will continue to dedicate countless hours and endless column inches looking for a different culprit. The elephant in the room is not the price of gasoline — it is us. David Burwell is the director of the energy and climate program at the Carnegie Endowment for International Peace .

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Martha Burk: Equal Pay — Will We Ever Get There? An Interview With Lilly Ledbetter

April 15, 2012

April is the month every year when the paychecks of women working full-time, year-round catch up with what men earned by the previous December 31. This year it’s April 17. There are a number of causes for the pay gap, including job segregation (so-called “men’s jobs” pay more than “women’s jobs”) and the fact that working moms are often seen as less serious or less reliable, despite solid evidence to the contrary. But plain old sex discrimination plays a big part. Lilly Ledbetter found out the hard way after 19 years at Goodyear, when she learned she had been underpaid all along compared to men doing the same job. She sued — and won in lower courts. But the Supreme Court overturned 40 years of precedent when it ruled against her in the now-infamous Ledbetter v. Goodyear case, saying she should have complained earlier — even though she didn’t know about the discrimination. The Lilly Ledbetter Fair Pay Act restoring the previous standard (a victim has 180 days to complain beginning when she learns about the discrimination) was the first law President Obama signed. Ledbetter’s new book Grace and Grit chronicles her struggle and the aftermath. I interviewed her this month for my radio show Equal Time With Martha Burk . MB: When did you go to work for Goodyear? LL: I was hired in 1979. There were 5 of us in the group, 2 female. MB : How did you find out after 19 years that you were making less than the men doing the same job and in some cases with less seniority? LL: An anonymous note — a little piece of paper with my salary and 3 male co-workers. I knew it was correct, because my numbers were there to the penny. The first thing that hit me was devastation, humiliation. Then I thought about how many hours of overtime I had worked and not been compensated for what I was legally entitled to, and how hard it had been on my family struggling to pay the mortgage, education, doctor bills. We had done without quite a bit. And this was not right. I didn’t know how I could through my 12 hour shift. MB : Did you leave the plant and go home? LL: No, I finally got my composure. Halfway through my night shift it hit me. My retirement, my 401(k), and someday my Social Security all were dependent on what I was making — and that’s another tremendous loss. MB : Did you go to the company and complain? LL: I had already been to the company recently, because there were rumors, and I wanted to know where I stood. They told me “you’re just listening to too much B.S.. Your salary is fine.” Later my lawyer found out that for many years I had been paid below the minimum for the job I was doing. MB : It had to be a hard decision to file a suit, and risk retaliation or even getting fired. LL: Yes, I thought about it. But I decided I could not let a major corporation do me this way, and not stand up for myself. I went straight to the Equal Employment Opportunity Commission closest to my home. MB: You’ve said that one of the most important pieces of advice you can give to women in this situation is “don’t hold back, tell the investigators as much detail as you can, and document as much as you can.” LL: That’s absolutely correct. It’s very hard — you feel like you’re being a complainer and a whiner, and that’s actually the reputation you get when you do file a charge. But you should open up and tell everything. I was shunned by co-workers. MB: You were transferred to another job where you had to lift heavy tires all day. You were over 60 years old. Wasn’t that retaliation for filing the charge, which is against the law? LL: Yes, but I lost that part and also an age discrimination complaint. MB: The State of New Mexico has a rule that any company applying for a state contract has to file a gender pay equity report showing pay statistics for men and women in each job category. Would that have helped you? LL: Absolutely. I thought because Goodyear was a federal contractor they would be following the law. But that turned out not to be the case, and I couldn’t find out. MB: What would your advice be to women who might be considering filing a complaint? LL: Do your research on salaries in your area. Do not take anything for granted, and document everything. Discrimination is alive and well today. You cannot afford to work any length of time accepting less money, because you can never catch up. Listen to the full Lilly Ledbetter interview here:

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Hayden Bixby: Family Bonding at Tax Time

April 15, 2012

I put my return (and not-insignificant check) in the mail to the IRS Friday, and I have to admit that I’m sad to see another tax season come to a close. I’m not saying I love paying taxes, but I am saying that I love doing taxes. Please tell me I’m not alone! For one thing, I enjoy the little moments of success when TurboTax prompts me to enter some information that I, miraculously, can locate in the file I keep throughout the year. This makes me feel organized and prepared — and even maybe a little smug, as I consider how much money I’m saving by not hiring someone to do this work for me. I’m pretty sure I get this personality quirk from my dad, who also does his own taxes and is a source of my most valuable and most inexpensive tax advice. I confess I don’t always follow his suggestions (yes, I know it makes more sense to keep the money in my bank account throughout the year than it does to try for a refund… but refunds are so much more fun!) — but I notice that I hear the wisdom of his words far more often as I get older. And I get to hear from other family members at tax time, too. The flurry of text messages from my brothers, asking and giving advice throughout the process, is a comical distraction, as is the friendly competition among us to see who can unravel a complicated question most efficiently, or get the best tax rate, or locate obscure but required information. I know: Nerd Alert. But the best connection I’ve found between family and taxes happened this year, when my usually-Facebook-averse cousin suddenly started posting images of Montana’s new Tax Gnome. She and her team at the Partnership for Montana’s Future came up with a “Thank Taxes” campaign that captures photos of a goofy-looking garden statue next to various buildings, services, and events that tax dollars support. That’s right: taxes are getting an image make-over with the help of an extra from Gnomeo and Juliet ! Because she’s my cousin, I think she’s a genius for even being part of a team that would come up with this. But a little more YouTube-driven exploration led me to other “Thank Taxes” campaigns from states as diverse as Minnesota and Arkansas . So maybe thanking taxes isn’t a completely original idea. Neither this fact nor the fact that I can’t look at the Montana photos without thinking about discount airfares diminishes my sense that she is on to something. In the political climate of my whole adulthood, we have been bombarded with criticisms of and challenges to our tax system: who is and isn’t taxed enough? how should or shouldn’t our tax dollars be allocated and managed? what social programs should or shouldn’t be shored up by tax revenue? should or shouldn’t inherited money be taxed a second time as it enters the hands of a new generation? These questions aren’t inherently bad, but the language in which the debate is conducted is polarizing and confrontational. As George Lakoff reminds us whenever he can, we have been linguistically and rhetorically hijacked, submitting to terminological conversions that affect us on an unconscious level. The move from the “estate tax” to the “death tax,” for example, equates taxes not with the “she’s gone to a better place” kind of death, but the “there’s a murderer on the loose and I’d better get a gun to defend myself” kind. This and other brainchildren of Conservative think-tanks have more or less successfully demonized taxes and social programs in the American popular consciousness. In this context, I’m heartened by the efforts to reflect on the daily benefits of programs that serve our whole society and, yes, are funded with taxes on our hard-earned pay. I like being reminded that the tax dollars I pay result in benefits to me and the people I care about… and even people I don’t know. Anyone who attends public school, appreciates roads that are pot-hole free, has ever checked out a library book or called 911, or likes that fact that there are limits set on how much “byproduct” can legally be included in his or her hot dog might like to engage in a moment of reflection during tax time, too. It is in this cheerful spirit that I’ll log back in to TurboTax, get my family’s phone numbers on speed dial, and sit down to file my amended 2011 return… My 1099 from PayPal just arrived in today’s mail. Yay!

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Jared Bernstein: A Debate on Inequality, Opportunity, and Politics

April 13, 2012

Had a rousing debate on inequality last night with Scott Winship from Brookings, moderated by Reihan Salam, both of whom lean conservative, and both of whom brought generally interesting and provocative views to the discussion. The conservative take on the issue tends to fluctuate from mild denial (Winship, not Salam), to which I strongly object, to “is it really that big a deal?” with which I disagree but find interesting and challenging. On the denial front, what you mostly get is the “if-you-just-adjust-it-this-way-or-that-way-it-all-goes-away.” Scott raises immigration, incarceration, family structure, employer-provided health insurance, deflators, to name just a few. Some of these don’t affect inequality, like deflators (although Scott cited research that finds prices grow more slowly for poor people); others cut “the other way” — incarceration disproportionately takes lower earners out of the mix, so putting them back in would widen the gap between lower and middle-wage earners. Most of these are dealt with in the CBO data shown in the figure below, including health care, family size, taxes and transfer payments. So, yeah, there’s a lot more inequality and forgive me if I won’t swim in de-Nile on this point. More interestingly, both Scott and Reihan raised questions about how much all this inequality matters. The first argument is that there’s nothing zero-sum about the rise in inequality. Romney’s or Buffett’s or Gates’ or Zuckerberg’s gains are not anyone else’s losses. That’s hard to accept, given that it’s not just that most people’s real incomes kept going up like they used to, just not as fast as those at the top. Income grew more slowly for middle- and low-income households and poverty rates were stickier (i.e., less responsive to growth) in times of rising inequality. The divergence of median compensation from productivity suggests that in the age of inequality, the typical worker is simply not capturing as much of their contribution to growth as was formerly the case. In economese, some of what these and other rich guys and gals capture are ” rents ,” which are not zero-sum. We see this most commonly in the growth of financial markets as a share of the American economy, an important factor in not just the growth of inequality but in the bubble-bust cycle that’s done so much damage of late. In the 2000s, the median income of working-age families stagnated and poverty went up, even as the economy grew and the capital-gains powered income of the top 1% soared (see figure). Since the current recovery began, profits have soared, inequality is back on the rise , and the pay of average workers has stagnated of late. My own longer-term analysis of the factors responsible for the diminished elasticity of poverty with respect to growth finds inequality to be the most important factor (see figure here ). The latter 1990s provides a very useful counterexample. With true full employment upon the land — my favorite inequality antidote — inequality actually diminished between the middle and bottom (the top continued to pull away — cap gains, again), low wages grew with productivity for a New York minute, and poverty rates fell sharply. Inequality, at least in the bottom half of the wage scale, compressed and a lot more growth reached a lot more people. Similarly, Scott doesn’t buy that inequality negatively affects opportunity, despite all the arguments here . From that post, I keep coming back to this anecdote, because I think it’s so emblematic of the problem: …once you start looking for these linkages between inequality and opportunity, they show up everywhere. Here’s a great example from this AM’s WaPo, where public schools facing budget cuts–the disinvestment in public goods noted above–turn to parents to raise funds, and not for one-off trips to Mount Vernon, but for science curriculum, guidance counselors, smaller class sizes, music classes, etc. Of course, the affluent parents can raise hundreds of thousands; the poor parents, barely hundreds. It’s a classic example of inequality reinforcing itself through educational opportunity. One of the problems, admittedly, is that, as noted, this is anecdotal. And most of the other evidence that inequality thwarts opportunity is too, showing that, for example, the inequality of enrichment expenditures on kids or college completion rates grew as income inequality grew. It’s evidence but it’s circumstantial. But it’s convincing to me, and to most others who’ve looked at this closely, so I don’t for a second buy the argument that inequality is economically benign. More challenging was their point that income concentration is a lot more politically benign then I’ve been thinking. As I argue in this deck (slides 16-18), hopefully well known to OTEers, while money in politics has long been a problem, it’s gotten a lot worse as there is so much more income at the top and so much more leeway for that income to “buy” the politics it wants. Read Hacker and Pierson’s book , and you find it awfully hard to avoid the conclusion that we’re stuck in a nasty feedback loop, where the increased concentration of money in politics locks and blocks–it’s locks in policies that perpetuate its growth, and blocks policies that would ameliorate it. An egregious example of late is that one person -Sheldon Adelson, whose net worth according to Forbes in $25 billion (yes, that’s with a ‘b’)-by dint of the Citizen’s United decision, was able to keep a candidate in a national primary for months on end. That strikes me as profoundly undemocratic, and is a potent symbol of how corrupt our political system has become. But Reihan and Scott argued that perhaps this was less portentous than all that. It was basically just a rich guy wasting some money, indulging a fantasy or something (hey, whatever turns you on, I guess). As Scott put it, if Gingrich wins the election, I’ll have a point. And of course he won’t. That’s interesting, although it’s a bit weird to contemplate that allegedly smart investors would make such foolish investment. But are they really that foolish? They’re using their unimaginable riches to steer the ideology, and they’re doing it throughout the system, from local school boards to national elections. This is scary and damaging to America. I’m open to good arguments from smart people like Scott and Reihan. But I simply don’t see how these extreme economic, social, and political imbalances are so benign. I fear they’re cancerous, and if we allow ourselves to be distracted by adjustments to deflators or we over-discount correlations because we haven’t yet determined causality, that cancer will metastasize and America will be in real trouble. Added bonus/penalty : here’s Scott and me debating this stuff on the radio yesterday.

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Jan Mazurek: The Climate Post: U.S. Energy Department Says Peak Travel Season Could Cost Drivers 6% More

April 12, 2012

Gasoline prices have edged off the pedal in recent days, but the Energy Information Administration this week released new data showing motorists will pay about a quarter more per gallon during peak travel season — April through September. Prices will top out at $4.01, on average, in May. The last time gasoline spiked to such levels was 2008, causing a much different reaction from motorists in part because prices had shot up 35 percent in just six months. While escalating gasoline prices are driving some folks to hybrid dealerships , only a few models offer a speedy return on investment . With the exception of the Prius and Lincoln MKZ, and the clean-diesel Volkswagen Jetta TDI, most clean-car technologies take more than a decade to pay owners back. Rising oil prices are feeding a population boom in North Dakota, with the town of Williston holding the distinction of fastest-growing town after its population rose 8.8 percent in about a year. Economists surveyed by CNNMoney say the economy can handle the current high oil prices of around $100 a barrel, but that a further spike in oil prices triggered by a confrontation with Iran could be one of the biggest threats to the economy . Smoggy City Makes Strides in Clean Air Mexico City only a few years ago rivaled Los Angeles and Houston as a smog capital, but thanks to air-scrubbing innovations such as vertical gardens and a popular bicycle sharing program , the city is becoming a leader in green efforts. Although California is slipping in the smog and air toxics categories, the state topped a list ranking states’ preparedness to address such challenges as rising sea levels that a warming world portends. Alaska, Maryland, Massachusetts, New York, Oregon, Pennsylvania, Washington and Wisconsin also ranked high. Realclimate.org reports that scientists’ predictions about human-caused climate change pushing the mercury up were on target. What’s more, a warming planet may be bad for bunnies threatened by the loss of sagebrush habitat and snow, where they hide from predators. Tennessee, meanwhile, enacted a law that would let teachers challenge climate change and evolution in the classroom. Energy vs. Environment A new slate of clean and renewable energy initiatives — part of the long-term “Operational Energy Strategy” aimed at reducing the military’s dependence on fossil fuels — was announced this week . The Obama administration aims to build three gigawatts of solar, wind and geothermal power capacity on U.S. military installations by 2025. The Army, meanwhile, is building fuel cell and hybrid vehicles . Actor Matt Damon has signed on to The Promised Land a film critical of hydraulic fracturing, or fracking. Meanwhile, promoters of the pro-fracking film FrackNation are raising funds on Kickstarter . Outside of Hollywood, the Department of the Interior is poised to propose guidelines governing fracking on public lands. For those opposed to fracking for fear that natural gas will diminish demand for renewables, the Center for American Progress says that in the long term, the two are not necessarily in opposition, with renewables becoming increasingly competitive as natural gas production nears a peak sooner than some might predict. A new energy poll says 61 percent of Americans said they’d be more likely to vote for a presidential candidate backing more natural gas. The same study concludes many Americans — six out of 10 — are unfamiliar with hydraulic fracturing. Payouts related to the BP oil spill, the largest in history, have recently increased four-fold . Texas, a recipient of some of the funds, announced plans to spend its money on long-term coastal conservation . Oil drilling in the Gulf is expected to see its biggest year since the 2010 spill, with predictions for eight more oil rigs, even though signs of the disaster’s effect on the environment still remain. India has forbidden its airlines from complying with a European Union law that went into effect Jan. 1 that charges airlines using European airports for their carbon emissions. Indian Environment Minister Jayanthi Natarajan called the requirement a “deal-breaker” for global climate change talks. Scientists have finally extracted sunlight from cucumbers. No, not really, but in a 2011 essay Vaclav Smil used the fictional cukes from Jonathan Swift’s 1726 novel Gulliver’s Travels to make a point about today’s serial infatuations with “it” technologies — simple solutions to complex energy problems. Bloomberg’s Eric Roston suggests that President Obama’s “all of the above” strategy — which consists of various “it” technologies — would do well to “focus not on our infatuations with particular energy sources but on the market in which they operate.” The Climate Post offers a rundown of the week in climate and energy news. It is produced each Thursday by Duke University’s Nicholas Institute for Environmental Policy Solutions .

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Zaid Jilani: As Donors Flee, Corporate Front Group ALEC Whines That Critics Are Trying to "Eliminate Discourse"

April 12, 2012

At least six major corporations and foundations — Coca-Cola, Pepsi, McDonald’s, Kraft, Intuit, and the Bill and Melinda Gates Foundation — have now left or have pledged to leave the American Legislative Exchange Council (ALEC), a secretive corporate front group that works to pass legislation in all 50 states. The corporations are leaving largely thanks to protests by activists and consumers outraged that ALEC has been pushing voter suppression and “Stand Your Ground” laws that harm American communities. Yesterday morning, ALEC sent out a panicked press statement complaining of an “intimidation” campaign that is trying to “eliminate discourse”: ALEC is an organization that supports pro-growth, pro-jobs policies and the vigorous exchange of ideas between the public and private sector to develop state based solutions. Today, we find ourselves the focus of a well-funded, expertly coordinated intimidation campaign. Our members join ALEC because we connect state legislators with other state legislators and with job-creators in their states. They join because we support pro-business policies that promote innovation and spur local and national competitiveness. They’re ALEC members because they’re more interested in solutions than rhetoric.  At a time when job creation, real solutions and improved dialogue among political leaders is needed most, ALEC’s mission has never been more important. This is why we are redoubling our commitment to these essential priorities. We are not and will not be defined by ideological special interests who would like to eliminate discourse that leads to economic vitality, jobs and fiscal stability for the states. A much more accurate re-write of one of those statements would read like this: Our members join ALEC because we connect state legislators with other state legislators and with the biggest campaign donors in their states. They join because we support pro-Big Business policies that promote the bottom lines of special interests and spur local and national donations by Big Business to our organization. They’re ALEC members because they’re more interested in profit than principles. ALEC loves to claim that it is simply advocating for small-government, conservative ideas. But its agenda isn’t that of the free market but rather one of its Big Business donors. It has in the past gotten state legislatures to pass laws stopping local governments from enacting their own municipal broadband systems and banning them from deciding to use their tax dollars to pay living wages to contractors. These laws are not designed to promote the free market or small government. They have only one goal — padding the profits of ALEC’s corporate members, even if small government principles are discarded in the process. ALEC claims that its critics are trying to “eliminate discourse.” That’s nonsense. We here at Republic Report love the discourse about ALEC that is occurring in town squares, Internet forums, social media, and corporate boardrooms all over America. We and our partners have sought to engage in this discussion with corporations sitting on ALEC’s Private Enterprise Board. Everywhere, Americans are asking why corporations are pouring so much money into this secretive organization that has such a harmful impact on their lives. And when groups like Color of Change call on corporate donors to leave ALEC, they are not utilizing Big Government but rather their own right to free speech — and the right to use their own money as they see fit in a free market — to change America. The campaign to hold ALEC responsible represents the best combination of free speech and the free market. ALEC hates that, but that’s because ALEC doesn’t stand for the free market or free speech at all. It stands for an America where Big Business can secretly write our laws. And increasingly, even Big Business is learning that a relationship with ALEC may be unprofitable. This story is adapted from a post originally appearing on Republic Report .

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Wray Herbert: The Surprising Benefits of Corporate Disunity

April 12, 2012

I love reading accounts of the West Wing’s inner workings, because they are studies in the predictable quirkiness of human psychology. Presidents and their trusted staffs always arrive in the White House with a unified message and team spirit, and they inevitably disintegrate into factions — ideological purists and pragmatists, seasoned vets and young Turks. It’s just as true of Obama’s West Wing today as it was of Nixon’s and FDR’s, and probably every presidency back to the founding. The common wisdom is that such factions are a bad thing, not just for the White House but for any complex organization. Internal bickering takes key leaders off message and saps energy and hurts job performance. But Margaret Ormiston isn’t so sure. Ormiston is a psychological scientist at the London Business School, and together with Elaine Wong of the University of Wisconsin — Milwaukee, she has been studying the consequences of such organizational fragmentation. Her work suggests that disunity may actually have some hidden benefits, including the promotion of more ethical business practices. The scientists’ theory goes like this: As unified leadership teams splinter into factions, the key players become more competitive and more vigilant in monitoring one another. Competition and monitoring have downsides, but they can also influence organizational decision making in positive ways. Specifically, factions foster intense scrutiny and discussion of competing agendas, which in turn lead to more ethical choices and judgments. To test this idea, Ormiston and Wong examined existing data on leadership teams at about 50 Fortune 500 companies. They ranked each leadership team’s degree of fragmentation, based on tenure and education as well as the homogeneity of competing factions. They also measured how centralized, or decentralized, the decision making power was in each company — figuring that disunity would be more beneficial in organizations where decision-making power was dispersed. Finally, they examined each company’s ethical record over a three-year period — measures like charitable giving, for example, or disregard for the local community economics. When they crunched all the data together, the results were unambiguous. As reported on-line in the journal Psychological Science , the more fragmented a company’s upper management was, the more ethical its record — but only in organizations where decision making was decentralized. In companies that consolidated power at the top, fragmentation did not lead to more ethical decision making. It just led to fragmentation. That’s a lesson for any organization, whether its business is business or governing.

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Jerry Chautin: Don’t Abolish SBA; Mills Says Her Agency Is Faster, Quicker, Better

April 11, 2012

Once upon a time, the U.S. Small Business Administration made direct loans to socially and economically disadvantaged small-business people. The SBA’s direct lending programs also targeted disabled veterans and others that politicians said deserved preferential treatment. What’s more, the agency required applicants to get turned down by two banks as a prerequisite to applying for its loans. The paperwork was voluminous, and it took many, gut-wrenching months to get a deal done. That was during the 1960s and ’70s, and yet the myths persist. With the exception of disaster lending , SBA has morphed into a loan grantor to mitigate some of the risk for its banks. The lenders underwrite the loans and make the credit decisions without the government imposing underwriting leniency for disadvantaged applicants. The timeline from application to closing is not much longer than for a conventional business loans. “The paperwork is actually not very much,” Karen Mills, the SBA’s administrator said, during an in the interview for a March 27 article in the New York Times . “Our turnaround time for loans is 10 days.” When delays do occur, it is often because the borrower is having difficulty assembling financial statements and other documentation requested by the lender. “Banks are working with mostly their own documents” for SBA loans, Mills added. “Our role is to provide access and opportunity.” As a hypothetical example, she cited, “The bank says the last two years have been a little tough, you don’t quite meet my standards.” But rather than turning down an existing or prospective client, “that’s when they use the SBA guarantee,” Mills explained. The SBA was there to give banks the comfort they needed to begin lending again when they were recovering from the Great Recession, according to a Feb. 3 column in Forbes Magazine . The agency was front and center as an important part of the Obama administration’s $1 trillion Recovery Act. The legislation temporarily increased the loan guarantee on SBA 7(a) loans to 90 percent from its typical 75 percent. As a result, lenders made more loans, and in some cases, accepted borrowers with lower credit scores, less cash invested and softer collateral than they would have approved otherwise. Newtek Small Business Finance , a non-bank, SBA lender, contributed the column to Forbes . “We believe that there are approximately $60 billion in outstanding balance of 7(a) loans,” the column said. “The funds are invaluable to small businesses that receive long term (7-25 year amortizing loans) with fair interest rates.” The SBA’s 7(a) program, for example, provides up to $5 million in working capital, equipment financing, acquisition funds to buy a business and real estate financing for owner-occupied buildings. That includes hotels and motels, daycare centers, manufacturing businesses, service businesses and most types of businesses. And yet, some legislative ideologues and conservative groups would rather abolish the agency than spend taxpayers’ money to boost its small business loan-guarantee programs. The programs put the full faith and credit of the federal government in loans that would otherwise not have been made. In many cases the non-chain, neighborhood restaurant, dry-cleaner, and even the McDonald Fast-food franchise that we have all come accustom to patronizing, would not exist. Furthermore, these businesses create jobs and stimulate the lackluster economy. One more myth needs to be laid to rest. The SBA does not give grants to small-business owners . An exception is for technical research and development . The SBA’s Small Business Innovation Research and Small Business Technology Transfer Research Programs offer grants directly to qualifying small businesses. SBA also gives grants and low interests loans to its licensed microlenders . In turn, the microlenders, such as Asheville, North Carolina-based Mountain BizWorks , makes small-business loans from $5,000 to $50,000. “The amount of money microlenders have to lend went from around $120 million in 2008 to $340 million now,” Mills says. “They provide an enormous amount of technical assistance,” in addition to making loans. In my opinion, some of SBA’s programs should be reformed or eventually phased out. But its lending programs are an essential part of our economy. Because without SBA, small-business ownership would founder. Jerry Chautin is a volunteer SCORE business mentor, business and real estate columnist, blogger and SBA’s 2006 national ” Journalist of the Year ” award winner. He is a former entrepreneur, commercial mortgage banker, commercial real estate dealmaker and business lender. You can follow him at www.Twitter.com/JerryChautin Copyright © 2012 Jerry Chautin — All rights reserved Huffington Post readers are permitted to distribute with attribution to the author

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Robert Teitelman: Facebook, Instagram and the Disciplines of Mergers and Acquisitions

April 11, 2012

For years, it’s been a popular pastime to decry the use of mergers and acquisitions (M&A) as a colossal, ego-inflating, comp-expanding, waste-of-shareholder-money exercise. Most of these charges are either wildly exaggerated or absurdly simplistic. M&A is a necessary means for companies to grow, particularly in a world so driven by change. Failures are unavoidable — it’s not easy — although measuring what’s exactly a failure or a success given the complexities of large corporations is pretty difficult. But it’s very true that in overheating markets, when currency in the form of shares is highly inflated, lots of lousy, value-destroying deals can get hatched. This is particularly the case in intensely competitive technology industries, where the value creation of a given deal may lie not in the current organization but in a technique, a process, a piece of intellectual property still undergoing gestation: that is, in an opaque future. Thus the truism beloved of Warren Buffett: In M&A, there’s nothing riskier than tech deals. And then there’s Facebook and Instagram. Facebook is famously paying a cool billion dollars for the two-year-old app-based photo service. Instagram has 13 employees, 30 million users and no revenues. Facebook’s Mark Zuckerberg decided the social media giant absolutely had to have the startup, and took a year’s worth of cash flow and offered it up, about twice Instagram’s recently closed Series B venture round valuing the company at $500 million. There was no indication of other bidders, though everyone seems convinced that a Google or an Apple was lurking out there ready to make its own pre-emptive bid. In the developing meme about the Instagram deal, Zuckerberg didn’t have a choice: He had to strike. It was eat or be eaten. The sheer uncertainty of the social media landscape can’t tolerate hesitation; it demanded action. In California, venture capitalists, investment bankers and analysts can’t praise the deal highly enough (of course, they all profit from the resulting euphoria). Zuckerberg showed brilliance, they said, by recognizing Instagram’s potential and making the bid — despite the fact that this will further complicate Facebook’s enormous and much-hyped IPO in a month or so. That alone should cause one to pause along with the profound faith in a young CEO who hasn’t done much dealmaking. The issue here is not that Zuckerberg made a good decision or not. We’ll find out in time whether Instagram is a PayPal or a Skype (both eBay acquisitions: the former, as The New York Times lays out today , a big success, the latter, a big loser) or a Flickr (a Yahoo! bomb) or a Flip (which Cisco, a regular and expert user of M&A, shut down last year). Instagram most closely resembles some of the giant telecom deals from before the bubble burst in 2001, particularly in the size of the deal and the tiny number of employees. Billions of dollars in those deals were written off when the market collapsed. And let us not wallow in AOL-Time Warner again. No, the issue with these sorts of deals is how any investor can make a rational judgment about a) whether this deal makes strategic sense, or b) whether the price makes any sense at all. The two are related, of course. The view from Silicon Valley seems to be that Facebook had the money so why not spend it. Cutting-edge tech companies need to bet big and make “strategic deals,” that is, deals that can’t be be valued — the feeling is that Zuckerberg is a genius and if he doesn’t know what Facebook needs, then nobody does. Facebook isn’t even public so Zuckerberg can spend his money any way he wants and the reaction of users and the tech community seems to be so positive it can’t go wrong. Well, of course, it can go wrong. Crowds change their minds, and Instagram’s users in the Twittersphere don’t seem to want to be enveloped into Facebook world, though this is about as scientific as a finger in the breeze. Apps (and social media sites) come and go. Instagram has very few employees, all of whom are now loaded with dough. They may stay and develop the product — though no one seems to know how it’ll make money — or they may drift off to start new companies or go into politics or try venture capital. There seems to be few barriers to entry in the app world, and it’s hard to imagine that Instagram, as nifty as it is, is unassailable. Moreover, it’s unclear whether Instagram boasts the kind of network effects that makes PayPal, YouTube, Google, Microsoft, Apple and Facebook so formidable. Remarkably, few seem to be asking. Again, this could turn out to be a fabulous deal. But this is the kind of deal that gives M&A a bad name. The notion that Zuckerberg can spend “his” money any way he wants is not only wrong — it’s not really his — but about to become a real problem when public investors buy shares. (Substitute, say, Bank of America for Facebook and see how that works.) A billion dollars remains a big number, no matter the market cap. Moreover, it’s pretty clear, as the Financial Times ‘ Lex column pointed out Tuesday, that despite Zuckerberg’s statement that this is a one-off deal, what it really suggests — and that the tech crowd confirms in its comments — is that there could well be other Instagrams to be scooped up. Facebook is implicitly admitting that in a burgeoning and remarkably fluid app world, it can’t really go it alone: It needs to buy and buy and buy. Again, that’s not a shock (Google has been a busy buyer) — though Zuckerberg, prepping for public company status, should be more careful with statements about one-offs he may have to take back, and that will hurt him with investors once he goes public. Will this deal hurt Facebook if it never works out? Not really. It’s just a write-off, which Facebook can shrug off. By then there will be new hot apps, racking up millions of grazing users. But what this deal tells us most clearly is just how risky the Facebook enterprise is. For Zuckerberg to make a pre-emptive bid that’s twice the venture valuation from two weeks ago — and one a month before a public offering — suggests two things: either he’s undisciplined with all that money (were there negotiations or due diligence? what’s the breakdown of cash and shares?) or that the powerful network effects that keep users coming back to Facebook may not be as strong as a relatively obscure two-year-old startup’s app. Is this a sign of a bubble? I don’t believe that , unless you define bubble in a very narrow sense. Social media is clearly heating up, but for rational reasons: new devices, new services, new apps, an exploding audience. Instagram might look like an old dot-com — lots of users that may come or go, no viable revenue model — but Facebook does not: Like Google, it has found a way to make a lot of money. But you don’t have to have a full-blown bubble to lose your discipline as a buyer. You just need the sudden appearance of a lot of cash. Which is how M&A gets a bad name. Robert Teitelman is editor in chief of The Deal magazine.

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Sara Hanks: Now the Really Hard Work Begins

April 11, 2012

With the ink still drying on the just signed JOBS Act, we are witnessing a new phase in America’s economy that will democratize access to capital and change the landscape for investors. This new period will look like “the wild, wild West” now that the law is unleashing the power of the Internet to allow citizens to invest in startup businesses. That’s what’s known as crowdfunding, something previously limited to non-profit groups or businesses promising non-monetary returns. The technology community is positively giddy about this development, which will expand the pool of investors dramatically and reduce entrepreneurs’ dependence on established financial institutions for access to capital. Now, the really hard work begins as the Securities and Exchange Commission begins writing the rules governing crowdfunding. Just as websites that will facilitate crowdfunding (known as “portals”) build out their physical infrastructure to be prepared for when the rules are adopted, we must also work on building a moral infrastructure too. Yes, moral. That’s because this is an entirely new form of capital market, and the tech community and excited entrepreneurs should acknowledge that while we all have new opportunities, there are new responsibilities too. Everyone who worked hard to bring this revolution to life will now have to work even harder to make sure it is not rife with fraud. If that were to happen, it will die an early death. For crowdfunding to succeed, entrepreneurs, investors, and regulators will all have to cooperate. But the SEC has the hardest job of all the players (full disclosure, I worked at the SEC for four years). The SEC rightly has serious reservations about companies at the most risky stage of development pitching securities to the most vulnerable investors on the basis of minimal disclosure that no one has vetted. And if things go terribly wrong, who will be blamed? The SEC. So the crowdfunding industry has an obligation to work with the SEC to ensure that investors understand just what they are getting into. We also need to make a special effort to work with groups like AARP and faith organizations to protect older Americans and those who are most vulnerable to fraud and affinity scams. In return, the SEC should be amenable to Congressional wishes that it adopt crowdfunding rules in a timely manner and not impose additional costs and burdens on crowdfunding intermediaries. In particular, the SEC’s registration process for portals should be timed so that registration could coincide with final adoption of the crowdfunding rules 270 days from the time President Obama signed the legislation into law. The responsibility lies not just with the SEC, however. Funding portals will need some form of due diligence to weed out bad actors whose only business is ripping off investors. The company I founded, CrowdCheck, will employ securities attorneys to perform due diligence on startups to make sure they are who they say they are and help entrepreneurs navigate disclosures and filings. We will be part of the crowdfunding community that seeks to keep a level playing field for both investors and start-ups, and we hope other crowdfunding portals will take that responsibility seriously as well. Start-ups must feel responsible to their investors and to the community that has fought for crowdfunding because we believe it can work. Entrepreneurs need to transparently define what they are offering, and be very clear on those terms and how they will handle relationships with their “crowdholders.” And venture capitalists need to help the crowdfunding industry work out how best to help companies graduate from crowdfunding to venture capital funding. Since the Internet has already democratized media, shopping, and social networking, it was only a matter of time before it disrupted our old model of financial investing. My hope is that angel investors and venture capitalists will be creative and embrace this new marketplace as well. Most of all, citizen investors need to take a lesson from the playbook of professional investors and treat it seriously. Investors have a moral obligation to actually think before they invest. They can’t act as if they are buying lottery tickets. Get informed, watch out for fraud, and fund those who most deserve a shot at the American dream. Crowdfunding does embody some of the most important aspects of what makes America American: entrepreneurialism, passion, risk, and a desire to give everyone a chance to show what they can do, no matter what their background. But it only works if we apply other American virtues: hard-headed realism and intelligent investing.

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Vitaliy N. Katsenelson: Not Buying Best Buy

April 11, 2012

Best Buy’s CEO Brian Dunn did a courageous and proper thing for shareholders by resigning. He was not the right person to lead Best Buy into battle against online-only competitors that use Best Buy’s spacious and beautiful stores as the showroom for their products. To make things even worse, smartphones make comparison shopping so much easier nowadays, and structurally, Best Buy cannot have lower prices than its online competitors. Its stores also lack the breadth of selection of Amazon and they are at a permanent, competitive cost disadvantage. The new strategy Dunn announced a few weeks ago of closing big stores and opening a lot of smaller stores for mobile sales makes little sense. It is basically morphing Best Buy into a Radio Shack. It would be great if this strategy had worked for Radio Shack, but it didn’t. Radio Shack’s margins are collapsing, and that is why its stock is scratching as-far-as-my-chart-goes-back lows. I don’t know what the solution is for Best Buy. It must involve a much tighter collaboration of physical stores and its Internet presence — the stores need to be turned from a liability into an asset. Or maybe a logistical miracle that would allow Best Buy to deliver a much, much greater range of products (like, hundreds of thousands) to its customers on the day they order them. One thing is for certain: The new strategy will require thinking that cannot be delivered by somebody who spent 28 years in the Best Buy box. It requires a Netflix or Amazon-like strategy, where management was willing to bring forward (and flawlessly execute) a disruptive strategy that undermines its current cash cowing business. Amazon did this by bringing electronic readers to the masses, which undermined its core book business. Netflix did it with streaming. I am sure I’ll get plenty of dissenting emails about Netflix: “We don’t know if its model will be successful down the road,” etc. I’ll admit, I don’t know what Netflix’s streaming business is worth. But one thing is for certain, if it did not bring out streaming, it would have been dead in three to five years. Now it has a fighting chance to survive and maybe even create value for shareholders. I am a value investor, and so when I see a stock dangling at six times earnings I’d be lying if I told you that I did not have an inkling to seriously consider it for our portfolios. But Best Buy is not a retailer that missed a fad (stacked the shelves with wrong-color shirts, etc.) — those sorts of situations often present great buying opportunities, as the problems are easily fixed. Best Buy is a retailer that so far has missed a structural change that may make its business obsolete. It is only cheap if the “E” projected for next year will be there. So far the market is betting that it won’t, and I have no insight that encourages me to disagree with the market. Reminder: The VALUEx Vail conference is June 20-22 in Vail. This is not your typical conference — think of it as the TED of value investing. Though this is a not-for-profit event, I hope what you’ll learn from attending will generate profits for you. You can find out more about VALUEx Vail here . Vitaliy N. Katsenelson, CFA, is Chief Investment Officer at Investment Management Associates in Denver, Colo. He is the author of The Little Book of Sideways Markets (Wiley, December 2010). To receive Vitaliy’s future articles by email, click here or read his articles here . Investment Management Associates Inc. is a value investing firm based in Denver, Colorado. Its main focus is on growing and preserving wealth for private investors and institutions while adhering to a disciplined value investment process, as detailed in Vitaliy Katsenelson’s Active Value Investing (Wiley, 2007) book.

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Hulya Aksu: Women in the SoLoMo Boardrooms

April 11, 2012

Those of us who pay attention to marketing trends have all probably heard the term “SoLoMo” by now. Companies are encouraged to appeal to a hyper-connected and technologically savvy, new consumer base through the use of social, local and mobile applications. Seems like a no-brainer. What entrepreneur wouldn’t want to utilize sites like Facebook and take advantage of the ever-progressing and near-universal use of mobile technology to promote their businesses? The problem is that the SoLoMo is missing something that is in many respects also a no-brainer. The Wo(men)! There is more. Women are the savviest of savvy tech junkies, whether they know it or not. Consider the illuminating data compiled by Aileen Lee in her March 20, 2011, TechCrunch post, ” Why Women Rule the Internet .” In it she states, Comscore, Nielsen, MediaMetrix and Quantcast studies all show women are the driving force of the most important net trend of the decade: the social web. Comscore says women are the majority of users of social networking sites and spend 30 percent more time on these sites than men; mobile social network usage is 55 percent female according to Nielsen. Women are not only outnumbering men in social media usage, but they are spending more time on the social sites that they visit. The importance of women consumers to businesses is only amplified when we take into account that women also control family budgets — the purse strings. Lee also tackles this point: In e-commerce, female purchasing power is also pretty clear. Sites like Zappos, Groupon, Gilt Groupe, Etsy, Pinterest and Diapers are all driven by a majority of female customers. According to Gilt Groupe, women are 70 percent of the customer base and they drive 74 percent of revenue. And 77 percent of Groupon’s customers are female according to their site. These are profound numbers. Women are fueling the economy as we know it. So if we are such avid users and are socially connected, then why are we not among the founders and the leaders of the companies that serve us? I publish Modern DC Business Magazine and in our latest issue we covered the burgeoning technology startup scene in Washington D.C. This year, I was also invited to be a part of a private group of hand selected CEOs that represent the technology community of Washington D.C. While I did meet women who are leaders in their companies, our numbers in boardrooms sadly did not mirror our dominance on the web. I am unfortunately a minority as a publisher and technology startup founder. Recently, I was a part of a startup pitch contest at one of the most prestigious law firms in the D.C., and the room was filled with Angel investors and venture capitalists, along with 12 companies’ founders eager to score the cash they needed to catapult them into mainstream success. As I quietly sat in my chair waiting for the presentations to start, a man, who upon making eye contact with me exclaimed: “Wow, we don’t see too many women at these events!” How illuminating, I thought. But he was right. I was one of the few women present at the event. One of the women presenting entrepreneurs could not hide her excitement when she saw me in the audience. Yes, another one of us. At risk of sounding too dramatic, I couldn’t help but draw similarities to a bygone era when companies were encouraged to sell products to minorities but not hire them into leadership positions. You obviously can’t mandate companies to hire women into their executive teams or flick a switch and have women spontaneously establish technology companies. But things can be done now to ensure that future generations of women will have access to the highest levels of success in the boardrooms of America. Encouraging young girls to enter the sciences and entrepreneurship early could be a good start. But there needs to be an overall shift in the way we think about women in leadership before any reform can actually take root and be meaningful. Companies too, can make a difference, and can do so in the short term rather than waiting for a generational shift in priorities. SoLoMo companies can begin hiring smart and qualified women into leadership roles to help better communicate and connect to the women who keep these companies afloat. It is time to be an “uncool” company if your boardroom doesn’t represent your consumer’s demographic representation. That would be a good start, and who knows, it may perhaps serve as a smart strategy in other industries as well.

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Jodie Levin-Epstein: Is Marriage a Poverty-Buster?

April 11, 2012

” The Myth of the Disappearing Middle Class ” (Washington Post, March 29, 2012) by Brookings Institution Senior Fellow Ron Haskins asserts that the lack of opportunity in 21st century America is largely driven by the failure of individuals to behave responsibly, particularly the failure of parents to marry. “The Myth” demonstrates the mathematical attributes of marriage (it also raises a host of other issues reverberating in the blogosphere). The arithmetic seems hard to beat: two incomes must be better than one. Haskins, who steered welfare reform for House Republicans, cares about results ; here he is typically careful with his data and provides a lot of it: Brookings Institution calculations of census data for 2009, a deep recession year, show that adults who graduated from at least high school, had a job, and were both at least age 21 and married before having children had about a 2 percent chance of living in poverty and a better than 70 percent chance of making the middle class — defined as $65,000 or more in household income. People who did not meet any of these factors had a 77 percent chance of living in poverty and a 4 percent chance of making the middle class (or higher). Unless young Americans begin making better decisions, the nation’s problems with poverty and inequality will continue to grow. Marriage (before children), high school graduation, and working are all great goals shared by many across the political spectrum. The sequence makes sense. Policies and programs to achieve the goals are valuable. But Haskins’ view scrambles together the data on good outcomes with the idea that gumption can move anyone into a higher-income cohort. The numbers simply celebrate how those who have a foot on the ladder can move up it. Haskins’ analysis considers the importance of missing rings but is essentially silent on the role of missing rungs. The question really ought to be what do we do when individual responsibility is no match for the economic forces that can envelop people as they move toward the desired goals? To note a few: Graduation from high school is particularly challenging for students enrolled in the nation’s dysfunctional “drop out factories,” which, by definition, graduate fewer than 60 percent of their students; while the good news is that the number of such schools declined 23 percent between 2002-2010, about 2 million students are still trapped in these failed institutions. Graduation from high school, while far better than dropping out, too often fails to adequately help job seekers. In March 2012, adults age 25 and over who had high school degrees faced an unemployment rate of 8 percent. Employment for youth is generally precarious, but within communities of color unemployment is a crisis : among those looking for work, youth unemployment (ages 16-24) stood at 16.5 percent in February 2012, essentially double the overall rate of 8.3 percent; black youth employment is more than triple the overall rate at 26 percent (large differences by race appear even among college graduates ; unemployment for white college grads in 2010 was 4.2 percent, while for African Americans it was 7.3 percent). Providing a child quality early care is out of reach for too many families: only one in six children federally-eligible for child care assistance receives any help. In 22 states, families seeking child care assistance face waiting lists or frozen intake. But is marriage invariably a poverty-buster? It turns out that one plus one does not always add up to two stable incomes. Particularly for those with precarious incomes the decision to get hitched includes a special calculation that adds in an assessment of economic instability and liability. As Stephanie Coontz , an expert on marriage observes, a woman “will certainly end up better off financially if she marries a man who is able to keep a job and is willing to share his resources. But she also has to weigh the very real possibility that he will become an economic liability if he loses his job or misuses the couple’s resources.” Income instability comes in many forms, not just a worry about job loss. Research that tracked young men ages 18 to 32 has shown that “changing jobs and having a large number of jobs end up lowering wage rates and reducing marriage rates .” Marriage may be more readily achieved by those who can woo with promises of economic stability. As reported in ” Marriage is for the Rich “, the rates of marriage are dramatically higher at higher incomes (even while rates are declining at all incomes). For low-wage workers, the math of marriage in which one plus one adds up and becomes two incomes may be true only infrequently over time. That creates instability. And while all workers may risk a job or earnings loss, there may be a low-income tipping point where instability feels boundless, not just some blip from which to bounce back. For some low-income couples, a future that anticipates economic liability makes it tough to tie the knot. It seems the poor and the rich share a crush on stability. So, when Haskins concludes “Yes, the nation needs its safety net, but improvements in personal responsibility would have a greater and more lasting impact on poverty and opportunity,” his assertion begets a question for all of us. Do you think factors such as limited educational opportunity and jobs that are inherently precarious (e.g. hours that are unpredictable) make it more difficult to succeed even for those who are trying to reach each benchmark, including marriage? I do.

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Ian Yolles: Contributing to the Greater Good by Being Selfish

April 10, 2012

“Doing well by doing good.” The phrase has been overused, but fortunately it is no longer a novel concept in business. Employees, shareholders, and customers are increasingly expecting companies to focus on their social and environmental performance hand-in-hand with their financial performance. In fact, recent studies by companies such as Edelman Financial Group and WPP indicate that when choosing between brands of equal quality and price, social purpose ranks as the number-one deciding factor for global consumers’ purchases, above design, innovation, and brand loyalty considerations, and 75 percent of U.S. consumers want to buy from green brands. Failure to listen, given the means in the digital age to stand in judgment of brands, will result in business being withdrawn. The reverse is also true. Consumers will reward brands for their behavior with passionate advocacy enabled by the same social media tools. At its core, the phrase “doing well by doing good” means that growth, revenue, and profit should be the byproduct of making a positive difference for multiple stakeholders, not the ultimate goal. This approach becomes more interesting when applied to the most microcosmic “business unit” possible: the individual consumer. If we could imbue this philosophy into our culture — at an individual level — collectively we would catalyze a broad positive impact previously thought unattainable. Businesses that embrace this philosophy focus on the connections between creating societal and economic value and are motivated by generating benefit for multiple and diverse stakeholders — for their employees, supply chain partners, customers, investors, and the health of their brand. Many individual consumers are similarly motivated. Our choices are heavily influenced by self-interest; we want to have enough resources to support ourselves and be able to provide for and protect our families, while at the same time wanting to leave a positive mark on our communities and even the world. The ROI of “doing good” for businesses is pretty easy to understand: improvements to the bottom line, increased customer satisfaction, and often a more visible, measurable environmental impact due to the larger scale. The return on making sustainable lifestyle changes at the individual level, however, isn’t always as clear or pronounced. Given the magnitude of our environmental issues, we cannot always “see” the impact of our behavior. To get a critical mass of consumers to change their behavior, you have to make the return relatable and valuable on a personal level. So which are the most effective motivators of behavior change? I believe there are three key pillars: Show me the money: If certain behavior changes can influence one’s personal financial position and that of one’s community, it forges a personal connection and increases the chance that the behavior is maintained over time. The consumer becomes invested, if you will. The opportunity to save or even make money taps into every person’s desire to better provide for themselves and their family. Get social: We now live in a world of hyper transparency and constant connectivity; people don’t hesitate to head online to seek out information around sustainability efforts, share their own thoughts, and promote the positive steps they are taking to live more sustainably. This public sharing contributes to our definition of our sense of self and provides social status and recognition, which adds an additional motivational factor. Incorporating elements of competition and personal reaffirmation into our efforts to inspire a mass shift towards more sustainable choices and behaviors is an effective way to use social currency as a catalyst for positive change. Make it measurable: The global environmental issues that confront us are so large, complex, and interconnected that they seem impersonal and impossible to do anything about at the individual level. By making the actions you are requesting people to take measurable and trackable, you can show individuals the tangible impact that their actions have in the context of the collective action of others. If you can show them how their actions are contributing positively to their own community as well as the natural environment, then you can catalyze social activism and commitment. If we’re going to navigate our way toward a sustainable future, we’re going to have to think and behave differently. It’s not about doing good for the sake of doing good. It’s really about self-interest. By engraining this into both business and consumer behavior, we can more effectively move society toward a sustainable future, and, in the process, help people understand the connection between the environment, economics, and the well-being of our communities.

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Richard Barrington: Are Money Market Rates Poised for a Comeback?

April 10, 2012

Is your money market account stuck in a rut? If so, you’re not alone. Money market rates have been locked into a long and steady descent for a few years now, resulting in average money market rates of just 0.14 percent as of the end of March. Finally, though, there are signs that this could change in the months ahead. Treasury bond yields trended upward in March, in reaction to a streak of positive economic news. This could ultimately start to affect money market rates, but there are still some obstacles to overcome. Higher Treasury Bond Yields After spending most of January and February below 2 percent , 10-year Treasury bond yields broke through on the upside in March, reaching a much-higher 2.3 percent before falling back a little. As this is written, they are still holding onto ground in a range around 2.2 percent. If they don’t slip back again, this would represent the first sustained upward progress for bond yields since late 2010. This is largely in reaction to positive economic news on the domestic front — in particular, a string of encouraging employment reports. Adding jobs has the potential to generate continuing economic momentum, which would eventually create an environment that could support higher interest rates. The Impact of Inflation Unfortunately, the rise in bond yields may not be entirely due to positive economic developments. The most recent Consumer Price Index report showed a 0.4 percent increase in February, which, if continued, would project to an inflation rate of nearly 5 percent a year. So far, this is a one-time uptick in inflation, and the rate for the last 12 months remains a moderate 2.9 percent. However, the high inflation reading for February is troubling in the context of rising oil prices , which have a way of spreading inflation to other segments of the economy. Higher inflation could push interest rates higher without really helping money market accounts. The Fed, and Other Obstacles to Higher Rates Besides inflation, there are a few other obstacles for money market accounts. Specifically, here are three things that could derail money market accounts on the way to higher interest rates: 1. Federal Reserve policy. The Federal Reserve has somewhat painted itself into a corner with a multi-year commitment to low interest rates. Money market rates can rise without the Fed, but it will be more difficult. 2. A European recession. For some countries in Europe, the question isn’t whether they will go into recession, but how deep it will be. The resulting reduction in global demand will hold interest rates back. 3. Slower growth in China. When it comes to China , the issue isn’t one of recession, but simply of a more moderate rate of growth. However, the effect is the same as with the prospect of recession in Europe — an incremental drop in world demand growth. When balanced against signs of job growth in the U.S., it is difficult to tell from day-to-day which of these factors might be gaining the upper hand. However, bond market yields provide a continuous assessment of economic developments, and based on recent moves, those yields seem ready to break out of their low-rate rut. The next question is, how soon will money market accounts follow? The original article can be found at Money-Rates.com : ” Are money market rates poised for a comeback? ”

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Russell C. Smith: Reinventing Capitalism: Strange Currencies in the Marketplace

April 10, 2012

As a species, human beings have excelled at hedonistic adaptation. It’s one of the main reasons we’ve become the dominant species on the planet, and have survived over the past 12,000 years, when many other animals that roamed the Earth far longer didn’t accomplish anything resembling modern civilization. Dinosaurs had millions of years to evolve, but they never got around to developing a Gap Outlet, much less online shopping. Adaptation, altering behavior on a reward/punishment basis, and always staying ahead of the competition — enabled humanity to create civilization and all the institutions, organizations, and social structures that evolved along with us. When coins and paper currency overtook the barter system, societal structures adapted and those with the gold wanted to hold onto the gold. Modern capitalism and economic theories have only been around for a brief time in the history of humanity. And when it comes to economics, most of what’s been written, argued about, and speculated upon was done so before the Internet Age. As the Internet continues to expand and morph into its next iteration, helping to reinvent and demolish one industry after another, one can easily imagine the Internet soon altering huge segments of how capitalism works in the digital age. It’s safe to say there’s been no other time in the history of the world when so much information on peoples’ purchasing habits has been gathered, stored, catalogued, and most importantly… used. Impulse buying is done quickly, with a swipe of a credit or debit card, without much thought as to how a person’s overall buying timeline connects back to every other purchase ever made. Buying everything on credit or debit is now the norm in our society, and people who still use cash on a daily basis will soon become an anachronism, similar to those odd individuals who don’t always carry a mobile communication device. If the constant tracking of one’s buying habits already has a decades-long history, and everyone in society is now expected to be on-call and constantly tethered to a mobile phone, how does this consumer surveillance and over-connectedness play out in the long run? One of the easiest ways a mega-corporation can change your behavior is to offer reward points to you for every purchase you make. And with smart phone and microchips becoming more prevalent in our daily lives, don’t be surprised if you’ll soon be able to accumulate points automatically, even in your sleep. You already receive points for special deals, so why not for regular daily purchases — having your morning Starbucks Latte, drinking a Coke at lunch, or filling up at the same Shell station every afternoon. You’ll get more and more points for buying, choosing, picking anything, anytime, anywhere. You’ll become a walking preferred card for hundreds of global brand that will embed themselves into your behavior. And eventually, you may receive real rewards for your loyalty, not just rewards the corporation chooses for you. Eventually a person could accumulate far too many points to spend in a lifetime, similar to the way some frequent flyers have racked up so many miles they just don’t have enough time to use them all. Internet sites specializing in point trading could easily become the next big online business. Individuals could sign up and trade reward points with others, which would go toward buying tangible items on eBay or Swap.com. In the near future, it’s easy to imagine companies like Facebook or Google creating their own brand of currency. A far fetched idea? Not really. Just ask anybody who’s spent money on Second Life currency so they could buy virtual products or experiences. In a few years you might be buying Starbucks coffee with Star Bucks. It’s often be said by politicians that small businesses are the driving force of a healthy economy, and right now further growth of small businesses are what will create a more sustainable economy. Small businesses have struggled through these hard times, and adapted to the harsh economic realities. The complete failure of trickle-down economics has been apparent for some time, and new methods of achieving successes are tried daily, in every city in the country, online, and in every possible way. One proven method has been for small communities to invent their own currency exchange. In Traverse City, Michigan, the community developed a local currency known as Bay Bucks in 2006, and it’s billed as a the “homegrown local currency.” And Ithaca, New York has been using Ithaca Hours as a form of local small business currency since 1991. In the pioneering, can-do spirit, their website proclaims Ithaca Hours “promotes local economic strength and community self-reliance.” More than one economic seismic shift could happen over the next several decades. Finding inventive ways to get off shaky ground and move toward a more a sustainable economic climate is certainly on everyone’s mind. If capitalism has proven anything, it’s that it serves our hedonistic sensibilities well — providing citizens with everything they desire, all the time, if only they can pay for it. When a majority of the population agrees it’s finally time to reinvent capitalism so that it works for the majority and not just the ultra-wealthy, the super rich may decide to openly condemn the same system they’ve championed for so long. Witness the voices of mega-rich capitalists who realized it was time to promote a better future and change the world. Bill Gates aimed higher, began a charitable foundation, and decided to use a portion of his sizable wealth to rid the world of Malaria, and Warren Buffett has suggested to other billionaires they should set an example by giving more, or at the very least be taxed appropriately to their wealth, while also using their riches to transform the state of the world. After all, the one formidable task huge amounts of capital can be used for is to improve lives on a global scale.

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Mike Lux: Rick Warren’s Dependency

April 10, 2012

Rick Warren’s recent comments on the Bible and dependency show him to be profoundly out of touch with the scripture he claims to hold sacred, as well as lacking a basic understanding of government programs related to poor people. Here’s the quote I am referring to: Well certainly the Bible says we are to care about the poor… But there’s a fundamental question on the meaning of “fairness.” Does fairness mean everybody makes the same amount of money? Or does fairness mean everybody gets the opportunity to make the same amount of money? I do not believe in wealth redistribution, I believe in wealth creation. The only way to get people out of poverty is J-O-B-S. Create jobs. To create wealth, not to subsidize wealth. When you subsidize people, you create the dependency. You — you rob them of dignity. Warren here is clearly showing his own dependency on right-wing mythology. First of all, no one I know in Democratic or progressive politics (and I do know a lot of folks) advocates that everyone has to make the same amount of money — that is the ultimate mythological conservative straw man. (The only writer I know that actually advocates for that is the author of the biblical Book of Acts : “all who shared the faith owned everything in common; they sold their goods and possessions and distributed the proceeds among themselves according to what each one needed.”) In fact, the vast majority of government assistance (over 90 percent, in fact) for lower-income people consist of Social Security, Medicare, and Medicaid-related nursing home coverage for senior citizens; school lunch, Head Start, pre-natal, early childhood, public education money, and other programs for young children; student loan and job training programs for students and laid-off workers looking for jobs; and SSI checks and other programs for those too disabled to work. Then there are government jobs themselves — teachers, cops and firefighters, road construction workers, etc, which Warren ignores completely. So unless Warren is expecting 85 and 5 year olds, or maybe desperately ill people, to work for their bread, this dependency thing is a load of bunk. Finally, it is important to note that some government benefits also go to people working full or part time whose wages are so low they are still below or close to the poverty line. Maybe Pastor Warren knows these facts, maybe he doesn’t, but when you have his platform in life as a person so many people listen to, it is morally important for you to check out your facts first instead of being dependent on partisan and mean-spirited mythology. Beyond his bad facts and ugly mythology about government spending to help low-income folks survive and maybe gain a toehold into the middle class is Warren’s apparent lack of any knowledge about what the Bible he claims to revere says about helping the poor. Let me give the good pastor some examples of what I mean. I don’t think Pastor Warren has ever read the Book of Isaiah, for example. You don’t have to read far: in the very first chapter, Isaiah calls on the rulers (yes, the government, not just individuals) of Israel to hear what God tells them: You multiply your prayers, I shall not be listening. Your hands are covered in blood, wash, make yourselves clean. Take your wrong-doing out of my sight. Cease doing evil. Learn to do good, search for justice, discipline the violent, be just to the orphan, plead for the widow. A little later, in chapter 10, Isaiah is at it again, attacking the government of Israel but not for creating dependency: Woe to those who enact unjust decrees, Who compose oppressive legislation to deny justice to the weak and to cheat the poorest of my people of fair judgment, To make widows their prey and rob the orphan… To whom will you run for help, and where will you leave your riches? Isaiah goes on and on like this, for chapters and chapters. But maybe you haven’t read Isaiah, Pastor, or perhaps you just don’t like it very well since it teaches such pro-dependency lessons. Maybe we should turn to some other prophets you might like better. Oh, wait. Jeremiah says to the rulers of Israel “the very skirts of your robe are stained with the blood of the poor.” Lamentations says about Israel, “All her people are groaning, looking for something to eat.” Ezekiel speaks of the rulers of Israel this way: “You have failed to make your weak sheep strong, or to care for the sick ones, or bandage the injured ones.” Okay, maybe you never liked reading the prophets. What about Psalms; they are so comforting. Oh, wait, maybe not, or at least not to conservatives. There’s Psalms 9-10, for example, talking about the wicked ruler who “watches intently for the downtrodden, lurking unseen like a lion in his lair, lurking to pounce on the poor.” Or Psalms 22, which proclaims that God “has not despised nor disregarded the poverty of the poor, has not turned away his face, but has listened to his cries for help… The poor will eat and be fulfilled.” Even if it creates dependency, I guess. And Pastor, sorry, it doesn’t get any better for you on this dependency notion you have in your New Testament. Jesus’ mother Mary in Luke said her son would “pull princes from their thrones and raise high the lowly” and “fill the starving with good things, sending the rich empty away.” She didn’t mention whether that would cause dependency, but I tend to doubt she was too worried about it. In Jesus’ first sermon in Luke he called for a year where the rich would be forced to forgive their debts to the poor. In Matthew 14, Jesus’ disciples told him he should send the crowds away so they could buy food for themselves, and Jesus replied “there is no need for them to go, give them something eat yourselves.” In Matthew 19, he told a rich man that he should go and sell all his possessions (in spite of the fact he was a job creator!) and give all the money to the poor.” And in Matthew 25:31-46, Jesus said that God would gather all the nations (yes, the nations, not just individuals, something conveniently overlooked by conservatives) to judge who had given food to the hungry, water to the thirsty, clothes to those lacking them, who had welcomed strangers and helped prisoners and the sick. All this must sound a lot like promoting dependency to Warren. And by the way, whether poor people are helped by government or individual charity, wouldn’t it be promoting dependency all the same according to conservatives? (Right-wing hero Ayn Rand sure thought so.) Now you may think I’m being selective with these particular quotes, that these are the few times in the Bible where helping the poor are mentioned. Sorry, Pastor Warren; take a look for yourself, go ahead and read the entire thing. The poor are mentioned more than 2,000 separate times in the Bible, well over a hundred by Jesus himself — and unless I missed something somewhere, not one time is it to castigate them for their laziness or fret that they are growing too dependent on help. I am consistently stirred to anger by these false prophets of Christianity. Pastor Warren, you have every right to have whatever religious and political beliefs you want to have, but don’t proclaim you are preaching the Christian Bible and then reject most of the things the people you are supposedly following said.

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Richard Barrington: Retirements Survey Finds Many Tripping Over Financial Hurdles

April 10, 2012

The 2012 EBRI Retirement Confidence Survey is out, and the results reflect the importance of continuing to strive for new goals as you move through life. The EBRI is the Employee Benefit Research Institute, and their long-standing annual survey of the confidence that American workers have in their financial prospects for retirement is a good benchmark for both economic conditions and the state of U.S. retirement savings . As you might imagine, retirement confidence has taken a beating in recent years. One of the root causes suggested by the survey results is that the difficulty of meeting short-term goals might be so great that people never get around to focusing on long-term goals. A look at some of the issues covered by the EBRI survey provides some insight into the sequence of financial hurdles people face. Progressing through financial goals There are many subjects covered by the EBRI survey, but one way to think about the results is to view topics in the order people naturally face them as they move through life: Meeting day-to-day needs. The first order of business is getting a job; this may be fundamental to meeting your financial goals, but it is by no means easy. 42 percent of survey respondents cited job insecurity as the most pressing financial issue facing Americans today. Of course, until you can move beyond worrying about day-to-day needs, you have little hope of preparing for long-term ones. Getting out of debt. People often borrow money to get by, so then the challenge becomes getting out of debt. 62 percent of survey respondents cited debt as being a problem to some extent, with 20 percent calling it a major problem. Debt can be a huge barrier to retirement saving: While 67 percent of workers with no debt problem said they were either very or somewhat confident in their retirement finances, only 22 percent of those with a major debt problem expressed the same levels of confidence. Saving for retirement. With employment and debt being such hurdles, it’s no surprise that many Americans haven’t adequately addressed retirement saving. Only 52 percent of worker respondents were very or somewhat confident in having enough money to last through retirement. In 2007, this figure was 70 percent. Sustaining wealth in retirement. The challenge doesn’t end with retirement. Between stock market setbacks and falling rates on savings accounts , making money last through retirement has become tougher than people expected. The percentage of retirees who are very or somewhat confident in having enough money to live comfortably through retirement is now 63 percent, down from 79 percent in 2007. The difficulty of meeting each of these goals, as reflected by the low level of confidence people currently have in each case, reinforces the importance of working toward these goals throughout your adult life. A sequence of goals will help you keep moving forward, and what the survey suggests is that if you aren’t moving forward, you will quickly find yourself moving backward. The original article can be found at Money-Rates.com : ” Retirements survey finds many tripping over financial hurdles ”

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Christina Gagnier: Facebook’s Instagram Play Could Be Unpopular With Users and Their Privacy

April 10, 2012

It would have been hard to miss the deal read about around the Internet yesterday: Facebook’s buying Instagram for $1 billion dollars. The comments around the deal have largely centered around the valuation amount, arguably inflated, and the pending doom of the often talked about “bubble” in Silicon Valley. Yet, there is another undercurrent that is likely far more important to the two parties in the deal: the prospective recalcitrance of Instagram users to continue their use of the photo social network now that it is linked to Facebook. The user conversation around the deal demonstrated several concerns, some relating to the fact that the platform would now suddenly become less “cool,” and others relating to the simple fact that they liked Instagram because it was just photos, not anything else. Likely the biggest criticism was that many Instagram users signed up for Instagram because they just wanted to use Instagram. While some users like to integrate all of their social tools together, others like to keep their web experience siloed. Many Instagram users loved the application for its simplicity; in the words of one user, “It made everyone feel like a professional photographer.” When talking to people casually about it at a concert I attended last night (certainly not hard research), many people said they were likely going to stop using it. One new user, who had just downloaded the Instagram application, said now he was not going to use it since it was owned by Facebook. Even if people are not ardent privacy advocates or display everyday concerns over such issues, they know Facebook does not play well in the sandbox with its users. Some people don’t want to share everything they do on every single platform. The reason why Instagram was so popular was its simplicity and that it allowed users to make choices where their photos would go. While we have yet to see operationally how this deal with play out, we may see more quickly in the court of public opinion what happens. For now, if users are unhappy with this recent move, maybe it’s time to try Hipstamatic?

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Susan Harrow: How Do I Smell? Use Twitter to Survey Customer Wants

April 10, 2012

When she decided to develop a perfume, Kim Kardashian didn’t guess what her almost eight-million Twitter followers wanted; she asked them. Her first scent, named after the “star” herself, was created after Kardashian asked her devoted Twitter followers what they wanted from a fragrance. The response? Hints of honeysuckle and sensual tonka beans. Tonka beans? Who knew? They are purported to be so intoxicating that they may be declared illegal. While I agree that to poll your Twitter followers before you create a new product is a great strategy, I also know that I don’t want to smell like dessert when I go out for the evening. But I may be alone on this. “I wanted something rich and creamy and sexy, but still youthful,” Kardashian said . Good enough to eat perhaps… Sister Kourtney Kardashian called Twitter “the best decision-maker,” disclosing that she Tweets everything from potential perfume bottle designs for the sisters’ signature fragrance, to outfit decisions, and even, absurd as this sounds, asking fans what she should have for dinner. Hey, ya’ll, what should I have for dinner? Weigh in on Twitter , will you? I may create a product from your suggestions. Susan Harrow is the author of “Sell Yourself Without Selling Your Soul.” She runs a Media Consultancy where she helps everyone from Fortune 500 CEOs to celebrity chefs, entrepreneurs to authors grow their business through media coaching and the power of PR. For more information please contact Susan .

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Edward Wytkind: Richard Branson Is Quite Busy Not Owning Virgin America

April 10, 2012

In 2005, British billionaire Richard Branson came to America to launch a new airline for Americans, owned by Americans and controlled by Americans. At least that was the story he was selling. First, you have to understand that under current U.S. law, foreign interests cannot own more than 25 percent of the voting stock or 49 percent of the equity in a U.S. carrier. To further ensure this is crystal clear, the law requires the “actual control” of the airline to be in the hands of U.S. citizens. This is no small matter not only for national security purposes, but also because of its impact on U.S. airlines, safety, jobs and the collective bargaining process. But Sir Richard doesn’t get involved in many things he can’t control, so you can imagine our skepticism at the outset. You think he would have let someone else control the introduction of his self-proclaimed ‘ sexiest spaceship ever ‘–Virgin Galactic? So I have a question: If Virgin America is independent of U.K.-based Virgin Group, why is the group’s founder talking to Virgin America’s flight attendants about the evils of unionizing? Hold that thought, I’ll get back to the video-taped evidence in a moment. Since the end of 2005 when Virgin America first filed an application with the U.S. Department of Transportation to operate as a U.S airline, the Transportation Trades Department, AFL-CIO and others argued that Virgin America is controlled by foreign interests, which is counter to U.S. law. But time and time again founder and Chairman of the Virgin Group Richard Branson, who is no stranger to arguing against U.S. ownership laws and regulations, was able to convince U.S. authorities that he was not controlling the airline and was, therefore, compliant with our laws. Eventually our regulators agreed. Therefore, we find ourselves in a place where — more than four years since it actually began flying in the fall of 2007 — Virgin America is vying for highly sought-after slots at Washington Reagan National Airport. And while it battles it out for these slots with its competitors, its compliance with foreign ownership and control laws must again be scrutinized. This time, it is not about speculation that at some point in the future Mr. Branson might play a role in controlling the operations of the airline. This time, there is a video produced by the Virgin Group and shown to Virgin America employees of the great founder taking the time out of his busy schedule (what, no space launch that day?) to speak to them about what is supposed to be their unfettered right to vote on unionization without employer interference. In the video, he tells flight attendants of the consequences to the company of joining a union after the Transport Workers Union filed to represent these employees. Branson asks the employees of Virgin America, a carrier in which he has sworn no control in, to think about what is at stake for the company if the TWU is elected. He then urges them to protect their “independent spirit” by rejecting the TWU because the union will take their “uniqueness away.” Actually, what is unique about these employees is that they have to sit at the table, on their own, and negotiate with a billionaire over wages and benefits without a union voice. That’s a “uniqueness” I wouldn’t cling to. In telling Virgin America employees to “say no to the old way of flying and say no to the TWU,” Sir Richard couldn’t have been clearer — he is at the helm making sure that his (sorry, I meant Virgin America’s) employees remain non-union. Branson is taking Virgin America down this path, an airline he allegedly doesn’t control. Odd. And now Branson’s airline has applied for two nonstop flights to San Francisco International from Reagan National. These slots are coveted by actual American-owned and controlled airlines because there are a limited number to go around from this popular stop near the nation’s Capital. It would appear that Mr. Branson is fond of making videos these days. In a Kobe Bryant ad for Nike, which features Branson and his business success, the video ends with this message: “Attack Fast. Attack Strong. Learn the System.” It looks as though Mr. Branson and Virgin America, fully in compliance with our foreign control laws I’m sure, have learned our system well, and how to beat it. Regulators take notice: Sir Richard is quite busy not controlling Virgin America.

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Chris Weigant: Occupy’s Next Crossroads

April 10, 2012

The movement that Occupy Wall Street began is at another crossroads, it seems. It isn’t the first such fork in the road, and it certainly won’t be the last. What happens next is anyone’s guess. Is the Occupy movement poised for a comeback? Or is it about to be co-opted altogether? Can both, in fact, happen simultaneously, and would that be a good thing or not? This week kicks off an effort known as “The 99 Percent Spring” by an impressive coalition of groups with solid lefty credentials (labor, Van Jones, MoveOn.org, etc.). The goal is to hold a series of “teach-ins” that will train 100,000 people (half in person, half online) in nonviolent protest techniques. The Huffington Post reports on the details: The organizing is not aimed at any one event, rally or issue and the effect will be unpredictable. Training tens of thousands of people in arrest techniques to make a political point tends to inspire people to put that training to use. Each training session lasts a full day and covers a lot of ground. The curriculum is broken into three basic areas: explaining broader economic issues such as income inequality and attacks on workers’ rights, encouraging participants to tell their stories of economic injustice and hardship, and teaching the nuts-and-bolts of nonviolent direct action. If the phrase didn’t have such militaristic overtones, I would call it “boot camp for protesting.” Lefties have decided that the Occupiers were onto something and are looking to expand and build on what Occupy Wall Street set in motion last fall. The 99 Percent Spring folks aren’t organizing any one protest over any one particular issue; they are merely training people how to go about doing so for the upcoming election year. They’ve even got some Occupiers teaching their seminars. But, as with all things Occupy, some purists are already charging that it’s all an attempt to “co-opt” them, their message, and their movement. The Occupy movement is planning a very concrete (and ambitious) event for May 1: a nationwide “general strike.” They fear outside groups will dilute their message and taint them by association, somehow. This is, to a large extent, silly. Here’s a quick question: is the Occupy movement inclusive or exclusive? As with all things Occupy, there is no one clear answer; it is both at the same time, in a way. The movement is inclusive, as evidenced by the fact that to join, all you had to do was show up. Anyone could be part of the “General Assembly,” if physically present when the group met. But Occupy also has a creeping sense of exclusivity to it, as well, mostly in fear of the dreaded fate of being “co-opted” by others (up to and including their biggest worry: being co-opted by the Democratic Party). “Being co-opted” is defined differently depending on whom you talk to, but it generally means some outside group would somehow hijack the Occupiers’ pure message and bend it to their own aims. At the same time, the Occupiers are attempting to encourage (one might say “co-opt” if one were being ironic) other groups to support their cause in a visible way — labor groups, especially. The re-launch of Occupy Wall Street (Occupy 2.0?) is slated for May Day, and the Occupiers would love it if they brought the country to its knees for a day as workers everywhere walked off their job in solidarity. That’s really the only way a general strike could work. The May Day plans and the 99 Percent Spring don’t seem to be mutually exclusive but complementary. If the folks who attend the 99 Percent Spring turn out in force on May Day in cities across the country in support of the Occupy protest, how can anyone involved in either see that as a bad thing, especially if the 99 Percenters teach others what they’ve learned, and so present an image to the media of peaceful, nonviolent protest techniques that are time-tested and proven? Any successful movement needs both dreamers and doers. If composed of mere dreamers, nothing ever gets accomplished. If composed of mere doers, things may get accomplished, but without any real direction toward any goal. A prudent mix of both is required not only to move but to move forward toward something. This requires both a lot of people out in the streets and the discipline that people trained in the art of protest and street theater can bring. The Occupiers should be proud of what they’ve achieved already: the change in the conversation in Washington and on the nation’s airwaves. The phrase “99 percent” is used in the discussion now, and the ideas behind that simple phrase have gotten enormously more attention than they did before anyone set foot in Zuccotti Park. That is not easy to do in American these days. Compare the coverage pre-Occupy and post-Occupy in the media on the subject of jobs, for instance. Pre-Occupy, the entire conversation was about slashing the federal budget. Post-Occupy, the conversation has at least shifted somewhat toward the economic plight of millions of Americans. It’s hard to remember now, but pre-Occupy this was deemed “old news” or “not news” by national news directors and editors, and now it will likely be a centerpiece of the upcoming presidential campaign. That is a big victory, even if a bit intangible. The problem of the Occupy movement has always been defining a path forward. Seeing the utopia at the end of the rainbow is always easier than trying to figure out how to get there, to put it another way. Asking Occupiers what they would change about the system brought forth many admirable goals: ending the power of Big Banking, getting rid of lobbying and money in politics, solving the student loan crisis, and many other worthy ideas. But when asked how to achieve those goals, many Occupiers shied away from working within the existing political system altogether, seeing it as so corrupted and ineffectual as to not be worth the effort. But how else is any of this stuff supposed to happen? Overturning the Citizens United decision, just to pick one, would likely (at this point) require an amendment to the Constitution. This would be an enormous achievement, and a fundamental realignment of money in politics, but it would also require an almost Herculean effort to pass. That effort would have to take place not only on the national political level (Congress) but also in statehouses across the land (ratification), and it would take years and years of very hard work to accomplish. That’s not to say it isn’t worth such an effort, but absent such effort it is never going to happen . All movements face this ultimate dilemma: work within the system, or work to create an entirely new system. But creating an entirely new “paradigm” would be even harder than passing an amendment to kill the Citizens United decision — and getting large groups of people to agree on what that new system would be seems (at this point) to be an almost impossible task for the Occupiers. The Occupiers need to ask themselves some very bedrock questions about what it is they are trying to do, and how exactly they plan to get there. Here is how I would compose such a self-examination: Do you want to get something done? Or do you just want to get on television? Do you want to take steps, however small, toward your ultimate goals? Or do you just want to make a certain point, and make it as loudly as you can? Can you accept the fact that in order to achieve any change at all, it will likely have to come from the same corrupt system you are protesting? Or will you remain pure and not change anything in any concrete way? Will you welcome fellow travelers along the path you foresee, even those who might have their own ideas about what to push for next, or will you exclude any group that doesn’t share your ideological purity? What is the point of your movement, and how do you see yourselves getting there? These are important questions, and I am quite obviously biased in the way I have framed them. I do believe that “the system” needs a good grasp by the collar and a healthy shakeup every now and again, but I also believe that ending “the system” and building a new one from scratch on better, more utopian lines is simply not going to take place in my lifetime. Call me a cynic if you must, but there it is. Working within a corrupt system to achieve even incremental change is hard: it takes a long time, and it takes a monumental amount of effort (and some luck). It is not easy. The only easy thing is getting frustrated by the glacial pace of change and giving up on “the system” altogether. The other thing change requires is numbers. Taking over a park — even in every city in America — is one thing. But getting millions of Americans who likely largely agree with your basic goals to influence politicians is another. Achieving even that is going to require some helping hands, which is why the 99 Percent Spring and the Occupy Wall Street folks would do far better to march forward hand-in-hand than worry too much about being “co-opted” or about anyone’s ideological purity.   Chris Weigant blogs at: Follow Chris on Twitter: @ChrisWeigant Become a fan of Chris on The Huffington Post  

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Dr Layla McCay: Wanted: Professional Soulmate

April 9, 2012

I had never heard of the term “professional soulmate.” But it turns out that while I was spending my formative years coming up with brilliant ideas to change the world, I should actually have been screening my fellow students for their potential as my future business partners. That’s what the founders of “farm-to-table” company Sweetgreen did, while they were students at Georgetown University. Recently, they told us at TEDxDupont Circle , a screening party that streamed the TEDxChange conference from Berlin (with “local voices” afterward), that as an entrepreneurial society, we put too much emphasis on the big idea. They argued that you could have all the best ideas in the world, but it takes a synergistic partnership to make it happen. As they said, Ben and Jerry didn’t become big because of Chunky Monkey. (Not that I’m suggesting that flavor is the best idea in the world, though it’s not unpleasant…) The conference wasn’t specifically about partnerships, but it really drove home the message — finding the right partners is critical to success. I liked hearing about designer Jeff Chapin’s partnership with a non-profit organization to design low-cost latrines that people really want, with huge potential impact on sanitation and health in the world’s poorest countries. It was intriguing to think of how aesthetics can play such a central role in the success of public health measures. Then Theo Sowa made a thought provoking presentation about how interventions to empower African women keep making the mistake of conceptualizing these women as “victims” who need to have things done to help them, rather than recognizing their leadership and partnering with them to deliver change. Bill and Melinda Gates are surely each others’ professional soulmates. The TEDxChange chair noted that their Foundation has become the biggest change agent in the world outside of government. This conference launched their ‘ no controversy ‘ campaign to catalyze the leadership needed to increase access to contraception in low and middle income countries. I suspect it will get results. In the meantime, there may be a gap in the market for professionalsoulmate.com …

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Neil McCarthy: Radical

April 9, 2012

Time to go radical. Reasonable is not working. If I hear one more politician or ersatz journalist rail about the need to find bi-partisan common ground in the sweet spot of a centrism where immediate deficit reduction and job growth live in some sort of economic harmony, I am going to get sick. It isn’t going to happen. It can’t. Over the last thirty years, conservative orthodoxy has simply pulled too much demand out the economy. That is what happens when (1) wages stagnate, the result of unions collapsing and globalized wage arbitrage taking over, and (2) bankers get unregulated free rein to peddle “products” that put consumers in long-term hock, which is what they accomplished when everyone was allowed to use their home as a credit card. Once those same bankers turned mortgages into cash for speculators via the now-infamous mortgage-backed securities, the con was complete. The ensuing real estate bubble created the impression that there was a free lunch (in the form of ever rising asset values). And then the bubble burst. Today, consumers are still over-leveraged (thanks to that explosion of private debt over the last decade), but banks can’t lend enough (given the shakiness of their balance sheets — where all those mortgage-backed securities are still being held at par — and the perceived need to adhere to credit standards that were ignored in the run up to 2008). So private spending is still weak. The March jobs report was a big disappointment. The private sector produced a mere 120,000 jobs that month . Wall Street (and just about everyone else) expected the number to be in the 200,000 range and it wasn’t even close. The recovery from 2008 continues unabated. But its pace is anemic and uncertain. In this world, conservatives continue to talk about immediate deficit reduction, business confidence and fears of inflation, certain that dealing with the first and the second is necessary to curb the third and produce jobs. All of this, however, is pure economic bunk. As Paul Krugman has continually pointed out to anyone willing to listen, we have not begun to put a dent in the job losses that came in the wake of 2008. The percentage of “prime age” workers who are actually employed — a real number, unlike the unemployment rate, which is distorted by failing to count those who stop looking — went down by about five points during the collapse and has gone up by less than one in the “recovery.” At the same time, our nominally low inflation rate (about 2% overall, even with the recent gas price hike) shows no sign of precipitously rising any time in the near future. Businesses are not hiring and producing because there is not enough demand (unemployed debtors don’t have a lot of walking-around money), not because they are worried about the tax and regulatory environment. The near term solution to all of this was a sufficient stimulus and some inflation. The conservatives, however, made the former impossible, and the chattering classes (including a lot of professional economists who should know better) have scuttled the latter. What we have, therefore, and have had for some time now, is an economic crisis that our political culture seems powerless to confront and solve. The problem here is not a lack of ideas. We have known how to pull ourselves out of depressions and severe recessions for at least 80 years. You do it by getting the government to increase consumer demand given that the private sector can’t or won’t. This typically involves some form of government spending — either on infrastructure (which creates both an immediate bump up in demand and also helps with long term productivity), welfare spending (food, housing, etc., which just increases demand), or targeted tax cuts (which increase demand so long as they are properly targeted to those who will spend the money rather than bank it). None of this, however, is politically possible now. A deficit which could create problems in the medium and long term is being used to eliminate any rational economic response to demand problems in the short term. It is also being used to eliminate any policies which could devalue private debt, which is what inflation and/or various forms of foreclosure relief would do. And the folks manning the barricades as deficit hawks circa 2012 are the same people who brought you the Bush tax cuts of 2001 and the two unpaid-for wars of the last ten years, which cumulatively turned the Clinton surplus into Bush’s sea of red ink. But hypocrisy has no cost in American politics. So it is practiced with abandon. I am a believer in incremental progress. I understand that American federalism is very slow. It is far easier to stop something than it is to pass anything. And that was the Founders’ collective intent. Over our two hundred plus years of history, therefore, progressives have always had to fight a two-steps-forward-three-steps-back war against reactionaries and the status quo. Their opponents changed — from slaveholders to industrialists to stock speculators to sexists. But the process rarely changed. Except when it did. Because, from time to time, progressives have abandoned the marble temples of incremental American federalism and… Gone radical. They’ve raised hell, hit the streets, jumped to the front of the bus, crossed the bridge, burned the draft cards, or camped out on the Mall. Unable to change the conversation from within, they altered it from without. Unwilling to defer to authority, they defied it. And underestimated by a smug establishment, they created a new one. That is where we are today. The system isn’t working. Twenty years ago, in his presidential campaign, former Massachusetts Senator Paul Tsongas made a point of admonishing unreconstructed New Dealers and trade unionists to stop bashing business. And the Democrats heard him and stopped. But now the other side has turned bashing labor… or women… or gay people… into a cottage industry. And that has to be stopped too. Progressives have to hit the streets. The kids have to vote like they did in 2008. The Wall Street occupiers have to return to Zuccotti Park. The conversation has to change. The people who change it will not be the bankers, hedge funders, or politicians checking out the “internals” on their polls. Because we have to stop talking just about margin… or return on investment… or individual responsibility… or the swing voter. And begin talking about redistribution… and economic fairness… and justice. We need to rediscover what it means to be a citizen in a democratic republic. Rather than just a consumer in a capitalist economy. We need to go radical.

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Jerry Jasinowski: A Mixed Economic Picture

April 9, 2012

I’ve just spent an interesting weekend with a group of CEOs discussing the global economic outlook, and how firms are striving to compete and grow in a challenging economic environment. They described a world of rapid change, financial and stock market volatility, and uncertainty. On balance, they are fairly upbeat about the U.S. economy, but have major concerns about Europe, China, and — of course — what’s going on in Washington. After major restructuring, most companies have dramatically reduced their breakeven points and strengthened their balance sheets so they can generate good earnings even in this slow growth environment. The CEOs believe that the U.S. economy is in better shape than most of the rest of the world, and is today the best place to invest. There was uniform agreement that Europe is in a recession and has done little to reduce its sovereign debt problem. More specifically, Spain’s economy is in deep trouble and will have difficulty financing its debt this spring. There were similar concerns about Italy and France. In general, the CEOS are skeptical that the Euro community has put in place the kinds of reforms necessary to make them more competitive and reduce debt. Few companies see a slowdown in China as a problem. Rather, the majority see China as a big opportunity as the Chinese hike investment in infrastructure and switch to a more consumer driven market. The CEOs were concerned about intellectual property protection and unfair business and trading practices by the Chinese. Many companies believe the Chinese government will always tip the scales in favor of Chinese firms, discriminating against U.S. business. I contended the recent run-up in the stock market was in large measure due to the easy credit environment driven by zero interest rates here, a short-term central bank bailout in Europe, and quantitative easing by most central banks. While it is clear that these actions have helped restore economic growth in some areas, particularly mining, oil, housing, commodities, and finance, there have also been negative impacts on economic fundamentals. More importantly, there is growing concern that more quantitative easing will stoke the fires of inflation either here or abroad. Overall, there was near uniformity of opinion among the CEOs that the U.S. will experience 2% to 2.5% growth in the months ahead. Although not satisfied about that, most of the CEOs felt quite able to operate profitably in that environment. They all stressed that they have in place lean manufacturing, new sourcing practices, and new product development that will allow them to be successful in both this country and abroad. Moreover, virtually everyone in the room was looking at acquisitions as a possible add-on to their organic growth models. They were not so optimistic about employment. All the companies were concerned about the high level of unemployment and inadequate training of the U.S. workforce. Friday’s weak — 120,000 payroll — number reinforces their view that too many workers are being left behind in this weak recovery, either because of weak growth, inadequate skills, or uncertainty emanating from Washington. What we need now is a public-private partnership backing a bi-partisan, pro-manufacturing, pro-growth agenda that creates jobs. Jerry Jasinowski, an economist and author, serve d as President of the National Association of Manufacturers for 14 years and later The Manufacturing Institute. Jerry is available for speaking engagements.

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Mike Lux: B Rapoport: Friend, Mentor, Great Progressive

April 7, 2012

I just learned that one of my dearest friends and mentors died Thursday night. Bernard Rapoport, or B as he loved to be called, was deep into his 90s, but still was handing out money from his foundation (his last board meeting was last weekend) and going into his office to work the phones as late as Tuesday of this week. It is hard to imagine someone so full of life is gone. B gave money to almost every progressive cause and candidate around, and raised money for practically all of them as well. He started organizations, chaired the University of Texas Board of Regents, demanded every politician he knew raise his taxes, told proud stories of his communist parents, introduced everyone he knew to everyone else he knew, and always had a grand time doing all of it. The first time I ever met him was when I had driven to see him in Waco, and he turned me down in about 30 seconds flat for the environmental group I was raising money for, telling me there were lots of rich people giving money to environmental causes, that he had to reserve his for helping labor and poor people organize. He then invited me to stay for a while; we told stories for three hours, and then he invited me to dinner and to stay the night. Didn’t get the check, but got one of my best friends of all time. We have been allies in every cause and on every campaign ever since. B delighted in telling people that his mother, when people asked what he did for a living, would say sheepishly, “Well, he’s a businessman, but he is a very learned man nonetheless.” B made a lot of money in his life, working with unions to provide good insurance policies for their members, but he never forgot his parents’ values or his progressive instincts. He was friends with presidents and senators and speakers of the House (at least the Democratic ones), but his heart and his friendship went out to just about everyone he met — I would often see him trading stories or having a drink with waiters and bellhops he knew, and a couple of them mentioned to me over the years that B had given them money for their kids’ scholarships. B was a voracious reader (I think B quoted Thorstein Veblen more times than all the other folks I ever met combined), and he had an annual tradition of sending out his favorite book of the year to thousands of friends across the country. He also helped countless authors pay for their research and publish their books. But he didn’t know much about pop culture. I had a friend who dated Cybill Shepherd for a while at the height of her “Moonlighting” fame, and he let me stay at her place in LA when I was out there. B called while I was in LA, and when I returned his call, I of course had to tell him where I was. He wasn’t impressed because he had never heard of her. He asked me, “So is this some candidate you are going to want me to give money to?” B Rapoport was one of the greatest men I have ever known, and I will always be in his debt for the friendship he made with me, the things I learned from him, the stories he told me. Our progressive movement, of which he was always such a leader and friend, will miss him dearly as well. He was one of the good ones.

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James Kwak: Fiscal Affairs: Someone Is Wrong in The Times*

April 7, 2012

James Stewart has doubled down on his infatuation with Paul Ryan. Ryan’s budget, he says, is a viable centrist starting point for budget negotiations, and attacks from “left and right” are mere “partisan rhetoric.” This is several different kinds of crazy. First, Stewart repeats his belief that Ryan’s plan would increase taxes on investment income. But that belief has no basis other than Stewart’s own belief that it would be a good idea. As I pointed out before, Ryan’s own budget argues against raising taxes on capital gains and dividends. The only thing Stewart can find is Ryan’s apple-pie platitudes about the need for tax reform. But Ryan’s own vision of tax reform, as evidenced by his budget’s own words, doesn’t include higher capital gains taxes. (In addition, as a signatory to the Taxpayer Protection Pledge, Ryan is sworn to “oppose any and all efforts to increase the marginal income tax rate for individuals and business.” That sounds to me like it includes the capital gains tax rate, which is a marginal income rate.) This is further evidence of columnists’ ability to project their own fantasies onto Paul Ryan’s handsome face. More generally, Stewart pins high hopes on Ryan’s embrace of tax reform. But all Ryan’s budget actually says about tax reform can be summed up in two points: tax reform is good; and tax rates should be lower (25 percent for the top individual rate and for the top corporate rate, both down from 35 percent today). This of course allows credulous people to see themselves in Paul’s blue eyes (see above). But if you want a serious starting point for tax reform, you should look at Simpson-Bowles or Domenici-Rivlin , both of which spelled out actual tax expenditures they would close (or Feldstein, Feenberg, and MacGuineas , or White House Burning , or any one of many other policy proposals that do the same). Ryan’s “tax reform” is nothing more than a few talking points designed to score political points (why else would you specify the lower tax rates but not the closed loopholes), not a starting point for anything. Stewart also plays the “centrist” card with unprecedented aggressiveness. He cites attacks by the Club for Growth as proof of Ryan’s reasonableness. But when it comes to military spending, the Club for Growth isn’t attacking Ryan from the right; it’s attacking him from the left . Democrats want to reduce military spending as a share of GDP; so does every bipartisan deficit reduction panel; so does the Club for Growth (which thinks that the automatic spending cuts in the Budget Control Act should be respected). Ryan, by undoing the automatic spending cuts to preserve defense spending, is to the right of the budget debate, not in the center. In other words, everyone knows that if you want to reduce the deficit you have to cut defense spending–except Paul Ryan and James Stewart. Then there’s Medicare, one of the few areas where Ryan is willing to spell out his cost-cutting proposals. For Stewart, this shows that Ryan is a brave warrior against entitlement spending. But simply tackling entitlement spending doesn’t make you reasonable, centrist, or worth listening to; everyone who talks about the deficit talks about tackling entitlement spending. (Even Simon and I do, although our entitlement cuts are smaller than most other people’s.) It’s the actual proposal that matters. And Ryan’s proposal is only one step from the far-right fringe–that’s the step he walked back since last year. Last year he was going to convert Medicare into a voucher program where you could use your voucher toward insurance from a private company, but the value of the voucher was artificially capped so it would buy less and less health care over time. This year the only difference is that now you can buy insurance from a private company or from traditional Medicare. But in either case, the important points are: (a) the vouchers are designed to grow more slowly than the cost of health care, meaning a huge transfer of cost and risk from the government to individuals; and (b) reliance on the private market to reduce costs and improve outcomes (something it’s failed at dismally for the last forty years). Having a Medicare plan shouldn’t win you any points; it’s what’s in the plan that matters. At least for most of us. This inattention to actual policy is how Stewart can think that “within the Ryan budget proposal is the outline of a grand compromise not all that different from the one President Obama and the House majority leader, John Boehner, reportedly came close to reaching last summer: long-term deficit reduction through tax reform, higher tax revenue and spending cuts.” Well, yes, if you’re going to stick to the level of abstract generalities, I guess the Ryan budget is similar to the Obama-Boehner deal in that both included tax reform and spending cuts. In practice, though, the Obama-Boehner deal was nothing like the Ryan budget. We know the tax reform was completely different because Boehner was offering higher tax revenues that were not entirely due to supply-side fantasies. Ryan only achieves higher tax revenues by dictating that his plan will bring in 19 percent of GDP in tax revenue; nowhere does he say how we would actually achieve this while slashing tax rates. We also know the spending cuts were completely different, because Obama-Boehner did not convert Medicare to a voucher system (they did include spending cuts, but they kept the same benefit structure), while Ryan does. Finally, here’s one more way to think about the Ryan budget: This picture shows all government spending except for Medicare, Medicaid, CHIP, Social Security, and net interest. (The data are from Tables 1.1, 1.2, 3.1, and 8.5 of the OMB’s 2012 budget, historical tables.) It’s a close approximation for discretionary spending, and it’s what the CBO uses in its long-term projections . The Ryan Budget would reduce spending on everything except Social Security and health care to the lowest levels since before the Great Depression. Furthermore, those numbers include defense spending. Since Ryan’s budget proposes to protect military spending from the automatic cuts in the Budget Control Act, I think it’s fair to assume that he won’t want to cut defense spending to historical lows. Since World War II, defense spending has never fallen below 3.0 percent of GDP. Assuming that defense spending never falls below that level, you get this picture: This is a blatant assault on the entire federal government except for health care, Social Security, and defense. This is not a courageous, centrist starting point for a real deficit solution. * See XKCD . James Kwak is the co-author of White House Burning: The Founding Fathers, Our National Debt, and Why It Matters To You , available from April 3rd. This post is cross-posted from The Baseline Scenario . Read more from the Fiscal Affairs series here .

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Mark Samuel: Being Indispensable: When Keeping Commitments Undermines Your Accountability

April 7, 2012

It is common thought that accountability is about keeping commitments. There is nothing so frustrating as when someone has made a commitment to us — to communicate with us, to complete a task we asked them to complete, to assist us with something we’re having difficulty with — and then fails to follow through. It can be hurtful or frustrating, and our typical response is “You aren’t being accountable.” It can be even more frustrating when we don’t keep our own commitments — to things like our diets, keeping ourselves organized or to staying in touch with our friends. We feel we are letting ourselves down and may label ourselves as “not very accountable.” Regardless of which side of the broken agreement or commitment we may find ourselves, thinking that a broken agreement is necessarily an example of a lack of accountability may be a misdiagnosis. It might surprise you to learn that being accountable does not have to mean keeping all of your commitments. Why? Because accountability is more about being counted on to achieve desired results than accomplishing lots of meaningless activities. How many times have you seen someone looking busy doing lots of things they’ve committed to, but failing to achieve quality results, or satisfaction of their target audience (spouse, boss or customer)? Accountability is not just keeping commitments. Accountability is taking action consistent with your desired outcome. It begins with defining the kind of results you want to achieve in your life at home and at work. What kind of partner do you want to be in your relationships? What is the optimal health that you want to experience? What kind of reputation do you want to have at work with your teammates, your boss and/or your direct reports? Being accountable is taking actions consistent with those desired outcomes. It is not making and keeping commitments that take you away from your purpose. Based on those desired outcomes, it is essential to only make commitments that support your “picture of success” rather than accepting every commitment put before you in order to accommodate others… Sometimes, you may even make a commitment that you have to break or change in order to get back to creating your desired outcomes. For instance, I made a commitment one day to go out with my co-workers after work the following Friday. However, after getting on the scale on Wednesday, I decided it was important for me to get back on my eating plan immediately to lose weight and get my cravings under control. I had to break my commitment with my friends for a higher purpose of getting myself back on track with my health. Now, you might wonder, why didn’t I just go out with my co-workers and eat healthy foods and drink water? Because, at that stage of getting healthy, I was still having difficulty curbing my cravings, and I didn’t want to risk breaking a commitment to my higher purpose. I also wanted to support myself by not putting myself in a risky position in order to accommodate others. The problem with keeping commitments that support others at the expense of supporting ourselves is that we feel like we have undermined our own value by breaking a bigger and more meaningful commitment to our own personal success. Six Steps for Increasing Accountability and Keeping Commitments Identify your “picture of success” and desired outcomes for various aspects of your life — relationships with yourself, family and friends; your performance and communication at work; your contribution to your community or your personal/spiritual growth, hobbies and health. Develop the very few commitments you are willing to make to support yourself in achieving your “picture of success” or desired outcomes. These are your “non-negotiable” commitments. Create “recovery plans,” or your best responses which you will use if you find yourself in jeopardy of breaking one of these commitments or agreements. Recovery plans represent how you will communicate with others and yourself if you can’t keep a commitment as is, so that the commitment can be amended or changed without breaking integrity with yourself. Assess any new commitments that others ask you to make in order to stay consistent with your “picture of success” and have the courage to say “no” to a new commitment that breaks your accountability to your higher purpose or your values. If you can’t make a commitment to support or accommodate another person, assist them in finding a new solution or re-evaluating their request so that they can achieve or make progress on their “picture of success.” Acknowledge yourself for every commitment you keep that reinforces your “picture of success,” and acknowledge yourself for every commitment you break or don’t agree to because it will take you away from acting consistent with your purpose or values. If you would like to learn more about making yourself indispensable, I invite you to visit http://www.MarkSamuel.com to download two FREE chapters of my new book. For more by Mark Samuel, click here . For more on success and motivation, click here .

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Mike Lux: Homes, Banks, and Politics: Round 2 of Settlement Talks

April 6, 2012

Now that the big settlement talks with the banks are over, and most of the reporters have gone home, not very many people are paying attention to what is going on in the financial fraud task force, or in the continuing conversations between various players on Wall Street and the government. But not understood by most people is that there may be a Round 2 in the settlement talks, and if there is, it may well be a doozy — a much bigger deal than the first round. If there isn’t a Round 2, that will likely be a different kind of “doozy,” a problem with huge political and economic implications for the president and politicians of all stripes. Let’s start with talking about why so many activists and organizations like the Campaign for a Fair Settlement and the New Bottom Line pushed so hard for a more aggressive investigation in the first place. No matter how those first settlement talks with the banks turned out, it was always clear that whatever the number government negotiators got would be tiny compared to the scope of the $700 billion dollar underwater mortgage problem homeowners and our entire economy is faced with. And we were right: the $25 billion is a drop in the bucket, about 3 percent of the way to a solution. The far bigger question is what would happen next, because our national economy will continue to be weighed down heavily by this deeply damaged housing market unless there are much deeper mortgage write-downs. There are two big ways for more mortgage write-downs to happen, and two big goals progressives should have for the financial fraud task force. The former pair first: most mortgages are owned by either Fannie and Freddie, or by the big bank conglomerates on Wall Street. The first way for massive mortgage write-downs to happen is either for Fannie and Freddie acting administrator Ed DeMarco to change his policies on write-downs, or for him to be replaced by Obama making a recess appointment of someone who would change the policies. That’s why many groups have launched a Fire DeMarco campaign, and many others keep banging on his door to ask him to change direction. There is some dissent on this among people who know the banking issue, because some banks own second liens on these mortgages and could benefit as a result. It’s a fair point, and anything that can be done to structure Fannie and Freddie write-downs in a way to not help the big banks is important to do. But my view is that maximizing the write-downs is critical, that homeowners and the overall economy need these write-downs too badly to spend an inordinate time worrying that some banks may benefit as a result. (Wall Street bankers find many different ways to hedge their bets and diversify their holdings, meaning they sometimes find ways to profit even on things that are actually good for people. Go figure.) The other way for big write-downs to happen is if the financial fraud task force can squeeze the big banks on all the fraud they have committed, and get them to agree to writing down a much bigger pot of money — in the hundreds of billions, not the tens — in exchange for a legal release on some fraud claims (although definitely not all) by the government. Which leads to my next major point: that of goals for this fraud task force. The two goals for the task force as far as the progressives I am talking to are these: write-down money and prosecution for crimes committed. Some people think these are mutually exclusive. I don’t, and neither should task force members. Based on what we already know from news reports and other legal action, it is clear that if the task force is aggressive and tough enough in their negotiations, they can through subpoenas and depositions find thousands of separate violations of punishable financial fraud. Much of that can be used to force the bankers to the table for real negotiations about hundreds of billions of dollars in mortgage write-downs, but investigators will also find plenty of fraud so egregious that the high rollers in these firms ought to be going to jail as well. Indicting, perp walking, and sending some of these top execs to prison is important, because if wealthy and powerful people can continually violate the law with impunity, they will in fact keep doing just that, and our financial system will be permanently at risk. The question now is whether the task force will be effective in bringing bankers to justice, and in forcing bigger write-downs. But this is a real question, and I think it is important for the American people to understand what is going on in there. To all of us on the outside who have been working on these issues, things don’t seem to be moving very fast. We need to know the answers to some very important questions, including: Is there an executive director, coordinator, or clear manager of any kind in place to drive this process forward aggressively? There was discussion for a while of Rep. Brad Miller (D-N.C.), a great consumer advocate, playing such a role, but that talk seems to have died out and I am still not clear how they are managing this in the meantime. Will any more staff resources beyond the very modest numbers announced when the task force was unveiled be appointed? Of the staff resources that were appointed, are all of them actually assigned and working? If not, how many are actually doing any work? If not, why (the hell) not? Are task force leaders keeping a close eye on statute of limitation issues to make sure we can actually prosecute the most important cases of bank fraud that exist out there? After the first flurry of subpoenas, we haven’t to my knowledge seen any more come down. Why not? Seems like there is plenty to investigate, why the hold-up on more subpoenas? At least some of the members of the task force have said they want to be aggressive and fast-moving in this investigation. Are there people putting road blocks up? If so, why aren’t they being cleared away? Who has point responsibility for clearing the road blocks out of the way? Here’s the most important question in my mind: is the White House paying enough attention to this? I know from my experience in the Clinton White House that once a decision is made to move forward on a major new initiative like the settlement and fraud task force, that sometimes the sense of urgency fades and senior staff tend to move on to new issues, problems, and crises — they assume whoever they appointed to do things is taking care of it. That is natural enough given all the demands on the White House, and I sense it may have happened here. But I fear for my friends in the Obama White House that this is going to come back and bite them in the ass in a really serious way if they aren’t paying a lot of attention to it. One of the greatest weaknesses the president has going into election season, both with swing and base voters, is the lingering feeling that he and his team have been too soft on the Wall Street guys that took down this economy. The big banks making record profits and handing out record bonuses the year after taxpayers bailed them out, and while the overall economy has been terrible, has left a lasting impression with voters. The failures of the HAMP program, the flurry of bad press around the Suskind book, the unwillingness to recess appoint Elizabeth Warren as the head of Consumer Financial Protection Bureau (even though the person Obama appointed, Rich Cordray, has been terrific, he has nowhere near the profile or cachet with activists following the issue as Warren), and the lack of any prosecution of Wall Street big shots has steadily added to that image. So if nothing happens with this task force any time soon, it will be a huge disappointment and a very big deal to people and organizations working on the issue, to the reporters who know the financial beat, and to voters in general. In an election season dominated by discussion of Mitt Romney’s Wall Street background, for the president to be vulnerable on this issue would be a terrible mistake, and the way they get strong on it is to have a successful task force. Here’s the electoral component of this that almost no one is thinking about: there are 1 1,000,000 underwater homeowners right now, many of them families with multiple voters living there. There are a ton of them in key swing states like Nevada, Florida, Ohio, Pennsylvania, North Carolina, Wisconsin, and Colorado. In my mind, they are very likely to be swing voters: screwed over by Wall Street, but not feeling like either party is helping them much. They have heard about the settlement, but $25 million doesn’t go very far when there’s $700 million in negative equity, so they aren’t likely to get much help, which will make them even more irritable — it could be HAMP all over again in terms of promises of help made but not delivered. Holding the banks accountable, and delivering a big new round of write-downs, is going to look awfully good to those voters and their neighbors who don’t want more foreclosed homes on the block. My advice to my friends at the White House is to pay a lot of attention to this sooner rather than later, and to light a fire under anyone involved in the task force who may be throwing those road blocks up. The task force needs to show some visible progress, some real movement that is obvious to people, sooner rather than later on this. If they move aggressively forward, I believe based on conversations with legal experts that it is entirely possible the banks can be forced to write down $200-300 billion in mortgages before the end of the year. That would not only help those underwater homeowners but would be a dramatic boost to the entire rest of the economy because of the extra cash it would put in homeowners’ pockets and the major boost it would be to the overall housing market. The big banks can certainly afford it: according to an SEIU report , in 2010 alone just the six biggest banks gave out an estimated $143 billion in bonuses. Given that these write-downs would be cumulative over many years, $200-300 billion might mean smaller bonus checks and profit margins, but it is nothing that would break the bank. And here’s the other thing: if you write down these mortgages and stabilize the housing market, all those toxic assets the big banks hold will start to look healthier soon, so the banks would even get some of that money back. This issue has faded from the headlines, but it is a huge deal — for the homeowners who remain stuck underwater, for the housing market and economy as a whole, and for the president’s re-election chances. Let’s hope these questions get answered soon, and in a good way. And let’s hope the task force can get its act together to force another big settlement, and some perp walks as well, before it is through.

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Blair Bowie: Disempowered Bankers Start Super PAC, Reveal Plans for World Domination

April 6, 2012

The American Banker Association recently announced that after years of being ignored in the halls of power, it will at last be creating its own super PAC to serve as its proverbial “big stick.” For too long, the banking industry has been stuck at 13 on the list of industries giving the most to members of Congress , drowned out by such vehemently anti-banking interests as “Misc. Finance” (12), “Lobbyists” (7), “Real Estate” (5), and “Securities and Investment” (3). American Banker editor-at-large Barbara Rehm writes, “Frustrated by a lack of political power and fed up with blindly donating to politicians who consistently vote against the industry’s interests, a handful of leaders are determined to shake things up.” While I am highly skeptical of the sentiment that “Congress is not afraid of bankers”, given that banking lobbyists outnumber banking reform advocates 25-1 and that the Chairman of the Senate Financial Services Committee seems to believe that “the banks own the place,” the most ridiculous thing about this announcement may just be ABA’s willingness to reveal its strategy for skirting the non-coordination rules. The Supreme Court and FEC explicitly prohibit Super PACs from coordinating with candidates and their campaigns. I generally interpret this to mean that having a direct conversation with a candidate is a violation of the rules. Yet Matt Packard, the Super PAC’s chairman, is apparently quite excited about using his new stick in that context, “If someone says I am going to give your opponent $5,000 or $10,000, you might say, ‘Yea, okay’. But if you say the bankers are going to put in $10,000 or $500,000 or $1 million into your opponent’s campaign, that starts to draw some attention.” When is Packard imagining himself having this conversation and what will he be asking for to call off the hounds? This statement speaks volumes about how the industry thinks about its involvement in politics. Note too that Packard says they may be directing money “into your opponent’s campaign.” He means that in the same way that one might give to Restore Our Future to support Romney right? Nope. While the coordination rules are twisted enough when it comes to candidate specific super PACs, Friends of Traditional Banking plans to go even further. The independen expenditure-only committee, according to Rehm’s description, will exist not to “touch the money,” but to direct it to the candidate’s actual campaigns. This is starting to feel like the scene where the Bond villain reveals his whole plan for world domination. Even with a feckless FEC on the beat, Friends of Traditional Banking seems to be inviting federal investigation. Rehm reports that the first thing prospective donors have been asking Utah Bankers Association president Howard Headlee is, “Is this legal?” Luckily, Headlee seems to have a Trevor Potter button for that.

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Robert Reich: The Fable of the Century

April 5, 2012

Imagine a country in which the very richest people get all the economic gains. They eventually accumulate so much of the nation’s total income and wealth that the middle class no longer has the purchasing power to keep the economy going full speed. Most of the middle class’s wages keep falling and their major asset — their home — keeps shrinking in value. Imagine that the richest people in this country use some of their vast wealth to routinely bribe politicians. They get the politicians to cut their taxes so low there’s no money to finance important public investments that the middle class depends on — such as schools and roads, or safety nets such as health care for the elderly and poor. Imagine further that among the richest of these rich are financiers. These financiers have so much power over the rest of the economy they get average taxpayers to bail them out when their bets in the casino called the stock market go bad. They have so much power they even shred regulations intended to limit their power. These financiers have so much power they force businesses to lay off millions of workers and to reduce the wages and benefits of millions of others, in order to maximize profits and raise share prices — all of which make the financiers even richer, because they own so many of shares of stock and run the casino. Now, imagine that among the richest of these financiers are people called private-equity managers who buy up companies in order to squeeze even more money out of them by loading them up with debt and firing even more of their employees, and then selling the companies for a fat profit. Although these private-equity managers don’t even risk their own money — they round up investors to buy the target companies — they nonetheless pocket 20 percent of those fat profits. And because of a loophole in the tax laws, which they created with their political bribes, these private equity managers are allowed to treat their whopping earnings as capital gains, taxed at only 15 percent — even though they themselves made no investment and didn’t risk a dime. Finally, imagine there is a presidential election. One party, called the Republican Party, nominates as its candidate a private-equity manager who has raked in more than $20 million a year and paid only 13.9 percent in taxes — a lower tax rate than many in the middle class. Yes, I know it sounds far-fetched. But bear with me because the fable gets even wilder. Imagine this candidate and his party come up with a plan to cut the taxes of the rich even more — so millionaires save another $150,000 a year. And their plan cuts everything else the middle class and the poor depend on — Medicare, Medicaid, education, job-training, food stamps, Pell grants, child nutrition, even law enforcement. What happens next? There are two endings to this fable. You have to decide which it’s to be. In one ending the private-equity manager candidate gets all his friends and everyone in the Wall Street casino and everyone in every executive suite of big corporations to contribute the largest wad of campaign money ever assembled — beyond your imagination. The candidate uses the money to run continuous advertisements telling the same big lies over and over, such as “don’t tax the wealthy because they create the jobs” and “don’t tax corporations or they’ll go abroad” and “government is your enemy” and “the other party wants to turn America into a socialist state.” And because big lies told repeatedly start sounding like the truth, the citizens of the country begin to believe them, and they elect the private equity manager president. Then he and his friends turn the country into a plutocracy (which it was starting to become anyway). But there’s another ending. In this one, the candidacy of the private equity manager (and all the money he and his friends use to try to sell their lies) has the opposite effect. It awakens the citizens of the country to what is happening to their economy and their democracy. It ignites a movement among the citizens to take it all back. The citizens repudiate the private equity manager and everything he stands for, and the party that nominated him. And they begin to recreate an economy that works for everyone and a democracy that’s responsive to everyone. Just a fable, of course. But the ending is up to you. Robert Reich is the author of Aftershock: The Next Economy and America’s Future , now in bookstores. This post originally appeared at RobertReich.org .

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Neda Talebian Funk: Fitness: The New ‘It’ Bag

April 5, 2012

Remember when dinner conversation between friends was once all about kids, fashion, and where you were traveling next? Today, the topic in vogue is fitness. It may start with, “Who is your favorite spin instructor and what class are you taking tomorrow?” and an hour later, the group is likely still talking about where and how they get their sweat on. Fitness is the new fashion, and — not surprisingly — it is quickly taking a greater portion of wallet share. At over $20 billion, the U.S. fitness market continues to grow at a solid clip. Further, the introduction of “a la carte” group fitness classes has created a growing market of fitness-goers who spend north of $300 per month on their group fitness classes alone. The boom in boutique studios and fitness apparel is proof. Fitness is not only what people are talking about, but it’s what they are doing. As Technogym’s Nerio Alessandri so perfectly once said, “Fashion is looking good outside; wellness is feeling good inside. It’s the new frontier of luxury.” What makes getting your heart rate up with a sweaty workout the new luxury? The Rise of the Boutiques. Let’s face it: The gym has not changed very much over the years. The big box format offers everything — its cardio machines, group fitness classes and locker rooms — all under one roof, and has remained pretty standard. Thanks, Jack LaLanne. Yet, in recent years, there has been a proliferation of “boutique” fitness studios offering a specialized workout. These workouts embody the “3 E’s,” as coined by fitness consultant, Jonathan Fields: efficiency, effectiveness, and engagement. Boutique studios also tend to be upscale: think $30+ per class in major cities. In fact, over the last three years despite the economic downtown, the NYC market has seen an incredible rise in the boutique studio — up over 30 percent, according to FITiST internal research. Chanel, Oscar de la Renta… and Lululemon. Walk down the street in NYC, LA, or any other metropolitan city and you will see more women in yoga pants than jeans. It’s a fact and a lifestyle. Fashion fitness brands such as Lululemon have revolutionized the fitness apparel industry. Remember working out in baggy soccer shorts and big t-shirts? Not anymore. Flattering, formfitting and highly technical sportswear is being worn not only in the gym, but to lunch, on weekends and even in the office. Want proof? Lululemon has posted over 30 percent year over year sales gains for the past nine quarters, and now boasts a market value of $10.4 billion… Yes, that’s billion. In the last quarter, the company’s sales per square foot were over three times that of luxury retailer, Neiman Marcus. And fashion designers themselves are mixing sportier styles into their lines and even doing collaborations with sportswear labels. Stella McCartney’s collaboration with Adidas has been among the more prominent designer athletic lines to date. The Celeb Factor. Simple truth: Thanks to the likes of Us Weekly , our culture is obsessed with celebrities’ every move, including how they sweat. Why do we all know Tracy Anderson? She trained Madonna and now Gwyneth. And who doesn’t want to look like Gwyneth Paltrow? People are more likely to fork over $35 for a class at a studio when they know it’s where Kelly Ripa gets her sweat on, Lady Gaga spends her birthday, or Matthew McConaughey blows off steam. In conclusion, fitness is simply the new “IT” bag, the season’s most talked about story — “seen in” is now “seen at.” For more by Neda Talebian Funk, click here . For more on fitness and exercise, click here .

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Jeff Jarvis: The Importance of JOBS

April 5, 2012

The JOBS bill being signed by President Obama today is critical to the emergence and growth of the next generation of industries as ecosystems. Those ecosystems are made up of three layers: Platforms (Google, Amazon, Salesforce, Facebook, Kickstarter, Federal Express, Foxconn), which make it possible for entrepreneurial ventures to be built at lower cost with less capital and reduced risk at greater speed. To provide the critical mass that large corporations used to provide — to, for example, sell advertising at scale or acquire distribution or acquire goods or services at volume — sometimes these ventures need to band together in networks (Glam, YouTube, Etsy, eBay). This is how I simplistically draw it on a whiteboard: Our economy — equity markets, regulation, taxation — has been built to support The Firm : large companies that controlled the entire chain from design to manufacturing to marketing to distribution, gaining efficiency and control as they gained size. The new ecosystem still benefits large companies if they are platforms, as today much — perhaps most — of the value created via the net falls to new corporate behemoths: Google, Amazon, Facebook…. But it’s at the entrepreneurial layer that the real work is being done, the real efficiency is being found, and the real value is being built. But they need capital — not much, but they need it. And they need to be able to recognize the value they create. That’s what I hope Steve Case and others worked toward with the JOBS bill. Andrew Ross Sorkin worries that the new law’s loosened regulation for some companies will mean that more will lose money. But Henry Blodget counters that it’s not the SEC’s job to save you if you’re stupid enough to invest in Groupon (told ya!). The lighter regulation certainly bears watching . But the part of the bill that encourages me is the ability of small companies to raise small amounts from small investors. I see this as economically democratizing on both sides of the transaction: more small companies disrupting large firms and more real investors able to get in on the opportunities (and risks) of a platform-enabled entrepreneurial economy. Such small-scale investment has already been possible in the U.K. — not just possible but encouraged through 30 percent tax break on investments. Recently I got an email from a company set to benefit, Escape the City (soon to be renamed escape.co), which helps would-be refugees from London’s financial district build new and, one hopes, better lives outside it. Cofounder Mikey Howe kindly wrote to me because he’d read What Would Google Do? and said it helped him think in new ways. (Thank you, Mikey.) Howe wrote on the occasion of the company sending a letter to its 57,000 members inviting them to pledge to invest in the venture. Within one hour, $6.6 million was pledged. I checked back with him three weeks later and 2,200 members had pledged $15 million (more than they will end up raising). What’s exciting is not just that a small company can more easily raise investment funds but that this small company knows its potential investors. They are members of the service already: a community of customers and investors. Imagine what that relationship could do to help a startup, when your users, your customers have a stake in your success. (I also enjoy the notion that their venture attempts to disrupt the financial district they left.) Start Something You Love: Escape the City…1 year on from Escape the City on Vimeo . Until the JOBS bill, about the closest thing we had in America was Kickstarter . My entrepreneurial journalism students are eager to try to use it to raise funds — perhaps a bit too eager, I caution them, for funding a single product or project does not a sustainable strategy make (any more than begging for grants from foundations). But properly used, Kickstarter reduces risk by performing the best possible market research (pre-orders) and allowing an entrepreneur to use her customers’ capital to start her venture while also turning customers into marketers. Kickstarter could not sell equity. Should it? I think that’s an entirely different proposition. In any case, now we can see Kickstarters of a new sort help more new companies. See also the U.K.’s Funding Circle , which loans capital to startups (and which just got an investment from New York’s Union Square Ventures). The irony of the JOBS bill’s title (it stands for Jumpstart Our Business Startups) is that it may end up killing more jobs than it creates as it funds highly disruptive and highly efficient new ventures that will try to replace large and now inefficient companies in old vertical industries. (See my post, the jobless future .) But if the disruption is inevitable — and I believe it is, across many industries from media to retail, banking to travel and even manufacturing — then the only sane response is to find the opportunity in the change. The JOBS act helps more people, entrepreneurs and investors, find more opportunity. That, more than bailouts, is the wise role for government to play in the shift from an industrial to a digital economy.

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Jenny Kassan: JOBS Act: Crowd Funding Could Give a Boost to Small Business

April 5, 2012

Today the President will sign the Jumpstart Our Business Startups (JOBS) Act in to law, a complex and by no means perfect bill that contains at least one ‘no-brainer’ win for both businesses and investors: crowd funding. This bipartisan legislation fulfills the President’s call to reduce regulatory burdens that prevent many small and young businesses from raising capital — specifically by allowing crowd funding and expanding mini-public offerings. The legislation is remarkable, as it (rightly) reverses more than 90 years of restrictions on raising capital at the grass-roots level. How we got here is historic as well — it illustrates what power lies in everyday individuals. An impact that will now be felt around the country as small businesses and startups look to crowd funding and other non-traditional means of raising capital. The movement began in 2009, when author and economist Michael Shuman wrote an article for Community Development Investment Review , a publication of the San Francisco Federal Reserve Bank. In it, he wrote: “Existing laws place huge restrictions on the investment choices of small, ‘unaccredited’ investors — a category in SEC vernacular that includes all but the richest 2 percent of Americans. The regulations prohibit the average American from investing in any small business, unless the firm is willing to spend $50,000 to $100,000 on lawyers to prepare a private placement memorandum or public offering — thick documents with microscopic, ALL CAPS PRINT that no human being has ever been observed actually reading.” The good news is that local businesses could get a huge investment boost with some modest securities reforms that would cost little or nothing. That simple idea gained momentum in the summer of 2010, when the Sustainable Economies Law Center (SELC), a nonprofit based in Oakland, California, wrote a letter to the Securities and Exchange Commission (SEC) requesting an exemption for crowd funding. The SEC received approximately 150 letters of support for the proposal. SELC volunteers then talked to staff at the President’s Office of Technology about the idea and the President supported the idea of an exemption for small securities offerings, which he announced in his jobs speech in September 2011. Legislation creating an exemption for small “crowd funded” investments passed the U.S. House of Representatives in November by an overwhelming majority — almost a unanimous vote of approval. With the final law being signed today, it reverses laws restricting investments that date back to the 1930s. What impact will this have on Main Street? The opportunity for growth, new startups and entrepreneurs whose ideas never make it past the dinner table due to lack of funding is vast. The impact on local business is undoubtedly also going to produce more resilient communities and cities where investors can now invest their money to build real wealth in the communities they care about. The vast majority of the American public, the 99 percent of us who are “unaccredited” investors, will soon have the opportunity to keep their money local. The half of our economy made up of small, independent businesses will now have access to capital that previously could only go to giant public companies. Americans have $30 trillion dollars invested in securities — imagine if even 10 percent of that went from Wall Street to Main Street. What could $3 trillion dollars do in our communities? Of course there is the potential, and frankly the likelihood, for abuse and failure. Investors who don’t proceed cautiously can (and some will) lose money on failed investments. There will be a rush of companies offering portals that will potentially fleece customers by charging unnecessary fees. But while some will try to make a quick buck, the broader opportunity gives me cautious optimism. There are some mechanisms in place that protect consumers from losing everything (they cannot invest more than 10 percent of their net worth for example) and there will be opportunities for savvy networks of small businesses to connect and create their own portals thereby owning an even bigger piece of the investment market. Next month I’ll be leading a conversation around how to accelerate community capital for small entrepreneurs at the Business Alliance for Local Living Economies (BALLE) Conference in Grand Rapids, Michigan. The topic of crowd funding will no doubt dominate interest and hopes for many. While crowd funding alone isn’t a silver bullet, it does play an important role in revitalizing the entrepreneurial small busines ssector of the economy. Its simplicity and ingenuity is American capitalism in its finest form.

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Blythe McGarvie: Wealth, Prosperity and Longevity (Part II)

April 5, 2012

In last month’s newsletter, I provided a Values Framework and stated that in subsequent letters I would dig deeper into the implications of the five dimensions of cultural values. Today, I will explain the first three dimensions. In Part 2 of this two-part series, I will discuss risk-taking and how people from different cultures deal with time. Today’s fast-paced technology is changing the levels of risk-taking in certain cultures. Individual vs. Collective Dimension When I worked in France, I advised my multicultural team to remember that French management holds in great esteem those individuals who make a name for themselves through their investments or accomplishments in great respect. Napoleon Bonaparte is still revered because he dared to be different and succeeded. Many western cultures, like those in the U.S. and the UK, tend to celebrate the strength of the individual and individual achievement. In such cultures, family ties tend to be secondary to individual goals and self-sufficiency is an honored trait. Nations like Japan or Kenya, however, embrace a collective or group-oriented value orientation, in which people tend to identify or define themselves as members of a group rather than as individuals. For example, an American company operating in Japan with Japanese employees must be sensitive to the notion that those workers think less about individual achievement than about how their efforts reflect on the group’s achievement as a whole. Also, unlike the American ideal of self-sufficiency, Japanese workers highly value the interdependence that comes from working within a group. For leaders, that means creating incentives and recognizing achievements for groups rather than individuals. In such a culture, a business should adopt a “high context,” defined as keeping the volatility and variability of a group to a minimum. In many Asian cultures, awareness of the concept of “saving face” should restructure a westerner’s behavior. How another person is perceived within his or her group is important. Accordingly, do not criticize an Asian individual in his own culture in public. Even praise should be done in a manner that does not isolate the individual from his group. Equality vs. Hierarchy Dimension Surprisingly, although Liberté, égalité, and fraternité is the national motto of France, the idea of equality is much different than to which Americans have grown accustomed. Hierarchy is quite important in France and modeling behaviors after King Louis XIV will serve you well when you meet the CEO or key political leaders. Whereas cultures like those found in the U.S., Canada or Sweden tend to share a value that people with different levels of power, prestige, and status, can interact with each other as equals, the cultures of nations like France as well as Asian countries expect recognition of social hierarchies based on a person’s social status. This acceptance of hierarchy leads to higher status differences, formal social relations and greater power concentrations among fewer people. It also means people who reside in lower rungs of the social order may have fewer perceived choices and rarely question authority. As a global leader coming from an egalitarian culture that might reward individuals that speak out or question authority figures, you will need to adjust your leadership approach if you want to create trust. It is crucial for you to define your rank and status at the onset of any relationship so that other individuals will know how to interact with you. You will also be expected to make the decisions affecting your organization with less input from subordinate. Tough vs. Tender Dimension I’ve done business and observed negotiations in Russia and learned that it is a tough culture. A “tough” culture has a preference for high material rewards to a winner and nothing to the loser. Tough societies also tend to enforce gender and racial stereotypes accepting male domination and aggressive behavior and discounting of minority races and cultures. When I was walking in downtown Moscow with our company controller who was of Indian descent, he was stopped by police who demanded to see his passport and questioned him. We found out later that this harassment was common and sent a message that certain foreigners are not welcomed. A book entitled Dilemmas of Diversity After the Cold War: Analyses of “Cultural Difference” by U.S. and Russia-based Scholars by Michele R. Rivkin-Fish and Elena Trubina expands on this theme describing social differences which often lead to symbolic violence and struggles between groups. It’s more difficult to assert which countries have a tender culture because the more aggressive participants stand out in business. When working within a tender culture, leaders need to be sensitive to gender issues. Men may also assume more domestic roles and take an active role in raising the family. Tender cultures also reject the “winner take all” approach championed in tougher cultures. Leaders need to adjust how they conduct their outreach to members of each kind of culture. While individuals from tough cultures will respond to personal challenges, members of tender cultures will respond more positively to efforts that result in “win-win” scenarios for everyone involved. Prepare differently Generalizations are dangerous yet they can give a clue to deep-rooted attitudes. With different nationalities in today’s workplace, just thinking in advance about how someone might think and behave will create better alignment in an organization and make your day more effective. Read Part I of this series here .

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Mohamed A. El-Erian: Markets Wake Up to Central Banks’ Complicated Tradeoffs

April 5, 2012

This week’s market action serves as a vivid reminder of how dependent valuations are on central bank policies, and especially the aggressive provision of liquidity by the Federal Reserve and the European Central Bank. The question for markets thus boils down to whether central banks will do more; and the issues these institutions face are extremely and increasingly complex. The global sell-off started on Tuesday with the release of the minutes of the most recent FOMC meeting. They were read by many as signaling less eagerness on the part of the Fed to embark on yet another round of liquidity injections (“QE3″). Virtually every asset class promptly slumped, including bonds, commodities and equities — a reflection of how liquidity, rather than fundamentals, partly underpins recent market strength. The sell-off in risk assets accelerated on Wednesday as the European Central Bank also cautioned about expectations of yet more unusual policy activism on that side of the Atlantic. The disappointing Spanish government bond auction was also a problem, coming at a time of mounting market concern about the country’s outlook. This time around, however, German and U.S. government bonds decoupled reflecting the “flight to quality” trade — out of risk assets and into what are regarded as safe heavens. Against this background, it is natural that investor conversations center on whether central banks will renew their liquidity injection programs if markets continue to sell off. Some believe that the institutions have no choice but to do so. Others are less sure. This uncertainty is not surprising. The analysis conducted here at PIMCO, including research for next week’s presentation of the Homer Jones Memorial Lecture at the St. Louis Federal Reserve, confirms that central banks face extremely complicated policy challenges: They are dealing with what Chairman Bernanke correctly called an “unusually uncertain outlook.” They are forced to use blunt tools. They receive very little support from other government agencies. And their repeated interventions inevitably distort price signals, alter market functioning, and disrupt liquidity. In sum, the critical trade-off in policymaking — between benefits, costs and risks — is becoming less attractive for central banks. Thus, recent signals of their hesitancy to do more, especially in light of improving economic data. When push comes to shove, however, we suspect that central banks may ultimately resort yet again to their printing presses, especially if meaningful economic and financial weaknesses reappear. Remember, this is not about what central banks SHOULD do; rather, it concerns what they are LIKELY to do. And in being forced to inject liquidity into the global system, central banks would be driven not by positive motivations but, rather, negative ones. In their hearts, central banks know that their policies cannot by themselves deliver the desired economic outcomes; and they are increasingly aware of the collateral damage associated with their unusual policy activism, as well as the unintended consequences. But they also feel that, for many reasons, they cannot be seen to stand on the sideline while politicians bicker, other agencies dither, and the economy stumbles. The markets’ obsession with central bank policies will not go away any time soon. Moreover, it will evolve over time to also include the question that holds the key to sustaining over time the bull market: whether central banks will be able to hand off the policy challenge — either to a robust economy or to other institutions that have better tools yet, for a host of reasons, have preferred to remain on the sidelines until now? Dr. Mohamed El-Erian is CEO and Co-CIO of PIMCO, the global investment manager. This post originally appeared at CNBC.com . © 2012 CNBC.com

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Stephen Robert Morse: Tracking the Success of Seed Accelerators

April 4, 2012

As a Tow-Knight Entrepreneurial Journalism Fellow at the CUNY Graduate School of Journalism, I am one of 16 lucky new media entrepreneurs who have access to world class mentors, financial opportunities, industry leaders, venture capitalists and like-minded thinkers. It is difficult to classify the program as a seed accelerator (because no seed funding is provided from the get-go), an incubator (because of the aforementioned relationships and opportunities that go beyond free office space), or an intrapreneurship for in-house academic experiment (because we have no obligations to continue our relationship with the university after the program ends). What I had not considered before embarking on this adventure was that a major benefit of having the Tow-Knight Center housed at CUNY is that all intellectual property that my colleagues and I create is our own. We don’t have to fork over any percentage of future revenues that we may derive from our forthcoming ventures to the institution or our advisers. I consider us lucky and rare to have this combination of resources without the potential of buyer’s remorse if a project grew but some equity was already distributed. This morning, I read an interesting INC article that provides an insider’s look into TechStars , the popular and fast-growing startup accelerator. While TechStars and YCombinator are generally considered the Harvard and Princeton equivalents of the accelerator world, I wonder whether the rest of the pack, essentially startups themselves, has equal value. While I enjoyed the INC piece, I was somewhat disappointed to learn that some TechStars applicants are accepted because of their relationships with the organization’s leaders, despite having severely underdeveloped or non-existent products. But on the other hand, I recognize that this is the way the world works. In private business, democracy has a very limited role. And merit may have even less. In the startup world, a frequently heard maxim is that venture capitalists invest in personalities and founders, not companies. With seed accelerators proliferating all over the world , one wonders if the talent pool at each individual accelerator will become severely diluted. Though it is impossible to gain data about the success of companies grown from seed accelerators that have not yet had the opportunity to flourish or flop, one can surmise that more startup accelerators will mean fewer success stories from each specific program. When YCombinator had less competition, it meant that they got their pick of the litter. Nowadays, founders may not want to schlep to Silicon Valley if they are confident that they can still make it in their home cities or countries. Jed Christiansen , a London-based American who works at Google, keeps track of seed accelerators through a spreadsheet on his personal blog . He defines seed accelerators as follows: The following are required to be a “seed accelerator” Open application process; anyone with an idea can apply Accelerator invests in companies, typically in exchange for equity, at pre-seed or seed stage Cohorts or ‘classes’ of startups; not an on-demand resource Programme of support for the cohorts, including events and company mentoring Focus on teams, and not individual mentoring Examples of what isn’t a seed accelerator: Programme where the startup pays for mentoring Incubator where the startup pays (discounted) rent in return for equity and/or discounted business services Programme where applications are restricted to certain groups (like students from a particular university) Because of the rapid growth of seed accelerators, now would be an ideal time for someone (an academic, perhaps, hint, hint) to create a more comprehensive database that keeps track of the success to failure ratio at each of these accelerators. I can already guess that firms that are only given $20K in seed funding in exchange for 7% of their company won’t have the same advantages that firms who are given $100k for an equal stake. In this sense, it will also be important for entrepreneurs to report back on any seed accelerators that are disorganized, don’t deliver on what they promise, or steal intellectual property — all issues that I foresee arising in the near future. But at the end of the day, one must think about Facebook, YouTube, Groupon and countless other uber-scalable companies that weren’t working within any set of rules at a seed accelerator when they launched. The investors flocked to them when their products were proven to be hits. So while some people wonder, what comes first — the chicken or the egg — I wonder what comes first — the seed or the flower that creates its own seeds to spread.

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Brian Hamilton: It’s a Good Time to Start a Business: Five Things You Need to Know

April 4, 2012

The economy is improving. Private company sales and profit margins are up and steadily increasing, GDP is growing, and there are signs of life in the real estate markets. However, while the unemployment rate is declining, it is still too high. Now is the perfect time to employ yourself by starting a business. Here is advice on the five things you need to know before you get started. 1) Do what you love. Find something that you know and something that interests you. 2) Start a low capital business. You’re not going to get a loan from anyone. Start small and build slowly and steadily. 3) Find something that is really needed in the marketplace. Do something that people don’t want to do or cannot do themselves. 4) Keep your overhead low. Hire slowly and do without. 5) Follow the customer. Value and listen to your customers — your best source of market research and the reason you’re in business.

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Amy Siskind: What if Goldman Sachs Was Run by ‘Fiona’ Blankfein?

April 4, 2012

Wake up Goldman Sachs! If your firm had more women, things would be better. In recent years, those of us on the outside have come to view Goldman Sachs as the perennial poster child for ethical lapses. But, when a departing employee — an insider for 12 years — writes an op-ed describing the Goldman environment as ” toxic and destructive ” — unrecognizable from when he joined in 1999, it’s all the more damning: When the history books are written about Goldman Sachs, they may reflect that the current chief executive officer, Lloyd C. Blankfein, and the president, Gary D. Cohn, lost hold of the firm’s culture on their watch. I truly believe that this decline in the firm’s moral fiber represents the single most serious threat to its long-run survival. Which left me to wonder: what if Goldman were run instead by ‘Fiona’ Blankfein? An interesting question in light of survey data just released by the Harvard Business Review which analyzes the leadership styles of women and men . Are women better leaders than men? The finding of the survey: unambiguously, yes! Here’s how the Goldman Sachs insider described the ingredients — the secret sauce — of the firm’s successful culture: “It revolved around teamwork, integrity, a spirit of humility, and always doing right by our clients.” According to Harvard Business Review , a ‘Fiona’ would outperform Lloyd in every element: ‘Collaboration and Teamwork’ — female mean percentile +6.1 , ‘Displays High Integrity and Honesty’ +9.3 , ‘Practices Self Development’ +9.4 and ‘Builds Relationships’ +7.1 . Women managers represent the same values which allowed Goldman to earn it’s clients’ trust for 143 years. Truth is, however: the difficulties at Goldman Sachs are not unique — even if they are the latest corporate pariah. My former employer, Morgan Stanley, recently announced its 2012 class of Managing Directors — 83 percent are men . The same as our current Congress ( 83 percent ) which, by the way, is the least productive and least popular Congress in our country’s history! The problem of gender imbalance is endemic and our leadership is failing us. Desperately failing us. And here’s the startling fact behind the numbers: unless we take action and change course, trends suggest gender imbalance will only get worse! The Truth about Women’s Progress: Where are the Fionas? On Wall Street, in corporate America and in politics, women today aren’t even getting into the pipeline. In the last decade — during the period depicted as ‘toxic and destructive’ in the Goldman op-ed — 141, 000 women — roughly 2.6 percent of female workers in finance — left Wall Street (389,000, or 9.6 percent, more men entered). More alarming, over that same period, the number of college and young women entering Wall Street declined by 22 percent . (Read why women are leaving Wall Street here ). And it’s not just on Wall Street. For the first time in decades, from corporate management to even politics, women’s progress has stalled or is moving backwards . The Rules of Engagement: A gift of the women’s movement in the 60s and 70s was for women to enter the workforce. But it was like giving us a car, without driving lessons. Women still haven’t learned to play the game. How could we? We haven’t been taught and these ways aren’t intuitive to us. It’s not our rules of engagement. The game remains male defined and male oriented. Because men still occupy the vast majority of leadership positions. And since we all tend to hire ‘people like us ‘ (We all pay lip service to the melting pot, but we really prefer the congealing pot), we’re in a vicious cycle. The way to break the cycle is advancing Fionas. Once women have a chance to set new rules of engagement, we will flourish and succeed. National Girlfriends Networking Day (‘NGN Day’): How do we get there? By cultivating and supporting one another. Today, just as many Fionas are graduating from college as Lloyds. But after college, women and men have vastly different trajectories with salaries and promotions. Why? Connections and networks are readily available and established for men. But women don’t have these connections, don’t think we deserve them, and don’t know how to build them. Decades ago, as women entered the workforce, we made a conscious effort to bring our daughters to work once a year. Today, we need to teach our daughters what to do once they are there — to teach women, young and old, to build their network of connections. This year we are starting that process — on June 4th — the first annual National Girlfriends Networking Day! On that day, we’ll begin the process of linking women together by creating a national network to help us all succeed. Women around the country will be meeting for breakfast, coffee, lunch and drinks to connect. Get involved by pledging to connect , attending a virtual event around the country — or making herstory as an Angel Investor along with prominent women like Senator Kirsten Gillibrand and FOX News co-anchor Gretchen Carlson. Desperately Seeking Fiona! We also need to give college and young women — our Fionas — a road map to success: A Girlfriends’ Guide . Our goal is to provide a realistic game plan — concrete steps and actions which young women can take, starting in their 20s — towards become tomorrow’s Fionas. Teaching them how to build their networks, connections and brand — and on their own terms! A Girlfriends’ Guide changes lives ( read this )! Join us cultivating and supporting tomorrow’s Fiona’s: 1) Get involved in National Girlfriends Networking Day ; 2) Devote one hour a month to mentor a young woman at The Mentor Exchange ; and 3) Reach out to The New Agenda set up a presentation of A Girlfriends Guide on campus.

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Richard Barrington: Seven Ways to Straighten Your Boomerang Child

April 3, 2012

Blame the economy. And get the spare bedroom ready. The recent wave of young adults returning to live with their parents has spawned the term “boomerang generation,” named for the object that turns after you throw it and sails back to you — a painful event if you weren’t expecting it. Similarly, if you’ve recently found your grown children asking to move back in, you may be experiencing pains of your own. Naturally, most parents are more than willing to make sacrifices for their children, and will make accommodations for them when they are in need. However, when young adults return home, it shouldn’t be to experience a second childhood. Parents need a game plan to make the arrangement bearable, get the kids on track to move back out, and most of all, help them finally achieve financial and social independence. In other words, parents need a plan for straightening their boomerangs. About the boomerang trend According to a recent study by the Pew Research Center , 29 percent of young adults (ages 25 to 34) have lived with their parents at some point in recent years. As of 2010, 21.6 percent of that age group was living in a multi-generational household — which typically meant living with their parents. High unemployment is one reason, but there is more to the trend than that. The percentage of young adults living in multi-generational households has been steadily rising since 1980. Back then, this percentage bottomed out at 11 percent, and remained well below today’s levels during the early 1980s, even though the unemployment situation back then was even worse than it has been in recent years. Also, while the trend slowed during the economic boom of the 1990s, the percentage of young adults in multi-generational households continued to rise. The rate of increase has accelerated again as the economy worsened in recent years. In other words, while the Great Recession may have exacerbated the situation, a long-term trend toward this kind of living arrangement has persisted through multiple economic cycles. Seven ways to straighten a boomerang Whatever the reason young adults have for moving back home, some parents may welcome it, while others may view it as a necessary evil. However, in no case should it be an excuse for the younger generation to lapse into adolescence. So, to help make the living arrangements bearable, to keep the kids focused on moving back out, and to help them develop a stronger sense of independence, here are seven tips for straightening out the boomerang generation: Come up with some kind of rent arrangement. Naturally, this should be on more favorable terms than it would be out in the cold, cruel world of landlords, but the young adult should not be absolved of financial responsibility. With so many older Americans behind on their retirement savings , this extra income might come in handy for the parents. If you don’t want to take money from your kids, have them put the equivalent of rent into a savings account , so they start building up the resources necessary to live more independently. Change rooms. If feasible, put young adults who return home somewhere other than the rooms they grew up in. This will help send the signal that this is not a second childhood. Establish ground rules for personal behavior. Your home should not be treated as a dorm or a hotel. Rules regarding noise, visitors and hours for coming and going should be established so as not to disturb your peace. Monitor job application activity. Make sure your son or daughter is applying for work every day — and keeping an open mind. Chances are, mommy and daddy didn’t start out in their dream jobs, and young adults need to understand that they can’t be too choosy in a tough economy. Make volunteering a substitute for work. If your adult child can’t find a job, have them volunteer for a regular set of hours instead. This will help them build a resume, make contacts and avoid slipping into the habit of idleness. Formulate a financial plan. Once your son or daughter starts working, help create a budget that will prepare them to move out. This will make sure they don’t take advantage of your cheap lodging to simply spend what they earn, and will teach them principles of goal-setting and budgeting that will help them maintain their financial independence once they’re back on their own. Discuss all these expectations explicitly and up front. You don’t need a formal contract or rental agreement — though some might prefer that — but you do need to set and reinforce these expectations. If they protest against “being treated like a child,” point out that you would lay down formal terms for any adult who sought to rent a room for you. With the baby boom generation now entering its retirement years, the percentage of multi-generational households may continue to increase, but for a different reason: Many aging parents will have to move in with their children for a combination of health and financial reasons. When that happens, perhaps it will finally be the kids’ turn to make the rules. The original article can be found at Money-Rates.com : ” 7 Ways to straighten your boomerang child ”

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Josh Levy: Hey America! We’re Ranked #16 in Broadband!

April 3, 2012

Q: Do you live in America? If you answered, “yes,” you can proceed directly to the “You live in a country ranked 16th in the world in broadband penetration, speed and price” section below. You live in a country ranked 16th in the world in broadband penetration, speed and price. It’s true . The U.S. ranks an average of 16th in the world in these three categories. That puts us behind countries like Portugal (15th), Belgium (9th) and Denmark (2nd), whose residents enjoy greater access to a faster, cheaper Internet than Americans do. There’s one core reason for our poor global performance. As journalist Rick Karr explained in his film on the state of broadband in Europe, a simple “game changer” — competition — leads to better broadband. But competition in the U.S. broadband market is virtually nonexistent. That means that millions of Americans live without high-speed Internet access, and those who do have it experience slower speeds and higher prices than their European counterparts. Most U.S. residents have a choice of only one cable provider, with slower DSL and satellite providing a cheap façade of competition . Big broadband companies are all too happy to point to this “competition” whenever they’re asked why they’ve been allowed to become quasi-monopolies that dictate how — and for what price — we connect to the Internet. Now the tiny sliver of broadband competition that still exists in America could disappear completely. Verizon and a group of cable companies including Comcast, Cox and Time Warner Cable have settled on a deal that would allow them to divide up the broadband market among themselves, leaving Internet users in the lurch. In short, Verizon would purchase a big chunk of wireless spectrum owned by the cable companies in exchange for an agreement to resell those companies’ broadband services to its customers — customers who once hoped that Verizon would build out its own FiOS network to compete with these very same cable companies. This deal amounts to an agreement between Verizon and these cable companies to stop competing. Whatever slices of the broadband market they currently dominate, they’ll continue to dominate — without the threat of competition. With that threat removed, these companies will have little incentive to lower prices, increase speeds or build out to underserved areas. Meanwhile, Verizon’s wireless spectrum purchase would make the already concentrated mobile market even more so — with AT&T and Verizon controlling two-thirds of all wireless subscriptions, 80 percent of the most valuable wireless spectrum and 80 percent of the entire industry’s profits. The U.S. broadband market is in bad shape. More competition could help fix it, but shady business deals and bad government policies are fostering more concentration, not less. How do we solve this competition problem? We’re asking Congress, the Justice Department and the FCC to block Verizon’s proposed deal . That’s a start. But we also have to support other forms of broadband competition, like municipally owned networks that compete with — and often beat — big incumbents like Comcast when it comes to speed, access and affordability. Unfortunately, those incumbents have spent millions to pass state-level bills that outlaw such networks. A movement is coming together to support communities’ right to decide for themselves whether to build such systems. You can join it here . You can also learn more about the history of corporations trying to control our access to basic utilities at the expense of residents who have depended on those utilities for their very survival. Indeed, many people see the battle for broadband as the 21st-century equivalent of the fight for rural electrification . We oppose the Verizon-cable deal and support community-owned broadband networks for one simple reason: Without competition, companies will leave Americans behind when it comes to the basic information utility of our time.

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Janet Tavakoli: MF Global: JPMorgan Produces Smoking Gun

April 3, 2012

When New York-based MF Global collapsed on October 31, 2011, its $41 billion in assets made it the eighth largest bankruptcy in U.S. history and the biggest financial firm to implode since Lehman in September 2008. Then Chairman and CEO Jon Corzine is connected to the head of one of his key regulators, the Commodity Futures Trading Commission (CFTC), through his former protégé at Goldman Sachs, Gary Gensler. He also knows the Fed’s William Dudley, a key member of the Fed’s Open Market Committee, from their days at Goldman Sachs. The Fed approved MF Global’s status as a primary dealer, a participant in the Fed’s Open Market Operations, less than one year after Jon Corzine took its helm. Corzine is also a former New Jersey governor, a former New Jersey U.S. senator and was a major campaign contribution bundler for President Obama. MF Global failed because of a disastrous leveraged bet on weaker European sovereign debt made by Jon Corzine. The problem wasn’t that the debt defaulted, rather that he didn’t have the money to throw in the pot when it was his turn to ante up. The firm filed for bankruptcy protection Oct. 31 after dipping into customer accounts. Around $1.6 billion of customers’ money is still missing. Probable Shortfalls of Customer Money Throughout 2011 MF Global reportedly employed 30:1 leverage — some reports are higher — against a portfolio of European sovereign risks including Belgium, Italy, Spain, Portugal, and Ireland. According to Bloomberg News, Corzine’s position on these sovereign trades was a gross position of around $11.5 billion , and the risk was only partially offset by short positions in stronger European credits. MF Global’s March 2011 report showed a net position, including offsets, was around $6.3 billion. According to Bloomberg’s information from an unidentified source: “At multiple meetings, Corzine reassured directors that the trades would work out… Corzine said the European countries he selected wouldn’t default before the bonds matured, and that the market was mis-pricing the debt.” (” Corzine Pushed Bet on Europe Debt to $11.5B ,” by Miles Weiss, Cristina Alesci and Matt Leising, Bloomberg News, Nov 28, 2011.) The accounting board, FASB, allowed Jon Corzine to characterize his trade as a “repo-to-maturity.” The problem with that is repo transactions are on balance sheets, and Jon Corzine’s trade was an off balance sheet transaction. In substance Corzine’s trade was a “total return swap-to-maturity,” a funding that includes a type of credit derivative, and Corzines trade received the off balance sheet accounting treatment of the total-return-swap-to-maturity. It allowed Jon Corzine to make a highly leveraged bet on fixed income securities that were going down in value and it allowed him to make that bet off balance sheet. In 2011, this trade was moving against Corzine. His reassurances to the board were empty, because his chief problem wasn’t default, it was not being able to come up with the cash to meet margin calls with his trading partners on this large leveraged bet. MF Global would have had several trading days in 2011 with moves of 5 percent to 10 percent on this sovereign risk. MF Global was so thinly capitalized that this trade alone could eat up half of its capital. Any of MF Global’s other asset positions moving the same way in 2011′s highly correlated markets would have put MF Global in a position of negative equity. From a risk management point of view, examiners have to consider the very strong possibility that MF Global had several negative equity days throughout 2011. An investigation into money flows throughout 2011 is in order. August 2011: MF Global Agrees to a $90 million Settlement In early 2008, a rogue trader racked up $141.5 million in losses in unauthorized trades that exceeded his trading limits. It seems he accomplished this in under seven hours. In August 2011, MF Global and the underwriters of its 2007 initial public stock offering (IPO) agreed to pay around $90 million to settle claims by investors that they were misled about MF Global’s risk management prior to the rogue trader’s actions. Since 2008, MF Global’s financial condition has been nothing to brag about. Now the settlement is in jeopardy due to the bankruptcy. In August, customers started pulling billions of dollars out of their segregated accounts with MF Global. It was the biggest outflow of funds since January 2009. The bankruptcy trustee may claw back transfers of funds from MF Global as it was teetering, because it is likely that employees within MF Global were well aware of the problems and tipped off key customers. Also in August of 2011, FINRA seemed to catch on that MF Global’s transactions were riskier than it previously thought and asked for more capital against these trades. Investigators Examining Possibility of Illicit Transfers in August According to the New York Times , “investigators are now examining whether MF Global was getting away with illicit transfers as early as August.” The illicit transfers refer to the use of customer funds to make up for MF Global’s own shortfall of funds needed to meet its margin calls and other expenses. As noted previously, it would be reasonable for investigators to look at MF Global’s accounts even earlier in the year. (” A Romance With Risk That Brought On a Panic ,” by Azam Ahmed, Ben Protess, and Susanne Craig, NYTimes’ Dealbook , December 11, 2011.) Wednesday, Oct 26, and Thursday, Oct 27, 2011: “Substantial Deficit” in Customer Accounts Christine Serwinski, MF Global’s chief financial officer for North America, testified in last Wednesday’s congressional hearing that she was told on October 27 of a “substantial deficit” in customers’ accounts for October 26, the previous day. She was on vacation when she was informed of the shortfall and claims she was told the shortfall was only in the “cushion” that MF Global had in customer accounts. She claimed the deficit didn’t violate rules — which is implausible given other events of that week (see MF Global’s check kiting below). Obviously there was a huge problem at MF Global and this would have gone to the top of the house, to CEO Jon Corzine, in a firm that had any sort of reasonable corporate governance. Serwinski further testified that on October 30, she was told of a nearly $1 billion deficit in customer funds. Regulators weren’t told of deficits until October 30. The firm collapsed into bankruptcy on October 31. (” MF Global exec cites early worry on risk to funds ,” AP, March 27, 2012.) Thursday October 27: MF Global Breaks Custom of Wire Transfers and Writes Rubber Checks Instead Jon Corzine claims he didn’t know about improper transfers of customer funds and of shortfalls in customer accounts until October 30, yet on Thursday, October 27, four days before the bankruptcy and again on Friday, October 28, three days before its bankruptcy, dozens of MF Global customers asked for wire transfers when they closed accounts, and they didn’t get them. Instead, MF Global wrote paper checks, sent the checks via snail mail. The checks bounced, since customers received them after MF Global declared bankruptcy on Monday, October 31. (” Clients Raise Questions About MF Global Checks ,” NY Times Dealbook, April 1, 2012, by Azam Ahmed and Ben Protess, and ” MF Global and the Rubber Check ,” by Matthew Goldstein, Reuters, November 5, 2011.) October 28: Edith O’Brien writes of Corzine’s “Direct Instructions” to transfer $200 million By now every officer of MF Global should have been on red alert that MF Global was short of cash and was at risk of using customer funds to meet its daily needs, and this is prohibited. On the morning of Oct. 28, three days before MF Global’s bankruptcy, JPMorgan contacted MF Global about an overdraft in London. A Congressional memo circulated March 23, 2012, quoted an email from Vinay Mahajan, MF Global’s global treasurer. Vinay wrote JPMorgan was “holding up vital business in the U.S.” and called for funding “A.S.A.P.” Bloomberg News reported that on October 28, Edith O’Brien, an assistant treasurer for New York-based MF Global, wrote an email saying that a $200 million transfer of funds was “Per JC’s direct instructions.” It turns out that part of that money was customer money, and the transfer was impermissible. ( “MF Global’s Corzine Ordered Funds Moved to JPMorgan , Memo Says,” by Phil Mattingly and Silla Brush, Bloomberg News, March 23, 2012.) October 28′s Smoking Gun: JPMorgan Doesn’t Buy Corzine’s Story Jon Corzine testified before the Senate Agriculture Committee in December: “I never gave any instructions to misuse customer money, never intended to give any instructions or authority to misuse customer funds, and I find it very hard to understand how anyone could misconstrue what I’ve said as a way to misuse customer money.” But that isn’t the standard to which Corzine is held. If investigators can show he knew of the risk that customer money might be included in the $200 million transfer he ordered, Corzine faces potential legal liability. (” MF Global’s Corzine May be Liable if Customer Risk Known ,” By Linda Sandler and Phil Mattingly, Bloomberg News, Mar 25, 2012.) Money went from a U.S. customer account to a U.S. MF Global account, and then it was transferred to a UK account. Even those who wish to claim Corzine slipped through a dubious loophole in the UK are out of luck. The original impermissible transfer of money occurred from a U.S. customer account to a U.S. based MF Global account. In my opinion, Corzine knew or should have known there was a strong probability that customer funds would be transferred. As it happens, they were. On October 28, JPMorgan didn’t buy Corzine’s story, either. Having been a risk manager myself, I believe Barry Zubrow, JPMorgan’s chief risk officer, did exactly the right thing. He called Jon Corzine to get him to verify that the funds belonged to MF Global and that none of the money was customer money. Zubrow, an outsider, was well aware of the possibility that customer funds had been transferred. It’s implausible that Corzine wasn’t aware of the potential impermissible transfer of customer funds when he gave the authority to make the transfer. By doing its job, JPMorgan removed Corzine’s ability to credibly deny knowledge of the potential problem. October 28: JPMorgan Asked for Written Assurances and Didn’t Get Them According to the NY Times , Jon S. Corzine, the former chief executive of MF Global, was told during the brokerage firm’s final day of business that a crucial transfer of $175 million came from the firm’s own money, not from a customer account, according to an internal email. The email, sent by an executive in MF Global’s Chicago office, showed that the company had transferred $175 million to replenish an overdrawn account at JPMorgan Chase in London. The transfer, the email said, was a ‘House Wire,’ meaning that it came from the firm’s own money. The email, sent at 2:20 p.m. on Oct. 28 to Mr. Corzine and two of his assistants in New York, says the transfer came from a ‘nonseg’ account, industry speak for a noncustomer account. (” E-Mail to Corzine Said Transfer Was Not Customer Money ,” by Ben Protess and Asam Ahmed, NY Times Dealbook, March 25, 2012) The problem with the NY Times report is that the email never said that the original source of funds wasn’t from a customer account, and a ‘house wire’ just means an internal transfer of funds. The email only verifies that the money was eventually transferred from a ‘nonseg’ account. It doesn’t rule out that money was transferred from a customer account to an MF Global account, which as it happens — and the NY Times later reports within the same story — it was. The New York Times bolloxed up the title of this story, and even within the story it acknowledges: “But it is unclear whether someone at the commodities brokerage firm told Mr. Corzine the origins of the money during a phone call or in person.” To be clear, the email in no way exonerates Jon Corzine and it in no way proves that he was unaware that the original source of funds was from a customer account and that the transfer included customer money. The email only suggests that the eventual transfer to the UK was from a U.S.-based MF Global account. But MF Global was short of funds, and the money that seemingly magically appeared in its ‘nonseg’ account was first transferred from a customer account. According to his December Congressional testimony, Jon Corzine said he spoke with Ms. O’Brien, who confirmed that the transfer was proper. “I had explicit statements that we were using proper funds, both orally and in writing, to the best of my knowledge.” But “proper funds,” could just mean funds from a ‘nonseg’ account that gave the appearance of being proper. Corzine knew or should have known that MF Global’s U.S. account only had funds because customer money from a U.S. account had been transferred into it. Ms. O’Brien has asked for, but not yet been granted, immunity. Last week she invoked her Fifth Amendment rights at a Congressional hearing. As for JPMorgan, it asked Jon Corzine for a signed letter stating that the transfer was legitimate. He reportedly responded : “Send me the letter and we’ll have our people look at it.” It was disingenuous of Jon Corzine to pass JPMorgan’s letter to Edith O’Brien to sign given that it asked for a sign-off that all “past, present and future” transfers complied with the law. Ms. O’Brien would have been asked to take responsibility for all transfers without having the authority over them. Jon Corzine had the broad authority to sign the letter, but by passing it on, he effectively stalled. JPMorgan sent additional versions of this letter in response to MF Global’s requests for revisions, but JPMorgan never received a signed letter back. On October 31, 2011, MF Global Admitted to Impermissible Transfers MF Global’s officers admitted to federal regulators that before the collapse the firm diverted cash from customers’ accounts that were supposed to be segregated: MF Global Holdings LTD… violated requirements that it keep clients’ collateral separate from its own accounts… Craig Donohue, CME Group’s chief executive officer, said on a conference call with analysts today that MF Global isn’t in compliance with the rules of the exchange and the Commodity Futures Trading Commission. (” MF Global Probe May Involve Hundreds of Millions in Funds ,” Bloomberg News, November 1, 2011, by Silia Brush and Matthew Leising.) Yet on November 1, Kenneth Ziman, a lawyer for MF Global, relayed information from MF Global to U.S. Bankruptcy judge Martin Glenn in Manhattan: “To the best knowledge of management, there is no shortfall.” If that sounded like a cover-up, it was: According to a U.S. official, MF Global admitted to federal regulators early Monday [October 31, 2011] that money was missing from customer accounts. MF Global acknowledged a shortfall in a phone call amid mounting questions from regulators as they went through the firm’s books. (” MF Global’s Collapse Draws FBI Interest ,” by Devlin Barrett, Scott Patterson, and Mike Spector, Wall Street Journal , November 2, 2011.) The initial bankruptcy estimate was a shortfall of around $600 million. As of Monday November 21, MF Global’s liquidating trustee believed the shortfall may be as much as $1.2 billion and later estimates put the shortfall of customer money at $1.6 billion. MF Global Debacle Damages a Key Global Market Even if all of the money is eventually clawed back and recovered, this remains an impermissible act. Moreover, full recovery — even if it is possible — is not the same as restitution. People have been denied access to their money, and businesses and reputations have been tarnished. The futures market is a globally connected market and it is a key mechanism for farmers, metals miners, and metals fabricators (among others) to hedge their risk. Confidence in the futures market has been shaken. No one knows if their money is safe, but what is more disturbing is the appearance of crony capitalism once again giving favored treatment, lax regulation, and absent oversight to a crony capitalist that abused all of these perks to blow up a large financial firm and damage a key global market. So far, no one has been held accountable. On March 26, 2012 , I discussed these issues with Lauren Lyster on RTTV’s Capital Account :

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