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Target Sues San Diego Gay Rights Group

March 25, 2011

SAN DIEGO — A judge said Friday he would issue a ruling next week in a lawsuit filed by Target Corp. against a pro-gay marriage group to make it stop canvassing outside the retailer’s San Diego County stores. The suit alleges the activists are driving away customers by cornering them and talking about gay marriage. Rights advocates say the legal battle between Target and Canvass For A Cause could further strain the retailer’s relations with the gay and lesbian community. Target previously made a $150,000 donation to a business group backing a Minnesota Republican candidate opposed to gay marriage. Minnesota-based Target insisted it remained committed to the lesbian, gay, bisexual and transgender community and its lawsuit has nothing to do with the political agenda of the organization. During a court hearing Friday in San Diego, Target attorney David McDowell told Judge Jeffrey Barton that the solicitors are on private property, and Target has the right to enforce its policy against solicitors. “The question is Target’s property right and its right to exclude,” McDowell told Barton. The group tries to collect signatures and donations in support of gay marriage. Barton had asked McDowell why the company did not present testimony from customers complaining about the activists. McDowell said Target could get such testimony if needed, but it was not needed since Target just wants to exercise its right to ask people to leave its property. Bryan W. Pease, the attorney for Canvass For A Cause, said Target does not have that right. He told the judge the outside area surrounding stores in shopping centers like Target have been considered by the courts to be public domain for free speech. He argued that Target is taking action because it does not agree with the group’s message about gay marriage. Barton said he will issue a written ruling by the end of next week. Target says it has taken similar action against a number of organizations representing a variety of causes. It alleges in the lawsuit that activists with the San Diego group harass customers by cornering them near front entrances of stores and debating with them about their views on gay marriage. The corporation says at least eight Target stores in the area have reported receiving more than a dozen complaints daily since canvassers started working outside their stores in October 2010. Target says the activists have refused to leave when asked politely and shown the company’s policy prohibiting “expressive activity” on its property. Canvass For A Cause director Tres Watson says Target wants to silence the 12,000-member group that formed in 2009 because it promotes gay marriage. “It’s very David vs. Goliath,” he said. “We understand they’re the Goliath in the room. They’ve got all money in world to get us to stop talking about gay marriage.” Watson says volunteers are trained daily on being professional and polite and their aim is to educate the public about the rights of gays and lesbians. He says they have a right to work outside the stores and the courts have ruled in the past that shopping centers are today’s public squares where freedom of speech should be allowed. “We train our staff and volunteers very carefully in techniques in winning people over,” he said. “When you’re trying to persuade voters and reach out to the community with a message, there is no advantage to being aggressive.” Target was seen as an ally of the gay and lesbian community before it gave money to MN Forward, which supported Tom Emmer, who lost the governor’s race to Democrat Mark Dayton. Target later said it was sorry for the hurt feelings and tried to repair its public relations damage from the controversial donation. Target created a committee to help it better scrutinize decisions regarding financial donations. The company also negotiated a deal with Lady Gaga to sell a special edition of her upcoming album in a partnership Gaga said was tied to their “reform,” supporting the gay community and making up for past mistakes. But the singer backed out a few weeks ago.

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The Million-Dollar Weapon

March 25, 2011

By Sharon Weinberger Center for Public Integrity In the opening days of the assault on Libya, the United States and the United Kingdom launched a barrage of at least 161 Tomahawk cruise missiles to flatten Moammar Gadhafi’s air defenses and pave the way for coalition aircraft. In fiscal terms, at a time when Congress is fighting over every dollar, the cruise missile show of military might was an expenditure of nearly a quarter of a billion dollars. Each missile cost $1.41 million, close to three times the cost listed on the Navy’s website. Raytheon Corp. is the manufacturer of the Tomahawk Block IV, a low-flying missile that travels at 550 miles per hour. During a decade of war in Afghanistan, Iraq, and now Libya, the Pentagon has increasingly relied on the Tomahawk. A year ago, Raytheon boasted of its 2,000th Block IV delivery to the Navy. The 20-foot missile is particularly attractive for the military in current conflicts because it can be launched from submarines and surface ships at a safe distance and can be used to take out air-defense systems that could pose a threat to manned aircraft. William Hartung, director of the Arms and Security Initiative at the New America Foundation and author of the book Prophets of War , said the use of the Tomahawk helps explain, in part, the high cost of the operations in Libya. “The no-fly zones in Iraq averaged about $1 billion or so per year, while the Libyan operation cost $100 million or more on the first day, largely due to the use of cruise missiles,” Hartung said. “I would stop short of calling it a boondoggle, as it does seem to be getting the job done, just at a very high cost,” Hartung told the Center for Public Integrity. Some members of Congress are nervous about yet another war, cost being one of their complaints. “It is hard to imagine that Congress, during the current contentious debate over deficits and budget cutting, would agree to plunge America into still another war,” said Rep. Dennis Kucinich, an Ohio Democrat, in a statement. “Our nation simply cannot afford another war, economically, diplomatically or spiritually.” Tomahawks have high accuracy rate The Tomahawk was first used operationally in the 1991 Gulf War, when 288 cruise missiles were fired at Kuwait and Iraq to destroy Iraqi forces. The Navy claimed the missiles, which were used to target everything from air defense sites to Saddam’s presidential palace, had an 85 percent accuracy rate. The low-flying cruise missile was used again, in 1998, against Serb forces, and over 325 Tomahawks were launched against Iraq that same year in Operation Desert Fox. During the Iraq war in 2003, the number of Tomahawks used more than doubled compared to the first Gulf War, with over 725 of the cruise missiles launched at Iraq, according to Richard Myers , then chairman of the Joint Chiefs of Staff. The Tomahawk, which is guided to its target by GPS, has tended to work well for fixed sites, like air defense systems, but perhaps less well for so-called fleeing targets, which depends on precise and up-to-date intelligence. In August 1998, President Bill Clinton ordered U.S. Navy vessels in the Arabian Sea to strike suspected Al Qaeda sites in Sudan and Afghanistan in retaliation for the Africa embassy bombings. “Though most of them hit their intended targets, neither Bin Ladin nor any other terrorist leader was killed,” the 9/11 Commission wrote in its final report. “[Former National Security Advisor Sandy] Berger told us that an after-action review by [CIA] Director [George] Tenet concluded that the strikes had killed 20-30 people in the camps but probably missed Bin Ladin by a few hours.” In some cases, it’s hard to judge the Tomahawk’s record: Amnesty International claims 41 civilians were killed by a U.S. Tomahawk strike against Yemen in 2009, but neither U.S. nor Yemeni officials ever confirmed the attack, which was reportedly directed against Al Qaeda sites. In Libya, the government claimed the recent Tomahawk strikes killed 48 civilians , though those reports have not been confirmed. Missile cost nearly tripled since 1999 From the standpoint of helping set up the no-fly zone, the Tomahawk’s use has been a success, according to U.S. officials. The most current version of the Tomahawk has some noted improvements, most significantly its ability to be reprogrammed in flight via two-way satellite communication. It that sense, the Tomahawk is roughly similar to an unmanned drone aircraft, except that it doesn’t ever come back. It’s not clear, however, how often its ability to be reprogrammed is actually used. “In the real world, you’re just not going to have the sort of precise intelligence that would tell you, after you launch a Tomahawk and it’s halfway there, that now there’s a bus full of widows and orphans” and it needs to be diverted, said John Pike, the director of GlobalSecurity.org. “That just doesn’t happen.” The cost of the Tomahawk has long been an issue. The Navy, according to a public fact sheet on its website, places the price tag of a Block IV missile at $569,000, but that’s in fiscal year 1999 dollars. However, Rob Koon, a spokesman for the Navy, on Wednesday placed the current price tag at $1.41 million. A spokesman for Raytheon, citing current operational use of the Tomahawk, directed all questions about the Tomahawk to the Navy. Whether the increasing use of the Tomahawk will translate to more orders is unclear. The Navy declines to discuss inventory numbers, citing operational security, but in February 2010, Raytheon announced that it had delivered its 2,000th Tomahawk Block IV missile to the Navy. The company’s trademarked motto is “Customer Success is Our Mission.” With $25 billion in revenues and $1.84 billion in profits companywide in 2010, Raytheon is one of the five largest defense contractors and has benefited from the military’s increasing reliance on cruise missiles. Missile sales have also been paralleled by its lobbying effort. Raytheon, now the world’s biggest producer of guided-missiles, spent just shy of $7 million on congressional lobbying in 2010, compared to $2.32 million a decade earlier, according to the Center for Responsive Politics’ OpenSecrets.org. Raytheon has liberally sprinkled campaign contributions across Congress, including more than $2.1 million in 2009-2010. The contributions were balanced between parties, with 53 percent going to Democrats and 46 percent to Republican candidates, according to OpenSecrets. Even in an era of staggering weapons costs, the price tag for a Tomahawk stands out because it’s only used once. So, is the Tomahawk worth well over $1 million a shot? “They are expensive rounds, but they give you the potential to attack heavily defended targets up front,” said Barry Watts, a senior fellow at the Washington, D.C.-based Center for Strategic and Budgetary Assessments. “How do you value not putting a bunch of pilots in harm’s way?”

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Leahy Presses Obama To Name Key Reformer To Swaps Panel

March 25, 2011

WASHINGTON — Sen. Patrick Leahy (D-Vt.) is lobbying President Obama to appoint Sean Cota, a Vermont business owner and an advocate of the regulation of the derivatives trade, to an open seat on the powerful Commodity Futures Trading Commission. Leahy sent a letter to the president on Wednesday backing Cota’s appointment. Leahy’s pick for the panel runs Cota & Cota, a longtime family-owned home heating company based in Vermont. Cota was active in the Commodity Markets Oversight Coalition, an alliance of small businesses, consumer advocates and other “end users” of derivatives. Cota was a fixture on the Hill during Wall Street reform, articulating opposition to dark derivatives markets and serving as a counter balance to industry lobbyists who insisted that regulating derivatives and clearing them in the open on an exchange would increase the cost of hedging risk. He was part of a powerful coalition of unlikely allies who lobbied to bring derivatives trading into the sun. He’s a past chairman of the New England Fuel Institute, which lobbied on behalf of reform. Leahy is a senior member of the Senate Agriculture Committee, which has jurisdiction over CFTC nominations – a relic of the days when commodity futures were used primarily by farmers to hedge pricing risk. Some small businesses still rely on derivatives to hedge against the risk of inflation or price swings, but because most derivatives aren’t traded on exchanges similar to the stock market, small end users of swaps have little way of knowing whether they’re paying a fair price or getting gouged on fees. Leahy, a Democrat from Vermont, is also chairman of the Judiciary Committee, a powerful spot and one that controls the flow of judicial nominations that the administration wants confirmed. A White House that wants its judges confirmed can resist only a small number of entreaties from the panel’s chairman. Were Cota to be nominated, he’d face an uphill climb in a Senate that is approaching stalemate on confirmations, as Democrats lack the 60 votes needed to overcome a filibuster. The CFTC is currently led by Gary Gensler, who was initially greeted by liberal Democrats with great suspicion for his role in pushing deregulation in the 1990s and his long stint at Goldman Sachs. He has since had an ideological conversion, putting him firmly on the pro-regulatory side, and counts among his allies some of his former opponents. Cota and Gensler hold many of the same positions, but the two arrived at them by starkly divergent paths. Gensler was shocked out of his deregulatory mindset when the dark derivatives market nearly brought down the global economy. Cota, meanwhile, watched fuel prices in Vermont fluctuate over the years while the cost of hedging continued to climb. “Sean has years of experience working with me and other members of Congress on financial reform efforts,” Leahy wrote in the letter to the president, which was obtained by HuffPost. “An early voice warning of manipulation and fraud needlessly driving up the cost of energy to American consumers, Sean has testified before Congress and the CFTC nine times on commodity markets and financial derivatives. His knowledge was integral in the drafting of key commodity, swap, and derivative provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act.” Spokespersons for Leahy and the White House weren’t immediately available.

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Supreme Court Won’t Hear Campaign Finance Rules Challenge

March 21, 2011

WASHINGTON — The Supreme Court won’t hear a Republican-backed challenge of federal campaign finance restrictions. The court on Monday refused to hear an appeal by former Louisiana Rep. Anh “Joseph” Cao and the Republican National Committee. Cao wanted the Supreme Court to declare unconstitutional the $42,000 federal limit on what state and national parties could spend in 2010 in coordinated efforts on behalf of a candidate in his race. Currently, the state and national parties cannot consult with each other on money spent beyond that limit. State party leaders have said can lead to duplicative or contradictory messages. The 5th U.S. Circuit Court of Appeals said the campaign finance limit was constitutional. Cao lost his seat last year to Democrat Cedric Richmond. The case is Cao v. Federal Election Commission, 10-776.

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Scott Walker Releases E-Mails About Union Rights

March 18, 2011

MADISON, Wis. — Wisconsin Gov. Scott Walker released to The Associated Press on Friday tens of thousands of e-mails he received in the days after introducing his plan to strip public workers of nearly all their collective bargaining rights. The e-mails provide a first glimpse of the extent of public support that Walker said he was receiving from Wisconsin residents via e-mail for the proposal, as well as extensive opposition that he generally downplayed. Signed into law a week ago, but halted Friday by a judge after a challenge from Democrats, the contentious plan drew tens of thousands of pro-labor protesters to the Capitol and has galvanized union supporters across the country. Walker first mentioned the e-mails on Feb. 17, the same day 14 Democratic state senators fled to Illinois in an effort to keep the legislation from passing. As thousands of protesters banged on drums and blew whistles outside his office door, Walker told reporters he had received 8,000 e-mails – the bulk of which he said supported his efforts. “The majority are telling us to stay firm, to stay strong, to stand with the taxpayers,” Walker said at the time. “While the protesters have every right to be heard, I’m going to make sure the taxpayers of the state are heard and their voices are not drowned out by those circling the Capitol.” The following day as an estimated 40,000 protesters flooded the Capitol, Walker said he received more than 19,000 e-mails and believed they were indicative of a “quiet majority” that backed his proposal. An initial review by the AP of the e-mails found that a mass e-mail Walker sent to state workers on Feb. 11, the day he introduced his proposal, thanking them for their service was met with a deluge of responses, many of them angry. “Please, keep your backhanded ‘thank you’s and empty compliments to yourself,” one person who identified himself as a state corrections worker wrote to Walker. “Actions speak louder than words, and every one of your actions speaks quite clearly to your irrational hatred of the very people that have dedicated their lives and careers to keeping the state running safely and efficiently.” Another woman who identified herself as a state prisons sergeant wrote in capital letters: “WHY ARE YOU TRYING TO TAKE WHAT WE HAVE WORKED SO HARD FOR? WE ALL HAVE FAMILIES AND HAVE CHILDREN OF OUR OWN TO FEED! TIMES ARE HARD ENOUGH WITH THE ECONOMY THE WAY IT IS!” One woman who identified herself as a Milwaukee Public Schools employee wrote in to support Walker’s plan. “I voted for you in November, and today I am thankful that I did so,” she wrote. “This legislation is more than fair to us in the public sector and will bring a measure of financial relief to the people of our state. Keep up the good work, Governor. I’m glad to see us moving in a conservative, constitutionally sound direction.” Other e-mails reviewed by the AP came from Wisconsin residents working in the private sector. “I urge you to protect collective bargaining rights for public employees. Making collective bargaining illegal would be devastating to Wisconsin’s working families and economy,” wrote a resident from Oak Creek, Wis. A couple from Genesee, Wis., encouraged Walker to “stay firm” and not give in to the opposition. “We support what you are doing. It’s the right thing to do for Wisconsin,” they wrote. AP and Isthmus, a weekly Madison newspaper, both filed open record requests with Walker’s office on Feb. 18 seeking the 8,000 messages the governor referenced at his news conference. The AP amended the request a week later, seeking all e-mails Walker had received through that day. After receiving no response from the governor’s office, the AP and Isthmus filed a joint lawsuit on March 4 seeking the e-mails. A settlement reached March 16 called for Walker to release the messages and pay the organizations’ attorney fees, which came to $7,000. The agreement specified that Walker did not acknowledge violating the state’s open records law. The public outcry over Walker’s collective bargaining proposal turned the state and its Capitol into a national flashpoint as lawmakers struggled to balance state budgets crippled by the Great Recession. The law requires all public workers, except most police and firefighters, to pay more for their benefits. It also limits most public workers’ collective bargaining rights to wages only, and caps those potential increase to the rate of inflation. The law means they can no longer negotiate issues such as work conditions, vacation time or grievance processes. Walker says the law is needed and will help the state fill its current $137 million budget deficit and a projected two-year shortfall of $3.6 billion. He said the plan gives local governments the flexibility to absorb more than $1 billion in cuts to state aid that he’s proposed as part of his budget plan. Opponents, including teachers, union leaders and the Senate Democrats who fled the state, have argued Walker’s true goal was to bust the powerful public-sector unions that have traditionally served as a strong source of support for Democrats. On Friday, a Wisconsin judge issued a temporary restraining order blocking the law from taking effect. The law had been challenged by Dane County District Attorney Ismael Ozanne, a Democrat who argued a legislative committee that broke a stalemate that had kept the law in limbo for weeks met without the 24-hour notice required by Wisconsin’s open meetings law. The order keeps Secretary of State Doug La Follette from formally publishing the law, which is required for it to take effect. ___ Associated Press writer Scott Bauer contributed to this report.

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House Republicans Amplify Attacks On Elizabeth Warren, Consumer Protection

March 16, 2011

WASHINGTON — In a hearing marked by openly hostile questioning from House Republicans, consumer advocate Elizabeth Warren made her highly anticipated first appearance before Congress as a member of the Obama administration, emphasizing the need for stronger oversight of big banks and small mortgage firms. Warren, who is currently tasked with setting up the new Bureau of Consumer Financial Protection, was subjected to two and a half hours of inquiry before a Financial Services subcommittee regarding her role at the emerging agency and the scope of its powers. In her testimony, she focused on the need for easily-understood consumer lending terms and stronger enforcement of predatory lending regulations. “I don’t care how big you are, I don’t care who you your friends are, everybody follows the law,” Warren said, adding later, “What this agency is about is making the prices clear, making the risks clear, making it easy to compare one product to another. The point is to get an informed consumer, because I believe that American families are good at making decisions when they have good information upfront.” Congressional Republicans attempted to portray Warren as the “unaccountable” head of a bureaucracy immune from oversight from Congress or federal agencies. Republicans are waging a two-front war on the CFPB, hoping to cut its funding and weigh down its rulemaking procedures by replacing its single director with a five-member board of directors. House Financial Services Committee Chairman Spencer Bachus (R-Ala.) has introduced a bill to establish such a board, which has garnered 11 Republican cosponsors, and last week told an audience of international bankers that such a commission was the most feasible way to limit further regulation given Democratic control of the Senate. Bachus stated early in Wednesday’s hearing that the CFPB has “no oversight” and “no accountability,” a charge echoed by Reps. Scott Garrett (R-N.J.), Sean Duffy (R-Wis.) and others. “When we don’t have any oversight of what you’re doing, I view that as incredibly problematic,” said Duffy, a former star of MTV’s “The Real World” who has occupied since January the seat long held by Democrat Dave Obey. Warren was clearly anticipating the claims, which Republicans have been making to the press since President Barack Obama signed the Dodd-Frank financial reform bill into law last summer. She presented lawmakers with 34 pages of written testimony covering everything from the agency’s plans for mortgages and credit cards to its budget needs, hiring procedures and organizational chart. Several Democrats on the committee were noticeably irked by the questioning. “I do think that Dodd-Frank, in allowing the CFPB to be overruled by the safety and soundness regulators, does put a … fail-safe in there,” Rep. Stephen Lynch (D-Mass.) said, referring to the bureau’s housing within the Federal Reserve, the nation’s central bank charged with preserving the stability of the financial system. Rep. Al Green (D-Texas) ticked off a list of statutory oversight requirements the CFPB is subject to: the Government Accountability Office must perform an annual audit of the new agency’s operations; it must submit quarterly reports to the Office of Management and Budget; and the director must appear before Congress at least twice a year. Perhaps more importantly, the Financial Services Oversight Committee can overrule any new regulation issued by the CFPB if the committee deems that the rule poses a threat to bank stability. Warren’s supporters say the main objections to the agency aren’t grounded in any serious good-governing principles. Instead, they say, politicians are simply trying to preserve big banks’ bottom lines. “There’s been no meaningful oversight of the big financial institutions for more than a generation, and even though the result was financial collapse, there’s real resistance to reform,” a source close to Warren told HuffPost. “She represents unwanted accountability and balance in the system, and the industry has virtually unlimited resources and lots of allies.” In an interview with HuffPost on Thursday, Rep. Randy Neugebauer (R-Texas) acknowledged that plans to curtail the CFPB’s funding were part of an effort to limit its ability to function effectively . Other Republicans zeroed in on Warren’s role in an ongoing settlement with big banks and other mortgage servicers over widespread allegations of improper foreclosure practices. Warren noted that her agency currently has no legal authority to negotiate a settlement, but said she had been asked to advise various negotiators on the deal, since the CFPB will have regulatory responsibility for mortgage companies starting in July. Warren has been pushing back against efforts to politicize the negotiations. “Political attacks against federal and state law enforcement officials for responding to alleged legal violations are dangerous,” she said in a statement released Tuesday. “We know what can happen when laws aren’t fairly or consistently enforced because of political pressure, and it doesn’t end well for American families, for honest businesses, or for the economy.” Many GOP objections were directed at the notion of consumer protection regulation itself. “What you’re talking about today … is preventing people from being able to fulfill the American Dream!” Rep. Lynn Westmoreland (R-Ga.) said in response to a story from Rep. Bill Huizenga (R-Mich.) about a constituent in the banking industry who told him, “I’m not gonna be able to serve the people … because of the paperwork and the layering.” Warren, however, has said that the CFPB’s first task will be to simplify credit card and mortgage disclosures into a single, easy-to-understand page, rather than stacks of paper filled with complicated fine print. Because several different regulators have consumer protection jurisdiction for banking activities, the amount of paperwork required to meet similar rules can be lengthy. While some Republicans expressed skepticism about Warren’s efforts to eliminate unnecessary fine print, Neugebauer told HuffPost on Thursday that he is on board with those plans. “I get the disclosure piece,” Neugebauer told HuffPost. “When I first started buying property, there was a one-page closing statement, there was a one-page note and the deed of trust was the front and back of another piece of paper. And so you’d walk out of a transaction with five pieces of paper.” Democrats at the hearing repeatedly praised Warren, with many suggesting she would make a good director for the nascent consumer protection agency. Rep. Brad Miller (D-N.C.) likened the CFPB to federal groups that began regulating meat during the early 20th century. At the time, Miller noted, the meatpacking industry decried attacks on consumer choice and consumer freedom — a freedom most consumers did not, in fact, want. “They did not particularly value the right to buy spoiled beef,” Miller said. “That is a fair point,” Rep. Thaddeus McCotter (R-Mich.) responded later in the hearing. “No one wanted to eat it.” McCotter argued, however, that preventing rotten food from coming to market 100 years ago also led to overly burdensome food regulations today. Rep. Steve Pearce (R-N.M.) contested the CFPB’s plans to regulate payday lenders. He suggested that existing regulators had done a good job enforcing mortgage laws in recent years, and demanded to know Warren’s plans to influence monetary policy, openly mocking favorable descriptions of Warren. “I wonder if you’re gonna be the angel, be the champion for consumers with inflation,” Pearce said. “Are you gonna take on the Fed for printing money?” “I’m sorry, Congressman, but our job is not in monetary policy,” Warren replied. After two and a half hours, the hearing concluded. “I’m buoyed by the notion that anyone who could withstand this kind of badgering … is going to do a very good job,” Rep. Gary Ackerman (D-N.Y.) told Warren.

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Rick Perry Reverses Course On Rainy Day Fund

March 16, 2011

AUSTIN, Tex (Reuters) – Texas Governor Rick Perry admitted on Tuesday that the state will have to use about a third of its rainy day fund to close a budget deficit this year, abandoning his stance that the fund should not be used. Perry said he supported using up to $3.2 billion of the $9.4 billion fund to close a deficit in the 2011 budget. But the Republican governor said that he still does not support using the fund to address the shortfall in the 2012-2013 budget. Perry said that using a “one-time amount” from what is officially called the Economic Stabilization Fund would “help our budget deal with the impact of the national recession.” Earlier this year he had opposed using the fund at all. “I remain steadfastly committed to protecting the remaining balance of the Rainy Day Fund, and will not sign a 2012-2013 state budget that uses the Rainy Day Fund,” Perry said in a statement that indicated that he, House Speaker Joe Straus and Comptroller Susan Combs agreed on the plan. Texas, which has a two-year budget cycle, is about $27 billion short of the money it needs to extend current programs and services through 2012 and 2013. That includes a $4 billion deficit in the 2011 budget, which ends August 31. The deficit had been $4.3 billion, but Combs on Monday revised the state’s revenue estimate, saying an additional $300 million is available because of increased sales tax collections. The House Appropriations Committee on Tuesday approved a bill to use money from the rainy day fund for the current budget. The measure now heads to the full House. Appropriations Committee member Mike Villarreal, a Democrat, said that without using the rainy day fund for 2012-2013, the state budget will lead to closing nursing homes, firing teachers and packing more children into classrooms. “The governor doesn’t mind using the fund to avoid the embarrassment of not paying our bills for the next five months, but he refuses to use a single dime from the fund to limit the damage to our children’s schools,” Villarreal said. Copyright 2010 Thomson Reuters. Click for Restrictions .

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Robert Kuttner: The Continuing Mortgage Mess

March 14, 2011

One of the most startling exit-poll results to emerge from the 2010 midterm elections was the finding that the 35 percent of voters who (correctly) blamed the economic collapse on Wall Street actually voted Republican by a margin of 56-42 percent. As Ruy Teixeira and John Halpin wrote in a sifting of the exit polls, “The Obama administration’s association with bailing out Wall Street bankers, who are heavily blamed for the bad economy, apparently had a negative effect on Democratic performance in this election.” To put it mildly. But since the election, Republicans keep on demonstrating that they are even better friends of the banks than the ambivalent Democrats. Tea Party populism at the grass roots coexists with close alliance with the financial industry where it counts. Under the guise of reducing the budget deficit, the Republican House and Senate budget would dramatically reduce funding for the agencies that regulate Wall Street. Richard Shelby, the ranking Republican on the Senate Banking Committee, keeps inserting himself into a law-enforcement proceeding, trying to block the proposed legal settlement of abuses in mortgage foreclosures and documentation that has been put forward by the 50 state attorneys general. Shelby last week called the plan: “Nothing less than a regulatory shakedown by the new Bureau for Consumer Financial Protection, the FDIC, the Fed, certain Attorneys General, and the Administration, led by Elizabeth Warren. This proposed settlement appears to be an attempt to advance the Administration’s political agenda, rather than an effort to help homeowners who were harmed by a servicer’s actual conduct.” It’s worth reviewing the back story. State attorneys general, led by Iowa’s Tom Miller, but with the vigorous support of Republican as well as Democrat AGs, have documented a wide range of illegal abuses by mortgage companies and banks dealing with homeowners who were victimized by corrupt lenders. So called “robo-signers” falsely signed affidavits that the bank or other mortgage service company had the right to foreclose when in fact it had no such legal right. Timely payments that were sent in to pay principal and interest were improperly applied to late fees and other penalties, causing homeowners to fall behind in their payments and then fall into technical default, leaving them vulnerable to foreclosure. While many homeowners who were working in good faith with the lender to secure refinancing or loan modifications, the loan servicer was proceeding on a separate track to foreclose and take away their house. Cases are legion of frantic homeowners not getting phone calls returned and being unable to get a straight story of how much money they owe, and to whom. Some military families lost their homes while a breadwinner was serving in Iraq, in flat violation of law. The proposed agreement with the five largest banks that control 59 percent of the mortgage market, drafted by the state AGs, would prohibit such abusive practices, define permissible procedures, and collect a one-time penalty fee from the banks in the range of $20 billion as an alternative to the criminal prosecution that the mortgage industry so thoroughly deserves. As the tireless Bill Black, a former senior financial regulator, keeps pointing out, in the savings and loan scandals of the 1980s, there were more than a thousand felony convictions. S&L executives went to jail. There was an interagency task force coordinating criminal prosecution, and this under the Reagan administration. And unlike the subprime disaster and its continuing fallout, the S&L collapse was largely contained to that industry, did not end up punishing homeowners, and caused little damage to the wider economy. Instead of using their political influence to resist the proposed global settlement of mortgage abuses, banking executives should consider themselves lucky. The proposed settlement would be a two-fer. It would prohibit illegal and deceptive practices, define proper ones, and would produce some of the money needed for the principal reductions to keep some ten million Americans from losing their homes. The Administration’s Home Affordable Modification Program (HAMP) is a widely acknowledged failure. About 600,000 loans — fewer than one at-risk mortgage in ten — have gotten relief. The program, which includes a modest incentive payment to banks, is entirely voluntary to bankers. The administration’s reluctance to push for stronger medicine is rooted in the banking industry’s reluctance to book losses on their balance sheets. By pretending that under-water mortgages are worth 100 cents on the dollar (until they are foreclosed) banks can pump up the stated value of their assets. But it would be far better for all concerned if banks reduced the principal amount of at-risk mortgages to roughly the actual market value of the home. That would compel honest accounting, and allow millions of homeowners to keep their homes. The present policy, by contrast, continues the epidemic of foreclosures and the resulting drag on housing prices. The downdraft in the real estate sector, in turn, functions as a deadweight drag on the economy. Leaks and counter-leaks suggest that the Obama administration is split on whether to strongly push for the AG’s proposed global settlement. The Treasury Department, both Secretary Tim Geithner, and the Office of Comptroller of the Currency, basically are siding with the banks. Elizabeth Warren, assistant to the president and acting director of the Consumer Financial Protection Bureau, favors the plan, as does the FDIC, and the Department of Housing and Urban Development. The banks and their Republican allies are, not surprisingly, dead set against it. But it is one thing for Republican politicians like Shelby to weigh in against policies they oppose. It is utterly shameful for them to try to block law-enforcement proceedings. Republicans like Shelby are all for states rights when it’s convenient, but not when state AGs go after their banker pals. As more and more abuses come to light, and more homeowners are fighting back against illegal foreclosures, the average foreclosure proceeding now drags on for almost two years. Just this month, the banking giant, HSBC had to suspend foreclosure actions because of questions about documentation and dubious practices. With Republicans so explicitly in bed with bankers, and after the drubbing that the Democrats took last November, you would think that it might occur to the White House that it makes good political as well as economic sense to be more clearly aligned with the interests of consumers. But that is still contested terrain. If the proposed global settlement does fail, bankers will face a continued legal morass, and some may yet face criminal proceedings for abuses. It would be tempting to wish that fate on an industry that is responsible for so much wider suffering. But it would be far better to get the mortgage mess behind us and get on with the economic recovery. Rather than political brickbats, the state AGs and Professor Warren deserve Shelby’s thanks and Obama’s strong support. Robert Kuttner is co-editor of The American Prospect and a Senior Fellow at Demos. His latest book is A Presidency in Peril.

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Al Norman: Wal-Mart: Unions Love Us

March 13, 2011

Last month Wal-Mart commissioned a poll which purported to show that 75% of union members in New York City were “all for” a Wal-Mart in the city. The New York Post ran a story which began, “New York City’s union workers love Wal-Mart.” The improbable results of this “poll” are part of organized effort by Wal-Mart which dates back to 2005, when the giant retailer began to use “push-polls” to counter-attack its critics. On his way out the door in 2009, Wal-Mart CEO Lee Scott told Fortune Magazine that one of the mistakes he made during his tenure was being far too slow in responding to public criticism of his company. According to Fortune , Scott admitted “he didn’t take its concerns as seriously as he should have, believing instead that the negative feedback was coming from blue-state elites who didn’t shop at Wal-Mart and therefore didn’t understand the money the company saved consumers.” But in 2005, Wal-Mart started to push back at the ‘blue state elites,’ and behave more like a candidate running for public office than a retailer. Scott hired the Democratic PR firm Edelman in 2005, and created a “war room” of operatives in its Bentonville headquarters. A prime weapon was the push-poll. In 2005, Thomas Riehle, a Democrat, and V. Lance Tarrance, Jr., a Republican, doing business as RT Strategies, produced a poll commissioned by Working Families For Wal-Mart, which concluded that: • 54% of union households believe union leaders should make protecting union jobs a higher priority than attacking Wal-Mart • 42% of union households believe the campaign against Wal-Mart makes labor union leaders less relevant to solving the economic challenges facing working families today. • 44% of union households agree that the campaign against Wal-Mart is not a good use of union dues Working Families For Wal-Mart issued the following statement with their poll: “The data clearly show that Americans in union households — as well as those not in union households — are skeptical about the goals and priorities of the anti-Wal-Mart campaign being waged by union leaders at a time when U.S. manufacturers are eliminating tens of thousands of union jobs…This poll shows that union families also support Wal-Mart.” In fact, the 2005 poll indicated that 56% of union households agreed that fighting Wal-Mart was a good use of union dues. In 2009, Wal-Mart produced a political push-poll in Chicago in which residents were asked the following leading question: Mayor Daley says that a Wal-Mart at 83rd & Stewart would bring 400+ jobs to the city and make fresh food available to the neighborhood; others believe jobs are not enough. Press 1 if you believe a Wal-Mart should be allowed to be built or Press 2 if you believe it should not. More recently, Wal-Mart commissioned two polls in New York City designed to bolster its wooing of the City Council. In December of 2010, the Brooklyn Daily Eagle ran a story which began : “A recent poll commissioned by Wal-Mart reveals that 76% of Brooklyn residents say they favor Wal-Mart coming to the city.” The newspaper added: “Based on these facts, it appears Brooklyn could soon have a Wal-Mart.” The pollster hired by Wal-Mart was Douglas E. Schoen, whose website describes him as “one of the most influential Democratic campaign consultants for over thirty years.” According to Crain’s New York Business , Schoen was hired by Wal-Mart “to counter those who would argue that a Wal-Mart poll would be biased.” The Schoen poll showed that 37% of respondents did not favor locating a Wal-Mart in their neighborhood, and 30% did not agree that New York City should have a Wal-Mart. These are remarkably high negative numbers for a retail store. As one Wal-Mart executive pointed out years ago, “Why all the fuss? We’re not a nuclear waste dump.” While on Wal-Mart’s payroll, Schoen also produced another poll of 400 small businesses in New York, which concluded that 62% of businesses with 50 workers or less wanted Wal-Mart to come to New York. But Schoen’s poll also showed that among small retailers — the only businesses surveyed who actually compete with Wal-Mart — 45% refused to say they favored Wal-Mart coming to New York City. In Manhattan and Brooklyn, 42% of small businesses did not say they were favorable to Wal-Mart, and in the Bronx, 56% of small business did not say they favored a Wal-Mart. Schoen apparently did not want the public to see his survey questions, because neither of his Wal-Mart surveys are posted on his website, nor are they mentioned on Wal-Mart’s websites. But Schoen was part of Mayor Michael Bloomberg’s inner circle, and Bloomberg’s former campaign manager, Bradley Tusk, was running Wal-Mart’s campaign in New York City. Lee Scott may have thought that Wal-Mart was slow to respond to its critics, but the company is working overtime now producing a wall of polling data to make it appear that everyone in urban America — including Democrats and union members — want a Wal-Mart in their neighborhood. No retailer in American history has ever had to divert so far from its corporate mission to do damage control on its image. Rather than focus on mass marketing cheap Chinese anythings, Wal-Mart has been forced to spend millions of dollars to sell itself instead. If its polling numbers were better, the company wouldn’t have to keep producing more polls. Al Norman is the founder of Sprawl-Busters. His book “Slam-Dunking Wal-Mart” is a classic in community organizing strategy. Sprawl-Busters can be found on Facebook.

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Chris Christie’s Attacks On Illinois Continue

March 4, 2011

TRENTON, N.J. — Gov. Chris Christie said Friday that he’s not worried about businesses leaving for Illinois because Illinois Gov. Pat Quinn is “a disaster.” Christie’s comments come as ads are set to appear in three New Jersey business publications on Monday criticizing the state’s business climate. They were paid for by the advocacy group For a Better Chicago and are in retaliation for an ad campaign Christie launched to encourage businesses in Illinois to relocate to New Jersey. “Let me tell you something: We won’t lose any business to Illinois as long as Pat Quinn’s the governor,” Christie, a Republican, said during a news conference Thursday. “He’s a disaster.” The Chicago group said it’s taking out the ads to set the record straight on which state has the best business climate. “We understand that governors have to be cheerleaders for their states, but the claims Gov. Christie is making are so far from the truth,” said Jake Braun, For a Better Chicago spokesman. The Chicago ads, which say “Rhetoric is nice, reality matters,” focus on New Jersey’s high property taxes and cost of living. Christie launched his campaign after Quinn, a Democrat, raised personal income taxes to 5 percent from 3 percent and corporate business taxes to 9.5 percent from 7.3 percent to help balance his budget. In print and radio ads, Christie reiterated his commitment not to raise taxes. Christie also took a trip last month to Chicago to meet with business leaders. Quinn spokeswoman Brie Callahan said Quinn has more important things to do than worry about Christie. “Instead of making personal attacks on other governors, Gov. Quinn is focused on getting our state’s fiscal house in order and continuing to make Illinois an even stronger economic competitor,” she said.

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Bernanke: Don’t Sweat The Oil Stuff

March 1, 2011

WASHINGTON (Reuters) – Federal Reserve Chairman Ben Bernanke said on Tuesday the surge in oil prices is unlikely to hurt the U.S. economy unless it is sustained, even as investors sold off equities on fears of a slowdown. Bernanke, making his first comments since the turmoil in Libya drove U.S. crude oil above $100 a barrel, said he would expect higher prices to lead to only a modest, temporary increase in U.S. inflation “at most.” The Fed chief told the U.S. Senate Banking Committee he saw increasing evidence that the economic recovery has enough momentum to become self-supporting. But job growth remains far too anemic, he said, indicating the Fed was unlikely to cut short its $600 billion bond-buying stimulus. “We do see some grounds for optimism about the job market over the next few quarters,” Bernanke said, citing a steep recent decline in the jobless rate among other factors. Bernanke, who will testify for a second day before a House of Representatives committee on Wednesday, also reiterated a warning that a failure by Congress to raise the U.S. government’s $14.3 trillion debt ceiling could lead to a devastating debt default. “It would be extremely dangerous and very likely a recovery-ending event,” he said. The U.S. Treasury Department on Tuesday said the debt limit could be reached as early as April 15, 10 days later than its previous estimate. Bernanke’s warning came just hours before the House approved a short-term funding bill that would avert a looming government shutdown and buy time to fashion a longer-term budget. The Senate was expected to quickly take up the measure. Some Republicans have vowed to use the need to raise the debt ceiling as a lever to push for deep spending cuts. Bernanke told the panel that downside risks to growth had eased and, for the first time, said the prospect of deflation was now “negligible.” The threat of deflation, a downward spiral in wages and prices that could derail the economy, was a key justification for the Fed’s bond-buying spree. “It’s encouraging to see that the risk of deflation is moderating according to the Fed,” said Omer Esiner, chief market analyst at Commonwealth Foreign Exchange in Washington. “That’s one of the keys that will be necessary for the Fed to wind down its quantitative easing program.” NO SPILLOVER At the same time, Bernanke did not appear concerned that the recent spike in the price of crude oil, driven in part by a wave of pro-democracy revolutions in the Middle East and North Africa, would do much harm to the U.S. economy. “The most likely outcome is that the recent rise in commodity prices will lead to, at most, a temporary and relatively modest increase in U.S. consumer price inflation,” Bernanke said. However, he warned that if expectations of future inflation were to build, the Fed may need to act. “We will continue to monitor these developments closely and are prepared to respond as necessary to best support the ongoing recovery in a context of price stability,” he said. U.S. crude oil futures rose 2.7 percent on Tuesday to settle at $99.63 a barrel, not far from highs hit late last month. Crude had traded at roughly $86 a barrel before protests swept through Egypt in late January. ( For graphic on oil’s effect on world growth, see bit.ly/hsRlo R) Financial markets showed little reaction to Bernanke’s comments, but the jump in oil prices weighed on stocks, with the Standard & Poor’s 500 index closing down 1.57 percent. Wall Street’s so-called fear gauge, the CBOE Volatility Index, jumped 13.1 percent. U.S. government bond prices rose as investors sought safety. With official interest rates held near zero since December 2008, the Fed in November embarked on a controversial program to buy government debt to keep down long-term interest rates. Bernanke said buoyant financial markets suggest the policy is working, but the labor market still has a long way to go. In January, the jobless rate stood at 9 percent. “Until we see a sustained period of job creation, we cannot consider the recovery to be truly established,” Bernanke said. MANDATE BATTLE BREWING Much of the discussion at the hearing centered around Washington’s heated budget debate. Bernanke refrained from offering detailed advice on fiscal matters, but urged lawmakers to get the deficit under control. “The long-term imbalances are not just a long-term risk,” Bernanke said. “They’re a near and present danger.” The banking committee’s chairman, Democrat Tim Johnson, kicked off the session with a strong defense of the Fed’s dual mandate of price stability and maximum sustainable employment. Some Republicans who have been critical of the Fed’s ultra-easy monetary policy have vowed to introduce legislation forcing the central bank to focus solely on inflation. Johnson suggested that would not be an easy fight. “As the economy continues to struggle to recover, we should be using every tool in the toolbox to create jobs and spur growth,” he said in a statement. “Taking tools away from the Fed now is the wrong idea at the wrong time.” (Additional reporting by Emily Kaiser, Doug Palmer, Lucia Mutikani and Tim Ahmann; Editing by Tim Ahmann, James Dalgleish and Leslie Adler) Copyright 2011 Thomson Reuters. Click for Restrictions .

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Democrats Rebel Against Governor Cuomo’s Budget

February 28, 2011

ALBANY, N.Y. — More than 40 elected Democrats made a rare attack on Gov. Andrew Cuomo and his proposed cuts to the party’s priorities of education and health care as the state tries to trim a $10 billion budget deficit, according to a letter obtained Monday by The Associated Press. In a letter to the state Democratic Party and the governor, the Democrats railed against Cuomo’s budget policies, calling them “neither balanced nor well-conceived” and warning that they would hurt children and the elderly. The group said Cuomo was not exemplifying what a “new Democrat” should be. The governor started using the term at last year’s Democratic convention to describe a pragmatic official in hard fiscal times. “According to the governor, that is what it means to be a ‘new Democrat,’” the letter said. “According to the governor, this is the path to becoming ‘the most progressive state in the nation.’ If this is what it means to be a new Democrat, and if this is what it means to be progressive then something is very wrong.” Neither Cuomo nor the party immediately responded to requests for comment. The letter is signed by Democrats on city councils and other legislative bodies in New York City, Albany, Binghamton, Kingston, Monroe County, Rockland County, Broome County, the town of Danby, Tompkins County, the village of Hempstead, Buffalo, and Ulster County. Cuomo won by a huge margin in the November election on a platform to clean up Albany and curb decades of spending and overtaxing. The popular former attorney general voiced the outrage seen in public opinion polls that politics and special interests have made state government unaffordable to taxpayers. His fiscally conservative stand that opposes tax increases is most strongly supported by the Senate’s Republican majority and in the polls. Last week’s Quinnipiac University poll found strong support for Cuomo and continued disfavor for the state Legislature. It also showed strong opposition to cuts in education and health care. Cuomo’s $132.9 billion budget proposal would cut spending 2.7 percent. The group urges Cuomo and the party to abandon proposed cuts to school aid, prescription aid for the elderly and other cuts to education and health care. Instead, the group is pushing for Cuomo to continue a temporary surcharge on New Yorkers making more than $200,000 a year. The income tax surcharge is scheduled to expire this year, although it could bring the state as much as $5 billion. The group said letting it expire would be a “massive tax break” for millionaires while schoolchildren and other vulnerable New Yorkers suffer. “If the new Democratic Party is acting like conservative Republicans, I don’t want any part of it,” said New York City Councilman Robert Jackson, one of the Democrats who signed the letter. “Elected public officials, it’s their duty and responsibility to stand up for justice and equality of all people,” Jackson said in an interview. “We’re speaking truth to power.” This isn’t the first time Democrats have tested the governor. On Thursday, veteran Democratic Assembly Richard Gottfried of Manhattan leveled some criticism at Cuomo’s Medicaid task force report that will result in cutting some services and funding to hospitals. Gottfried, who was on the task force, said the final report has good ideas, but there are concerns, too. His comment was met with a blistering statement from Cuomo’s spokesman that Gottfried “has been the protector of the Albany status quo and special interests for years.” The next day, Gottfried and Assembly Speaker Sheldon Silver issued a joint statement saying they were optimistic the task force report would result in long-term financial stability while safeguarding care. Days before, Democratic New York City Councilman Charles Barron led a disruption of Cuomo’s speech to black and Latino lawmakers with chants of “Shame on you!” and “Tax the rich!” Five of those who signed the letter noted they were part of the group called the Black, Latino and Asian Caucus.

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Hank Morris Is Going To Prison

February 17, 2011

NEW YORK — A former top political consultant to New York’s disgraced ex-comptroller was led off to prison Thursday after being sentenced to at least a year and four months behind bars for his pivotal role in an influence-peddling scandal involving the state pension fund. Henry “Hank” Morris, who rose to political prominence in the state as a campaign manager for Democrats, apologized to the people of the state for compromising their faith in government before a Manhattan judge handed down the punishment. “Words cannot express the depth of my remorse,” he said, his voice and hands shaking as he read a prepared statement. Supreme Court Justice Lewis Bart Stone was unmoved. He sentenced Morris to the maximum allowed under the law, then denied him time to put his affairs in order before going to prison. “No. It’s time to go,” the judge said. Morris, 57, pleaded guilty in November to securities fraud. He admitted using his connections to former state Comptroller Alan Hevesi and other officials who oversaw New York’s massive pension fund to extract kickbacks from investment firms hoping to manage some of the funds’ assets. New York’s $125 billion retirement pool is one of the world’s largest government pension funds and richest sources of potential investment dollars. Over just a few years, Morris made $19 million in fees from companies awarded state business by Hevesi’s office. Prosecutors with the state attorney general’s office and the Securities and Exchange Commission said firms that refused to play ball had a harder time getting their foot in the door. The scandal enveloped a number of state officials and money managers, including Steven Rattner, the Wall Street financier who helped lead the Obama administration bailout and restructuring of Chrysler and General Motors. Morris has agreed to forfeit his millions of dollars in fees and has already repaid the retirement fund about $18 million, officials said. But “it is not sufficient that a thief restore stolen property so as to avoid jail time,” the judge wrote in explaining his sentencing decision. Morris will be eligible for parole after 16 months and would serve no more than four years behind bars. “Throughout my life, I have believed in the potential for government to be a force for good in the lives of people. In fact, I devoted the bulk of my professional life to achieving that goal,” Morris told the court before he was sentenced. “To recognize that my actions undermined those efforts has been very painful.” “Simply put, my actions undermined the integrity of New York State’s government, and, most importantly, have led ordinary people to question their faith in the political system.” As he was led away in handcuffs, he told relatives and friends in the courtroom: “I love you. I love everybody. Thank you.” The pension fund investigation was initiated and led for several years by former State Attorney General Andrew Cuomo, a Democrat who is now the governor. He called Morris’ sentence “a strong signal that it’s time to clean up Albany and the culture of corruption must and will end.” The pension fund probe became a political issue during Cuomo’s run for governor last year. His Republican opponent, Buffalo businessman Carl Paladino, argued that Democrats were going easy on Democrats in the case. Paladino continued his criticism Thursday, saying Morris emerged with too light a conviction and adding, “These people should pay for their indiscretions.” Eight people pleaded guilty to criminal charges in the case, including Hevesi, who admitted taking campaign contributions and luxury vacations from one money manager seeking pension fund business, and David Loglisci, the pension fund’s chief investment officer. Several financial firms also paid more than $170 million in civil penalties for their actions, including well-known, politically connected firms like the Carlyle Group. Rattner, who was accused of arranging for his investment company to pay Morris $1 million to better the firm’s chances of landing an investment deal with the pension fund, ultimately paid $16.2 million to settle civil lawsuits filed against him by Cuomo’s office and the SEC. Attorney General Eric Schneiderman, a Democrat who inherited the case from Cuomo, said Morris’ sentence showed “that those who abuse positions of power to line their own pockets will be held accountable by this office.” ___ Associated Press writer Michael Gormley in Albany contributed to this report.

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GOP Budget Would Cut Consumer Protection Agency’s Funding In Half

February 16, 2011

With reporting by Ryan Grim WASHINGTON — A new federal budget proposal from House Republicans would dramatically restrict the budget of the new Consumer Financial Protection Bureau during its first year of operation. No House Republicans voted for the Wall Street reform bill that created the CFPB, which is currently being set up by consumer watchdog Elizabeth Warren. Several House Republicans have suggested cutting the agency’s budget, however, as a method of restricting its capacity to regulate. The language included in the House GOP’s budget proposal for 2011 would restrict the CFPB’s annual budget to $80 million– a major cut from the $143 million the agency expects to spend as it hires staff and implements new systems to get off the ground. Warren warned Congress against creating a weak agency last summer, as lawmakers sought to placate Wall Street lobbyists. She insisted that the new CFPB must be given the authority and resources to prevent bank abuses. “My first choice is a strong consumer agency,” Warren said in an interview with the Huffington Post last year. “My second choice is no agency at all and plenty of blood and teeth left on the floor.” The Republican attack on the CFPB’s funding would only apply to this year, but would make launching the new agency very difficult, and send a very aggressive signal about Congress’ intent to follow through on the bill it passed in July. Regulations cannot be enforced if regulators do not have the budget to hire staff. Rep. Barney Frank (D-Mass.), the top Democrat on the House Financial Services Committee, told HuffPost that Democrats would be offering an amendment to strip the CFPB language from the GOP budget plan. The amendment will likely come up for a vote on Thursday. “When you’re talking about $143 million or $80 million you’re talking about several multiples of a bank bonus,” Frank said. “It just shows the disproportion between what the banks have and what they have.” Last year’s Wall Street reform legislation tied the CFPB’s budget to the Federal Reserve’s operations, requiring 12 percent of all funding for the central bank to be diverted to the CFPB. The new House GOP budget proposal, known as a continuing resolution, or CR, would block the Fed from disbursing more than $80 million during fiscal year 2011, which ends in October. Some estimates suggest that the CFPB could receive as much as $550 million a year under the existing funding structure– less than half of the Securities and Exchange Commission’s current budget. That funding will be needed as the new agency staffs up– the CFPB is tasked with regulating a broad array of consumer lending, from payday lending to credit cards to mortgages, many of which have been prone to abuses in recent years. “Remember, the consumer bureau doesn’t just deal with credit cards, it’s a major way to go after all these unregulated financial industries, payday lenders, check cashers, etcetera,” Frank told HuffPost. Connecting the CFPB’s budget to the Fed was a move that consumer advocates hoped would protect the new agency from this type of appropriations gamesmanship. If any new budget law can direct the Fed how to spend its resources, Wall Street-friendly Republicans are likely to continue trying to restrict the CFPB’s budget. Other bank regulators are funded by special taxes they levy against the banks they regulate, known as “assessments,” which are not subject to the Congressional appropriations process. In a speech yesterday before the Consumer’s Union, Warren warned that, “Politicizing the funding of bank supervision would be a dangerous precedent, and it would deprive the CFPB of the predictable funding it will need to examine large and powerful banks consistently.”

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Rob Johnson: Who Is Influencing Obama’s Budget Proposal? Follow the Funders

February 15, 2011

Cross-posted from New Deal 2.0 . President Obama is a smart man. When Gallup surveys suggest that unemployment is around 10 percent — and that unemployment plus underemployment is 19 percent of the workforce — then it’s clear that the best way to raise revenues and close the deficit is to put people back to work. President Obama surely knows this. But his actions don’t seem to follow this obvious logic. Why is that? Part of the reason lies in a group of people who pour money into our political system but don’t necessarily want the same things that ordinary Americans want. In fact, these people benefit from municipal crises, breaking teachers unions, and increasing the fear of the workforce. They fall disproportionately into the group that Harvard professor Lawrence Lessig identified as “the funders” in his recent TedX Talk in San Antonio, Texas. The increasing power of this group produces political contortions by buying results in Congress that do nothing for regular folks. Their influence also steers President Obama to focus on his reelection rather than trying to change the climate of opinion and become America’s Great Persuader. The public has now heard the conservative mantra that government is the problem and not the solution for 40 years. Couple that with the experience of valid rage following the bank bailouts, and it’s not surprising that the public overwhelmingly feels that the government has become an instrument of the wealthy and powerful. Strong leadership is needed to challenge this narrative. But the President seems content to conform to the prevailing suspicion of government. He fails to convince the public that the government can have an active response to the jobs crisis that benefits them. And that suits many funders in the top 3 percent of the wealth distribution just fine. With profits so high and so many slack resources, it is sad that President Obama continues on the path of “triangulation” and chooses to “pre-concede” so much to the Republicans. In electoral terms, the breaking of all of the unions at the state and local level will serve to benefit the Republican party in many regions and exacerbate inequality. It is surprising the the President does not resist this for the benefit of his own party’s future. But Presidents often fly solo rather than represent their party when reelection looms — especially in a post- Citizens United world that will be influenced by unprecedented rivers of money. Looking forward, we can see that our infrastructure is worn out in many, many places. We can also see that a dearth of public goods, education, basic science and infrastructure portend a weakening of the living standard of our nation. President Obama seemed to acknowledge this in his State of the Union address vision. But his budget strategy does not. The current budgets, both Democrat and Republican, appear to be imposing cuts on the lower middle class and poor. We are, as Paul Krugman said in The New York Times on Monday , are eating our future. Unfortunately, the proposed budget appears more likely to contribute to the ongoing widening of wealth and income inequality. And it seems more likely to increase, rather than reduce, the idle resources in our society. This budget logic makes little sense, and the human costs are dreadful. Only the logic of power sheds light on our path of dysfunction in the USA. Andrew Mellon must be smiling.

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Tax Cut Proposals On State Level No Guarantee For Jobs

February 13, 2011

NEW YORK — It’s recently become an article of faith for many governors as they try to attract jobs: raising taxes during a recession is a nonstarter, choking off growth and damaging a state’s fragile economic recovery. With the notable exception of Illinois, where Democratic Gov. Pat Quinn last month signed a 66 percent temporary personal income tax increase and a separate corporate rate hike to help close a $15 billion budget gap, governors this year are mostly vowing to cut regulations and hold the line on taxes to attract employers and rebuild after a brutal recession. “We … hope that every bill you consider passing will be viewed through the lens of its impact on our economic growth,” Colorado Democratic Gov. John Hickenlooper told lawmakers in his State of the State address, sounding a theme many governors share. “This doesn’t mean we compromise our standards or put our land, air or water at risk, but it does mean that we’ll keep a fierce and even relentless focus on jobs.” Whether they can hold to that promise will become clearer in the coming months as governors release their new budget proposals. But there’s a catch to the anti-tax, pro-business rhetoric: Businesses consider a range of factors when deciding where to locate, including the quality of schools, roads and programs that rely on a certain level of public spending and regulation. And evidence suggests there is little correlation between a state’s tax rate and its overall economic health. “Concerns about taxes are overstated,” said Matt Murray, a professor of economics at the University of Tennessee who studies state finance. “Labor costs, K-12 education and infrastructure availability are all part of a good business climate. And you can’t have those without some degree of taxation.” States’ tax rates also do not predict their resilience during an economic downturn. While high-tax states such as New York, New Jersey and California have been clobbered by the current recession, so too have states that pride themselves on low tax rates, including Nevada, Texas and Arizona. The collapse of the housing market and the financial industry meltdown largely drove the current conditions, sparing almost no state regardless of its level of taxes. Governors agree this is a particularly challenging budget year, with federal stimulus dollars drying up after years of deep state budget cuts. Some 34 states raised taxes or fees as recently as 2009 to help close budget shortfalls. Now, chief executives from both parties mostly have little appetite for new tax measures after Republicans successfully ran on tax issues last fall – they now control 29 governorships – and President Obama and Senate Republican leaders teamed up to extend Bush-era tax cuts, even for the wealthiest Americans. Illinois’ big tax hike is considered an anomaly – an emergency measure that includes strict spending limits to close a budget hole that is the largest of any state as a percentage of its overall budget. Neighboring states such as Wisconsin quickly pounced, urging businesses to relocate from Illinois even though its tax rate remains lower than those of many states in the region. Meanwhile some other governors have opened the door to potential tax increases, insisting the measures are necessary to offset fiscal calamity. In California, Democratic Gov. Jerry Brown has been promoting a package of temporary tax increases as a ballot measure for voters to consider, while also proposing deep cuts to higher education and social services. Two newly installed New England governors – Connecticut’s Dan Malloy and Rhode Island’s Lincoln Chafee – have told state residents to expect some taxes to go up. Most are pairing their tax increase proposals with targeted spending cuts and promises of fiscal discipline over the long term. To be sure, several governors, including Republican Chris Christie of New Jersey and Democrat Andrew Cuomo of New York, say they have sworn off tax increases. Some other governors – such as newly sworn-in Republicans John Kasich of Ohio and Rick Scott of Florida – say they plan to cut taxes even as they try to bring their budgets into balance. Scott wants to reduce the Sunshine State’s corporate income tax despite the fact that Florida faces a projected budget gap next fiscal year of at least $3.5 billion; the corporate income tax now generates about $2 billion a year. Other governors, despite tight budgets, want to boost spending on economic development projects to bring jobs to their states. In Nebraska, Republican Gov. Dave Heineman has proposed a $16.5 million initiative aimed at attracting jobs while saying he will not raise taxes. The money would be spent on several measures, including an internship program pairing graduates of Nebraska universities with state-based companies, and a fund offering start-up cash and technical assistance to small businesses. In an interview, Heineman said his state must spend money on education and job programs to attract economic development. “We’re competing for jobs with other states and other countries, and I’m trying to do it in a healthy and positive way,” Heineman said. “The only way I can compete is to have a better tax and regulatory climate, but education and a quality work force are also key to that.” Kansas Republican Gov. Sam Brownback is requesting $105 million for universities in his state to do targeted research in the areas of animal health, cancer and aviation. Virginia Republican Gov. Bob McDonnell has proposed a $54 million jobs initiative for the state to compete more aggressively against neighbors North Carolina and Maryland. The quality of a state’s labor market is another significant factor for businesses as they choose where to locate, in some cases mitigating the level of taxes they will have to pay. “As much as Nevada talks about getting California business because of their low taxes, their population would need a substantial amount of retooling,” said Kim Reuben, a senior fellow at the Tax Policy Center in Washington. “Nevada has survived largely on growth, a place where people without much education could get relatively good jobs in construction and casinos. California is a place that has great intellectual institutions and will always attract talent and overcome its taxes.” But Kail Padgitt, an economist with the conservative Tax Foundation, said a state’s tax burden might not have affected its performance during the recession but certainly will affect the pace of its recovery. “When the economy starts to pick up, that’s where you’re going to see more the impact of taxes,” Padgitt said. “Where businesses are going to expand operations, where new investments are going to be made – a lot of these companies want to know what their taxes are going to be.” How much the lure of lower taxes acts as an incentive for businesses seeking to relocate or expand remains an open question. In late 2008 and early 2009, California lawmakers and then-Republican Gov. Arnold Schwarzenegger approved a series of corporate tax breaks that was estimated to save businesses about $1.3 billion a year. At the time, Schwarzenegger and GOP lawmakers promoted the tax cuts and credits as a way to create jobs, but there is little evidence they have done so. California’s unemployment rate rose in December to 12.5 percent and has remained above 12 percent for a year and a half. The questionable connection between corporate tax policy and job creation prompted a Democratic state lawmaker to call for legislation that would force companies to prove they were using tax breaks to boost employment. “The bill is not to deny them those tax credits. I want to give them those tax credits because they make a rather credible argument why they need them,” state Sen. Leland Yee said. “All I’m asking is for them to prove it.” Associated Press writer Don Thompson in Sacramento contributed to this report.

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Top House Democrat: JPMorgan Responsible For "Homicide" Of Soldiers

February 9, 2011

WASHINGTON — A leading House Democrat said on Wednesday that executives at JPMorgan Chase are responsible for the deaths of soldiers who take their own lives under illegal financial pressure from the bank. That charge, leveled by Rep. Bob Filner (D-Calif.), the ranking Democrat on the House Veterans’ Affairs Committee, came at the panel’s hearing Wednesday on violations of the Servicemembers Civil Relief Act by the megabank. The law limits interest rates that banks can charge soldiers who are deployed abroad at 6 percent, a rule an executive at the hearing admitted the bank has broken. “People who are under pressure commit suicide. I would call it homicide, frankly, because you are putting them under pressure. You are responsible for that,” Filner told Stephanie B. Mudick, a JPMorgan Chase executive vice president of consumer practices. Mudick didn’t directly respond to Filner, but said that JPMorgan would working to correct its mistakes in the future. A JPMorgan Chase spokesman referred HuffPost to her testimony. The bank also came under fire from committee Republicans. “Our nation’s war fighters — and their families — should not have to fight to keep their piece of the American Dream while they are on foreign ground defending that fundamental right for all of us,” Chairman Jeff Miller (R-Fla.) said. “While I am heartened that JPMorgan Chase Bank is attempting to fix these errors with respect to wrongful foreclosures and is refunding over $2.4 million in excessive interest charges, more must be done to ensure that this never happens again. I hope this is a wake-up call for the entire financial services industry.” The thrust of the hearing focused on the difficulty of getting banks to comply with the law, given that the bank has a financial incentive to pay occasional fines rather than strictly adhering to it. Filner made his remark during a discussion about what legal responsibility the bank might have for wrongful deaths. In 2010, 156 active-duty soldiers committed suicide, down six from the year before. Suicides among soldiers not on active duty jumped from 80 to 145.

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Lawrence G. McDonald: Fannie Mae and Freddie Mac’s Days Are Numbered, But It’s a Big Number

February 3, 2011

In my New York Times Best Selling book, A Colossal Failure of Common Sense — The Inside Story of the Collapse of Lehman Brothers , I make a strong case. Our government allowed Fannie Mae and Freddie Mac to become a giant mortgage backed security hedge fund, complete with 70-1 taxpayer funded leverage. They had sub Libor financing, meaning the luxury of borrowing money at one of the lowest interest rates in the world, all risks backed by the US taxpayer. To understand this kind of leverage imaging walking into the most profitable casino in Las Vegas, all you have is $100 in your pocket. Yet, because of your good credit, the casino allows you to play blackjack with $7000 at risk on the table. The slightest loss and your equity is wiped out. That’s exactly what happened to Fannie and Freddie and today the US taxpayers have lost well over $360 billion in this reckless risk taking bonanza. That’s over half the cost of the entire war in Iraq. It wasn’t always this way but as Samuel Johnson once said, the road to hell is paved with good intentions. In the 90′s Fannie and Freddie only used 30-1 leverage but the great enabler, US Congress, was there all they way either ignoring or clueless as to the real risks lurking below the surface. I know a thing or two about risk and leverage. My former employer was levered 40-1, that was before we filed Chapter 11 bankruptcy. Uncle Sam chose not to save Lehman yet letting her fail cost the taxpayer dearly. When that $660 billion domino fell, she obliterated the value of Fannie and Freddie’s $5 trillion mortgage portfolio, crushing the US taxpayer in the process. Thank you Hank Paulson. Where We Stand Today The recent conferences in Washington debating reform of Fannie Mae and Freddie Mac are filled with political mud slinging, it’s the ultimate blame game. Last week’s release of the Financial Crisis Inquiry Commission’s (FCIC) Report and Dissents are making big headlines. Yet, the story within the story is how political infighting tore this dysfunctional commission apart, ten million dollars spent and we have very little to show for it. I am outraged that President Obama has not stepped in here. I think he blew a golden opportunity to lead and protect billions of US taxpayer dollars at stake. The FCIC report is a joke, it’s the rehash of all rehashes. It looks like my book, Andrew Ross Sorkin’s Too Big to Fail and Michael Lewis’ The Big Short . All thrown into one 700 page document. Is there anything new we have learned in the Commission’s report? Are there clear recommendations that will help prevent another financial crisis? No. The commission was divided by politics and their conclusions are as messed up as a Brett Farve retirement party, his 7th one no less. Ironically the most hapless part of the commissions report is probably the most important. What really went wrong with Fannie and Freddie and how do we fix them? The real battles are being fought within the Obama Administration, among regulators over smaller related housing issues, and between Republicans in the new Congress. The next few weeks will show significant developments in some of these areas, but the process for reforming Fannie and Freddie, the housing finance system more broadly, lags far behind the deficit and job creation in the minds of Congress and the Obama Administration. It’s a shame but look for this battle to take years, not months, dragging out the uncertainty and sclerosis which has plagued the housing markets for the past several years. The Obama Administration has recently leaked reports to the press that their report outlining suggested reforms to Fannie Mae and Freddie Mac, will be delayed till mid-February, from the statutory due date of January 31. The Deadly Divide? My friends at DCTripwire [firewalled] tell me the likely causes of this delay are twofold: (1) A lack of senior staff at Treasury and the Federal Housing Finance Agency (FHFA)–the same over loaded team responsible for implementing many of the rules and regulations of the Dodd-Frank Act. Guess what? They’re also in charge of Fannie and Freddie reform. (2) The fact that there is a divide within the Obama Administration, both substantively and politically on any reform efforts. One side is determined to maintain some sort of government (and hence taxpayer) guarantee of mortgage securities, providing support of middle class homeowners. The other side seeks to remove the government from having either an explicit or even implied guarantee. Instead they hope to trade this removal of the government from the market for the creation of a fund to assist low-income citizens in attaining affordable rental housing. We all know President Lincoln once said “A house divided against itself cannot stand.” Well, this one can’t even roll over. Why? Because Treasury Secretary Geithner (and former National Economic Council Director Larry Summers) are in the former group, while Housing and Urban Development (HUD) Secretary Shaun Donovan and other progressive members of the Administration are in the latter. This might explain President Obama’s silence over the politically handicapped Financial Crisis Inquiry Commission. Even with the Administration’s move back towards the political center, I think the President’s chum Tim Geithner wins and their report, whenever it is issued, will maintain some government role in the mortgage market. I’m told the report will also spell out several options for housing finance reform, in very broad terms, and will not be in legislative language. The Obama Administration wants this report to add to the discussions on Fannie and Freddie, but for political reasons, they want to allow Republicans in the House of Representatives to launch the first salvo in this legislative battle. Inside the Reform Process Despite the lack of concrete action by the Administration, there are several regulatory actions that are being discussed or implemented at present. The first actions have been taken internally by Fannie and Freddie. They each have improved their balance sheets since conservatorship began. Credit standards have been raised, and both they are refusing to purchase mortgages from borrowers with poor credit scores. Fees that each entity charges to banks to guarantee their loans have also been increased and this income has helped to rebuild their balance sheets. Fannie and Freddie still owe a substantial quarterly payment to the Treasury Department in the form of a 10% dividend on the Treasury’s preferred stock. If this dividend was lowered, it would allow the them to begin to repay the billions in taxpayer support and simplify any future restructuring. Any change to the dividend would need to be approved by both Treasury and the Federal Housing Finance Administration (FHFA) which is the GSEs conservator. Expect that any changes will be subjected to heavy Congressional scrutiny. In a move I support, Fannie and Freddie are contemplating is a shift in the ways that servicers are compensated. This is crucial because the incentives in the mortgage servicing business are all screwed up and have hurt the foreclosure process. According my DCTripwire, a Federal Housing Finance Administration / HUD study is being made of future mortgage servicing structures and compensation for single-family conforming mortgage loans. Servicer compensation at present is based on a minimum servicing fee that is included in the mortgage rate, and thus decreases the flexibility of servicing non-performing loans, which has the potential to affect negatively both borrowers and guarantors. Democrats will continue to hammer on mortgage servicers and the lack of investigation and sanctions by the Obama Administration on servicers. Special Inspector General for TARP, Neil Barofsky has assured the Congressional Oversight Committee that criminal investigations and audits of the largest servicers are currently underway, in addition to the 50 state attorneys’ general investigation, though he also emphasized that the Administration could and should do more in this area. Fannie and Freddie Reform Efforts in Congress After the release of the White House report on options for the future of housing finance, look for Congress, especially Republicans in the House of Representatives, to take the lead in proposing GSE reforms. The House Financial Services Committee has already scheduled four hearings on housing and GSE-related topics. When following these developments, it is important to note that the Committee’s rules have reverted to “regular order” whereby the Subcommittee Chairs will hold all, or nearly all, of the hearings on individual topics and investigations , leaving the full Committee hearings, led by Chairman Spencer Bachus (R-AL), for marking up legislation and receiving prominent figures, such as Federal Reserve Chairman Bernanke. Reading between the lines, in my opinion I don’t think House Speaker Boehner and House Finance Committee chair Bachus are all that close these days, especially on reform of Fannie and Freddie. Boehner’s Boys This Subcommittee move is significant change and will introduce important new names and characters into the contentious world of housing finance, including the Rep. Neugebauer (R-TX); Rep. Jeb Hensarling (R-TX), Committee Vice-Chair; Rep. Scott Garrett (R-NJ), Chairman of the Subcommittee on Capital Markets & GSEs (Fannie and Freddie). The list of hearings shows that housing finance and GSE reform are the main focus of the Committee, save Dodd-Frank oversight and macroeconomic policy. What has also become apparent is that Committee Republicans are no further along in devising a credible plan for reform of the GSEs than they were during Dodd-Frank Act negotiations. After conversations with House staff, it is likely that Vice-Chairman Hensarling’s bill from the 11th Congress remains the starting point for Republican legislative reforms. The bill was widely derided in the 111th Congress as “unserious,” since it remains ideologically pure, and refuses to acknowledge the fact that the GSEs currently represent nearly 100% of the mortgage securitization market, alongside an extremely weak housing market. With this in mind, look for the Obama Administration, despite their internal disagreements, to acknowledge this reality and allow Republicans to take the lead in this contentious area as part of a delaying tactic, hoping to push reform off for as long as possible. As mentioned earlier, House Republicans have painted themselves into a corner, consistently and eagerly proclaiming that any government guarantee or involvement in the housing finance markets, save perhaps the Federal Housing Administration and Veterans Administration (for providing assistance to first-time moderate income homebuyers), is unacceptable. Look for any House Republican bill to draw heavily from the work of Peter Wallison, who along with Alex Pollock and Edward Pinto, have recently released a White Paper entitled : “Taking the Government Out of Housing Finance: Principles for Reforming the Housing Finance Market.” Rep. Garrett, who is expected to lead the way on this issue, has been quoted this past week saying definitively, “There can’t be any explicit guarantee. The main problem has been that the taxpayer has been on the hook for this credit risk for a long time. We are adamant there should be no more bailouts.” This will make any compromise with the Democrat-controlled Senate very difficult, if not impossible, let alone with the Obama Administration. Although Garrett and his fellow House Republicans are often portrayed as sympathetic to the financial services industry, the Congressman has also been quick to pour his scorn on an industry proposal, from the Financial Services Roundtable, which proposes to replace the GSEs with several privately capitalized firms that would package mortgage-backed securities, while the federal government would guarantee the interest and principal for investors. In theory the very same entities securitizing nonconforming and private label securities would also be the co-owners of the guaranteeing entities, but these would only be allowed to work with traditional, conforming, 30 year mortgages. The Federal guarantee would not apply to the new entity itself, or any debts or securities issued by them to cover the costs of their operation. The Long Road Ahead The problem for Garrett and other Republicans will be the presence of a “federal catastrophic insurance fund,” similar to that which was put in place after 9/11 for terrorism reinsurance. This fund would support the guarantee only if one of these firms fell into financial trouble. The guarantee firms would contribute to the insurance fund and several layers of capital would need to be used up before the government was responsible. Even this level of taxpayer exposure is unacceptable to many Republicans. Instead of any government support, the Republican school of thought espouses a housing finance sector where the government operates only on the margins, by setting and enforcing standards for what types of mortgages can be securitized, what are appropriate servicing standards and procedures, and potentially by explicitly offering rental assistance for affordable housing. Most plans for privatization of the GSEs are implemented chiefly through the gradual reduction in the size of the conforming loan limit (at a rate of around 20% per year), so that in theory, the private sector is able to securitize more and more newly originated mortgages, and/or an alternative such as covered bonds are introduced. Due to the problems that may result from such a plan, it is likely that the Senate Banking Committee will proceed on GSE reform at a far more deliberate pace than the House akin to the recent Dodd-Frank Act preparations. The Senate Committee (which has yet to hold its first organizational hearing) also will have several new personalities, including a new Chairman, Tim Johnson (D-SD). Its increased Republican presence, which is increasingly made up of conservative-leaning members, will likely echo the House Republicans. Two Senate Republicans are likely to emerge as key thought-leaders in this debate, Senator Mike Crapo (R-ID) and Bob Corker (R-TN). Early indications are that although they each consistently show concern for taxpayers, they both recognize the inherent risks of rushing though a privatization of the GSEs with a weak housing market and without deep and serious reforms of the other aspects of housing finance, such as the rules regarding securitization (including servicing standards, representations and warranties.) It is doubtful that any substantive legislation will be introduced before the summer and even then, it will likely only be in the House, with the Senate months, if not nearly a year behind. For more info go to www.lawrencegmcdonald.com or www.dctripwire.com

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

January 30, 2011

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

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Michael J. Critelli: My Highly Improbable Journey From CEO to Contemporary Urban Film Producer

January 28, 2011

Growing up, my family felt unusual empathy with black people. Because my mother worked as a public health nurse’s aide, we got to know her black professional nursing friends. I also grew watching incomprehensible brutality against well-behaved black people in the South on TV. My parents had been direct victims of discrimination when they were younger. Even in my generation, attending schools dominated by members of other ethnic groups, I experienced more subtle forms of discrimination, including degrading ethnic jokes from some classmates. I spent 30 years at Pitney Bowes, 11 as CEO, because Pitney Bowes welcomed all kinds of people. Walter Wheeler, its longest serving CEO, had been a National Urban League board member, because, like Pitney Bowes, the NUL invited everyone, black, white, young, old, male, female, Democrat or Republican, to aspire to the American dream. I accepted the NUL’s invitation to join its Board in 1997, became its chairman for five years, and served for 13 years. Both organizations created and celebrated success stories for women and people of color. In 2004, I discovered such a story. My younger son’s white Swedish chess coach told me he had secured a golf scholarship to Tennessee State University, a historically black college. The coach was a black woman, Dr. Catana Starks. When she began coaching in 1988, she fielded a black golf team, but she was forced to recruit mostly or all white non-U.S. golfers after the mid-1990′s. Two insights came together to make me passionate, even obsessive, about making a film about her story: Golf had evolved from a relatively inexpensive sport open for elite competitive access to most young people of most income levels to an extremely expensive sport which required a great deal of wealth. Young black people did not have access to private country clubs, although I encountered some of them on the public course on which I played, but they found a way to excel at golf. Becoming a caddy was how young black people got access to golf instruction, equipment and facilities to achieve elite performance levels. Country clubs phased out caddies, because they saw more profit potential renting golf carts. Coach Starks recruited abroad, because middle-income young people were more likely to learn golf through caddying or government-subsidized golf academies. Although Title IX had opened up big opportunities for girl athletes, the financial and competitive pressures of coaching had shrunk the number of women coaches. Coach Starks, who had grown up in the Jim Crow era in Alabama, and whom I met in 2006, reminded me of my late mother: short and soft-spoken, but very tenacious, inspirational, caring, competitive and visionary woman. She coached golf successfully for 18 years, although the financial wear and tear of coaching and travel caused her to retire from coaching at age 60 in 2006. Her most famous golfer was Sean Foley, who has recently coached Tiger Woods, but she developed other golfers, like San Puryear, Michigan State University’s golf coach, and Robert Dunwiddie, who is a European tour player. I was determined to make a film about her life to prove that women like my mother and Coach Starks deserved to prove their ability to succeed in a man’s world. Why a film? Entertainment is the most powerful medium for changing minds. After all, I was inspired to be a lawyer because I watched Perry Mason when growing up. In November, 2009, I asked my son Mike, who had graduated from the University of Southern California in 2008, to write a screenplay about the Coach Starks story. In March, 2010, I contacted Pierre Bagley, an African-American filmmaker, whom I met when serving as the Chairman of the National Urban League Board of Trustees. We decided to form Gyre Entertainment, a firm with a mission to create film and other entertainment content of strong interest to contemporary urban audiences, with the Coach Starks film as our first project. The film, called From the Rough , stars Taraji P. Henson, an Academy Award nominee for The Curious Case of Benjamin Button , as Coach Starks. Tom Felton, from the Harry Potter series, Michael Clarke Duncan, an Academy Award for The Green Mile , are other members of an outstanding cast. We are targeting a Fall 2011, theatrical release. Our Gyre team is attending the PGA of America merchandise show in Orlando, Florida. We share an interest in expanding access to golf for African Americans with the PGA and the merchandisers attending the show. However, I will also think about my mother, Coach Starks, and countless other heroic women.

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GE CEO To Replace Volcker On Obama’s Economic Team

January 21, 2011

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

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Net Neutrality Rules Poised To Pass FCC Tomorrow

December 20, 2010

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

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Arizona Sues Bank Of America, Alleges Loan Modification Fraud

December 17, 2010

PHOENIX — Attorneys general in Arizona and Nevada filed civil lawsuits Friday against Bank of America Corp., alleging that the lender is misleading and deceiving homeowners who have tried to modify mortgages in two of the nation’s most foreclosure-damaged states. Bank of America violated Arizona’s consumer fraud law by misleading consumers who tried to reduce their monthly payments to keep their homes, state Attorney General Terry Goddard said. The bank also violated the terms of a 2009 consent agreement requiring its Countrywide mortgage subsidiary to implement a loan modification program, the Arizona lawsuit alleges. Hundreds of homeowners kept making their mortgage payments because Bank of America repeatedly assured them that their loans were being modified, Goddard said. Instead, many lost their homes anyway. “Those people could have used that money for something else,” Goddard told The Associated Press. “They were deceived into continuing to make mortgage payments when they had no hope of saving their homes.” Nevada Attorney General Catherine Cortez Masto told the AP that the Silver State’s lawsuit was a last resort to try to get the bank to change its ways. It was filed after several discussions with bank managers led to assurances but little more. “Clearly there is a disconnect between what Bank of America tells me at the management level and what’s happening on the front line,” Masto said. Masto said separate lawsuits show the bank’s problems with consumers are widespread. “The only thing that I’m asking is that (Bank of America) give them a reasonable response in a timely manner,” she said. “It is, in my perspective, a callous disregard for what we are telling them.” Nevada and Arizona are among the states hardest hit by homeowners who have defaulted on mortgages in the last few years as adjustable payments soared, people lost their jobs, and home values collapsed. One out of every 99 households in Nevada received a foreclosure notice last month, according to RealtyTrac Inc., and Arizona’s rate wasn’t far behind. The Arizona attorney general’s office was deluged with consumer complaints and launched an investigation more than a year ago, Goddard said. Settlement talks with Bank of America began in April but ultimately collapsed Thursday. Goddard, a Democrat, is leaving office in January after an unsuccessful run for governor and will be replaced by Republican Tom Horne. A Bank of America spokesman criticized Goddard for filing the lawsuit in his last days in office while multistate negotiations on foreclosures were under way. Dan Frahm, a senior vice president for the Charlotte, N.C.-based bank, said it shares the attorneys general’s goal of helping homeowners. “We are disappointed that the suits were filed at this time, however, because we and other major servicers are currently engaged in multistate discussions led by Attorney General (Tom) Miller in Iowa to try to address foreclosure related issues more comprehensively,” Frahm said in an e-mailed statement. “Bank of America has been a cooperative partner with the attorneys general, has worked with state leaders to evolve programs and resources to broaden assistance to distressed customers, and we are already under way with further improvements to our processes and programs for Bank of America customers,” Frahm said. Bank of America has completed nearly 750,000 loan modifications and has foreclosed on fewer than half that many homes, Frahm said. Many of the foreclosures did not qualify for loan modifications. The Arizona lawsuit, filed in Maricopa County Superior Court, alleges that the bank has repeatedly violated an October 2008 consent agreement between Bank of America and 11 states requiring the bank’s Countrywide subsidiary to modify hundreds of thousands of loans. Arizona’s agreement was finalized in 2009. Countrywide was accused of engaging in widespread deceptive practices with its customers, and Bank of America agreed to reduce principal or interest payments by up to $8.4 billion on those loans. But Bank of America, which had acquired Countrywide in July 2008, failed to make timely decisions on modification requests and went ahead with foreclosures, Goddard said. Bank of America is the No. 1 loan servicer in both Arizona and Nevada. It’s also tops in complaints to Arizona regulators, and not just because of its size, Goddard said. “They’re head and shoulders above any other financial institution,” he said. “Nobody’s got a great record, but Bank of America’s is worse than any of them. Friday’s lawsuit in Arizona asks for contempt citations against the bank for violating the consent agreement. It also seeks restitution for consumers, civil penalties, legal fees, plus $25,000 for each consent agreement violation and up to $10,000 for each violation of the Arizona Consumer Fraud Act. Nevada’s complaint accuses the bank of operating its loan modification program in violation of the Nevada Deceptive Trade Practices Act. It seeks civil penalties and restitution along with other fees. Bank of America shares rose 5 cents to $12.57 Friday. ___ Associated Press writer Oskar Garcia in Las Vegas contributed to this report.

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Arizona Sues Bank Of America, Alleges Loan Modification Fraud

December 17, 2010

PHOENIX — Attorneys general in Arizona and Nevada filed civil lawsuits Friday against Bank of America Corp., alleging that the lender is misleading and deceiving homeowners who have tried to modify mortgages in two of the nation’s most foreclosure-damaged states. Bank of America violated Arizona’s consumer fraud law by misleading consumers who tried to reduce their monthly payments to keep their homes, state Attorney General Terry Goddard said. The bank also violated the terms of a 2009 consent agreement requiring its Countrywide mortgage subsidiary to implement a loan modification program, the Arizona lawsuit alleges. Hundreds of homeowners kept making their mortgage payments because Bank of America repeatedly assured them that their loans were being modified, Goddard said. Instead, many lost their homes anyway. “Those people could have used that money for something else,” Goddard told The Associated Press. “They were deceived into continuing to make mortgage payments when they had no hope of saving their homes.” Nevada Attorney General Catherine Cortez Masto told the AP that the Silver State’s lawsuit was a last resort to try to get the bank to change its ways. It was filed after several discussions with bank managers led to assurances but little more. “Clearly there is a disconnect between what Bank of America tells me at the management level and what’s happening on the front line,” Masto said. Masto said separate lawsuits show the bank’s problems with consumers are widespread. “The only thing that I’m asking is that (Bank of America) give them a reasonable response in a timely manner,” she said. “It is, in my perspective, a callous disregard for what we are telling them.” Nevada and Arizona are among the states hardest hit by homeowners who have defaulted on mortgages in the last few years as adjustable payments soared, people lost their jobs, and home values collapsed. One out of every 99 households in Nevada received a foreclosure notice last month, according to RealtyTrac Inc., and Arizona’s rate wasn’t far behind. The Arizona attorney general’s office was deluged with consumer complaints and launched an investigation more than a year ago, Goddard said. Settlement talks with Bank of America began in April but ultimately collapsed Thursday. Goddard, a Democrat, is leaving office in January after an unsuccessful run for governor and will be replaced by Republican Tom Horne. A Bank of America spokesman criticized Goddard for filing the lawsuit in his last days in office while multistate negotiations on foreclosures were under way. Dan Frahm, a senior vice president for the Charlotte, N.C.-based bank, said it shares the attorneys general’s goal of helping homeowners. “We are disappointed that the suits were filed at this time, however, because we and other major servicers are currently engaged in multistate discussions led by Attorney General (Tom) Miller in Iowa to try to address foreclosure related issues more comprehensively,” Frahm said in an e-mailed statement. “Bank of America has been a cooperative partner with the attorneys general, has worked with state leaders to evolve programs and resources to broaden assistance to distressed customers, and we are already under way with further improvements to our processes and programs for Bank of America customers,” Frahm said. Bank of America has completed nearly 750,000 loan modifications and has foreclosed on fewer than half that many homes, Frahm said. Many of the foreclosures did not qualify for loan modifications. The Arizona lawsuit, filed in Maricopa County Superior Court, alleges that the bank has repeatedly violated an October 2008 consent agreement between Bank of America and 11 states requiring the bank’s Countrywide subsidiary to modify hundreds of thousands of loans. Arizona’s agreement was finalized in 2009. Countrywide was accused of engaging in widespread deceptive practices with its customers, and Bank of America agreed to reduce principal or interest payments by up to $8.4 billion on those loans. But Bank of America, which had acquired Countrywide in July 2008, failed to make timely decisions on modification requests and went ahead with foreclosures, Goddard said. Bank of America is the No. 1 loan servicer in both Arizona and Nevada. It’s also tops in complaints to Arizona regulators, and not just because of its size, Goddard said. “They’re head and shoulders above any other financial institution,” he said. “Nobody’s got a great record, but Bank of America’s is worse than any of them. Friday’s lawsuit in Arizona asks for contempt citations against the bank for violating the consent agreement. It also seeks restitution for consumers, civil penalties, legal fees, plus $25,000 for each consent agreement violation and up to $10,000 for each violation of the Arizona Consumer Fraud Act. Nevada’s complaint accuses the bank of operating its loan modification program in violation of the Nevada Deceptive Trade Practices Act. It seeks civil penalties and restitution along with other fees. Bank of America shares rose 5 cents to $12.57 Friday. ___ Associated Press writer Oskar Garcia in Las Vegas contributed to this report.

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Video: Ed Rendell Says Obama Did `Right Thing’ on Tax Plan

December 17, 2010

Dec. 17 (Bloomberg) — Pennsylvania Governor Ed Rendell, a Democrat, discusses Congress’s decision to extend existing tax rates for all earners through 2012. President Barack Obama is scheduled to sign the $858 billion tax-cut plan into law this afternoon. Rendell, speaking from Harrisburg, Pennsylvania, with Pimm Fox on Bloomberg Television’s “InBusiness,” also discusses his state’s economy and his plans to publish a book. (Source: Bloomberg)

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Video: Philadelphia’s Nutter Seeks 401(k)-Style Retirement Plan

December 10, 2010

Dec. 10 (Bloomberg) — Philadelphia Mayor Michael Nutter, a Democrat, talks about the city’s retirement plan. Nutter says the sixth-most populous U.S. city is negotiating with public employee unions to move to a 401(k)-style defined-contribution plan. He talks with Mark Crumpton on Bloomberg Television’s “Bottom Line.” (Source: Bloomberg)

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Obama Tax Cut Deal Projected To Cost More Than Stimulus

December 10, 2010

WASHINGTON — President Barack Obama is predicting congressional approval of the tax-cutting compromise he has reached with Republican leaders, but he’s not ruling out that unhappy Democrats will make some changes in the mammoth legislation. In an interview with NPR released Friday, Obama said that despite a rebellion by many Democrats against his tax deal, it will pass because “nobody – Democrat or Republican – wants to see people’s paychecks smaller on Jan. 1 because Congress didn’t act.” The pact would extend cuts in income tax rates for all earners that would otherwise expire next month, renew long-term jobless benefits and trim Social Security taxes for one year. Democrats have objected that it is too generous to the rich, especially its provisions cutting estate taxes for the wealthiest Americans. House Democrats voted in a closed-door meeting Thursday not to allow the package to reach the floor for a vote without changes to scale back tax relief for the rich. Asked about those objections, Obama said there will be talks between House and Senate leaders about the package’s final details. “Keep in mind, we didn’t actually write a bill,” he said of his agreement with GOP leaders. “We put forward a framework. I’m confident that the framework is going to look like the one that we put forward.” Rep. Michele Bachmann, R-Minn., one of the House’s highest-profile conservatives, said that Democratic discontent highlights the difference between the two parties. “The compromise that was forged wasn’t rich enough for Speaker Pelosi and the Democrats,” Bachmann said on NBC’s “Today” show, referring to Nancy Pelosi, D-Calif. “They want the taxes up even higher. And that’s really where the line of demarcation is in this discussion.” Speaking separately, Tim Kaine, chairman of the Democratic Party, said Democrats objecting to Obama’s tax deal may be showing voters in their districts that they have “some spine” and predicted that the two-year extension of the lowered income tax rates would eventually help Democrats. “By extending it two years, and I think this is going to happen, you’re putting the debate about tax cuts for the wealthiest right in the heart of the presidential election. I think the president feels very confident he can make the case,” Kaine said on CBS’ “Early Show.” The measure appears headed for Senate approval after negotiators added a few sweeteners to promote ethanol and other forms of alternative energy. Tax provisions designed to increase production of hybrid automobiles, biodiesel fuel, energy-efficient homes, coal and energy-efficient household appliances would be extended through the end of 2011. There is no precise timetable for passage in the Senate, but a test vote was set for Monday afternoon that appears likely to demonstrate overwhelming support for the legislation. Supporters say it would help accelerate a sluggish recovery from recession. “This bill is not perfect, but it provides the economic boost middle-class families and small businesses in Nevada and across America need,” said Senate Majority Leader Harry Reid, D-Nev. “Middle-class families and small businesses will see their taxes go down.” At the insistence of Republicans, the measure includes a more generous estate tax provision. That infuriated Democrats already unhappy with Obama for agreeing to extend tax cuts at incomes of more than $200,000 for individuals and $250,000 for couples. In all, the package would cost about $855 billion, according to a preliminary congressional estimate. “If we pass this agreement as written, it says we are going to continue the Bush policy of trickle down economics for at least two more years, and in my mind, that is absurd,” said Sen. Bernie Sanders, a Vermont independent. Vice President Joe Biden has told Democrats in closed-door meetings this week that they are free to oppose the agreement but it might unravel if they do. “If it’s take it or leave it, we’ll leave it,” said Rep. Lloyd Doggett, D-Texas, after a closed-door meeting in which rank-and-file Democrats chanted, “Just say no.” Despite significant criticism from fellow Democrats, Obama has said the sweeping measure is necessary to help the struggling economy recover from the worst recession in decades. Senate GOP leader Mitch McConnell has said he expects most Senate Republicans to support the tax bill. Prominent House Republicans back it, too. Among the energy tax provisions added was an extension through 2011 for the current 45-cent per gallon subsidy for ethanol, at a cost to the Treasury estimated at nearly $5 billion. The issue is of particular interest to lawmakers from Midwestern states with grain crops. “While this legislation is not as long as we had hoped, it is a commonsense approach that will ensure American ethanol production continues to evolve and new technologies commercialized,” said Bob Dinneen, president of the Renewable Fuels Association.

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Marian Salzman: Mad as Hell–and Only Getting Madder

November 29, 2010

This is the first in a series of 12 posts expounding on the 2011 forecasts in the annual trends report from Salzman, president of Euro RSCG Worldwide PR and an internationally respected trendspotter. Despite the relatively peaceable environment abroad–there’s a successful coalition, for now, in the U.K., and Australians still appear confident despite debt problems–the U.S. in 2011 is going to flash even red-hotter than the map of the country at midterm elections. Temperatures at home are pushing up the mercury, and not because of global warming or climate change. It’s a trend that extends from politics to domestic life: Expect men at home to be angry at their wives, working women to express ire over being their household’s sole wage-earner, and everybody to be furious about taxes, privacy, individual freedoms and more. Ordinary Americans will have their feedback loops set on tantrum. We maybe haven’t seen so much anger since 1976 when Peter Finch, playing anchorman Howard Beale in Network , came in from the rain to exhort his audience to express themselves. (“I want you to get up right now and go to the window. Open it, and stick your head out, and yell, ‘I’M AS MAD AS HELL, AND I’M NOT GOING TO TAKE THIS ANYMORE!’”) Headlines show banks once again making billions (and well-connected bankers aren’t doing so poorly, either), while the middle class have lost savings, homes, health care, jobs, prospects. The millennials can’t find jobs. The poor have less faith than ever about staying in school (1.2 million Americans drop out ). Washington talks about solutions, but for many Americans, government itself plays out as the problem. Listen in on Rand Paul’s acceptance speech in Kentucky, the new purple-grass state. His chorus of ” Deliberate upon this ” had the ring of a schoolyard heavy premeditating a rumble at the noon bell. During the race, even MSNBC liberal pundit Chris Matthews flashed plenty mad at Paul’s opponent , Democrat Jack Conway, whose attempt to smear Paul with an anonymous source in the “Aqua Buddha” ad toppled as hard in the heartland as the statue of Saddam Hussein once did in Baghdad. On Twitter, AT&T users get really upset at how frequently iPhones drop their calls . AT&T’s SoMe strategy– mapping angry tweeters’ locations to try to restore service and confidence–is, depending on your point of view, either another noxious example of “eavesdropping” or a positive response to a negative. The Gap felt the blowback of contagious wrath on SoMe after it tried redesigning its logo. Even though business press critics called the company ” spineless ” for backing down, the detractors asking for the old Gap back–in droves on social and digital media–won. Don’t doubt it: Consumers are mistake-intolerant for brands and causes. As for what used to be called “customer satisfaction,” Frances Allen, EVP and CMO of Denny’s, offers that “insight” and “innovation” are among the few things you can do when they’re losing it. You can also plan ahead. Before the urge to attack strikes, brands must know what “insightful” means, from extracultural preferences to all-American nostalgia, and anticipate the defensive game plan. You don’t want to wind up with fingers pointing every which way, as Samsung did when its Lebanese ad agency FP7 Doha took a creative prize for a spot the client had never seen. The trouble started when the public saw it–a robed Jesus snapping a picture of a group of nuns–and went berserk. Anger, it turns out, just isn’t that easy to unstrand even by the most evolved among us. The Dalai Lama tweets that the energy of anger feels like progress but is “almost always unreliable,” as emotions go. It’s Buddhist theology that it’s possible to have compassion without attachment and anger without hatred. But don’t try telling that to Rep. John Yarmuth, a Dem whose win of a House seat in Kentucky he called ” bittersweet ” because of the flavor of the harsh language heaped on Nancy Pelosi and President Obama all year. What is sure is that anger is the color of the zeitgeist now, and anyone who isn’t tapping it risks appearing out of touch. When MSNBC network star Keith Olbermann got suspended without pay earlier this month for making three Democratic political contributions, including against Rand Paul, one gloating headline read: “Time to Feast on a Delicious Second Helping of Schadenfreude.” After Election Day, pundits on the right weighed in about Olbermann and MSNBC’s commentators, while other sites noted that the staff of some defeated Democrats had talked to grief counselors after the election–a soft touch seemingly tailor-made for the very angry to dis. Indeed, this emotion–anger–which has been analyzed by everybody from Sigmund Freud to 12-step gurus as sublimation of fear, anxiety or grief, doesn’t feel the need today to get deeply in touch with its masks. Like Bill Clinton trying to parse what “is” is, anger is the new “it.” And being angry makes for dynamics. Seth Godin has noted that angry people grab attention because they are interesting, and interesting people will get more air time for their angry message, helping them in turn set agendas and get elected. In the new movie Skyline , futuristic warmongers descending on Los Angeles first appear as so many dropping points of light. They’re robotic cyberwarriors, metal hulks that first dazzle, then destroy. How ’bout this new phrase: light-rippin’ mad! Back in Prohibition (the era for the new HBO series “Boardwalk Empire”), shrinks thought angry people should dispel their emotion at the piano, by banging out “The Devil’s Sonata.” Not having any was boardwalk boss Enoch Thompson (Steve Buscemi), who skipped go (and did not go directly to jail) by setting his childhood house (and bad memories) literally on fire. With the casualties of voter anger feeling the chill winds of Alaska, and the Tea Party steeping those enmities as one serious kind of ” flippin’ fun ,” look for a kinder, gentler era to become itself an object of public ire. I expect, in the personal sphere, we’ll see more and bigger cases of domestic violence and the faceless menace that is cyberstalking . Meanwhile, expect the political arena to roil ever hotter. Barack Obama’s cool, calming rhetoric hit the spot for many Americans in panic-stricken 2008. In retrospect, his no-drama persona appealed just long enough to get him elected, but now it’s very two years ago. Tomorrow: “Talk to the Hands”

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Meredith Bagby: What’s So Wrong With Simpson-Bowles?

November 23, 2010

The Simpson-Bowles Deficit Plan is unraveled (the good and the bad) by Harvard senior Sam Barr, publisher of the Annual Report of the USA : As a liberal and a deficit hawk (the two aren’t mutually exclusive), I think there’s actually a lot to like in the Simpson-Bowles plan, which makes it disappointing that the proposals have been so coolly received. But there’s plenty to be skeptical about, too. We need a frank discussion to separate the wheat from the chaff, but we aren’t getting that from Washington. Let’s begin with the good. The plan would eliminate a popular tax deduction, the mortgage-interest deduction, which costs a ton of money and primarily benefits the wealthy. This is a political sacred cow, and Simpson-Bowles commendably puts it on the table. It also recommends increasing the gas tax and cutting farm subsidies, two important but inevitably unpopular changes that the country benefits from hearing a Republican and Democrat advocate. Similar sentiments apply to the plan’s discussion of defense spending, which it insists should be reduced by over $100 billion in 2015. This is a good start, and already we are seeing the Republican Party split at the seams between serious deficit hawks and flunkeys for the military-industrial complex. Simpson-Bowles also has an admirable take on long-term health care spending, which is the key to the whole deficit-reduction puzzle. In attacking other pieces of the plan, liberals have overlooked the fact that Simpson-Bowles endorses the cost-control measures of the Democrats’ signature legislative achievement, the Affordable Care Act. For example, it proposes to strengthen the Independent Payment Advisory Board by subjecting all health care providers to IPAB’s recommendations. (The ACA gave hospitals a reprieve until 2018.) Simpson-Bowles should get credit for rejecting Republicans’ claims that health care reform was a budget-buster, and for suggesting that, if we don’t meet our cost-control targets, we should implement a public option to help us do that. Now for the bad news. First, on taxes. Not only would Simpson-Bowles end the mortgage-interest tax deduction, but all tax credits and deductions, including the Earned Income Tax Credit, which benefits the working poor. And the plan puts over 90% of the money saved from eliminating these credits and deductions into lowering tax rates, not reducing the deficit. Why a deficit-reduction plan wouldn’t actually try to reduce the deficit, rather than give away tax cuts, is beyond me. The only explanation is that, otherwise, Republicans wouldn’t go along with it. Of course, Republicans won’t go along with it anyway. And what about those programs Simpson-Bowles proposes to cut? Many liberals have made a fuss about Social Security, which the plan would nudge towards welfare by increasing benefits for the lowest earners while increasing taxes and reducing benefits for the highest. But I’d like to focus on the domestic discretionary budget, which is where Simpson-Bowles finds a huge chunk of its savings. It’s very easy to slash the domestic discretionary budget. It’s been done for decades by both parties, and there really isn’t anything left to squeeze out of it. Simpson-Bowles proposes cutting the federal workforce by 10% and freezing employees’ salaries for three years. This accepts on faith the conservative assumption that the government is doing something now that it shouldn’t be doing. But what, exactly? Prosecuting criminals? Funding medical research? Building levees, tunnels, and bridges? (All of the above?) The fact that Simpson-Bowles spends equal energy on domestic discretionary spending and Social Security as on health care, the biggest driver of long-term debt, is very disconcerting. My worry is that it will be easy for Republicans to latch on to the domestic spending cuts while conveniently overlooking everything else. And then it will be hard for Democrats to say no. Why? Because it always is. Everything’s a battle in today’s Washington, and Obama, Reid, and Pelosi aren’t going to go to bat for discretionary spending. Hence my concern about the Simpson-Bowles plan. In a vacuum, it’s not such a bad proposal. The question is whether Democrats will be able to stand up to Republicans when they grab hold only of those aspects of the plan that fit with their interests and ideology. About that I have serious doubts. Join the discussion: www.annualreportusa.com

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Video: Schweitzer Says Montana Drug Plan Will Save U.S. $96 Mln: Video

November 18, 2010

Nov. 18 (Bloomberg) — Montana Governor Brian Schweitzer, a Democrat, talks about his plan to cut the state’s Medicaid costs. Schweitzer also discusses Montana’s budget and the U.S. health-care system. He talks with Mark Crumpton on Bloomberg Television’s “Bottom Line.” (Source: Bloomberg)

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Video: Schweitzer Says Montana Drug Plan Will Save U.S. $96 Mln: Video

November 18, 2010

Nov. 18 (Bloomberg) — Montana Governor Brian Schweitzer, a Democrat, talks about his plan to cut the state’s Medicaid costs. Schweitzer also discusses Montana’s budget and the U.S. health-care system. He talks with Mark Crumpton on Bloomberg Television’s “Bottom Line.” (Source: Bloomberg)

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Video: Dodd Challenges Proposal to Strip Fed of Job Mandate: Video

November 16, 2010

Nov. 16 (Bloomberg) — U.S. Senator Chris Dodd, a Democrat from Connecticut who leads the Senate Banking Committee, talks with Bloomberg’s Peter Cook about criticism of Federal Reserve monetary policy. Republican lawmakers in the U.S. House and Senate say they want to compel the central bank to focus solely on controlling inflation, upending a congressional mandate that’s shaped monetary policy for more than 30 years. Bloomberg’s Mark Crumpton also speaks. (Source: Bloomberg)

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Video: Warner Proposes Compromise on Extension of Bush Tax Cuts

November 12, 2010

Nov. 12 (Bloomberg) — U.S. Senator Mark Warner, a Democrat from Virginia, talks about the likelihood of a compromise over extension of the Bush-era tax cuts. Warner, speaking with Peter Cook on Bloomberg Television’s “Fast Forward,” proposed allowing tax cuts for the wealthiest Americans to lapse and using the additional revenue for “targeted business-tax cuts” to encourage companies to hire more workers. (Source: Bloomberg)

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Bailout Oversight Panel Slams Obama Administration Over Foreclosure Crisis

October 27, 2010

WASHINGTON — A key government panel keeping tabs on the bailout strongly criticized the Obama administration Wednesday for its apparent failure on a variety of housing-related fronts, from its ineffective foreclosure-prevention initiatives to its refusal to acknowledge the growing crisis sparked by widespread evidence that mortgage companies frequently take their customers’ homes via fraud. Faced with increasingly heated criticism from the Congressional Oversight Panel, the administration’s representative — the Treasury Department’s housing rescue chief, Phyllis Caldwell — hunkered down, refusing to answer basic questions. It was a familiar scene. As the housing market continues to flirt with the risk of falling into a double dip — prices are already heading downward, and the Federal Housing Finance Agency forecasts prices to return to their June 30, 2010 level in the fourth quarter of 2013 — the Obama administration continues to face assaults on its attempts to fix the crisis threatening Americans’ most valuable asset. Some independent experts, while critical overall, praise the administration for its role in spacing out the negative shocks from the record home repossessions taking place, lessening the chances of the economy suffering a fatal blow. Others say the administration’s efforts have simply prolonged the crisis and delayed the recovery. Either way, the consensus is that the administration hasn’t pursued the right policies to jumpstart the recovery. During Wednesday’s hearing, members of the Congressional Oversight Panel said Treasury’s foreclosure-prevention programs “failed to provide meaningful relief,” generated “false expectations,” and have been a “major disappointment.” COP is an independent, nonpartisan commission created by Congress. More than 20 months after President Barack Obama announced a plan to “enable as many as three to four million homeowners to modify the terms of their mortgages to avoid foreclosure,” just 640,300 homeowners remain in the program. Nearly 729,000 struggling homeowners have been kicked out. “We are faced with a choice here,” said Damon Silvers, a member of the panel who also works as director of policy and special counsel at the AFL-CIO. “We can either have a rational resolution to the foreclosure crisis or we can preserve the capital structure of the banks. We can’t do both.” The commissioners were just as critical when it came to assessing Treasury’s response to the growing crisis emanating from mortgage companies’ use of fraudulent paperwork to foreclose on homeowners. That consequences of that, though, may pale in comparison to the risk faced by the nation’s biggest banks when it comes to demands for them to buy back the faulty home mortgages that they bundled and sold to investors as securities. Estimates from Wall Street analysts range well into the hundreds of billions of dollars. The Federal Reserve Bank of New York is part of a group of investors that sent a letter demanding Bank of America buy back some $47 billion in dodgy mortgages. The New York Fed owns the mortgage debt as a result of its 2008 bailout of Bear Stearns, the fallen global investment bank. The administration and financial regulators are conducting a review, though it’s unclear how comprehensive it is or how many people have been devoted to it. Administration officials say that thus far “there is no evidence of systemic risk.” Not taking that for an answer, Silvers bore into Caldwell. “I’m concerned about Treasury making representations categorically that you don’t see a systemic risk,” Silvers told Treasury’s chief homeownership officer. “And let me walk you through exactly why.” “That letter asks for $47 billion of mortgages — of mortgage- backed securities to be repurchased at par,” Silvers went on. “Do you know what those mortgages are currently carried at … the market value of those bonds today?” Caldwell declined to comment. Silvers continued: “OK, fine. Let me tell you what the Fed says they’re worth. The Fed tells us they’re worth 50 cents on the dollar. So if the Fed’s request to Bank of America is honored, right, Bank of America, assuming they are carrying these bonds, assuming when they buy them back they mark them to market, Bank of America will take a $23 billion loss. “The Federal Reserve further informs us that there is nothing particularly unique about that particular set of mortgage-backed securities — meaning they have not been chosen…because they’re particularly bad. They believe they are of a common quality with the rest of Bank of America’s underwritten mortgage-backed securities. There are $2 trillion [worth] of Bank of America’s underwritten mortgage-backed securities. “Five such deals — five such requests, if honored to Bank of America…will amount to more than the current market capitalization of Bank of America, which is $115 billion. “Now do you wish to retract your statement that there is no systemic risk in this situation? And the word is ‘risk’ — not ‘certainty’ — but ‘risk’? And I would urge you to do so, because these things can be embarrassing later.” Caldwell repeated her earlier claim that it was still early in the review. She added that Treasury is working “very closely” with “11 regulatory and federal agencies,” and that the administration is “watching this every day. “And that at this stage there appears to be no evidence of a systemic risk — but again it is early and it is something we are monitoring daily,” Caldwell said. Silvers questioned her again. “Let me suggest to you that the ‘it is still early’ is a perfectly acceptable position. … Is it your position that Bank of America honoring five of these things would not present a systemic risk? … Is Bank of America not systemically significant?” Caldwell responded that she and Treasury “didn’t say there was no risk. We said there didn’t appear to be evidence of a major systemic risk.” “I hope that … if the Treasury comes back to us and is discussing whether or not we need to deploy further public funds to rescue Bank of America, or such other institutions as might be affected by these events, that we get a similar kind of indifference to their fate after it’s too late,” Silvers shot back. “Because it strikes me that in light of the mathematics I’ve gone through with you, it is not a plausible position that there is no systemic risk here.” Silvers is a Democrat, but the panel’s concerns were bipartisan. Republican panelist J. Mark McWatters, a high-powered corporate tax lawyer and CPA, similarly peppered Caldwell with questions. After asking whether “Treasury [was] concerned that any of the large, too-big-to-fail financial institutions may experience a solvency or liquidity or capital crisis over the next few years” due to investor demands that it buy back faulty mortgages, and being told that Treasury had to find evidence of “systemic risk,” McWatters continued to press Caldwell. Citing the roughly $2.3 trillion of non-government-backed mortgage securities held by investors at the height of the housing bubble, McWatters said that “even if a relatively small percentage of those are put back and the banks have to buy them back at face [value], this could be a substantial problem. “Also, considering that this is not just a one-shot deal. I mean, when a mortgage is originated and put in a [mortgage-backed security], it may be multiplied through synthetic CDOs. So you may have the synthetic CDO problems also going back to the banks,” he added. CDOs, or collateralized debt obligations, are securities based on the value of other securities, like home mortgage bonds. Synthetic CDOs are essentially side bets on those securities. “So, I mean, it sounds like Treasury as of today has not done even a back-of-the-envelope sketch as to what the potential put-back rights could be to the TARP financial institutions,” McWatters said, referring to the risk big banks face from investors forcing them to buy back dicey mortgages. Caldwell repeated that Treasury is “monitoring this situation daily.” She declined to offer specifics, though at one point she did say that the administration was “monitoring litigation risk.” Despite the many questions, and various hypothetical scenarios, Caldwell declined to give any more details on the foreclosure paperwork crisis than had already been disclosed by other members of the administration. The panel was forced to make due with open questions and a lack of details on what, exactly, the administration was looking at, how hard it was looking, and whether they are considering or planning for worst-case scenarios. McWatters likely summed up the feelings of the entire panel when he said, “It’s a little bit frightening.” ************************* Shahien Nasiripour is the business reporter for The Huffington Post. You can send him an e-mail ; bookmark his page ; subscribe to his RSS feed ; follow him on Twitter ; friend him on Facebook ; become a fan ; and/or get e-mail alerts when he reports the latest news. He can be reached at 646-274-2455.

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Election Paradox: House Candidates From Hardest-Hit Regions Are Safer

October 26, 2010

In a year when voters are angry about the economy and ready to oust incumbents, Democratic Rep. Shelley Berkley would seem to be in big trouble – her Las Vegas-area district is the most economically stressed in the country, with soaring unemployment, bankruptcy and foreclosure rates. But she and most other House members who represent areas with huge numbers of lost jobs appear to be in little danger of losing their own during this election cycle. Just the opposite: Incumbents from the nation’s most economically resilient regions are the ones in trouble. An Associated Press analysis of foreclosures, bankruptcies and unemployment figures shows that of the more than 100 races that will determine whether Republicans gain control of the House, only a few are in areas with the most extreme levels of economic stress. In New Hampshire, for instance, polls show Republican challenger Frank Guinta ahead of Democratic Rep. Carol Shea-Porter even though the state’s unemployment is 5.5 percent, well below the national rate of 9.6 percent. The state’s other House race is tight despite New Hampshire’s relative prosperity. Susan Terzakis, 45, of Bedford, N.H., said she has voted for both parties in the past but feels having a Republican in the seat will help mend the economy. She has been frustrated by what she calls an exodus of jobs from the state and said Shea-Porter has been unresponsive to local and national economic problems. “I don’t think it’s fair to lay it at any one person’s feet,” Terzakis said. “But I do think it’s fair to say, `Where have you been? What have you been doing to stem that tide?’ All we get is crickets.” Across the country, California has a bankruptcy rate twice as high as New Hampshire’s, along with much higher unemployment. But only a few of its 53 congressional races are competitive. Rep. Bob Filner, a Democrat who has been in office since 1993 and represents a California district that runs Mexico’s border from suburban San Diego to the Arizona state line, is heavily favored for re-election, drawing much of his support from hard-hit Imperial County, which is saddled with the nation’s highest unemployment rate – 30.4 percent in August. Democrats have a 52-to-27-percent edge over the GOP in voter registration in the county, a farm region known for growing lettuce, spinach and broccoli. Many of the places where economic stress is worst are urban or other areas that are heavily Democratic to begin with. As downtrodden as those voters are, they are unlikely to vote for Republican challengers. Richard Flowers, a retired power plant operator who was born and raised in Imperial County, remembers voting only once for a Republican – Richard Nixon for president in 1968. Filner hasn’t impressed him much, but Flowers voted absentee to give the congressman a 10th term, arguing that Republicans may make the economy worse. “Obama’s been in office two years and he’s being blamed for not saying, ‘Abracadabra, everything’s perfect,’” Flowers said at Burgers & Beer in El Centro, the county seat. “Sometimes the devil you don’t know is worse.” Elsewhere, in places less hard hit by economic stress, races are being shaped by perceptions about the economy nationally or by other frustrations over incumbents in Congress. The AP’s rough analysis of congressional district health indicated that the 20 districts with the worst economic conditions are in California, Nevada or Michigan. Two of the districts are competitive. The 20 districts with the best conditions are predominantly in the Midwest. Seven of them have competitive races. North Dakota’s lone congressional race, to represent an area with the strongest economy in the nation in the AP analysis, is too close to call. And in South Dakota, which has just one congressional district and the nation’s second-healthiest state economy, three-term Rep. Stephanie Herseth Sandlin, a moderate Democrat, is in a close race against tea party star Kristi Noem, the GOP nominee. Herseth Sandlin showed her independence by voting against health care reform and bailouts for the financial and auto industries, but it may not do her much good in a state where registered Republican voters outnumber Democrats 46 percent to 38 percent. “I think, ultimately, this election is less about economic downturn in some very competitive races and more about perceived disconnects between incumbents and constituents,” said William Anderson, a political science professor at the University of South Dakota. Then there’s Berkley, the Nevada congresswoman who has spent 10 years representing a portion of Las Vegas. Her Republican challenger, Kenneth Wegner, is trying for a third time to oust her from Congress, blaming Berkley and years of other political leadership on both sides of the aisle for policies that caused the economic collapse. Wegner said he believes all political leaders should be ousted from office. But his message isn’t sticking. “They’re just not holding her responsible yet,” he said. “If we really want to keep the Titanic captain in charge, then let’s do that and we’ll all go down together.” ___ Associated Press Writers Holly Ramer in Manchester, N.H., and Elliot Spagat in El Centro, Calif., contributed to this report.

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Leo Hindery, Jr.: Finally, a Tax Compromise That Makes Sense: DeFazio/Kaptur

October 5, 2010

I recently wrote about our perverse individual income tax regulations which, since 1980, have been manipulated literally out of control, to the particular benefit of the wealthiest Americans so that, purportedly, they can ‘trickle down’ their wealth to the poorest, which of course they almost never do. And then I wrote about the tax policy of the Republicans in Congress today, and of the Tea Party candidates, that even with unprecedented individual income inequality would further gut and in some aspects even abandon completely our nation’s fundamental principle of progressive taxation. Sometimes this manipulation takes the form of taxing ordinary income as capital gains. Sometimes, it’s offshore accounts and deferrals that unfairly keep taxes unpaid. Currently, most perverse of all, it’s trying to permanently preserve the Bush tax cuts for the richest American taxpayers, which according to the nonpartisan Tax Policy Center would cost the federal government an almost unbelievable $680 billion in revenue over the next 10 years. President Obama and the Democrats in Congress want to preserve the Bush tax cuts that benefit the middle class and lower income earners, while letting those provisions that benefit only people with very high incomes expire on schedule at the end of this year. The Republicans disagree. And thus things sit, even though, unfathomably, under the Republicans’ plan, nearly all of the benefit of the extension they’re seeking would go to the richest 1% of Americans, people with incomes of more than $500,000 a year. The majority of even this amount would go to the richest one-tenth of one percent, the least wealthy of whom have annual incomes of more than $2 million and the average of whom makes more than $7 million a year. Republican House Minority Leader John Boehner and his compatriots would have us believe that they are the only ones standing in the way of the complete ruin of American small business and the American family farm. According to Boehner, Republicans will do everything they can to protect these businesses and farms even if it means Republicans have to — have to! — push for continued tax cuts that overwhelmingly benefit the extremely wealthy. Politically and rhetorically, the Republicans are accomplishing a great sleight of hand by focusing on the small number of small businesses and farms that would be affected, skewing a debate that should be about efficient government spending and tax fairness. Democrats — as we often do — have allowed Republicans to get away with this tactic for too long, and until this past week, I had pretty much given up hope for any thoughtful ‘compromise’, particularly a compromise which would materially help jumpstart our jobless economic recovery. Well, thank God for Representatives Peter DeFazio (D-OR) and Marcy Kaptur (D-OH), who just put forward a proposal in the House that I believe no responsible Member of Congress — whether in the House or the Senate, whether Democrat, Republican or Tea Partier — should find objectionable. This proposal, this ‘compromise’, would extend the 2001 tax cuts for all small businesses that might be subject to the top two tax brackets if these businesses can merely certify that they are manufacturing in the U.S., only hiring American citizens, and generally buying domestic content goods and materials. Very simply, each small business would seek certification by meeting the common sense standards that its headquarters and manufacturing are in the United States, its manufacturing uses at least 75% domestic content, it verifies its workers using “E-Verify” and does not use temporary visas, and it has not outsourced its labor or manufacturing overseas. Representatives DeFazio and Kaptur note that companies which would realize this lower tax rate range from software companies to bicycle manufacturers to poultry producers to call centers — and frankly every small business in between. The DeFazio/Kaptur compromise would drive down the cost of extending the Bush tax cuts while more effectively promoting job creation than could ever result from extending the tax cuts for the top two individual tax brackets. This effort to reward small businesses that are operating in the best interests of our nation is not only right for them — it’s right for all American workers and the American economy. Of course companies don’t have to meet these standards, they just wouldn’t benefit from the tax cut extension. As Defazio and Kaptur have sensitively noted, if Congress is going to extend the upper tax brackets to anyone, it should be to small businesses that create American jobs and generally use American goods and materials. Importantly, the consequent loss of tax revenue to the Treasury associated with this proposal would be far outweighed by the long-term benefit to the overall economy from the positive ripple effects of directly stimulating these small businesses. The several “Make it in America” bills which the Democrats have already advanced in the House would, if they ever get through the Senate, be of exceptional benefit to our struggling economy. But DeFazio/Kaptur would, on its own, generate very positive outcomes. (Over time, the ‘answer’ to the Bush tax cuts issue – and to all individual and small business taxation issues – is a tax system with more brackets and thus more stratification, so that the super-rich pay higher rates, instead of a tax system that has a family or small business that earns $250,000 a year paying at the same tax rate as a family or business earning tens of millions of dollars.) Let me close by offering the hope that the wisdom of Reps. DeFazio and Kaptur, and of their like-minded colleagues, can overcome the ongoing nonsensical opposition in Congress to thoughtful tax reform and job creation initiatives — opposition of the sort that we are seeing in the Senate right now related to two bills also with very sound concepts. The first of these bills would give companies — all companies — a break on the employer share of the Social Security payroll tax for creating new jobs in the United States. The other bill, introduced by Senator Dick Durbin (D-IL), would provide tax breaks to U.S. companies that bring jobs home from abroad, and would end certain tax credits, deductions and deferrals for U.S. companies that move jobs overseas. In the first bill, in order to get such tax relief, a company would simply have to certify that a new U.S. worker is replacing an employee who’d been working overseas. In the second bill, in a very simple way we would, as Senate Majority Leader Harry Reid has said, be “taking away the incentives corporations now have to send our jobs overseas, and giving them powerful new incentives to keep American jobs in America.” Yet Republicans say, with no supporting evidence whatsoever, that these measures “wouldn’t do anything to create jobs on U.S. shores.” Even more unbelievably, Senate Finance Committee Chairman Max Baucus, a Democrat for Heaven’s sake, says that these two bills would “put the United States at a competitive disadvantage.” (Of course, Senator Baucus, this is the same United States that today already has the largest trade deficit in the history of the world and real unemployment of 20%.) No surprise, but disappointing nonetheless, on the very same day that the senior Senator from Montana was effectively dissing unemployed American workers in those states which don’t have the luxury of only 4% unemployment (as Montana does), the U.S. Chamber of Commerce and the Business Roundtable of CEOs sent letters to all Senators urging them to vote against both Senate bills, while urging them to extend the expiring Bush-era tax cuts for the wealthiest of American taxpayers. Here’s hoping, Congressman DeFazio and Congresswoman Kaptur, that your proposed ‘tax compromise’ becomes a model for everyone in Congress, starting with John Boehner and Republican Senate Minority Leader Mitch McConnell, and that even the Democrats’ own Senator Max Baucus sees its wisdom and the wisdom behind the entire Make it in America legislative agenda. It wouldn’t hurt to also see the White House get beyond its own rhetoric and proactively address – head-on – the challenge of job creation in the America, starting with an enthusiastic embrace of DeFazio/Kaptur and its related job creating legislation. Leo Hindery, Jr. is Chairman of the US Economy/Smart Globalization Initiative at the New America Foundation and a member of the Council on Foreign Relations. Currently an investor in media companies, he is the former CEO of Tele-Communications, Inc. (TCI), Liberty Media and their successor AT&T Broadband. He also serves on the Board of the Huffington Post Investigative Fund.

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Video: Cardoza Urges Congress to Pass Mortgage Refinancing Bill: Video

October 1, 2010

Oct. 1 (Bloomberg) — U.S. Representative Dennis Cardoza, a Democrat from California, talks about his push to streamline mortgage refinancing requirements and cut borrower fees for Fannie Mae and Freddie Mac loans. He talks with Margaret Brennan on Bloomberg Television’s “InBusiness.” (Source: Bloomberg)

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Ted Kaufman To Replace Warren On Bailout Oversight Panel

September 30, 2010

Sen. Ted Kaufman, the outgoing Delaware senator who battled to break up major banks the past year, will replace Elizabeth Warren as chair of the Congressional Oversight Panel, an aide to Senate Majority Leader Harry Reid (D-Nev.) told HuffPost. Reid initially appointed Warren to run the panel, launching her as a national champion of the middle class. The committee oversees the federal government’s bailout of Wall Street. Kaufman, a Democrat, was appointed to fill Joe Biden’s remaining two years and will serve until a new senator is sworn in in November, after which he’ll take over duties on the panel. In a recent interview with HuffPost, Kaufman reflected on his time in the Senate.

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Video: Michigan’s Granholm Sees `Bright Spot’ in Renewables: Video

September 29, 2010

Sept. 28 (Bloomberg) — Michigan Governor Jennifer M. Granholm, a Democrat, talks about the outlook for the state’s economy and the U.S. alternative energy industry. Granholm speaks with Pimm Fox on Bloomberg’s “Taking Stock.” (Source: Bloomberg)

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GOP, U.S. Chamber Of Commerce Beat Back Bill To Combat Outsourcing

September 28, 2010

Senate Republicans beat back an effort by Democrats Tuesday to end tax breaks for companies who send jobs offshore only to import products back into the United States. The House has passed a series of similar legislation over the past several weeks, as Democrats work to portray Republicans as in the pocket of Big Business at the expense of workers, the economy, the trade deficit and the budget deficit. That message was muddied, however, by the defection of four Democrats and Independent Democrat Joe Lieberman, who voted against the motion to end a filibuster. “I wish this election would be a simple referendum on this issue,” Dick Durbin, the Senate’s number two Democrat, said on the Senate floor Monday night. “Who in the world believes that we should be rewarding corporations in our country for shipping jobs overseas?” The U.S. Chamber of Commerce is one powerful answer to Durbin’s query. The Chamber, which represents businesses in the United States, has aggressively battled the effort to reduce outsourcing. During the debate over the stimulus, the U.S. Chamber fought efforts to include a provision that would encourage taxpayer money to be spent on products made by domestic companies. It opposed the outsourcing bill, arguing in a letter to the Senate that “the concept of economic growth is not a zero-sum game. Replacing a job that is based in another country with a domestic job does not stimulate economic growth or enhance the competitiveness of American worldwide companies.” In 2004, Chamber head Tom Donohue made the case that outsourcing shouldn’t be a concern because only “two, maybe three million jobs, maybe four” would be lost. “American companies employ 140 million Americans,” Donohue said in a CNN interview that Chamber opponents are happy to remind him of. “They provide health care for 160 million Americans. They provide training in terms of 40 billion a year. The outsourcing deal over three or four or five years and the two or three sets of numbers are only going to be, you know, maybe two, maybe three million jobs, maybe four.” The bill included a payroll tax holiday for companies that bring jobs back from overseas, ended tax breaks for plants that shut down to go elsewhere, and blocked companies from deferring their tax bill year to year by keeping money out of the U.S. The U.S. Chamber, in a letter to the Senate, outlined its opposition to the measure and said that it may use the vote to rate how friendly to business a senator is in the lobby’s annual scorecard. The bill, argued the Chamber, would “significantly curtail [tax] deferral [of earnings], reversing longstanding tax policy and subjecting American worldwide companies to immediate double taxation on the earnings of their foreign subsidiaries. Limiting deferral would hinder the global competitiveness of these American companies, impede U.S. economic growth, and ultimately result in the loss of jobs – both at the companies directly impacted and companies in their supply chains.” Sens. Ben Nelson (D-Neb.), Jon Tester (D-Mont.) and Mark Warner (D-Va.) broke with their party to vote to continue the filibuster, as did the chairman of the Senate Finance Committee, Max Baucus (D-Mont.). Republicans argued that revoking the tax breaks would punish American companies and make them less competitive with foreign firms. But more broadly, they pressed the case that the vote was a political stunt since Democrats knew they didn’t have 60 votes to cut off the filibuster. The best thing to do, said GOP senators, is to get out of town. “I think that right now all concerns, the leader included, are to get this over with, get back home and campaign,” said Sen. Jim Inhofe (R-Okla.). “To be honest with you, because of the election, we’re not going to get anything done. We’re just wasting–they’re wasting time. My hope is that after the election we can come back here and get serious about some issues that need to be dealt with,” said Sen. George Voinovich (R-Ohio). “They may be forcing it, but what we should be taking up right now are the tax cuts,” argued Sen. George LeMieux (R-Fla.). Sen. Bernie Sanders (I-Vt.) pushed back on the GOP argument that the vote was political theater. “Republicans call this a stunt. You go and you speak to the millions of American workers who have lost their jobs, because their plants have shut down and their companies have moved to China, and you ask them if they think focusing on outsourcing and demanding that American companies reinvest in American companies is a stunt. I don’t think they believe it’s a stunt,” he said. “We’re hearing a lot of things thrown out to create a diversion,” added Sen. Debbie Stabenow (D-Mich.). “The question is this: Do Republicans think that middle class families should pay through their tax subsidies for plants to close up and the cost of shipping jobs overseas to be on their back?” House Democrats are making a similar attempt to draw a bright line on jobs between Republicans and Democrats. At Tuesday’s “Conference on the Renaissance of American Manufacturing,” House Majority Leader Steny Hoyer (D-Md.) laid out the agenda for the remaining floor time before the election. “[T]his week the House will vote on three additional bills,” he said, according to his prepared remarks. “One will make sure that the government buys American-made American flags. Another helps ensure that American workers are given every opportunity to earn certifications, degrees, and qualifications for the jobs American industry needs to fill. And the third addresses China’s unfair currency policy and its harms to American workers. By deliberately keeping the value of its currency low, China is able to sell its goods in the United States at an artificially low price–which helps put American manufacturers out of business. The bill we vote on this week will help level the playing field for American businesses and workers.”

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Keith O’Neale: How Dirty Politics Are Threatening An American Economic Success Story

September 28, 2010

“It’s the economy, stupid!” Nearly two decades after James Carville introduced the axiom, it is more relevant than ever for Democrats and for America. Every company that wants to stay in America and contribute to our economy is important. And every Democratic leader fighting to keep these companies here – and fulfilling the electoral mandate to stabilize and grow the economy – needs support, not attacks from fellow Americans. In the U.S. Virgin Islands, we face the same recession-driven hurdles as the rest of the country. The USVI’s difficulties are compounded by our inherently limited economy, a challenge for more than 50 years. We must be smart, work hard and think creatively, building on our strengths and core industries. One of those is rum making, which dates to the 1760s in the USVI. Rum is serious business for us. It creates direct economic growth in America’s Caribbean islands. It supports indirect jobs, from our transportation companies to our local stores and restaurants. And under the rum excise tax cover-over program, it generates an essential revenue stream for the USVI government. To successfully expand our economy, rum is a vital tool. So you can understand our consternation and bemusement when the USVI is attacked for making economic decisions that are good for our territory and America. Because remember, “it’s the economy, stupid.” The latest barrage – with its hyperbole and misinformation – has come from a strange alliance of Puerto Rican statehood backers and a few conservative bloggers. They simply are not interested in the truth. The USVI has few tools in its arsenal to promote economic development, while both the USVI and Puerto Rico receive fewer federal benefits than the 50 states. The rum excise tax cover-over is among the most important. It rebates the excise tax paid by rum producers when they import rum to the U.S. mainland back to the government where the rum is produced. The Congressional Research Service reported that the cover-over program was created nearly a century ago to generate business activity and spur economic growth. CRS also declared that cover-over revenue is under full local control. The USVI is using it to keep companies in the United States, create new local government revenue, modernize the rum industry and clean up the environment. The USVI’s Governor John deJongh – a Democrat with a business and economic development background – struck two innovative public-private partnerships with Diageo and Fortune Brands to produce Captain Morgan and Cruzan Rum brands in the USVI. The key to these agreements is that we will work together to grow rum production so our investments bring in significantly more cover-over revenue to the USVI. This is found money. By more than doubling this revenue stream, our government can fund economic development and public needs, from upgrading infrastructure, to building schools, to fixing our pension system’s unfunded liability. The partnerships have already prevented layoffs of thousands of government workers. Equally important, the partnerships lock in the companies to stay in the USVI for 30 years. You won’t be reading newspaper headlines about these companies moving to a foreign location for cheaper production, weaker environmental protections or lower labor standards. So what’s the problem? Puerto Rico and its allies don’t like our agreements. After decades controlling America’s rum industry, providing billions of dollars in funding to their rum producers, they say our investments and incentives are too high. They toss around scary statistics and made-up production figures with no basis in reality. And they are pushing federal legislation that would retroactively overturn our partnerships, divert revenue from the USVI to Puerto Rico’s coffers and maintain Puerto Rico’s 80-plus percent market share. Yes, 80-plus percent market share. The reality is another story. Our investments have protected American jobs. They are already benefiting small businesses. They improve the environment with best-in-the-world sustainable facilities. They guarantee our children have a better future. And they make sure companies that want to stay in America do so. Most leaders in Washington have rejected Puerto Rico’s smear campaign against the USVI. So the attacks have become more offensive. Now Puerto Rico is targeting Democratic lawmakers and possibly harming the Democratic party this fall as it fights for every Congressional seat and statehouse. Miguel Lausell, the chairman of one attack group, the National Puerto Rican Coalition (NPRC), claims to be a Democrat but endorsed Senator McCain over then-Senator Obama. He recently wrote of Democratic “failures,” called Democrats “unethical” and claimed we do not deserve to lead. A board member of this group (NPRC) was just appointed by the Obama administration to a senior role at USAID. How does he explain Puerto Rican assaults on the President’s own party that seem to have come from the GOP’s playbook and are undermining the Democratic majority and senior Democrats on Capitol Hill? Instead of attacks, Puerto Rico should look for solutions. Creating economic growth requires commitments from businesses and governments that are fair and guarantee a real return-on-investment for local residents. In the USVI, where Diageo will start producing rum later this year, this ROI is tangible. The contractors and employees at work, the “under construction” signs and the ringing cash registers are proof of which all Virgin Islanders are proud. In a year of “it’s the economy, stupid,” letting politics stop economic progress is a recipe for disaster.

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Video: Barney Frank Says Basel Rules `Important Step Forward’: Video

September 22, 2010

Sept. 22 (Bloomberg) — U.S. House Financial Services Committee Chairman Barney Frank, a Democrat from Massachusetts, talks about new Basel III rules on capital requirements for banks and possible sanctions against China over that nation’s currency policy. Frank, speaking with Peter Cook on Bloomberg Television’s “Street Smart,” also discusses Elizabeth Warren’s job setting up the new Consumer Financial Protection Bureau and the planned departure of Lawrence Summers from the National Economic Council. (Source: Bloomberg)

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Video: Durbin Sees Vote on Tax Cuts Before Recess in October: Video

September 20, 2010

Sept. 20 (Bloomberg) — The U.S. Senate’s second-ranking Democrat, Dick Durbin of Illinois, talks about the outlook for the mid-term congressional elections, the impact of the Obama administration’s stimulus package on the economy, prospects for extension of the Bush-era tax cuts and the likelihood White House Chief of Staff Rahm Emanuel will run for mayor of Chicago. Durbin speaks with Peter Cook and Matt Miller on Bloomberg Television’s “Street Smmart.” (Source: Bloomberg)

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Video: Dodd Says U.S. Can’t Just `Jawbone’ China on Yuan: Video

September 16, 2010

Sept. 16 (Bloomberg) — Senate Banking Committee Chairman Christopher Dodd, Democrat from Connecticut, talks with Bloomberg’s Peter Cook about China’s valuation of the yuan. Dodd also discusses President Barack Obama’s expected announcement tomorrow introducing Harvard law professor Elizabeth Warren as head of a steering committee to create the new Consumer Financial Protection Bureau. (Source: Bloomberg)

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Video: Dodd Says U.S. Can’t Just `Jawbone’ China on Yuan: Video

September 16, 2010

Sept. 16 (Bloomberg) — Senate Banking Committee Chairman Christopher Dodd, Democrat from Connecticut, talks with Bloomberg’s Peter Cook about China’s valuation of the yuan. Dodd also discusses President Barack Obama’s expected announcement tomorrow introducing Harvard law professor Elizabeth Warren as head of a steering committee to create the new Consumer Financial Protection Bureau. (Source: Bloomberg)

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Video: Dodd Says U.S. Can’t Just `Jawbone’ China on Yuan: Video

September 16, 2010

Sept. 16 (Bloomberg) — Senate Banking Committee Chairman Christopher Dodd, Democrat from Connecticut, talks with Bloomberg’s Peter Cook about China’s valuation of the yuan. Dodd also discusses President Barack Obama’s expected announcement tomorrow introducing Harvard law professor Elizabeth Warren as head of a steering committee to create the new Consumer Financial Protection Bureau. (Source: Bloomberg)

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Robert Scheer: ‘The Great American Stickup’: Is Bush Really To Blame For The Economy?

September 15, 2010

“The Great American Stickup!” Chapter 1 “It Was the Economy, Stupid” Part II: The first half of this chapter was excerpted on the Huffington Post yesterday, here . Since the collapse happened on the watch of President George W. Bush at the end of two full terms in office, many in the Democratic Party were only too eager to blame his administration. Yet while Bush did nothing to remedy the problem, and his response was to simply reward the culprits, the roots of this disaster go back much further, to the free-market propaganda of the Reagan years and, most damagingly, to the bipartisan deregulation of the banking industry undertaken with the full support of “liberal” President Clinton. Yes, Clinton. And if this debacle needs a name, it should most properly be called “the Clinton bubble,” as difficult as it may be to accept for those of us who voted for him. Clinton, being a smart person and an astute politician, did not use old ideological arguments to do away with New Deal restrictions on the banking system, which had been in place ever since the Great Depression threatened the survival of capitalism. His were the words of technocrats, arguing that modern technology, globalization, and the increased sophistication of traders meant the old concerns and restrictions were outdated. By “modernizing” the economy, so the promise went, we would free powerful creative energies and create new wealth for a broad spectrum of Americans — not to mention boosting the Democratic Party enormously, both politically and financially. And it worked: Traditional banks freed by the dissolution of New Deal regulations became much more aggressive in investing deposits, snapping up financial services companies in a binge of acquisitions. These giant conglomerates then bet long on a broad and limitless expansion of the economy, making credit easy and driving up the stock and real estate markets to unseen heights. Increasingly complicated yet wildly profitable securities–especially so-called over-the-counter derivatives (OTC), which, as their name suggests, are financial instruments derived from other assets or products — proved irresistible to global investors, even though few really understood what they were buying. Those transactions in suspect derivatives were negotiated in markets that had been freed from the obligations of government regulation and would grow in the year 2009 to more than $600 trillion. Beginning in the early ’90s, this innovative system for buying and selling debt grew from a boutique, almost experimental, Wall Street business model to something so large that, when it collapsed a little more than a decade later, it would cause a global recession. Along the way, only a few people possessed enough knowledge and integrity to point out that the growth and profits it was generating were, in fact, too good to be true. Until it all fell apart in such grand fashion, turning some of the most prestigious companies in the history of capitalism into bankrupt beggars, all the key players in the derivatives markets were happy as pigs in excrement. At the bottom, a plethora of aggressive lenders was only too happy to sign up folks for mortgages and other loans they could not afford because those loans could be bundled and sold in the market as collateralized debt obligations (CDOs). The investment banks were thrilled to have those new CDOs to sell, their clients liked the absurdly high returns being paid — even if they really had no clear idea what they were buying — and the “swap” sellers figured they were taking no risk at all, since the economy seemed to have entered a phase in which it had only one direction: up. Of course, this was ridiculous on the face of it. Could it really be so easy? What was the catch? Never mind that, you spoiler! Not only were those making the millions and billions off the OTC derivatives market ecstatic, so were the politicians, bought off by Wall Street, who were sitting in the driver’s seat while the bubble was inflating. With credit so easy, consumers went on a binge, buying everything in sight, which in turn was a boon to the bricks-and-mortar economy. Blown upward by all this “irrational exuberance,” as then Federal Reserve Bank chair Alan Greenspan noted in one of his more honest moments, the stock market soared, creating the era of e-trade and a middle-class that eagerly awaited each quarterly 401(k) report. Later, in the rubble, consumer borrowers would be scapegoated for the crash. This is the same logic as blaming passengers of a discount airline for their deaths if it turned out the plane had been flown by a monkey. Shouldn’t they have known they should pay more? In reality, the gushing profits of the collateralized debt markets meant the original lenders had no motive to actually vet the recipients–they wouldn’t be trying to collect the debt themselves anyway. Instead, they would do almost anything to entreat consumers to borrow far beyond their means, reassuring them in a booming economy they’d be suckers not to buy, buy, buy. That this madness was allowed to develop without significant government supervision or critical media interest, despite the inherent instability and predictable future damage of a system of growth predicated on its own inevitability, is a tribute to the almost limitless power of Wall Street lobbyists and the corruption of political leaders who did their bidding while sacrificing the public’s interest. While much has been made of the baffling complexity of the new market structures at the heart of the banking meltdown, there were informed and prescient observers who in real time saw through these gimmicks. The potential for damage was thus known inside the halls of power to those who cared to know, if only because of heroines like gutsy regulator Brooksley Born, chair of the Commodity Futures Trading Commission from 1996 to 1999. When they attempted to sound the alarm, however, they were ignored, or worse. Simply put, the rewards in both financial remuneration and advanced careers were such that those in a position to profit went along with great enthusiasm. Those who objected, like Born, were summarily crushed. Of the leaders responsible, five names come prominently to mind: Alan Greenspan, the longtime head of the Federal Reserve; Robert Rubin, who served as Treasury secretary in the Clinton administration; Lawrence Summers, who succeeded him in that capacity; and the two top Republicans in Congress back in the 1990s dealing with finance, Phil Gramm and James Leach. Arrayed most prominently against them, far, far down the DC power ladder, were two female regulators, Born and Sheila Bair (an appointee of Bush I and II and retained as FDIC chair by Obama). They never had a chance, though; they were facing a juggernaut: The combined power of the Wall Street lobbyists allied with popular President Clinton, who staked his legacy on reassuring the titans of finance a Democrat could serve their interests better than any Republican. Clinton’s role was decisive in turning Ronald Reagan’s obsession with an unfettered free market into law. Reagan, that fading actor recast so effectively as great propagandist for the unregulated market — “get government off our backs” was his patented rallying cry — was far more successful at deregulating smokestack industries than the financial markets. It would take a new breed of “triangulating” technocrat Democrats to really dismantle the carefully built net designed, after the last Great Depression, to restrain Wall Street from its pattern of periodic self-immolations. Clinton betrayed the wisdom of Franklin Delano Roosevelt’s New Deal reforms that capitalism needed to be saved from its own excess in order to survive, that the free market would remain free only if it was properly regulated in the public interest. The great and terrible irony of capitalism is that if left unfettered, it inexorably engineers its own demise, through either revolution or economic collapse. The guardians of capitalism’s survival are thus not the self-proclaimed free-marketers, who, in defiance of the pragmatic Adam Smith himself, want to chop away at all government restraints on corporate actions, but rather liberals, at least those in the mode of FDR, who seek to harness its awesome power while keeping its workings palatable to a civilized and progressive society. Government regulation of the market economy arose during the New Deal out of a desire to save capitalism rather than destroy it. Whether it was child labor in dark coal mines, the exploitation of racially segregated human beings to pick cotton, or the unfathomable devastation of the Great Depression, the brutal creativity of the pure profit motive has always posed a stark challenge to our belief that we are moral creatures. The modern bureaucratic governments of the developed world were built, unconsciously, as a bulwark, something big enough to occasionally stand up to the power of uncontrolled market forces, much as a referee must show the yellow card to a young headstrong athlete.

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Video: Burton Discusses Virginia Jobless Rate, Election Impact: Video

September 13, 2010

Sept. 13 (Bloomberg) — Edwin Burton, professor at the University of Virginia, talks with Bloomberg’s Melissa Long about the state’s economy and labor market. Burton also discusses the impact of high unemployment on Democrat congressional candidates in Virginia. (Source: Bloomberg)

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Bush Tax Cuts: More Dems Come Out Against Tax Increases For The Rich

September 2, 2010

WASHINGTON — Congress seems increasingly reluctant to let taxes go up, even on wealthier Americans. Worried about the fragile economy and their own upcoming elections, a growing number of Democrats are joining the rock-solid Republican opposition to President Barack Obama’s plans to let some of the Bush administration’s tax cuts expire. Democratic leaders in Congress still back Obama, but the willingness to raise taxes is waning among the rank and file as the stagnant economy threatens the party’s majority in the House and Senate. “In my view this is no time to do anything that could be jarring to a fragile recovery,” said Rep. Gerry Connolly of Virginia, a first-term Democrat. The most sweeping tax cuts in a generation are due to expire in January, and that’s setting up a showdown when lawmakers return from their summer vacations this month. By waiting to act on the tax cuts until just before congressional elections in November, Democratic leaders have raised the stakes, politically and for taxpayers. If Congress fails to act – a possibility given the gridlock that has gripped the Senate – workers at every income level would face significant tax increases next year. Taxpayers making between $40,000 and $50,000 a year would get hit with an average income tax increase of $923 next year. Those making between $50,000 and $75,000 would face an average increase of $1,126, according to estimates by the nonpartisan Joint Committee on Taxation. Obama wants to make the tax cuts permanent for middle- and low-income families while allowing them to expire for individuals making more than $200,000 and married couples making more than $250,000. Republicans want to make all the tax cuts permanent, adding nearly $4 trillion to the national debt over the next decade. Most Democrats in Congress support Obama’s plan, but a growing number have come out in favor of extending all the reductions for a year or two, leaving the outcome very much in doubt. “It’s going to be hard to resist a one-year extension for everybody, given the state of the economy,” said Clint Stretch, a tax expert at the consulting firm Deloitte Tax LLP. “That’s where I think the ball is moving.” The tax cuts were enacted in 2001 and 2003 under President George W. Bush. They provided help for both rich and poor, reducing the lowest marginal rates as well as the top ones and several in between. They also provided a wide range of income tax breaks for education, families with children and married couples. Taxes on capital gains and dividends were reduced, while the federal estate tax was gradually repealed, though only through this year. Connolly said the nation cannot afford to make all the tax cuts permanent, which would add about $3.9 trillion to the national debt over the next decade according to updated estimates from the nonpartisan Congressional Budget Office. “I would say certainly a year, until we feel more confident about the economic growth of this economy,” he said. Another freshman Democrat, Rep. Bobby Bright of Alabama, said he would like to see all the tax cuts extended for two or three years, if lawmakers cannot agree on a more permanent plan. “Party leaders are not my directors or my boss,” Bright said. “My boss is my constituents, and I’ve heard from a vast majority of my constituents that they don’t believe in tax increases on anybody at this point in time.” Bright is high on the re-election endangered list, one of roughly four dozen Democrats in districts won by Republican presidential nominee John McCain in 2008. In the Senate, where Democrats need unity and at least one Republican vote to overcome filibusters, at least three Democrats and independent Joe Lieberman of Connecticut have said they want to extend all the tax cuts temporarily. Several Democratic candidates for Senate have also come out in favor of extending them all, including Robin Carnahan in Missouri and Jack Conway in Kentucky. “Jack Conway was in favor of the Bush tax cuts when they first passed (in 2001 and 2003), and he’s in favor of extending the Bush tax cuts now,” said spokeswoman Allison Haley. Obama first staked out his position on taxes during the presidential campaign, and his administration has been adamant that the nation cannot afford to extend the reductions for top earners. The president’s plan is less expensive than extending all the tax cuts, but it would still add more than $3 trillion to the national debt over the next decade, including the cost of an annual fix that spares the middle class from being hit with the Alternative Minimum Tax. Obama’s plan would let taxes increase by a little more than $38 billion next year, with nearly 80 percent of the increase falling on families making more than $1 million, according to the Joint Committee on Taxation. Taxpayers making between $200,000 and $500,000 would face an average tax increase of $532, according to the analysis. Those making from $500,000 to $1 million would average an increase of a little more than $9,800. Taxpayers making more than $1 million would average an increase of just over $95,000. This week, White House economic adviser Jason Furman said it would be a bad idea to extend tax cuts for the wealthy, even for just a year, because it would open the door to making them permanent. Last week, Vice President Joe Biden said Republican claims that small businesses would be hurt by the proposed tax increase are a “bunch of malarkey.” On Thursday, White House spokesman Robert Gibbs said extending cuts for the wealthy would do little to improve the economy. “We are focused first and foremost and only on extending tax cuts for the middle class,” Gibbs said.

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