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Raul A. Reyes: Supreme Court Misses the Mark on Legal Arizona Workers Act

by on June 3, 2011

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On May 26, the Supreme Court upheld the Legal Arizona Workers Act of 2007. Now any business in the Grand Canyon State that knowingly or intentionally hires undocumented workers can lose their business license. If they are caught with a second offense within three years, they can be shut down. The law also requires employers to use E-Verify to check whether prospective hires are authorized to work. As an attorney and firm believer in the need for comprehensive immigration reform, I found the Court’s decision troubling. It signals that states can continue to experiment with anti-illegal immigration initiatives. Eight states already have laws similar to Arizona’s Legal Worker Act. According to the National Conference of State Legislatures , this year there have been 279 bills in 44 states focusing on penalties for businesses that hire illegal immigrants. But a patchwork of local immigration laws on is no substitute for a coherent national policy. While punishing employers for hiring illegal workers is a good idea, Arizona’s law has not been shown to reduce illegal immigration. In 2008, the first year it was in effect, state income tax collection dropped 13%. But sales tax revenues on food and clothing remained fairly steady. The Arizona Republic , economists, and researchers have all concluded that the law has sent unauthorized workers into the underground economy, not back to Mexico. The law shifted people into informal employment, resulting in a drop in much-needed tax revenue. In upholding Arizona’s law, the Court also approved the mandatory use of E-Verify. With this program, employers check the names of prospective employees against a database maintained by the Social Security Administration and the Department of Homeland Security. One problem with E-Verify is that it often does not detect unauthorized workers. A 2009 study by the U.S. Citizenship and Immigration Services found that E-Verify cleared 54% of illegal immigrants to work. In his majority opinion , Chief Justice John Roberts noted that E-Verify clears 98% of new hires to work. Yet the system poses a real hurdle for those incorrectly identified as unauthorized to work. This could be almost anyone, from those who have married, divorced or changed their name, to those unlucky enough to be the victim of a clerical error. The Government Accounting Office (GAO) estimates that taking E-Verify national would result in 164,000 workers a year being incorrectly tagged as not eligible to work. Arizona’s law allows only eight working days to fix errors before a person must be fired. By the way, good luck with that. The GAO has called the process of fixing errors in the federal government database “formidable.” Although the government promotes E-Verify as “Fast, Easy, and Free,” it places a significant burden on small businesses. Bloomberg estimates that if E-Verify were to go national, small businesses would have to spend $2.6 billion in time, training, and productivity to become compliant. E-Verify can be a hassle for big corporations, too. In 2008, Intel reported that 12% of its workforce was incorrectly tagged as ineligible to work. In his dissenting opinion , Justice Stephen Breyer was rightly concerned by an unintended result of Arizona’s law. Employers, faced with the risk of penalties or the loss of their business, will be reluctant to hire those who look or sound foreign-born. This opens the door for discrimination against Latinos, legal residents, or anyone who doesn’t “look” American. In the wake of the Court’s ruling, the Obama Administration must ensure that the anti-discrimination provisions of employment laws are zealously enforced. The government must also invest in improving E-Verify’s accuracy. Still, the program is a compliance tool, and was never intended to be enforcement option. It is not going to create jobs; its consequences may be the opposite. Unfortunately, the Court’s decision shows disregard for immigration policy, economic reality, and civil rights.

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Raul A. Reyes: Supreme Court Misses the Mark on Legal Arizona Workers Act

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Agency Blocks Restart Of Keystone Oil Pipeline

by AP on June 3, 2011

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WASHINGTON — The U.S. pipeline safety agency Friday blocked a Canadian company from restarting its Keystone oil pipeline until U.S. officials are satisfied the company has made required repairs and completed safety tests. The order by the Pipeline and Hazardous Materials Safety Administration cites two leaks last month on the 1,300-mile pipeline, which carries oil from Canada through North Dakota, South Dakota and Nebraska. One arm then travels through Missouri to Illinois, while another goes through Kansas to Oklahoma. A spokeswoman for the pipeline agency said Friday that federal inspectors will closely review repair work done by the pipeline’s owner, Calgary-based TransCanada. The company reported a May 7 leak of about 400 barrels in North Dakota, and a leak of about 10 barrels last Sunday in Kansas. TransCanada is seeking to build a second pipeline from western Canada to the Texas Gulf Coast – a project that has drawn fierce opposition from environmental groups who call the pipeline an ecological disaster waiting to happen. The proposed pipeline, like the existing pipeline, would carry crude oil extracted from tar sands in Alberta, Canada, to refineries in the U.S. Critics say the tar sands produce “dirty oil” that requires huge amounts of energy to extract, while supporters say the two pipelines would create thousands of jobs and help cut $4-a-gallon prices at the pump. Anthony Swift of the Natural Resources Defense Council, an environmental group, said the federal order blocking the Keystone line “should be a clarion call” for the U.S. State Department to seriously consider safety concerns posed by the proposed pipeline from Canada through Montana to Texas. State Department approval is needed because the project crosses the U.S. border. Pipeline regulators need time to sort out what has gone horribly wrong with the current Keystone project before moving forward with the new one, dubbed Keystone XL, Swift said. “The history of Keystone has shown that these pipelines are dangerous. State shouldn’t fast track the review of Keystone XL until we know how they can be built and operated safely,” he said. A spokesman for TransCanada could not immediately be reached for comment. ___ Array

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Agency Blocks Restart Of Keystone Oil Pipeline

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John Arensmeyer: New Healthcare Regs Could Unlock Entrepreneurship

June 2, 2011

Before he’d even graduated from college, Arthur Holst knew he was destined to work for a big organization. Not because the corporate culture called to him or because he had an undying love for cubicles, but because at age 19 he had a kidney transplant. He had to work somewhere that offered good health benefits because that was the only way he was going to get the insurance he needed to survive. Starting his own company and running the risk of being denied insurance because of his health condition was not an option. “You’re not thinking in terms of taking risks, you’re thinking in terms of the security the job offered through health insurance,” Arthur said. Many years later, the Pennsylvanian is happy working for the city of Philadelphia, but he would have preferred to have the option of striking out on his own and starting a business — something he could have done if the Pre-Existing Condition Insurance Plan (PCIP) program enacted under federal healthcare reform had been in place. These plans allow individuals with a preexisting condition to obtain health insurance if they’re denied coverage. On Tuesday, the Department of Health and Human Services beefed up the program to make it more affordable and easier to participate in. And although it’s too little too late for Arthur, there are many people out there just like him who will now have the option to see where their entrepreneurial spirit takes them. The PCIP program is run by the Department of Health and Human Services in 17 states and by state governments in the rest. Thanks to the regulations issued on Tuesday, premiums in the states where the federal government administers the plans will drop, some by as much as 40 percent, and eligibility requirements will become less stringent. Instead of requiring applicants to submit rejection letters from insurance companies to prove their eligibility, they can now use a doctor’s note to verify their status. America prides itself on being the land of entrepreneurialism, yet the act of denying people coverage for a preexisting condition discourages that tradition. When someone has a great idea or invention and wants to start a new business, but is forced to stay in their current job to keep health benefits, the potential for a new business flies out the window. This scenario, often referred to as “job lock,” costs our economy startup opportunities and job growth. Small business owners Marsha and Russell Geist, owners of Metropolitan Landscape Management in Dayton, MD, would have found themselves in exactly this situation if Maryland hadn’t been ahead of the curve when it comes to preexisting condition bans. Both Marsha and Russell worked for the federal government while they were starting their landscape business, but were able to quit their government jobs and focus full-time on their start-up. However, Russell had medical issues, including a benign brain tumor, which landed him in the preexisting condition group. If Maryland hadn’t banned denying coverage based on preexisting conditions in the 1990s, Marsha would have had no choice but to continue working for the government to maintain their insurance instead of joining her husband. “It would have directly affected the growth of our business,” Marsha said. “Maryland was very proactive in making that change.” Small business employees are also the frequent victims of coverage denial based on preexisting conditions. Small business owner Rick Poore, proprietor of Shirts 101 in Lincoln, NE, spent a tremendous amount of time trying to get one of his 29 employees who suffered from pancreatitis onto his company’s group plan. If Rick had put the employee on the group plan, the costs would have skyrocketed, and it was likely the carrier would drop them altogether. Eventually, Rick was able to get his worker on the company plan without breaking the bank, but it was time and money that Rick could have spent running his business instead of jumping through one insurance hoop after another. The Department of Health and Human Services made the right decision to lower premium costs and make it easier for people to join these much-needed programs. These new regulations will make it easier for employees like Rick’s and would-be entrepreneurs like Arthur to get the coverage they need while working in the jobs they love.

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White House Issues Rules On For-Profit Colleges

June 2, 2011

The Obama administration on Thursday issued a series of highly anticipated regulations aimed at cracking down on for-profit colleges and other career training programs that leave students saddled with unmanageable debts and contribute to an unequal share of federal student loan defaults. The final rules issued by the Department of Education, however, are significantly less stringent than a draft version released last year, giving college programs an additional three years to come in line before possibly losing access to lucrative federal student aid dollars. The changes come after an unprecedented lobbying and campaign finance offensive over the past year by the for-profit college industry, which derives a vast majority of revenues from federal student loan and grant programs and has sought to protect that income by gaining influence in Washington. Education Secretary Arne Duncan said the changes came after discussion with “lots and lots of different folks,” not just the industry, and he pointed out that the colleges were not unanimous in their suggestions for changes. “What we really wanted to do was give people a chance to reform … this was not about ‘gotcha,’” Duncan said. “We tried to be very thoughtful, very reasonable and give people every opportunity to succeed, but be very clear where we wouldn’t permit ongoing failure.” The rules have been in the making for nearly two years, amid evidence that students at for-profit institutions default on federal loans at a significantly higher rate and pay higher tuition than their counterparts at public universities, despite for-profit schools devoting significantly less money toward instruction. The rules were derived as a way to bring accountability to the federal student aid system and to protect students from unscrupulous programs that sought only their federally subsidized tuition. “The for-profit education sector business model invokes much of the same characteristics of what happened with subprime housing and securitization, namely that the schools can capture all of the upside of increased volume while shifting all of the downside risk somewhere else,” said Gene Sperling, director of the National Economic Council. “In this case, that somewhere else is to students and taxpayers.” Specifically, the rules will measure student outcomes at such programs in two ways: whether students repay at least a portion of their student loans and whether a graduate has an excessive debt burden compared to his or her income. Department of Education slide In order to be disqualified from the student loan program, more than 65 percent of students would have to be delinquent in repaying their loans, and graduates would need to have loan debts that comprise more than 30 percent of their discretionary income, or more than 12 percent of their total earnings. A program would have to fail each of those three metrics in three out of four years in order to completely lose eligibility for federal student aid, as opposed to potentially losing eligibility after one year under the draft rules from last year. That means programs cannot be disqualified from receiving federal student aid until 2015, as opposed to 2012 under the draft rules. Groups that have criticized for-profit colleges expressed disappointment that the rules did not go far enough in protecting students from harmful programs, but said the reform will still address some of the worst abuses in the industry. “I think it means that more bad programs that don’t serve students well will continue, but that many bad programs will be put out of business, or be forced to reform,” said David Halperin, a senior vice president at the Center for American Progress who directs the group’s Campus Progress arm. “It would have been better if the rule was stronger or kicked in sooner, but nevertheless I think over time, hundreds of thousands if not millions of students will be protected because this rule was issued.” Sen. Tom Harkin (D-Iowa), who has led a series of hearings probing abuses in the industry, called the regulations “a modest and important first step to protect students and taxpayers from subprime academic programs that have a demonstrated track record of failure.” Groups representing the for-profit college industry largely reserved judgment on the rule. Harris Miller, president and chief executive of the Association of Private Sector Colleges and Universities, said it appeared that the Department of Education listened to concerns they had raised. But he said his group will bring on a third-party researcher to study the potential effects of the rule on students. Miller’s group has sued the Department of Education over a series of other for-profit regulations relating to compensation of recruiters and misrepresentation of a program’s benefits. “The bottom line is not whether the department makes changes or not, but what are the impacts of those changes to student access to higher education?” Miller said. He did not say whether the group would file a lawsuit over this set of regulations. Lanny Davis, a former special counsel to President Clinton who has lobbied against the regulations for for-profit colleges, noted that “there appears to have been some second thoughts” by the administration. Davis now lobbies for the National Black Chamber of Commerce, which has argued that the rules would restrict access to minority students who attend such institutions in greater numbers than in other sectors of higher education. “We hope we can continue to see some changes in what is essentially a targeted regulation that has a disparate impact on low-income and vulnerable students,” Davis said. For-profit schools and their lobbying groups engaged in a vicious fight over the past year, accusing the Department of Education of coming up with the rules as part of a conspiracy with Wall Street short sellers, based on e-mails and a handful of meetings where Department officials viewed presentations. The Department of Education’s Inspector General disclosed at a hearing in March that she is investigating any potential improper communications, after Sens. Tom Coburn (R-Okla.) and Richard Burr (R-N.C.) brought up the matter last fall. The industry also publicly attacked the Government Accountability Office, Congress’ investigative arm, over a series of corrections made to an undercover report that found widespread abuse and deception among recruiters at for-profit schools. The industry spent more than $8.1 million on lobbying in 2010, more than doubling spending of $3.3 million from the year before. In addition to increased government regulation, the industry is facing a joint probe by attorneys general in at least 10 states, and the Justice Department has intervened in a lawsuit filed against Education Management Corp., a Pittsburgh corporation that owns numerous colleges across the country. The original draft of the rules would have restricted growth at certain programs that failed loan repayment and debt burden measurements. The rules released Thursday require schools that fail to meet all standards to provide disclosures to students. For example, although it takes three years of failure for a program to be ineligible for student loans, after one year of failure a school must tell students how the program failed to meet the regulation. And the school is required to give students a three-day waiting period before they are able to enroll. After two years of failing to meet standards, a school must warn students that they may be unable to afford their debts and explain transfer options. The regulations apply to individual degree programs, not entire schools. Although the rules are expected to have the most impact on for-profit colleges, there are more than three times as many public and non-profit vocational programs also subject to the new regulations.

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Maine Teen Labor Law A Boon To Businesses

June 1, 2011

WASHINGTON — Paul LePage, Maine’s Republican governor, signed into law Tuesday a watered-down version of a controversial bill that would have rolled back the state’s child labor standards. Although the most contentious elements had been struck by the time of its signing, the new law marks a small victory for two groups: Children who want to work more hours on school nights, and business owners who want more cheap labor. The law boosts the maximum amount of hours a 16- or 17-year-old can work during the school year from 20 to 24 hours per week. It also raises the per-day limit from four hours to six, and allows children to work until 10:15 p.m. on school nights. Although the law doesn’t affect wages, teen workers tend to earn significantly less than older workers. According to the most recent statistics from the Department of Labor , about 25 percent of teen workers made the minimum wage or less in 2010, compared with just 4 percent of workers age 25 and older. The much stronger original bill, sponsored by Sen. Debra Plowman (R-Hampden), would have removed all the hour restrictions on 17-year-old workers, as well as the summer work restrictions on 16-year-old workers. Plowman could not be reached for comment. According to her biography on the state legislature page, the state senator is a member of the National Association of Women Business Owners, and her family runs a garage-door installation business. Rep. Timothy Driscoll (D-Westbrook), a strong opponent of the bill, told The Huffington Post that the final law “did get softened up a bit, but it still wasn’t to my liking.” Driscoll said the focus for teens should be school, not work, and that the new law “exploits children.” Driscoll also said he never really believed the Republican line that the bill was aimed at giving youngsters more work experience, noting that his suspicions grew during a state labor committee hearing on the proposed bill back in March. “The only folks there supporting it were the folks in high-priced suits and shiny shoes,” Driscoll said. “There weren’t any children or parents there testifying in favor of it.” (The Maine legislature’s website does not feature video from past hearings.) Instead, as Driscoll recalls, there were a representative from the Maine Restaurant Association, a representative from the Maine Innkeepers Association and a stakeholder from a Maine amusement park called Funtown Splashtown USA. Driscoll pointed out that restaurants, inns and amusement parks tend to rely on low-priced teen labor and would have an interest in seeing children allowed to work more hours. Earlier this year, a bill was proposed in Maine that would have pushed the teen pay floor beneath the state minimum wage of $7.50 per hour, to a so-called training wage of $5.25 for the first 6 months of employment. That bill, titled ” An Act To Enhance Access to the Workplace for Minors ,” was voted down in committee. Similar proposals have been popping up in the last four years, according to Driscoll who’s been in the legislature since 2004. The lawmaker said he usually hears the same argument for relaxing teen labor regulations: Some kids are cut out for school, and some kids aren’t, so best to get the latter to work as soon as possible. “I’ve always pushed back on that,” said Driscoll. “What we should be doing is giving every kid a fair opportunity to get ahead and make sure they’re afforded an education.” “They’ll have the rest of their lives to work,” he added.

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Jodi R. R. Smith: The Top Ten Things Your Boss Will Never Tell You But Wishes You Knew

May 31, 2011

It was around this time of year, almost 20 years ago, when I first learned that managers are human too. I was fresh out of college and all of my management theory coursework stated that the boss was hardworking and fair. The boss was a mentor and a motivator. The boss assigned work based upon ability and provided training to shore up skills. The fact that bosses had human foibles and failings were simply not mentioned. So, it came as a big surprise when a boss approached me about an open job requisition I was sourcing. The hiring manager had whittled the candidates down to the top three and references were being sought. The top candidate’s boss came to my office to explain that while his subordinate was likely the most qualified for and deserving of the position, he would not provide a recommendation for her. Apparently she was the only person keeping his department together. Her organizational knowledge and positional expertise were unmatched. If she were to be promoted, he would need to hire two or three new employees to replace her. Even with training, it would take over a year before his department would run smoothly again. He simply could not afford to let her go. The gravity and reality of the situation were eye-opening. I learned that day that bosses are human… just like the rest of us. Even with the most professional of managers, there are some conversations they would prefer to avoid. Listed are the top 10. Fashion Police . Bosses have enough on their plates already. They do not want to add evaluating your attire. Review the written dress code, and observe the unwritten dress code. Remember what grandmother said, dress for the job you want, not the job you have. Total Package . Appropriate attire is just the beginning, as everything about you should communicate that you are a professional. This includes your entire visual résumé. Your visual résumé begins with your wardrobe, and includes your grooming and accessories. It continues to your workspace and your work. Your Attention, Please. Bosses do not want to monitor your electronic ADD. All cell phones and mobile devices should be turned off when in meetings or interacting with others. Social Media is a great equalizer. Your boss is on Facebook and Twitter too. Be wary of any job related posting … especially if it is negative. Constantly checking your personal email distracts from your focus at work. Stealing Time . While not everyone punches a time-clock, bosses are not as oblivious as you may think. Being late to work, arriving late back from lunch and being tardy to meetings is noticed. Whether you are “just” checking your Facebook page, chatting on your cell phone with friends or shooting the breeze with colleagues, you are stealing time. The company is paying you to get work done. Office Soap Opera Stars . There is enough happening in the office. Do not add your own personal drama. This includes everything from flirting to full-blown affairs. Bosses want you to have boundaries between your personal and professional lives. More Picturesque Speech . Bosses cringe when you open your mouth and foul language, inappropriate topics or grammatically incorrect speech comes out. Your inability to monitor your mouth reflects poorly on everyone. Facts Not Feelings . The boss is pulled in many different directions already. When you need to report something, take the time to think before you speak. Present the facts of the situation. Panicking only adds stress. And speaking of facts, understand how the company makes money and how your part plays into the bigger picture. This knowledge will help to guide and direct your behavior. Anticipatory Actions . When there are issues, do bring the boss at least one possible solution. While understanding what caused the problem is relevant, blaming others and making excuses is unhelpful. Even when there are no immediate issues, take the time to look forward and plan ahead. It is better to act than react. Next Stop, Knowledge . The boss can not possibly be fully responsible for your career. You need to be responsible for your professional development. Research and source training that you need. Make it your goal to stay current in your field. Replace Yourself . If the boss finds you irreplaceable, your chances of promotion diminish greatly. Divide your job into manageable chunks and train others in your department as back-ups. This way, you will position yourself for promotion. The candidate’s boss was looking out for his own best interests. Fortunately, the hiring manager was savvy. He was able to read between the lines of the weak recommendation. The candidate was offered the job and she took it. Hopefully your boss would not attempt to sabotage your opportunity for promotion. But chances are there is something your boss wishes you knew, but is hesitant to tell you. An honest self-evaluation, using these top 10 tips as a starting point, may prove to be enlightening. I would like to thank the following managers who took the time to tell me the things they would prefer not tell their employees and consultants who enlighten managers on such delicate communications: Tom Armour, Chantay Bridges, Marlene Caroselli, Kathi Elster, Pamela Feld, Diane Gayeski, Neil Gussman, Antoine Lane, Holly Paul, Don Phin, Jack Signorelli, Patricia Sigmon, Leslie Singer, as well as many other HARO responders who opted not to be mentioned by name. Jodi’s latest book, “The Etiquette Book: A Complete Guide to Modern Manners” is now available. Chapters 10 – 14 cover professional protocol in detail.

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Lockheed Martin Hit By Cyber Attack

May 29, 2011

WASHINGTON — Hackers launched a “significant and tenacious” cyber attack on Lockheed Martin, a major defense contractor holding highly sensitive information, but its secrets remained safe, the company said Saturday. Lockheed Martin, the Department of Homeland Security and the Pentagon confirmed that the contractor’s information systems had come under attack. Lt. Col. April Cunningham, speaking for the Defense Department, said the impact on the Pentagon “is minimal and we don’t expect any adverse effect.” Still, the concerted attempt to breach the contractor’s systems underscored the risk to the nation’s critical defense data. Chris Ortman, Homeland Security spokesman, said his agency and the Pentagon were working with the company to determine the breadth of the attack and “provide recommendations to mitigate further risk.” Lockheed Martin said in a statement that it detected the May 21 attack “almost immediately” and took countermeasures. As a result, “our systems remain secure; no customer, program or employee personal data has been compromised.” The company’s security team is still working to restore employee access to the targeted network. Neither Lockheed Martin nor the federal agencies revealed specifics of the attack. ___ AP writer Jennifer Malloy contributed to this report from Los Angeles.

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The Summer Gas Squeeze

May 28, 2011

NEW YORK — There’s less money this summer for hotel rooms, surfboards and bathing suits. It’s all going into the gas tank. High prices at the pump are putting a squeeze on the family budget as the traditional summer driving season begins. For every $10 the typical household earns before taxes, almost a full dollar now goes toward gas, a 40 percent bigger bite than normal. Households spent an average of $369 on gas last month. In April 2009, they spent just $201. Families now spend more filling up than they spend on cars, clothes or recreation. Last year, they spent less on gasoline than each of those things. Jeffrey Wayman of Cape Charles, Va., spent Friday riding his motorcycle to North Carolina’s Outer Banks, a day trip with his wife. They decided to eat snacks in a gas station parking lot rather than buy lunch because rising fuel prices have eaten so much into their budget over the past year that they can’t ride as frequently as they would like. “We used to do it a lot more, but not as much now,” he said. “You have to cut back when you have a $480 gas bill a month.” Alex Martinez, a senior at Arcadia High School outside Los Angeles, said his family’s trips to San Francisco, which they usually take once or more a year, are on hold. As he stopped at a gas station to put $5 of fuel in his car – not much more than a gallon – he said the high prices are crimping social life for him and his friends. “We’re always worrying, `How are we going to get home. We’ve got less than half a gallon left,’” Martinez said. “We definitely can’t go out as much, and we can’t go as far.” As Memorial Day weekend opens, the nationwide average for a gallon of unleaded is $3.81. Though prices have drifted lower in recent days, analysts expect average price for 2011 to come in higher than the previous record, $3.25 in 2008. A year ago, gas cost $2.76. The squeeze is happening at a time when most people aren’t getting raises, even as the economy recovers. “These increases are not something consumers can shrug off,” says James Hamilton, an economics professor at the University of California, San Diego, who studies gas prices. “It’s a key part of the family budget.” The ramifications are far-reaching for an economy still struggling to gain momentum two years into a recovery. Economists say the gas squeeze makes people feel poorer than they actually are. They’re showing it by limiting spending far beyond the gas station. Wal-Mart recently blamed high gas prices for an eighth straight quarter of lower sales in the U.S. Target said gas prices were hurting sales of clothes. Every 50-cent jump in the cost of gasoline takes $70 billion out of the U.S. economy over the course of a year, Hamilton says. That’s about one half of one percent of gross domestic product. The Commerce Department reported Friday that consumer spending rose just 0.1 percent in April, excluding the extra money spent on more expensive gas and food, while wages stayed flat for the second straight month. Mike Nason, a marketing consultant from Laguna Niguel, Calif., says he’s clipping coupons to save money for gas and cutting back wherever else he can. His daughter Chandler, 17, recently settled for a prom dress that cost $170 instead of asking her parents to spend $400 for another that caught her eye. “In prior years we would have spent more money on the dress, but money has become a big object,” he says. The tourism industry is bracing for an uncertain summer. AAA predicts the typical family will spend $692 on its vacation, down 14 percent from $809 last year. Many of those surveyed said they are planning shorter trips and expect to pinch pennies when they arrive. AAA estimates 34.9 million Americans will travel 50 miles or more from home this weekend, an increase of about 100,000 from last year. But they will have to do more complicated math to make the summer budget work. The median household income in the U.S. before taxes is just below $50,000, or about $4,150 per month. The $369 that families spent last month on gas represented 8.9 percent of monthly household income, according to an analysis by Fred Rozell, retail pricing director at Oil Price Information Service. Since 2000, the average is about 5.7 percent. For the year, the figure is 7.9 percent. Only twice before have Americans spent this much of their income on gas. In 1981, after the last oil crisis, Americans spent 8.8 percent of household income on gas. In July 2008, when oil price spiked, they spent 10.2 percent. Average hourly earnings, meanwhile, have risen just 1.9 percent in the past year. That’s only just enough to keep up with inflation. The good news is that analysts expect gas to fall to $3.50 a gallon in the coming weeks. In order for household gasoline expenses to return to their historical place in the family budget for the year, gas prices would have to fall by about half and stay that way for the rest of the year. Demand for gasoline has fallen for eight straight weeks as drivers try to cut back, but higher prices can’t keep drivers parked for long. Even with high prices this year, the government expects gasoline demand to grow slightly for the year. “Drivers try to do what they can, but they have to go almost all the places they go,” says David Greene, a researcher at the Center of Transportation Analysis at Oak Ridge National Laboratory and manager of the Department of Energy website fueleconomy.gov. “There’s no magic gizmo that will drastically change someone’s gasoline use.” Mike Siroub clutched his heart as he described the experience of filling up lately. He owns a Union Oil gas station in Arcadia, Calif., but one of his cars is also a 1975 Oldsmobile. “Think about it,” he said. “If you’ve got a car with a 30-gallon tank and gas is $4 a gallon and you fill it up, you’re out $120.” He says high gas prices will keep him home this weekend. And he runs a gas station for a living. As he greeted a steady stream of customers at his station, he laughed and said, “I have to pay for gas just like everyone else.” ___ Associated Press writers John Rogers in Los Angeles and Brock Vergakis in Norfolk, Va., contributed to this story. Jonathan Fahey can be reached at . http://www.facebook.com/Fahey.Jonathan

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David Vitter Makes Bold Move In Oil Drilling Battle

May 25, 2011

WASHINGTON — Democrats are crying foul after a GOP senator blocked a pay raise for Interior Secretary Ken Salazar in an effort to pressure him to approving more deepwater oil and gas drilling permits. At issue is a move by oil state Sen. David Vitter, R-La., to not only block the almost $20,000 raise for Salazar last week but then offer to allow the raise to go forward if the Interior Department issues six new deepwater permits a month. Salazar responded with a letter accusing Vitter of employing strong-arm tactics and of trying to coerce him into approving new drilling permits in order to get the raise. Salazar said Vitter’s move amounted to “attempted coercion of public acts here at the Department” and asked that efforts to give him a pay raise be halted. Salazar’s pay is lower than other Cabinet members because of an obscure constitutional requirement that blocks lawmakers who move to the executive branch from claiming pay raises they’ve voted on while in Congress. Vitter blocked legislation last week to fix the disparity, saying he was keeping the “boot on the neck” of the department. “It is wrong for Sen. Vitter to try to get something in return for moving forward on a matter that the Senate has considered routine for more than a century,” Majority Leader Harry Reid said in a statement. Democrats suggested Vitter was skating close to federal bribery laws that make it a crime to promise “anything of value … to influence any official act.” Vitter’s not backing down. “I’m glad the secretary has dropped his push for a pay raise,” Vitter said. “It was truly offensive to Gulf energy workers who are struggling under his policies. Now I hope he starts earning what he already makes and properly issues new permits for much needed drilling in the Gulf.”

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States Shorten Duration For Unemployment Benefits

May 22, 2011

WASHINGTON — Some of the states that have drained their unemployment insurance funds are cutting the number of weeks that a laid-off worker can count on those benefits. Legislators are trying to limit tax increases for businesses to replenish the pool and are hoping the federal government keeps stepping in when the economy slumps. Michigan, Missouri and Arkansas recently reduced the maximum number of weeks that the jobless can get state unemployment benefits. Florida is on the verge of doing so. Unemployment in those states ranges from 7.8 percent in Arkansas to 11.1 percent in Florida. The benefit cuts come as legislatures deal with the damage that the recession inflicted on state unemployment insurance programs. The sharp increase in the number of people who lost their jobs drained the reservoir of money dedicated to paying out benefits. About 30 states borrowed more than $44 billion from the federal government to continue payments to laid-off workers. Many states hastened the insolvency of their funds by keeping balances at historically low levels going into the downturn. The burden of replenishing the funds and paying off the loans will fall primarily on businesses through higher taxes, but the benefit cuts are an effort to limit the tax increases. States usually provide up to 26 weeks of benefits to laid-off workers. Michigan and Missouri have cut that to a maximum 20 weeks. Arkansas went to 25. Florida is considering a more complex change that would link the duration of benefits to the strength of the economy. The cap would range from 23 weeks during periods of double-digit unemployment to as low as 12 weeks during periods of extremely low unemployment. The Florida Legislature approved the changes, but the governor hasn’t signed the bill. Once state benefits are exhausted, laid-off workers often are eligible for 13 weeks to 20 weeks of extended benefits. States and the federal government usually split the cost for that program. During recessions, Congress typically takes the aid a step further, providing several more months of emergency benefits entirely paid for by the federal government. The actions taken by legislatures apply specifically to state benefits, but also will reduce future federal benefits because the changes affect the formula used to calculate them. Allen McClendon, 40, of Kansas City, Mo., said he lost his job as a mechanic in August 2010 and has been getting unemployment benefits in Missouri since February. He said the payments allow him to buy food, make payments on his pickup truck and pay for gas and auto insurance. He is worried about what will happen if his state and federal benefits run out before he lands a job. Before that happens, he hopes to get training from a Missouri employment center that would allow him to get a commercial driver’s license or to repair heating and cooling units. “If they run out before I’ve completed my schooling and have got a job, then I’m really in trouble,” he said. “I’d so much rather be working than dealing with this,” he said. Benefits vary from state to state, but average about $300 a week, or about one-third of a recipient’s previous wages. In good economic times, most of the unemployed find a new job before their benefits expire. But in times of high unemployment, states have come to count on extra help from the federal government. Some say that reliance is playing a role in the bills to cap benefits. “A lot of states are basically saying, `Hey, why are we paying for these benefits when, in a recession, the federal government will step in?’” said Steve Woodbury, an economics professor at Michigan State University. Sen. Debbie Stabenow, D-Mich., said relying on the federal government to keep up the cash flow is risky. She said last year’s fight to extend unemployment benefits was difficult, with Democrats barely able to generate the votes necessary to pass a bill. “I think it would be an error in judgment to assume that the Republican House would extend unemployment benefits,” she said. Sen. Orrin Hatch, R-Utah, said Congress in the future might worry that repeated extensions of unemployment benefits would serve as a deterrent to finding a job. “There’s some truth to that” concern, said Hatch, the top Republican on the Senate Finance Committee, which has jurisdiction over the program. Employers pay both state and federal taxes for unemployment insurance. States collect the taxes that pay for basic benefits. The federal taxes help pay for administering the program and providing the federal government’s share of extended benefits. State tax collections will have increased about 44 percent since 2009, according to the Department of Labor. Still, as a percentage of wages paid, unemployment insurance taxes are at historically low levels, less than 1 percent. When the unemployment insurance program began in 1938, the tax rate for unemployment insurance averaged about 2.7 percent of wages. Nevertheless, higher taxes in tough economic times are challenging businesses. States apply their highest tax rates to those industries with the most worker turnover. Those often are the same industries that are hardest hit by recession, such as manufacturers. In Florida, the minimum tax that is applied to businesses with low employee turnover went up from about $25 per employee to about $72 this year. The maximum tax for businesses with high turnover remained at $378 per employee. Companies could use that tax money to keep their doors open or to expand and hire more workers, said Teye Reeves, a policy director for the Florida Chamber of Commerce. “For our economy to thrive again, we need businesses to be strong,” Reeves said. “They want to have more employees. They want to open new stores. … They’ve got to have the capital to be able to provide those jobs.” But Rick McHugh, of the National Employment Law Project, argued that legislatures should not shore up their unemployment insurance programs by making workers share the pain. “It’s not a shared-sacrifice situation because, certainly in most states, employer organizations lobbied to keep the programs from being properly funded in advance of the recession,” McHugh said. “Now, they’re saying the program is broke so we have to cut benefits” McHugh said he’s worried that more states will seek to limit benefits when legislatures return to work next spring. Most have adjourned for the year. “It’s really a threat to the vitality of the safety nets because each state feels pressure to go to that lowest common denominator,” McHugh said. ___ Associated Press writer Heather Hollingsworth in Kansas City, Mo., contributed to this report. ___ Online: Labor Department: http://workforcesecurity.doleta.gov/unemploy/uifactsheet.asp National Association of State Workforce Agencies: http://www.workforceatm.org

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Pentagon On Joint Strike Fighter: Too Expensive, But There Is No Alternative

May 19, 2011

By Colin Clark Editor, AOLDefense WASHINGTON — The U.S. must buy the Joint Strike Fighter, but it’s not affordable right now. That was the somewhat confusing message from the Pentagon’s top acquisition official, Ashton Carter, when members of the Senate Armed Services began hammering him Thursday about the plane’s huge cost overruns over the last three years. The Joint Strike Fighter (JSF), also known as the F-35, may cost a total of more than $1 trillion dollars to design, build, buy, fly and repair through 2065, according to Pentagon documents. Under sharp questioning by Arizona Sen. John McCain, the Senate committee’s top Republican, Carter said the F-35’s costs are “simply unacceptable in this fiscal environment.” The program faces a “watershed moment” after years of cost overruns and schedule delays have piled up in the midst of one of the greatest fiscal crises in United States history, McCain said. Carter stressed to the Arizona senator that he and his Pentagon colleagues now feel they have much more information — and much more accurate information — about the program’s likely path. He and other Pentagon officials repeated their mantra that there is no alternative to buying the F-35. Carter’s comments about the program’s sky-high costs during the hearing stood in stark contrast to the much more upbeat tone of a joint statement he and other top Pentagon officials prepared for the hearing. That statement conveys the official position –- adopted by all senior military officials –- that the F-35 is “the centerpiece of the Department of Defense’s future precision attack capability.” Most of it details the current status of the program, which is actually ahead of the latest version of its testing schedule. However, as McCain noted, the program overall is 80 percent over its original cost estimate, and roughly 30 percent over the estimate of the last restructuring. Defense Secretary Robert Gates and Carter have been at pains recently to say they support the F-35. After years of getting either insufficient or lousy numbers from the program office, they say they now have “credible” cost estimates for production and operation and support. The later two are the dollars spent on fuel, the people who fly and maintain the jets and the equipment needed to repair and improve them. These sustainment costs typically makes up at least 70 percent of total expense of a major weapon system. The JSF program office, led by Vice Adm. David Venlet, is preparing the first credible stab at estimating those costs — and they are high. According to Christine Fox, director of the Pentagon’s feared Cost Assessment and Program Evaluation office, the F-35 is currently estimated to cost less to operate and maintain than the F-22, which is America’s most capable stealth fighter. The F-35 will cost about one third more to sustain and operate than the main plane it is replacing, the F-16. It will cost about same as the F-15C, she told the Senate committee. A document leaked last Thursday, the Dec. 31 Selected Acquisition Report, puts the F-35′s costs at $16,425 per flying hour. That’s more than $3,000 more per hour than the F-16C/D’s $13,466 cost. Since “affordability” has been the watchword for the F-35 since it was first conceived, these numbers pose a difficult conundrum for senior Pentagon leaders. Lockheed Martin’s CEO Bob Stevens is keenly aware of the threat they pose to the program, and he has pressed company officials to do everything possible to get the costs back on track. The company’s top man on the F-35, Tom Burbage, told the Senate Armed Services Committee in his prepared remarks that the F-35B, that Marine’s version of the JSF, will save the military an estimated $1 billion a year when it replaces three other aging aircraft. That gives some sense of how complex the F-35B is intended to be. It will serve the roles of the F-18, the Harrier jumpjet and the EA-6 currently fulfill — a conventional fighter, an attack aircraft and an electronic and cyber warfare platform all rolled into one. Launching next month, AOL Defense will provide news, insight and tools about the strategy, politics and policies that shape the defense sector. Follow Colin on Twitter for views at @colinclarkaol . Follow AOL Defense for news at @aoldefense .

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High Oil Prices Hit Wallets As Consumers Are Forced To Spend More On Fuel

May 19, 2011

The price of oil eroded Americans’ spending power over the last several months, according to new post from the Commerce Department. The pain will likely continue, the department warned. As oil prices have shot up and gas prices at the pump have followed, consumers and businesses have been forced to pay more for fuel. The average household monthly motor fuel expenditure increased by more than 22 percent between October and March, the post by Commerce Department Chief Economist Mark Doms showed. Even though oil prices abruptly dropped earlier this month, crude has since pared some of its losses, and pump prices remain high, suggesting that fuel will continue to sap household finances. From the Commerce Department At this rate, the net amount of money the nation pays to other countries for oil is on track to reach about $3,000 per household in 2011, an increase of 25 percent from last year, the note said. This fuel trade deficit per household grew by two-thirds between October and March, and in the first quarter of the year, petroleum-related products made up nearly 60 percent of the total U.S. trade deficit, the note showed. From the Commerce Department Faced with higher gas prices, some Americans have reported cutting back on driving . But people need to get to work and shop for food — they can only cut back so much. Every penny increase in the cost of gasoline tears more than a billion dollars from the economy yearly, economists say. As conflict in the Middle East has stoked commodity investors’ fears of a supply disruption in recent months, oil prices have skyrocketed. Even after the price of crude dropped by 10 percent in one day earlier this month, prices are still at levels that recall the summer of 2008, when months of record-high fuel prices helped drag the economy into recession. The price of Brent crude, an international benchmark, is now more than 50 percent higher than it was this time last year. Nationwide, the average cost of a gallon of regular gasoline is now $3.91, according to the American Automobile Association . Go to the Commerce Department website for more charts.

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JCPenney Plans Supply Chain Restructuring; Reduced Store Openings

May 19, 2011

J. C. Penney Co. plans to streamline its supply chain operations and has trimmed back the number of new stores it expects to open by 2014. Currently in the second year of its 2010-2014 long-range plan, the department store chain is looking to re-align its enterprise-wide approach to inventory management. “We have some legacy supply chain facilities that support our catalog and Internet operations together,” Myron E. (Mike) Ullman, III, chairman…

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Michael A. Siegel: A Decade Later "New Markets" Continues to Build Opportunity in an America Left Behind

May 18, 2011

The idea, in it’s purest form, was called “community capitalism” as think tanks along with many of the nation’s top economists began pushing a revolutionary idea that began to take hold in late 1990s — the solution for economic revival in impoverished America stretched beyond traditional anti-poverty programs. The answer, they maintained, to creating sustainable and measurable economic opportunity throughout these regions “left behind” rested in private investment. With national unemployment at 4% and the federal surplus continuing record gains, as America had all but erased it’s national debt, President Clinton signed the Community Renewal Tax Relief Act into law in December 2000 including a critical provision to help bring opportunity to severely distressed low-income urban, older suburban and rural communities which had failed to enjoy in the prosperity boom of the 1990s: The New Markets Tax Credit . Working closely with then-Speaker Dennis Hastert and GOP Senate leadership, the Clinton administration crafted this business-based solution designed to stimulate private economic growth in neglected regions throughout the nation. At the time of its introduction, the program marked a decidedly different and bold approach to helping “America’s forgotten neighborhoods” replacing models of the past that relied exclusively on federal grants with a commercially oriented plan to direct private dollars into areas where employment was scarce; investment non-existent. A decade later the innovation behind the “New Markets” public system/private sector approach has become a policy standard and continues to enjoy Republican and Democrat support based on its record of success as recently evidenced by the latest joint effort of Senators Jay Rockefeller (D-WV) and Olympia Snowe (R-ME) who urged Congress to renew the program last week introducing S996: a five year extension of the program. How it Works At its core, “New Markets” is designed to encourage private investments from corporations and individuals who might never consider buying into so-called “high-risk areas” of America where unemployment and poverty rates can soar by as much as twice the national average. As both Senators Rockefeller and Snowe have attested, the program is geared to provide much needed capital so that all qualifying locals — from urban to rural — can benefit, consequently improving the quality of life and building employment opportunities for people in these areas through lasting investments in local businesses. Administered by the Department of Treasury, investors receive a seven‐year, 39 percent federal tax credit for New Markets investments: a five percent credit in each of the first three years, six percent annually in the last four years. These investments are made to spur community and economic revitalization. The statute requires that investments be located in census tracts where the individual poverty rate is at least 20% or median income does not exceed 80%. Today, $50 billion of capital is flowing in under-served communities in all 50 states, the District of Columbia and Puerto Rico. Yet unlike many other tax credit programs the “New Markets” program has required renewal during each session of Congress since its introduction. New Markets Success There are and will always remain those who will attempt to discredit the “New Markets” program by delving into what some call “the less than 2%” arena — pointing to a handful of projects out of some 3,000 which, while approved and in qualified areas, may not seem worthy of recognition. But taken on the whole, the “New Markets” program has made significant improvements in distressed communities throughout the country, creating opportunity and jobs while defraying costs to the taxpayer and federal government. In fact, The New Markets Tax Credit Coalition conducted an independent audit of the program as it reached its 10th Anniversary. Some of the key findings include: Between 2003 and 2009 the New Markets Tax Credit leveraged $8.00 in private investment for every $1.00 of cost to the government. Demand for funds far exceeds availability. To date, community enterprises have requested a total of202 billion in allocation authority since 2003, a demand of more than seven times the credit available. The vast majority of “New Markets” investments (89.5%, of the dollars invested) have been made in communities with at least one factor of higher economic distress than required by law (unemployment rates at least 1.5 times the national average, poverty rates greater than 30%, median income less than 60% of area median). And then there is this: According to the website for the American Reinvestment and Recovery Act , the cost to taxpayers to create one job requires approximately $90,000 in federal dollars. In contrast, “New Markets” programs — fusing public incentives with private funds — have created nearly 500,000 jobs at a cost to the federal government of less than $12,000 per job. By any definition the New Markets program has exceeded expectations. Not only has it created a successful model of for-profit, business-driven expansion of investment, job creation and economic opportunities in distressed communities with government and the community partnerships playing key supportive roles — it has done so in tough times when private capital has been hard to find due to the credit crunch and slowing economy. Continuing this program is in the best interest of businesses, taxpayers and communities hit hard by recent economic conditions. Let’s hope Congress agrees.

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Confidential Federal Audits Accuse Five Biggest Mortgage Firms Of Defrauding Taxpayers

May 16, 2011

WASHINGTON — A set of confidential federal audits accuse the nation’s five largest mortgage companies of defrauding taxpayers in their handling of foreclosures on homes purchased with government-backed loans, four officials briefed on the findings told The Huffington Post. The five separate investigations were conducted by the Department of Housing and Urban Development’s inspector general and examined Bank of America, JPMorgan Chase, Wells Fargo, Citigroup and Ally Financial, the sources said. The audits accuse the five major lenders of violating the False Claims Act, a Civil War-era law crafted as a weapon against firms that swindle the government. The audits were completed between February and March, the sources said. The internal watchdog office at HUD referred its findings to the Department of Justice, which must now decide whether to file charges. The federal audits mark the latest fallout from the national foreclosure crisis that followed the end of a long-running housing bubble. Amid reports last year that many large lenders improperly accelerated foreclosure proceedings by failing to amass required paperwork, the federal agencies launched their own probes. The resulting reports read like veritable indictments of major lenders, the sources said. State officials are now wielding the documents as leverage in their ongoing talks with mortgage companies aimed at forcing the firms to agree to pay fines to resolve allegations of routine violations in their handling of foreclosures. The audits conclude that the banks effectively cheated taxpayers by presenting the Federal Housing Administration with false claims: They filed for federal reimbursement on foreclosed homes that sold for less than the outstanding loan balance using defective and faulty documents. Two of the firms, including Bank of America, refused to cooperate with the investigations, according to the sources. The audit on Bank of America finds that the company — the nation’s largest handler of home loans — failed to correct faulty foreclosure practices even after imposing a moratorium that lifted last October. Back then, the bank said it was resuming foreclosures, having satisfied itself that prior problems had been solved. According to the sources, the Wells Fargo investigation concludes that senior managers at the firm, the fourth-largest American bank by assets, broke civil laws. HUD’s inspector general interviewed a pair of South Carolina public notaries who improperly signed off on foreclosure filings for Wells, the sources said. The investigations dovetail with separate probes by state and federal agencies, who also have examined foreclosure filings and flawed mortgage practices amid widespread reports that major mortgage firms improperly initiated foreclosure proceedings on an unknown number of American homeowners. The FHA, whose defaulted loans the inspector general probed, last May began scrutinizing whether mortgage firms properly treated troubled borrowers who fell behind on payments or whose homes were seized on loans insured by the agency. A unit of the Justice Department is examining faulty court filings in bankruptcy proceedings. Several states, including Illinois, are combing through foreclosure filings to gauge the extent of so-called “robo-signing” and other defective practices, including illegal home repossessions. Representatives of HUD and its inspector general declined to comment. The internal audits have armed state officials with a powerful new weapon as they seek to extract what they describe as punitive fines from lawbreaking mortgage companies. A coalition of attorneys general from all 50 states and state bank supervisors have joined HUD, the Treasury Department, the Justice Department and the Federal Trade Commission in talks with the five largest mortgage servicers to settle allegations of illegal foreclosures and other shoddy practices. Such processes “have potentially infected millions of foreclosures,” Federal Deposit Insurance Corporation Chairman Sheila Bair told a Senate panel on Thursday. The five giant mortgage servicers, which collectively handle about three of every five home loans, offered during a contentious round of negotiations last Tuesday to pay $5 billion to set up a fund to help distressed borrowers and settle the allegations. That offer — also floated by the Office of the Comptroller of the Currency in February — was deemed much too low by state and federal officials. Associate U.S. Attorney General Tom Perrelli, who has been leading the talks, last week threatened to show the banks the confidential audits so the firms knew the government side was not “playing around,” one official involved in the negotiations said. He ultimately did not follow through, persuaded that the reports ought to remain confidential, sources said. Through a spokeswoman, Perrelli declined to comment. Most of the targeted banks have not seen the audits, a federal official said, though they are generally aware of the findings. Some agencies involved in the talks are calling for the five banks to shell out as much as $30 billion, with even more costs to be incurred for improving their internal operations and modifying troubled borrowers’ home loans. But even that number would fall short of legitimate compensation for the bank’s harmful practices, reckons the nascent federal Bureau of Consumer Financial Protection. By taking shortcuts in processing troubled borrowers’ home loans, the nation’s five largest mortgage firms have directly saved themselves more than $20 billion since the housing crisis began in 2007, according to a confidential presentation prepared for state attorneys general by the agency and obtained by The Huffington Post in March. Those pushing for a larger package of fines argue that the foreclosure crisis has spawned broader — and more costly — social ills, from the dislocation of American families to the continued plunge in home prices, effectively wiping out household savings. The Justice Department is now contemplating whether to use the HUD audits as a basis for civil and criminal enforcement actions, the sources said. The False Claims Act allows the government to recover damages worth three times the actual harm plus additional penalties. Justice officials will soon meet with the largest servicers and walk them through the allegations and potential liability each of them face, the sources said. Earlier this month, Justice cited findings from HUD investigations in a lawsuit it filed against Deutsche Bank AG, one of the world’s 10 biggest banks by assets, for at least $1 billion for defrauding taxpayers by “repeatedly” lying to FHA in securing taxpayer-backed insurance for thousands of shoddy mortgages. In March, HUD’s inspector general found that more than 49 percent of loans underwritten by FHA-approved lenders in a sample did not conform to the agency’s requirements. Last October, HUD Secretary Shaun Donovan said his investigators found that numerous mortgage firms broke the agency’s rules when dealing with delinquent borrowers. He declined to be specific. The agency’s review later expanded to flawed foreclosure practices. FHA, a unit of HUD, could still take administrative action against those firms for breaking FHA rules based on its own probe. The confidential findings appear to bolster state and federal officials in their talks with the targeted banks. The knowledge that they may face False Claims Act suits, in addition to state actions based on a multitude of claims like fraud on local courts and consumer violations, will likely compel the banks to offer the government more money to resolve everything. But even that may not be enough. Attorneys general in numerous states, armed with what they portray as incontrovertible evidence of mass robo-signings from preliminary investigations, are probing mortgage practices more closely. The state of Illinois has begun examining potentially-fraudulent court filings, looking at the role played by a unit of Lender Processing Services. Nevada and Arizona already launched lawsuits against Bank of America. California is keen on launching its own suits, people familiar with the matter say. Delaware sent Mortgage Electronic Registration Systems Inc., which runs an electronic registry of mortgages, a subpoena demanding answers to 75 questions. And New York’s top law enforcer, Eric Schneiderman, wants to conduct a complete investigation into all facets of mortgage banking, from fraudulent lending to defective securitization practices to faulty foreclosure documents and illegal home seizures. A review of about 2,800 loans that experienced foreclosure last year serviced by the nation’s 14 largest mortgage firms found that at least two of them illegally foreclosed on the homes of “almost 50″ active-duty military service members, a violation of federal law, according to a report this month from the Government Accountability Office. Those violations are likely only a small fraction of the number committed by home loan companies, experts say, citing the small sample examined by regulators. In an April report on flawed mortgage servicing practices, federal bank supervisors said they “could not provide a reliable estimate of the number of foreclosures that should not have proceeded.” The review of just 2,800 home loans in foreclosure compares with nearly 2.9 million homes that received a foreclosure filing last year, according to RealtyTrac, a California-based data provider. “The extent of the loss cannot be determined until there is a comprehensive review of the loan files and documentation of the process dealing with problem loans,” Bair said last week, warning of damages that could take “years to materialize.” Home prices have fallen over the past year, reversing gains made early in the economic recovery, according to data providers Zillow.com and CoreLogic. Sales of new homes remain depressed, according to the Commerce Department. More than a quarter of homeowners with a mortgage owe more on that debt than their home is worth, according to Zillow.com. And more than 2 million homes are in foreclosure, according to Lender Processing Services. Rather than punishing banks for misdeeds, the administration is now focused on helping troubled borrowers in the hope that it will stanch the flood of foreclosures and increase consumer confidence, officials involved in the negotiations said. Levying penalties can’t accomplish that goal, an official involved in the foreclosure probe talks argued last week. For their part, however, state officials want to levy fines, according to a confidential term sheet reviewed last week by HuffPost. Each state would then use the money as it desires, be it for facilitating short sales, reducing mortgage principal, or using the funds to help defaulted borrowers move from their homes into rentals. In a report last week, analysts at Moody’s Investors Service predicted that while the losses incurred by the banks will be “sizable,” the credit rating agency does “not expect them to meaningfully impact capital.” ************************* Shahien Nasiripour is a senior 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 917-267-2335.

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Newt Gingrich Businesses Owed Unpaid State Taxes

May 14, 2011

ATLANTA — Companies run by Republican presidential candidate Newt Gingrich have faced overdue tax bills in four states worth more than $6,000, according to records reviewed by The Associated Press. The tax liens, which generally allow governments to seize assets or property to settle tax bills, ranged in size from a $195 property tax bill in the Atlanta suburbs to $1,969 in unpaid Missouri taxes. Most of the liens were paid shortly after tax authorities filed them. One exception was in Pennsylvania, where Gingrich Holdings Inc. last week paid off a $1,599 lien for unpaid corporate income taxes just days before Gingrich formally announced he would run against Democratic incumbent Barack Obama. Gingrich spokesman Rick Tyler said Gingrich and his firms were unaware of most of the tax liens until being contacted this week by the AP. “When an issue has arisen, we’re anxious to resolve the issue and get the taxes paid,” Tyler said. “We want to be in compliance with all the states.” Georgia State University professor Jack Williams, who teaches multistate taxation, said he most commonly sees liens filed against businesses in financial distress. Other contributing factors could be poor record-keeping or aggressive tax collectors. “The lien stage is about as deep into the process you get before the taxing authority seizes your assets and sells that,” Williams said. Until deciding to run for president, Gingrich was the CEO of Gingrich Holdings Inc., the parent company of firms that manage his book and TV contracts, produce documentary films, offer consulting services and oppose Obama’s health care overhaul. Tyler said Gingrich’s businesses are financially healthy. Last week, Gingrich Holdings paid off a lien worth $1,599 for corporate income taxes that court records show dates back to 2002. Pennsylvania Department of Revenue spokeswoman Elizabeth Brassell said privacy laws forbid her from discussing the case further. Tyler said the problem appears to have started in 2002 when state officials rejected a tax return on a technicality. While the company believed it had satisfied the bill, it paid off the lien earlier this month after learning of the remaining balance, Tyler said. In 2009, a Gingrich Holdings subsidiary paid $2,654 in Missouri tax liens for unpaid withholdings taxes and sales or use tax. Court documents show Gingrich’s company still faces a $688 lien for more withholding taxes, although Tyler said Gingrich’s company previously paid the bill and blamed state officials for failing to note the payment. He said Gingrich’s company expects to receive paperwork from Missouri officials acknowledging the payment in several days. Missouri Department of Revenue spokesman Ted Farnen said privacy laws ban him from discussing the case. One of Gingrich’s now-defunct businesses, Gingrich Enterprises Inc., faced a flurry of tax liens in Indiana. It satisfied some and believes the rest are paperwork problems. In 2002, records show Gingrich Enterprises resolved Indiana tax liens totaling $1,349. Tyler said he did not know Friday what caused those tax bills. Gingrich had delivered speeches in the state before and after the liens were issued and may have received speaking fees. The company filed paperwork in Georgia showing it was dissolving in November 2002. The next month, Indiana officials filed the first of 43 more liens against the company. Tyler said Gingrich officials alerted Indiana this week that the company went out of business in late 2002 and never owed state taxes after that. He said Gingrich expects to receive a letter from Indiana officials acknowledging that decision shortly. Indiana Department of Revenue spokeswoman Stephanie McFarland said she could not discuss the case, citing confidentiality laws. Business records show the mailing address for the firm was a post office box and the home of Gingrich’s ex-wife, Marianne Gingrich. She said she previously alerted Indiana officials that the company closed and supplied them with ways to contact her ex-husband. She now throws away some of the bills. “If Indiana really wanted money from him, they could find him,” she said. ___ Associated Press news researcher Judith Ausuebel in New York and reporter Charles Wilson in Indianapolis contributed to this report. Ray Henry can be reached at . http://twitter.com/rhenryAP

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With Debt Ceiling In Sight, Regulators Continue Dire Warnings

May 13, 2011

The federal government is scheduled to reach the debt limit Monday, and with no deal yet struck, top economic officials are warning lawmakers of the consequences of inaction. Federal Reserve Chairman Ben Bernanke told a Senate committee Thursday that a failure to raise the debt ceiling could lead to a devastating financial crisis, as he reiterated the argument that he and Treasury Secretary Tim Geithner have been making for months. A default would be a “black swan event,” so rare that it’s impossible to fully predict the potentially disastrous consequences, argues a new study leaked by Politico . The two sides in the debt ceiling debate seem to be hardening, rather than bridging, their differences. Republican lawmakers expressed increased skepticism that a failure to raise the debt ceiling would have serious consequences, while top economic officials repeated the argument that this legislative inaction could lead to a default and spark a worldwide economic disaster. “The worst outcome would be one in which the financial system would again destabilize,” Bernanke told the Senate Banking Committee, saying such an event “would have extremely dire consequences for the U.S. economy.” The U.S. government must continuously borrow money to pay principal and interest on older debt, which means that if it is barred from borrowing above a limit, it risks defaulting on some of its loans. A missed debt payment, which Getihner said could happen by August 2 if the debt ceiling isn’t raised, would send panic through financial markets around the globe, as what is considered the world’s safest investment would become compromised, independent economists say. A default would likely touch off a financial crisis worse than the one the county is still recovering from, Geithner told Congress last month. Since it appears that no deal will be struck before Monday, the Treasury is expected to initiate the second phase of the program of “extraordinary measures,” designed to keep the government out of default. Earlier this month, the Treasury stopped issuing special securities designed to help cities and states manage their debt. Starting Monday, it will be able to turn some government debt held by a federal pension fund into cash, and to block other funds from new investment. This will allow the government to tread water until August, at which point it might have to default. Republican lawmakers have used the debt ceiling debate as a way to enforce fiscal austerity, saying they will not raise the limit unless they win concessions from their colleagues on the Hill. Obama administration officials have sharply criticized this position, saying lawmakers are essentially threatening to crash the economy in order to achieve a political agenda. The Centrist Democrat Group Third Way is preparing a study that describes the consequences of default in clear terms. Politico’s Morning Money got a draft of the study, which lays out five consequences: 1) Treasury bond rates rise. 2) The stock market drops, potentially sharply. 3) The dollar loses its “special status.” 4) Mortgage rates rise. 5) Small business and consumer credit tightens and chokes the recovery. The study explains: The United States has the luxury of borrowing money more cheaply than any other country because Treasury bills are the safest investment on earth. But that would no longer be the case with default. Losing this safety feature would be a devastating blow, jeopardizing our ability to borrow at low rates, a huge advantage for America and part of our engine for economic growth. The group also has a nice graphic that shows these consequences as dominos. One stumbling block in the negotiations, it seems, is that the two sides in the debate don’t view the consequences of Congressional inaction with the same degree of solemnity. “When you say the drop-dead day is going to be August, I question that,” Rep. Tom Rooney (R-Fla.) said, according to the Wall Street Journal . “I’ll believe it when I see it.” The so-called drop-dead date, at which the government would likely default, was once July 8. But in a recent letter to Congress, Geithner said tax receipts were stronger than expected, allowing the drop-dead date to be August 2 instead. That revision has apparently increased skepticism on the Hill. “We are writing to seek clarification and an explanation of the rationale for the Department’s August 2, 2011 estimate,” reads a Thursday letter from the Republican Study Committee , a House group, to Geithner (hat tip to Politico). But in multiple letters to Congress, Geithner has made his reasoning clear. He has described the process the government must undertake to avoid default, and he has repeatedly emphasized the “catastrophic” consequences of keeping the debt ceiling where it is. “We are particularly concerned by the growing belief that hitting the August drop-dead date would be no big deal,” Bank of America chief economist Ethan Harris said in a new note, according to Business Insider . Harris says there’s a 60 percent chance Congress will delay raising the limit until right before the deadline. And there’s a 30 percent chance Congress will blow past the deadline, Harris says in the note.

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Video: Harte Says Goldman Criminal Charges Don’t Seem Likely

May 13, 2011

May 13 (Bloomberg) — Jeffery Harte, an analyst at Sandler O’Neill & Partners LP, talks about Goldman Sachs Group Inc.’s stock performance and outlook. The bank closed at its lowest level in more than eight months yesterday after Rochdale Securities LLC Analyst Richard Bove told investors to sell the stock on concern that the Department of Justice faces growing pressure to bring claims against the firm. Harte speaks with Erik Schatzker on Bloomberg Television’s “InsideTrack.” (Source: Bloomberg)

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Breaking Up With T-Mobile May Cost AT&T $6 Billion

May 12, 2011

By Nadia Damouni and Paritosh Bansal NEW YORK (Reuters) – AT&T Inc (T.N) has promised to give Deutsche Telekom (DTEGn.DE) $6 billion in assets, services and cash as a break-up fee if U.S. regulators reject its proposed $39 billion purchase of the German company’s T-Mobile USA, according to sources familiar with the matter. The $6 billion would include $3 billion of cash, as AT&T has previously disclosed, and about $2 billion worth of spectrum and a roaming agreement valued at $1 billion, according two sources who asked not to be named as those details were not public. AT&T declined comment for the story. While the cash agreement is already unusually high at 7.7 percent of the total deal price, the addition of assets and services of a similar value would mean that the companies are breaking global records with a 15.4 percent break-up fee, according to Thomson Reuters Data. The high fee underscores AT&T’s confidence that it can convince regulators to approve the deal, which is already being heavily criticized by many consumers and AT&T rivals including No. 3 U.S. mobile service Sprint Nextel (S.N). The acquisition of T-Mobile USA, ranked No. 4, would enable AT&T, currently the No. 2 U.S. mobile service, to leapfrog the leader of the U.S. market, Verizon Wireless, a venture of Verizon Communications (VZ.N) and Vodafone Group Plc (VOD.L). The deal needs approval from the U.S. telecommunications regulator, the Federal Communications Commission, and the Department of Justice, which examines antitrust issues around mergers. AT&T’s chief executive, Randall Stephenson, had to defend the deal at a hearing held by skeptical lawmakers in Capitol Hill on Wednesday. Based on valuations in past spectrum sales, $2 billion would pay for roughly 10 megahertz of spectrum, according to Fabricio Martinez, a UK-based consultant from Aircom International. This is the minimum necessarily to offer high-speed wireless services based on the emerging technology Long Term Evolution (LTE), according to analyst estimates. Martinez estimated that 10 megahertz would double T-Mobile USA’s current available spectrum for high-speed services. But he noted that “ideally a carrier would want 20 megahertz,” for LTE services to perform well. T-Mobile USA would be able to increase its current data speeds by only once and a half times using 10 megahertz for LTE, according to Martinez, who said that if it had 20 megahertz it could increase data speeds by four times. AT&T shares were up 37 cents, or 1 percent, at $31.75 in afternoon trade on the New York Stock Exchange. (Additional reporting by Sinead Carew; Editing by Steve Orlofsky) Copyright 2011 Thomson Reuters. Click for Restrictions WATCH:

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Microsoft’s Antitrust Saga Finally Comes To An End

May 12, 2011

Microsoft’s historic and prolonged dispute with U.S. regulators over antitrust violations has finally come to an end. And how things have changed. May 12 marks the expiration of a consent decree the software giant signed with the Department of Justice in 2002, an agreement that narrowly saved Microsoft from being broken up after it was found guilty of using its dominant position to stifle competition. On the anniversary of the agreement, the Department of Justice cheered its victory, while Microsoft adopted a more repentant tone. The company said of the thirteen years it spent under the scrutiny of antitrust regulators, “Our experience has changed us and shaped how we view our responsibility to the industry.” The Department of Justice celebrated the Microsoft antitrust case as a vital ruling that fostered competition in the tech industry and said it had paved the way for new products, including “computing services and mobile devices.” It wrote in a statement : The final judgment proved effective in protecting the development and distribution of middleware products and prevented Microsoft from continuing the type of exclusionary behavior that led to the original lawsuit. Microsoft no longer dominates the computer industry as it did when the complaint was filed in 1998. Nearly every desktop middleware market, from web browsers to media players to instant messaging software, is more competitive today than it was when the final judgment was entered. Nine years is a lifetime in Silicon Valley and while Microsoft remains one of the world’s most valuable technology companies, it is a far cry from the industry overlord it was years ago. Critics once derided Microsoft as the “Death Star” and “Evil Empire” bent on the domination of all desktops. Now it has a new nickname: Facebook CEO Mark Zuckerberg recently deemed it the “underdog.” Microsoft software still powers nine out of every ten computers, but it has lost ground in vital areas. In smartphones, music players, and search, it is struggling catch-up to Apple and Google, two companies that were floundering and yet-to-be-born, respectively, when Microsoft was hit with antitrust lawsuits in 1998. Microsoft’s mobile phone operating system has seen its share plummet from 35 percent in 2003 to 7.5 percent in 2011. Its search engine, Bing, has swallowed billions of dollars, but still claims just 14 percent of the market to Google’s 65 percent. And the same browser that put Microsoft at odds with regulators saw its market share fall below 50 percent for the first time ever. And now, even as Microsoft makes its peace, regulators are turning their spotlight on another Silicon Valley behemoth: Google. Already facing antitrust scrutiny in Europe and South Korea , Google is rumored to be the target an antitrust probe being launched by the FTC . Where antitrust matters are concerned, Google may be the new Microsoft. A law professor told Bloomberg that an FTC investigation of Google “could be on par’ the Department of Justice’s probe of Microsoft. WATCH:

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States Shortchange The Unemployed With Junk Debit Card Fees

May 11, 2011

WASHINGTON — Many states shortchange the jobless by distributing unemployment benefits on debit cards loaded with obnoxious fees, according to a new study by the National Consumer Law Center . Of the 40 states that have switched from paper checks to prepaid debit cards, 22 states’ cards charge ATM fees, 24 charge balance inquiry fees, and 28 charge inactivity fees. The cards in Arkansas, Idaho, Nebraska, Ohio, and Oregon come with overdraft fees ranging from $10 to $20. And in Connecticut, Iowa, Rhode Island, and Tennessee, cardholders “must pay for every ATM inquiry or pay a denied transaction fee if they request cash when their balance is insufficient,” the study says. Tennessee stands out for having the card with the most “junk fees,” the study says. Tennessee’s card, provided by JPMorgan Chase, charges $1 for initial ATM withdrawals, 40 cents for balance inquiries, and 25 cents whenever someone swipes the card at checkout. It’s one of just four states that doesn’t provide even one free ATM withdrawal per deposit. Tennessee doesn’t think its card’s fees are junk. “I’m not sure calling them ‘junk fees’ is a fair statement,” said Jeff Hentschell, a spokesman for the Tennessee Department of Workforce Development, which distributes Tennessee Automated Payment cards for jobless benefits. “When you look at the context of where we were and where we are today, the fees are actually minimal compared to where people were going to cash paper checks before.” Indeed: The NCLC study itself points out that for people without bank accounts, “getting cash from a UC prepaid card will usually be cheaper than paying a check casher to cash a paper check.” Hentschell added his department has a handy website that lays out the fees. As for Chase, the bank says it’s giving states a good deal on a valuable service. “Each state negotiates its own contract and fee structure from numerous bidders,” a Chase spokeswoman said in an email. “To date, states have chosen card solutions that cost government nothing and save taxpayer dollars, selecting their card provider based on the best mix of fees and services to the consumer.” The NCLC study says the Bank of America-issued cards in California and New Jersey are the best, since they offer “free and ample access to cash and transactions with no penalty fees.” The study says close runners-up are Chase’s card in Arizona and Citibank’s in Maryland.

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Amtrak, 15 States Get $2 Billion That Florida Lost

May 9, 2011

WASHINGTON — Amtrak and rail projects in 15 states are being awarded the $2 billion that Florida lost after the governor canceled plans for high-speed train service, the Department of Transportation said Monday. The largest share of the money – nearly $800 million – will be used to upgrade train speeds from 135 mph to 160 mph on critical segments of the heavily traveled Northeast corridor, the department said in a statement.. Another $404 million will go to expand high-speed rail service in the Midwest, including newly constructed segments of 110-mph track between Detroit and Chicago that are expected to save passengers 30 minutes in travel time. Nearly $340 million will go toward state-of-the-art locomotives and rail cars for California and the Midwest. California will also get another $300 million toward trains that will travel up to 220 mph between San Francisco and Los Angeles. “These projects will put thousands of Americans to work, save hundreds of thousands of hours for American travelers every year, and boost U.S. manufacturing by investing hundreds of millions of dollars in next-generation, American-made locomotives and rail cars,” Vice President Joseph Biden said in a statement. President Barack Obama has sought to make creation a national network of high-speed trains a signature project of his administration. He has said he wants to make fast trains accessible to 80 percent of Americans within 25 years. The money – initially $2.4 billion – had been awarded to Florida for high-speed trains between Tampa and Orlando. After Gov. Rick Scott canceled the project, the Transportation Department invited other states to bid for the funds. It received 90 applications seeking a total of $10 billion. Scott said he was concerned that the state government would be locked into years of operating subsidies. However, a report by the state’s transportation department forecast the rail line would be profitable. The project initially had been approved by Scott’s predecessor, Republican-turned-Independent Charlie Crist. Two other Republican governors elected in November have canceled high-speed train projects in their states. Wisconsin Gov. Scott Walker turned down $810 million to build a Madison-to-Milwaukee high-speed line. Ohio Gov. John Kasich rejected $400 million for a project to connect Cincinnati, Cleveland and Columbus with slower-moving trains. Both the Ohio and Wisconsin projects had been approved by the governors’ Democratic predecessors. Republican members of Congress have also opposed funds for high-speed trains, rescinding $400 million of the money previously awarded Florida as well as other unspent money designated for trains in budget deliberations with the administration.

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Jobs Increase In April, But The Employment Picture Isn’t All Bright

May 6, 2011

This story was reported and written in collaboration with our partners at Patch.com . If you’re among the millions of Americans who don’t have a job and want one, you may have drawn some encouragement from a government report that came out this morning. According to the numbers-crunchers at the Department of Labor’s Bureau of Labor Statistics, the US economy added 244,000 jobs last month, making it three straight months in which the national payroll has increased by a monthly average of more than 200,000 positions. If you took a closer look, though, you might not have felt quite so encouraged. Jobs in some of the key higher-wage industries -– the kind that an economy needs to go from recovering to recovered –- are still lagging behind low-wage work. Nearly a quarter of the new jobs were in the retail sector, where the average hourly rate as of last year was $9.03, only a dollar and change above the current minimum wage. A very small and thoroughly unscientific sampling of job-related stories in towns and neighborhoods around the country seemed to confirm that things on the job-creation front are pretty ambiguous — not quite as bleak as they’ve been at times in the recent past, and not quite as bright as the overall job-growth numbers might lead you to expect. In Patchogue, N.Y., Anthony Hubert, a manager of the Roast Coffee and Tea Trading Company, said that the café was looking to hire baristas and had been getting lots of applications. Good news, right? Sure, but it came with a caveat. “Usually applicants are overqualified,” he said. “We’re looking for someone who has experience in cafés, but need someone younger without a college degree.” The problem with college degrees, he said, is that people who have them tend to hang up their aprons when better-paying jobs come calling. Not that the no-grad guideline is written into the company rulebook. The café recently hired a graduate of St. John’s University, Nicole Westfall. She’s making nine dollars an hour, exactly three cents below the 2010 retail-sector average. “You send resumés all over,” she said, “but every employer wants experience that isn’t there.” On the opposite side of the country, in Rancho Santa Margarita, Calif., about 200 people filed into a McDonald’s recently for what the company billed as its “National Hiring Day.” Maybe an eighth of them would walk away with jobs; the restaurant said it was looking to hire 25 workers. Jairo Moran, a store manager, said he met a lot of applicants who’d been unemployed since the start of the recession. “At this point, they really had to find a job,” he said. One of the applicants was Ken Bishop, a 30-year-old resident of Long Beach who said he’d already filled out paperwork in four other restaurants by the time he got to the McDonald’s. He planned to apply to three more jobs by the end of the day. Since losing his job as a greeter at Verizon Wireless in early March, Bishop, had filled out 30 to 40 applications. It had been “tough,” he said, but he remained hopeful. Dressed in a suit and tie, he sounded a note of defiant optimism: “My long-term goal is to apply for a position, move up, go back to school and get into human resources. Anything you can use as a starting point to move from point A to B to C to D. Everyone has to start somewhere.” In Morristown, N.J., Melissa Rivardo, a 42-year-old resident, put an even more positive spin on a recent bout of unemployment. After losing a restaurant job in 2008 — a job she’d held for ten years — she looked for a new job in the restaurant industry, she said. But the few owners who were hiring then didn’t give her a chance — it was clear, she said, they wanted someone younger. So she enrolled in a course for massage therapy, her passion. It paid off. She ended up getting a waiter job after all and now works two jobs — massage therapy and waiting tables. When her old restaurant closed, she said, “I felt some anxiety but then I also felt a sense of freedom to pursue what I had been thinking about for a long time.” Sal Canzonieri, a 51-year-old resident of Whippany, N.J., told a similar stor y. In 2008 he lost his job as a technical writer to Alcatel-Lucent, a company that makes telecom equipment. He’d been working there for 25 years when the company outsourced operations to China. But if China took away his old job, it supplied him with a new one, too, in a way. With the threat of bankruptcy and foreclosure looming, Canzonieri thought about how much he’d enjoyed teaching Qigong and Kung Fu to coworkers as part of the company’s employee wellness program. He decided to open his own business; what did he have to lose? He now teaches the Chinese martial arts in ten locations. *** Check out these other bleak/bright job-related dispatches from the Patch network: In Alpharetta, Ga., investments in city infrastructure attract high-tech jobs. (Bright.) In Port Washington, N.Y., a ” war for talent .” (Bright.) In Red Bank, N.J., a job recruiter advises ” Fall in love with the word ‘no .’” (Bleak.) In Ridgefield, Conn., the Chamber of Commerce reports an increase in ” small opportunities .” (Partly sunny?)

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10 States Launch Investigation Into For-Profit Colleges

May 3, 2011

Top prosecutors in 10 states have convened a joint investigation into potential violations of consumer protection laws by for-profit colleges, Kentucky Attorney General Jack Conway (D), who is leading the multi-state effort, said in an interview with The Huffington Post. The combined investigation only began within the past two months, but it comes after several state attorneys general launched individual probes of deceptive recruiting practices and possible misrepresentations to recruits regarding federal financial aid dollars. The multi-state probe is the latest sign that rapidly rising enrollments and an increased reliance on federal student aid dollars by for-profit colleges are attracting greater scrutiny of the industry. The for-profit higher education industry, which includes a vast swath of colleges ranging from the more than 400,000-student University of Phoenix to small mom-and-pop beauty schools, is facing intense scrutiny from the federal government due to growing federal student loan default rates at many schools. Although only about 10 percent of college students nationwide attend such for-profit institutions, the schools account for nearly half of all student loan defaults, leaving the government to pick up the tab. “A lot of people who are in Washington right now want to run around talking about fiscal responsibility,” said Conway, who issued subpoenas to six for-profit schools in Kentucky last year, seeking information on job placement claims made to prospective students and management of financial aid dollars. “Well, making certain that $25 billion in federal education dollars doled out is being spend in a way that appropriately trains people and prepares them for job opportunities that are out there … That, to me, is a fiscal responsibility issue.” Conway confirmed that 10 states so far have signed on to the multi-state working group. He declined to name the other states, but representatives for Attorneys General Tom Miller of Iowa (D), Lisa Madigan of Illinois (D) and Pam Bondi of Florida (R) confirmed that they are participating in the investigation. A spokesman for the Association of Private Sector Colleges and Universities, Bob Cohen, said in a statement that the organization’s schools are “committed to putting students first” and enforcing existing federal and state laws. “We support a dialogue with the attorneys general that is based on hard facts, on principles fairly applied to all, and is not a product of ideology, innuendo or anecdote,” the statement said. “We firmly believe such a conversation will demonstrate that there is no systemic, sector-wide issue here.” At this point, Conway said, the primary goal is to share information and compare notes about violations of consumer protection statutes. But he said it is possible that the participating states could outline a joint agreement to require such schools to adhere to certain industrywide standards. “There need to be guidelines for information on cost and student loan debt provided to the students before they sign up, and we need to make sure that these schools reform the way they target and recruit potential students,” Conway said. He said the investigation so far involves civil violations, not criminal activity. But he did not rule out a criminal prosecution if investigators discover more information. There are precedents for multi-state settlements with state attorneys general, most notably in litigation against tobacco companies and in an agreement reached with state attorneys general and social networking sites meant to protect children against sexual predators. In 2008, 11 states reached an $8 billion settlement with Countrywide Financial to settle predatory lending allegations. And state attorneys general and the Obama administration are negotiating with the nation’s five largest mortgage companies to settle accusations of improper foreclosures and violations of consumer protection laws. “If you’ve got a school negotiating with 10 attorneys general, they snap to much faster than if they’re dealing with just one,” Conway said. Conway noted that unlike the tobacco industry, which was concentrated in a few major corporations, there are many smaller, independently-owned colleges throughout the country. The Department of Education has stepped up its scrutiny of for-profit colleges in the past year, proposing stronger federal regulations regarding bonuses or raises given to recruiters based on enrollment numbers . The department has also drafted rules regarding student loan accountability, which could cut off funding to programs with a track record of enrollees failing to pay back student loans and facing high debt loads. The industry has mounted an aggressive, multimillion-dollar lobbying campaign against the student loan regulations, saying they unfairly target for-profit colleges and would restrict college access to low-income students who attend such schools in large numbers. The multi-state investigation comes as the Department of Justice is also stepping up its involvement in litigation against for-profit colleges. This week, Education Management Corp. of Pittsburgh, the second-largest publicly traded college corporation, acknowledged that the U.S. Attorney of Western Pennsylvania had intervened in a civil case that had been brought against the company. Other states have also gotten intervened as parties in the case against Education Management Corp., which owns schools ranging from The Art Institutes to Argosy University. In a filing with the Securities Exchange Commission, the corporation noted, “The case alleges that the company’s compensation plans for admission representatives violated the Higher Education Act.” The company said it plans to “vigorously defend itself.”

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Cytori Appoints Tommy G. Thompson to its Board; Names Lloyd Dean Chairman

May 3, 2011

SAN DIEGO, CA–(Marketwire – May 3, 2011) – On April 28, 2011, Cytori Therapeutics ( NASDAQ : CYTX ) elected the Honorable Tommy G. Thompson, former Secretary of the US Department of Health & Human Services and Governor of Wisconsin, as an independent member of Cytori’s Board of Directors. In addition, the Company’s Board of Directors has elected Mr. Lloyd H. Dean to serve as Chairman of the Board. Past Chairman Ronald D. Henriksen will continue to serve as an independent member of the Company’s Board of Directors.

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Video: Obama, Musharraf, Chertoff Own Words on Bin Laden Death

May 2, 2011

May 2 (Bloomberg) — President Barack Obama, former Pakistan President Pervez Musharraf, and former Department of Homeland Security Secretary Michael Chertoff offer their views on the killing of al-Qaeda leader Osama bin Laden by U.S. special forces yesterday in Pakistan. This report also contains comments from Mohamed El-Erian, chief executive officer of Pacific Investment Management Co.; Paul Rosenzweig, senior legal fellow for the Heritage Foundation and Richard Falkenrath, a principal at the Chertoff Group and a Bloomberg Television contributing editor. (Source: Bloomberg)

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Mayors To Washington: ‘We Need Money’

April 30, 2011

CHICAGO — Near the end of a two-day summit here that brought together mayors and federal officials to talk about city design, the mood turned confrontational. It started when Philadelphia Mayor Michael Nutter , in the middle of a Friday discussion on the federal government’s role in city development, turned toward the Washington officials who were sitting with him on stage and expressed his disappointment. “Mayors could never get away with the kind of nonsense that goes on in Washington,” he said. “In our world, you either picked up the trash or you didn’t. You either moved an abandoned car or you didn’t. You either filled a pothole or you didn’t. That’s what we do every day. And we know how to get this stuff done.” That evidently hit a nerve, as cheers erupted through the Grand Ballroom of the Hilton hotel, where many in the audience were mayors. Manny Diaz, former mayor of Miami, who sat on stage with Nutter, gave an impromptu speech criticizing Washington lawmakers. Other mayors stood up and took the microphone during the question and answer session — not to ask questions, but to get things off their chests. The event, co-sponsored by the National Endowment for the Arts, the American Architectural Foundation and the U.S. Conference of Mayors, became, for a few minutes, a forum for mayors to express a difficult truth: Two-and-a-half years after the worst financial crisis since the Great Depression, the nation’s cities still struggle with chronic budget gaps that can’t easily be filled. Tax revenue has plunged as property values have fallen and payrolls have shrunk. Local governments, many of which are legally required to balance their budgets, have made cuts that a few years ago would have been unthinkable. Municipal budget woes stem partially from crises on the state level, which in turn aren’t helped by a lack of federal assistance. Federal dollars from the American Recovery and Reinvestment Act covered less than half of states’ combined budget shortfall during this fiscal year, according to a recent report from the nonpartisan Center for Budget and Policy Priorities . Come next fiscal year, which for many states begins this July, states’ combined shortfall will exceed $110 billion, with only $6 billion in federal aid available, according to the report. That leaves cities out in the cold, as states focus on solving their own problems. In Newark , aid from the state of New Jersey fell by 40 percent between 2008 and 2010, contributing to a budget crisis that eventually prompted the city, one of the country’s most dangerous according to FBI data, to lay off 13 percent of its police force late last year. In Milwaukee County , a community that has contended with a decade-long erosion of bus service, a transit cut in the coming state budget could deal a critical blow to the region’s public transportation. “We get the brunt of what the recession really entails. We’re also the last to come out of that,” Ed Pawlowski, the mayor of Allentown, Pennsylvania, said in an interview after the panel discussion. “While the economy is getting slowly better, cities are still struggling in a significant way.” Mayors want federal money. They say they can put it to quick and efficient use, creating jobs and helping improve the economy from the bottom up. Nutter gave an example: He closed Philadelphia’s crumbling South Street Bridge in 2008, initiating a two-year repair project that was completed on budget and a month early last fall, he said. But federal funds are running dry, as Washington lawmakers have become seemingly obsessed with a desire to cut the federal deficit. In April, lawmakers almost shut down the federal government as they argued over a few billion dollars in spending cuts. Now, some are saying they will not vote to increase the debt ceiling, and risk leading the nation into default, just to enforce budget austerity. The four federal officials who sat on stage during the discussion — Derek Douglas, special assistant to the president on the White House Domestic Policy Council; Roy Kienitz, under secretary for policy at the Department of Transportation; Salin Geevarghese, senior advisor at the Department of Housing and Urban Development; and Rocco Landesman, chairman of the National Endowment for the Arts — became punching bags. “You guys need to keep your day jobs. You’d make lousy mayors,” said Jennifer Hosterman, mayor of Pleasanton, California, addressing the federal officials as she stood on the ballroom floor. “To hear from the four of you all of your gyrations and concerns and discussion about how we communicate with local government — we at local government just have to make it happen.” The moderator, Carol Coletta, the former executive director of the NEA initiative the Mayors’ Institute on City Design, tried to ease the tension. “What are you asking them to do?” she said. “I mean, what is it that they’re keeping you from doing?” Hosterman talked about her efforts to come into compliance with California’s Global Warming Solutions Act. She described months of intense, focused efforts to make her city more efficient. She has specific goals in mind, she said, but she needs more resources. “Love the dialogue — thank you very much for that,” she said. “But we need money.” The audience laughed in assent, clapping loudly. The federal officials on stage were speaking in broad, theoretical terms. But the mayors wouldn’t stand for that. They knew what needed to get done, they said. What they wanted from Washington was the dollars to do it. “We should not be expecting or depending on top-down permission from the White House or Washington to have us advocate for this stuff,” said R. T. Rybak, mayor of Minneapolis, who stood up and addressed the other mayors. Earlier, Mayor Nutter had complained about the seeming hypocrisy of federal lawmakers who go to ribbon-cuttings and ground-breakings, even if they never supported the legislation for those projects. Rybak heartily commiserated. “I’ve seen those guys at the ribbon cuttings. And it pisses me off,” he said. “But I go out and organize at election time and tell people exactly who delivered and who did not.” Douglas, of the White House Domestic Policy Council, said federal officials are doing what they can to help. But political gridlock can muck up the process. “We do hear you,” he said. “If you look at the president’s budget proposal for FY12 and you go look at the transportation section that he proposed — this is what he’s asking for — the stuff you’re talking about is in there. That’s what he requested. Is he going to get what he requested?” “We can ask for everything under the sun,” Douglas added. “But just because we ask for it doesn’t necessarily make it so.” But the mayors were not satisfied. Diaz, the former mayor of Miami, said that the conversation in Washington is the opposite of what it should be. Instead of cutting spending, he said, lawmakers should be finding ways to support job-creation and help the economy grow. It’s the mayors, he said, who create jobs. But the mayors aren’t getting the federal support they need. “We’ve got to figure it out. All of us have very, very difficult budget times right now. But notwithstanding that, we have to figure out how to do it,” he said. “As a matter of fact, there’s a greater argument to move the country forward now, because we’re in the dumps, than when things were hopping five, 10 years ago.” Kienitz, of the Department of Transportation, suggested that Diaz run for U.S. Congress. “You could provide that leadership that we need,” Kienitz said. “Thanks,” Diaz replied, “but I don’t want a job in Washington.”

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Washington Governor Vetoes Critical Parts Of Medical Marijuana Bill

April 30, 2011

WASHINGTON — In the wake of conflicting legal opinion, Washington Gov. Chris Gregoire (D) on Friday vetoed critical parts of a new medical marijuana bill, citing concerns that state workers could be prosecuted by federal authorities under the law. “We cannot presume to assure protections to one group of people — patients, providers and health care professionals — in a way that subjects another group, Department of Health and Department of Agriculture employees to federal arrest or criminal liability,” she said in prepared remarks in Olympia on Friday. “That is not acceptable to me; it is not workable.” The bill, which would legalize, regulate and tax medical marijuana dispensaries, has garnered the support of Seattle’s mayor and city councilmembers, even as the state’s two U.S. attorneys have warned that state regulators could be subject to criminal charges under the proposed legislation. In a letter to Gregoire earlier this month, U.S. Attorney Mike Ormsby of Spokane said the bill, if passed, would put state workers issuing licenses at risk of fine or criminal prosecution, but many have said such concerns are unwarranted. Hugh Spitzer, an associate professor at the University of Washington Law School, wrote in a letter to Gregoire on Thursday that Ormsby’s warning amounted to so much “federal bullying,” adding that he wasn’t aware of a single case in which the federal government had prosecuted a state worker for doing his or her job. Gregoire’s partial veto statement comes just one day after armed officials conducted federal raids on several dispensaries in Spokane. Washington voters first approved an initiative legalizing marijuana for medical use in 1998. It is one of 15 states where the substance is legal for medicinal purposes.

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Minimum Wage, Labor Investigations Targets Of Missouri Republicans

April 28, 2011

WASHINGTON — Earlier this year, Missouri business leaders presented lawmakers with a six-point plan they said would bring jobs to the state during tough economic times. Since then, state Republicans have aggressively pushed the agenda and added their own legislative tweaks. Critics say the business-friendly platform is currently one of the most aggressive attacks on low-wage workers. Backed by the Missouri Chamber of Commerce and other trade groups, the ” Fix the Six ” plan includes a few of the business community’s perennial gripes — tort reform, workers’ compensation reform, and corporate tax reform — but it also pushes two reforms that have infuriated progressives and labor groups: capping the minimum wage and making it more difficult for employees to sue for discrimination. In 2006, Missourians voted to add a cost-of-living adjustment to the state’s minimum wage so that it would keep pace with inflation. The minimum wage has since risen from $5.15 an hour to $7.25, where it matches the federal rate, and has remained there since 2009. A bill that has passed the Republican-controlled state House of Representatives would eliminate any future cost-of-living boosts. In explaining the bill in a committee hearing earlier this month, state Rep. Jerry Nolte (R) said, “By putting more pressure on the people who are doing the hiring, my concern is we’ll continue to work our way into a jobless recovery and lose more jobs.” In a brief provided to The Huffington Post, the state chamber argues that the cost-of-living adjustment makes it hard for businesses to keep employees on their payrolls, “particularly affecting entry-level workers.” Opponents of the reform point out that three-quarters of Missourians voted for the original cost-of-living increase in 2006, and the initiative passed in every county in the state. Lew Prince, a small business owner who testified against the current bill, told HuffPost that he believes a capped minimum wage would do nothing to bring business to the state. “All they’re doing is taking an extra buck out of Missouri, which comes out of our economy,” said Prince, who owns the Vintage Vinyl record shop in St. Louis and starts his workers at $8.50 an hour. “It’s morally wrong and it’s economically stupid.” A bill currently in the Missouri Senate would also scale back the state’s employee discrimination laws. Right now, discrimination only has to be a “contributing factor” in an employee’s termination for a worker to be eligible for compensation, whereas the new law would require it to be the “motivating factor.” The bill would also cap damages in discrimination lawsuits by putting them on a sliding scale according to the size of the business. In a statement this week, Gov. Jay Nixon (D) called the bill “unacceptable” and said it undermined the Missouri Human Rights Act. “This bill would make it harder to prove discrimination in the workplace and would throw new hurdles in the path of those whose rights have been violated,” Nixon said. Lara Granich, director of Missouri Jobs with Justice, a coalition of labor and community groups, said she believes the “Fix the Six” platform is part of the broader anti-labor atmosphere seen in states like Wisconsin, Ohio and Maine this year. “I think [the bills] are all part of this dynamic happening in our state where the business interests smell blood in the water,” said Granich. “They’re doing everything to roll back the progress working people have made in the state in the last decade.” With regard to both the proposed changes to minimum wage and employment discrimination law, Missouri Sen. Claire McCaskill (D) recently tweeted, ” Ugh .” But arguably the biggest change to Missouri employment law isn’t found in a “Fix the Six” proposal — it’s in a budget amendment added by House Speaker Steven Tilley (R) that would effectively end all investigations by the state labor department. By eliminating all nine of the state’s labor investigators and cutting $379,000 from the department’s budget, the amendment would render Missouri incapable of enforcing child labor legislation or addressing wage theft claims. Tilley told the Columbia Daily Tribune earlier this month that his amendment was aimed at ending the enforcement of “prevailing wage” law in Missouri. State law requires that certain minimum wages be paid on publicly funded construction projects; the wages vary county by county. Tilly told the Daily Tribune that he’d heard labor investigators were “harassing and picking on non-union contractors” in prevailing-wage cases. Tilley did not respond to requests for comment from HuffPost. State Rep. Jacob Hummel (D) spoke against the amendment on the House floor. He told HuffPost it was “a back-door attempt to stop all prevailing-wage investigations. “There’s currently an attack on the prevailing wage in this state right now,” he said. “I guess it’s easier to get rid of the investigators than to change the law.” Even if the intended target of the budget amendment is prevailing-wage enforcement, there would be collateral damage if it passed, according to the Missouri labor department. “If budget cuts removed the Department’s Division of Labor Standards investigators, there would be no entity to enforce the state’s wage and hour laws or the child labor laws,” a department spokesperson said in a statement. “There would be no protection for workers who are underpaid or for children in the workplace.” In 2010, Missouri’s labor department collected $200,000 in restitution for minimum-wage violations and another $500,000 for prevailing-wage violations. In 2009 and 2010, the department issued 1,714 citations for child-labor violations and levied $31,000 in fines. Among the worst violations in recent years: one child had his legs crushed in a meat processing plant, and another had his hand mutilated in a meat-tenderizer at the restaurant where he worked. Earlier this year, state Sen. Jane Cunningham proposed a bill that would roll back the state’s child labor laws by eliminating the prohibition on employing children under 14, as well as the restrictions on how many hours a week a child could work. Missouri isn’t the only state this year where Republicans have taken aim at child labor regulations. In Maine, Gov. Paul LePage has voiced his support for loosening the laws, and Tea Party-backed Utah Sen. Mike Lee argued that federal child-labor laws are unconstitutional.

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Beth Kobliner: Education Comes With a Price Tag

April 26, 2011

President Obama has made it a goal to add eight million college grads to the American workforce by 2020. To that end, last month Vice President Joe Biden announced an ambitious plan to increase the country’s college graduation rates that includes $50 million in competitive grants for states that succeed in growing their number of graduates and $123 million in other incentives. The administration’s goal sounds like a no-brainer: It would make the US #1 in the world. Right now, the US is ranked 9th. We can do better. But we also need to be careful what we wish for. A higher graduation rate won’t come free of charge. According to a new study by the Higher Education Policy, in Washington DC, an astounding 41% of recent borrowers face delinquency or default on their federal student loans. That makes the mortgage default and foreclosure rate, even at the height of the housing crisis, look like child’s play. In fact, student loan default rates have been rising over the last few years, according to a September 2010 report from the Department of Education. And it’s no wonder, since tuition has been rising above the rate of inflation for decades now. The default numbers are even worse for students at for-profit schools, where the graduation rate is a scandalously low 22%. Clearly, although education may be priceless, it comes with a price tag. Too many young people are being convinced to take on debt burdens they simply can’t afford. And who is helping teenagers make those decisions? Ambitious parents want the dream first but they often don’t ask the money questions until later. Overworked high school counselors are sometimes the only source of information, especially for students whose parents haven’t gone to college. Unfortunately, many students aren’t getting the guidance they need. A Public Agenda survey last year sponsored by the Gates Foundation found that 59% of young adults rated their high school counselors as “poor” or “fair” when it came to informing them about paying for college. So while it’s nice for the country to have an ambitious goal, we need to set up systems in order to get students not just the education they deserve, but the financial aid they need. Since 1965, the government has required that all federal student loan borrowers receive exit counseling about their loans, and the consequences of not paying them. For example, even bankruptcy does not discharge student loan debts, unlike credit card debt. But if that message comes after they receive their loans, it’s too late. In the meantime, we can’t wait for colleges to clean up their acts. High school counselors need to help students make smart choices to avoid these crippling debts. They should be steering kids to good community colleges, with low tuitions, strong academics and successful transfer rates. They should help students and their parents fill out the Free Application for Federal Student Aid (FAFSA) form to maximize their financial aid. They should inform students of programs like Income-Based Repayment (a relatively new federal option that lets many loan recipients make payments based on their incomes, not their debt loads) and Public Service Loan Forgiveness (which forgives federal student loan debts after 10 years if you work for a non-profit, for the government, or another designated “public service” job). These programs may seem too good to be true, but they’re real, and not enough prospective college students know about them. Counselors should also warn their students about the dangers of for-profit schools: poor graduation rates and high costs. Those schools market themselves as training grounds for practical skills, but in fact they too often just profit from students who drop out after year one. Recently, I met a bright teenager who was making extra money for college by checking children’s heads for lice. But then she told me her goal was to attend a for-profit college. I had to wonder: Who was advising this girl and how could we do our jobs better to get her the right information? A college education is part of the American dream for a reason: College graduates’ salaries are higher and their unemployment rate is lower than their peers with only high school degrees. College is truly an attainable goal if students are wise and realistic about the financial realities of enrollment. But for those who carry thousands of dollars in debt — many with no job in sight-it’s instead just another expensive nightmare. We should all be working together to prevent that. * * * * * Beth Kobliner is a personal finance commentator and journalist, the author of the New York Times bestseller ” Get a Financial Life: Personal Finance in Your Twenties and Thirties ,” and a member of the President’s Advisory Council on Financial Capability. Visit her at bethkobliner.com , follow her on Twitter , and fan her on Facebook .

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Obama’s Oil Market Fraud Squad May Miss Wall Street Abuses

April 22, 2011

WASHINGTON — On Thursday, President Obama unveiled a new working group to combat any fraud or manipulation in the oil and energy markets that may be contributing to near-record gas prices. But some economists and market experts worry that by focusing on criminal activity, Obama is shrugging off a much bigger problem: rampant Wall Street speculation in commodities markets that has helped drive up food and energy prices in the past. “If prices start moving quickly up, you can get a side effect … that people might try to play [fraudulent] games of one sort or another,” said Massachusetts Institute of Technology economist John Parsons. “But it wouldn’t be central to the price movement” currently being seen in the market, he said. Gas prices are approaching record levels set in 2008, when prices at the pump eclipsed $5 a gallon. While unrest in the Middle East is almost certainly playing a major role in boosting current prices, increased speculation in commodities markets is likely contributing to the near record prices. The number of speculative bets being placed on oil and gas now far exceeds that of the 2008 price swing , which many economists believe was driven by excess speculation. Moreover, on March 21, Goldman Sachs analyst David Greely advanced the argument that Wall Street speculation was helping drive up oil prices in a memo sent to the bank’s clients. But, if speculative excess is contributing to current sky-high gas prices, such activity may not be illegal, in part because the Commodities Futures Trading Commission has not yet issued key regulations intended to rein in Wall Street gambling on food and energy prices. Congress ordered the agency to crack down on excessive speculation with last year’s financial reform bill, but the CFTC has been slow to implement new rules in the face of intense lobbying from Wall Street bankers. Financiers are quick to note that commodities markets need speculation — a raw bet that the price of oil or food will move up or down — in order to function. But economists say that too much speculation can distort the market, leading to wild price swings. Even if so-called “fundamental” factors are driving prices, heavy speculation can cause prices to swing further than normal supply and demand forces would dictate. In January, the CFTC announced it would push back implementing ‘position limits’, a key regulatory tool that restricts the size of the bets investors can make on commodities, in order to collect more data. But many reform advocates and CFTC Commissioner Bart Chilton say that there is plenty of data available to implement new rules now. “What the administration and others should do, which they have the power to do quickly, is impose position limits, which would stop excessive speculation now,” said Dennis Kelleher, a former securities lawyer with Skadden, Arps, Slate, Meagher & Flom who now heads the financial reform advocacy group Better Markets. “An investigation into criminal acts is not likely to lead to much.” Attorney General Eric Holder, who is in charge of the new inter-agency taskforce, specifically instructed members of the new taskforce in a Thursday memo to look into “the role of speculators and index traders in oil futures markets” — something the CFTC is already required to do. Officials from the CFTC, the Federal Reserve, the Federal Trade Commission, the Department of Agriculture, the Deparment of Energy and state attorneys general will be part of the group. But Chilton, the CFTC’s strongest proponent of reining in commodity speculation, says that the task force may well do some good. “Seventy-five percent of the cases we send to the Justice Department for criminal prosecution are rejected,” Chilton told The Huffington Post. “But if we can work more closely with the DOJ folks, we may be able to put more people in jail.” Nevertheless, Chilton said the CFTC should be taking steps independent of the task force: “That doesn’t mean that the working group is a panacea for actions that can be taken by regulators right now. The position limits are something we can do right now. I don’t need a task force to tell me to do that.” Unlike the stock market and other capital markets, commodities markets are not designed to function as a forum for investment vehicles. Instead, commodity markets are supposed to allow farmers, manufacturers and other producers to hedge the risks of doing business. By taking out a futures contract, or similar bet in the derivatives markets, farmers can lock in a price for their crops, protecting themselves from price changes. Producers need someone to take the other side of their price bets, whether it be another producer or, as it more frequently is, a Wall Street trader. Commodities markets work well when around 30 percent of the market is dedicated to speculation, According to Kelleher. But since the mid-2000s, the share of speculators in commodity market activity has increased to about 70 percent, Kelleher says, in part driven by new commodities “index funds,” which allow investors to bet on the price of several commodities at once.The size of those funds expanded from about $15 billion in 2003 to $200 billion in 2008 , and are currently valued at over $400 billion , according to Barclays Capital. The explosion in the over-the-counter derivatives market has also contributed significantly to oil price increases, according to Kelleher, by allowing investors to place huge bets on commodities without either regulatory oversight or market scrutiny. The derivatives market for commodities grew from about $674 billion in 2001 to $13.2 trillion by June 2008 , according to the Bank for International Settlements. Last year’s financial overhaul gave the CFTC authority over that entire derivatives market — one vastly larger than the $5 trillion futures market that the agency had previously policed in isolation. Whatever new rules the CFTC writes, they will need funding additional funding to enforce them. “The CFTC’s current funding is far less than what is required to properly fulfill our significantly expanded mission,” CFTC Chairman Gary Gensler warned in April 12 testimony before the Senate Banking Committee . But Obama was willing to negotiate away additional funding for the agency during negotiations over the budget for the rest of 2011. Under the budget deal Obama struck with congressional Republicans earlier this month, the CFTC will receive a $34 million boost in funding for the remainder of the year. But, even with that additional cash, the agency will receive about $60 million less this year than the amount Obama requested for the agency under his 2011 budget. Calls to the White House were not returned. The Department of Justice declined to comment. Elise Foley contributed to this report.

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Air Force Looks to China When American Manufacturing Falls Short

April 20, 2011

Michael Mandel , the chief economist for BusinessWeek, was recently doing some research for a textbook he’s revising when he stumbled upon a surprising entry in the Federal Registry. On March 21, the U.S. Air Force waived the “Buy American” provision of the American Recovery and Reinvestment Act of 2009 for a construction project at Eielson Air Force Base in Alaska. As workers tried to build a few stimulus-backed housing units, it became apparent that a number of simple domestic items couldn’t be procured from American manufacturers – namely, ceiling fans, shower rods, towel racks, toilet-paper holders, and all manner of screws and fixtures. According to the registry entry, a contracting official has determined that the above items of manufactured goods are not produced in the United States in sufficient and reasonably available quantities and of a satisfactory quality. The domestic nonavailability determination for these products is based on extensive market research and thorough investigation of the domestic manufacturing landscape. This research identified that these products are manufactured almost exclusively in China. In fiscal year 2009, more than 44,000 waivers of federal “Buy American” provisions were granted, worth nearly $14 billion. On his blog, Mandel writes that the Air Force waiver in particular “certifies the weakness of domestic manufacturing in America,” though he also questions whether all the household items listed are actually unavailable in the U.S., given that, according to him, the American production of nuts and bolts has been climbing in recent years. Similarly, the Alliance for American Manufacturing (AAM) wonders whether there isn’t a “single American manufacturer” producing the screws required for the Eielson project. “There’s a great deal of evidence that many agencies, including the Department of Defense, don’t look very wide or deep for procurement,” AAM’s Executive Director, Scott Paul, told HuffPost. “Some agencies are much more aggressive about enforcing it than others.” But in this case, it seems the collated screws in question are certifiably unavailable in the States. Jennifer Baker Reid of the Industrial Fasteners Institute, a trade group for nuts-and-bolts manufacturers, says such screws are “largely, if not entirely, imports” from China nowadays. The waiver, Reid says, “appears to have been issued appropriately based on market research.” That’s not to say Reid’s group hasn’t had other bones to pick with federal agencies over the stimulus package’s “Buy American” stipulation. Her group complained to the Environmental Protection Agency over some 2009 waivers granted for fasteners for stimulus-funded wastewater treatment upgrades. In that case, Reid says her group had two U.S. manufacturers who could have supplied the necessary fasteners. “These waivers have come out fast and furious without checking to see if a U.S. supplier is available,” she says. In the case of the Eielson project, it may be more troubling that the Air Force did its due diligence and still couldn’t find a supplier. “It’s not like China has a competitive advantage in making screws,” says Paul. “Shame on us if we can’t make them.”

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Eric K. Clemons: The Need to Focus on the Correct Issues in Google, Power, and Antitrust

April 19, 2011

A proper discussion of the benefits and limitations of the recent Consent Decree between the Department of Justice and Google, concerning Google’s acquisition of ITA, needs to begin with a discussion of appropriate measures for consumer welfare, the ultimate objective of antitrust regulation, and with a discussion of the relationship between protecting the current competitive process and future consumer welfare. Misconceptions About Google and Antitrust The discussion of Google and antitrust has shifted in recent weeks from relevant market (is Google 65% of paid search, 32% of online advertising, or 3% of all advertising?) and anticompetitive behavior (is Google engaging in ” preemptive line extensions ,” unfairly squeezing out competition by pricing its non-search offerings below cost, or unfairly listing its own offerings above those of competitors?) to consumer happiness and consumer convenience. Mainstream publications have adopted the consumer happiness argument. Indeed, the consumer happiness argument has not only been adopted, but twisted out of all recognition. Bill Gurley writes about the unstoppable Android Freight Train , and describes how Adwords provides Google with an unassailable set of “Castles and Moats,” generating huge cash surpluses, which can then be used to destroy all competition by offering products free: One might yearn to suggest that there is a market unjust here that should be investigated by some government entity, but let us not forget that the consumer is not harmed here – in fact far from it. The consumer is getting great software at the cheapest price possible. Free. The consumer might be harmed if this activity were prevented. And as we just suggested above, the market is finally driving towards software pricing that represents “perfect competition.” How can the absence of competition be perfect competition? And yet, why should we care if the public does not understand competition or competition law? Antitrust really is about consumer welfare, right? It’s not about corporate welfare, right? How could consumers be happier than they are now, when they are getting great stuff free? And if consumers are happy now, shouldn’t regulators be happy as well? If consumers are happy, is there even a need for regulation? Mainstream publications have also argued that consumers are well informed and better able to counter monopolistic behavior than any regulatory agency. Harry McCracken at Time Magazine recently claimed : “Consumers, in other words, tend to be pretty good at figuring out what’s good for consumers. I trust their take on Google and its competitors more than that of any government agency.” There are three problems with this analysis: Consumers are not always the best judges of their own welfare. Happiness and convenience are not always the best measures of welfare. Current happiness and convenience are not always the best measures of long-term future welfare. It should be obvious that consumers are not always the best judges of their own welfare, and it should be obvious that consumers have extreme difficulty judging whether actions will improve their welfare if the results follow from complex interactions, occur after a significant delay, or both. The argument that government should help consumers through regulation sounds paternalistic, but if consumers were always the best judges of their long-term welfare, we would not have problems with smoking or obesity. We know that consumers often make bad decisions when an experience is immediately pleasurable and when harm is deferred or the relationship between cause and effect are complex and not immediately visible. Free software is pleasurable. This free software is funded through excessive charges imposed on companies that need to pay to be found through search; consumers cannot readily observe the harm that comes from these excessive charges because the complex mechanisms by which these charges are passed along to consumers are not directly observable. Again, it should be clear that consumer convenience not always best metric of consumer welfare. Fast food is convenient, but consumers who indulge excessively in fast food incur substantial medical problems and regulators are now arguing against easy access to fast food in public schools. Regulators can and do intervene when consumers over-value convenience and under-estimate the costs to themselves resulting from convenience. Michael Jacobson’s indictment of McDonald’s in the Huffington Post may seem a bit harsh, noting that “McDonald’s has coarsened our palates, expanded our waistlines, clogged our arteries, and brainwashed our children with toy-based marketing” and connecting it to the fact that we now spend over $270 million annually on heart disease; still our national love-affair with fast food suggests that we are not always the best judges of our own welfare, and that we do not always do the best job balancing immediate convenience with long term harm. Finally, it may not be obvious, but short-term consumer gains can still represent long-term harm to the competitive process and long-term harm to consumers. Indeed, antitrust laws are concerned with harm to the competitive process, not merely harm to consumers. Courts have long recognized this discrepancy and rejected any arguments that current consumer happiness is a valid measure of future antitrust concerns, or indeed that current consumer happiness is even a valid measure of present antitrust dangers. 1 Free or subsidized offerings can appear to offer additional choice, but they often kill competition, harming the competitive process. This inevitably reduces consumer choice, which often reduces the new player’s incentive to innovative and allows the new player to charge substantially higher prices. After Microsoft’s offerings destroyed Word Perfect, consumers were left only with Word, with some features (like footnoting and outlining) that remained bug-ridden and inferior for years; the absence of competition also allowed Microsoft to convert Office into a major cash cow. This is not merely an abstract discussion of future power, but a discussion of abuses that are already possible. Likewise, it is not an abstract discussion of consumers being unable to detect harm to the competitive process, but an example of undetected harm already occurring. Google’s revision to its search engine , code-named Panda, substantially reduced the visibility of low quality sites, which is definitely a good thing. But the Panda release also seems to have slammed Ciao.co.uk , a Microsoft-owned company, and a potential competitor as a pricing comparison site, which had been leading an EU competition case against Google. Reductions in visibility of between 81% and 94% have been report for Ciao.co.uk since the update. Not surprisingly, Google claims it is “almost absurd” that the reduction in visibility could have been rigged, although a convincing alternative explanation seems to be lacking. As importantly, as damaging as the changes may be to competitors and ultimately to consumers, consumers do at present appear pleased with the changes. Consumers are happy. And they are being harmed. While current consumer happiness is important, it is not and indeed cannot be the sole measure of antitrust abuse. Notes: 1 – See e.g., Fisherman v. Estate of Wirtz , 807 F.2d 520, 536 (7th Cir. 1986) (“The antitrust laws are concerned with the competitive process, and their application does not depend in each particular case upon the ultimate demonstrable consumer effect. A healthy and unimpaired competitive process is presumed to be in the consumer interest”); Key Enterprises of Del., Inc. v. Venice Hosp. , 919 F.2d 1550, 1560 (11th Cir. 1990) (“A court must consider the effect on competition and not simply the effect on the ultimate consumer.”) This is the first installment in a three-part series on the Department of Justice, Google, and the Consent Decree. Check back later this week for more.

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Obama Administration Considers Altering U.S. Military’s Global Role

April 14, 2011

By Colin Clark Editor, AOL Defense WASHINGTON — The Obama administration, with very little fanfare, has launched what national security experts say is the most significant reconsideration of the United States’ military role in the world since at least the end of the Cold War. The announcement was made yesterday in President Obama’s deficit speech, in which he appeared to call for cutting as much as another $400 billion in spending from the Department of Defense. “Over the last two years, [Defense] Secretary [Robert] Gates has courageously taken on wasteful spending, saving $400 billion in current and future spending. I believe we can do that again. We need to not only eliminate waste and improve efficiency and effectiveness, but conduct a fundamental review of America’s missions, capabilities, and our role in a changing world,” Obama said. The Pentagon “will identify alternatives for the president’s consideration,” Gates’ press secretary Geoff Morrell said late yesterday afternoon. The “roles and missions analysis” — military shorthand for the review — should be finished by the beginning of Fiscal Year 2013, about 10 months from now. One of Gates’ closest advisers, Andrew Krepinevich, called the president’s remarks “an almost earth-shattering speech” during an address at a conference sponsored by the Institute for Foreign Policy Analysis on the future of the Marine Corps. Krepinevich, who is head of the Center for Strategic and Budgetary Assessment and also serves on the Defense Policy Board, told AOL Defense he believes this is the most significant strategic period since the turbulent period after World War II. Krepinevich said the cuts come at a very difficult time. The threat level the U.S. faces is likely to increase for the next decade and, more ominously, the threats are shifting in form. If the U.S. is forced to cut defense spending in this environment, it may well be left with the wrong mix of weapons, strategy and personnel to handle the changing world, Krepinevich said. But he was cautious in his analysis of the Gates’ announcement of a roles and missions study, which traditionally focuses on smaller changes. The White House has not, as far as he knows, decided to launch a strategic review. But Krepinevich said he thinks the White House and Pentagon must first focus on strategy because the stakes are so high and there are so many fundamental military and social changes underway across the globe. Jacquelyn Davis, a defense expert at the Institute for Foreign Policy Analysis (IFPA), told AOL Defense that she believes Libya may spell the “death” of the NATO alliance — a statement that shows just how fundamental the stakes are. Another speaker at the IFPA conference, national security author Bob Kaplan, called the current period the “most unstable era in a long time.” But it looks as though the president isn’t really asking for an additional $400 billion in defense cuts. A White House fact sheet issued after the Wednesday speech says the cuts will come from “security spending,” which defense budget expert Todd Harrison, who works with Krepinevich at CSBA, noted would include the departments governing veterans, energy, homeland security and defense. “It looks like we won’t know every much until the [roles and missions] review is done,” how much might be cut from the Pentagon budget, Harrison said. Any savings would be spread over 12 years, out to 2023. Harrison said the pledge of cuts is “kind of vague, but the takeaway is that it’s a larger cut than we expected.” Launching in Spring 2011, AOL Defense will provide news, insight and tools about the defense sector. Follow Colin on Twitter at @colinclarkaol . Follow defense news on Twitter at @aoldefense .

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Lease Up: Kohl’s Buys Distribution Center To Support Online Growth

April 11, 2011

Kohl’s Department Stores closed on the purchase of a 602,250-square-foot industrial building at 1701 Trimble Road in Edgewood, MD. The sale price was not disclosed. The building previously sold in 2005 for $21.25 million. The retailer plans to use the building as a distribution center to fulfill orders made on Kohls.com, which is expected to handle $1 billion in e-commerce sales in 2011. The Maryland facility will be the company’s third distribution…

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How The Budget Deal Affects For-Profit College Regulations

April 10, 2011

Much of Friday’s last-minute budget gridlock centered on policy disputes over funding for Planned Parenthood and environmental regulations. But another largely unnoticed provision at play in last week’s negotiations involved rules that would regulate billions of dollars of federal student loan and grant money allotted to college programs with a track record of poor student outcomes. A spokesman for Senate Majority Leader Harry Reid (D-Nev.) confirmed on Saturday that the final deal will not include a measure that would have prevented the Obama administration from cracking down on certain schools. Last week, a bipartisan group of House members pushed for a rider in the spending bill that would block the Department of Education from implementing rules that would punish certain for-profit college and community college programs for saddling students with debts they cannot repay. Designed as a consumer protection measure, the Department of Education’s proposed “gainful employment” rules would limit federal student aid for programs with a track record of leaving students with high debt burdens. The for-profit college industry, which relies on such funds for the vast majority of its revenues, has viciously fought the regulations over the past year. “It is imperative that the final (budget bill) retain this important funding limitation,” lawmakers backing the rider, including House Education and Workforce Committee Chairman John Kline (R-Minn.), wrote in a letter to House leaders earlier this week. “These regulations are a clear example of federal overreach into the affairs of American institutions of higher education,” On the other side of the debate, more than 40 civil rights and consumer advocacy groups urged Reid to block the rider from any budget compromise. Their letter to the Senate Majority Leader said the provision would prevent the Department of Education from doing what was needed “to protect students and taxpayers from the most toxic choices.” “The Department of Education’s proposed gainful employment regulation recognizes that some current career education programs are so toxic that they doom students to a lifetime of debt burden and waste millions of precious taxpayer dollars,” the letter read. The House voted on a similar amendment to block the Obama administration from implementing gainful employment rules in its February budget bill, a measure that received overwhelming support from Republicans and more than 50 Democrats. Gainful employment rules would apply to career-focused programs at both for-profit and non-profit colleges, but the for-profit college industry has mounted an unprecedented lobbying campaign against the regulations. As drafted, the rules would track students after they leave college and evaluate them in two ways: whether they are paying down the principal on their student loans and whether they have attained an income that allows them to manage debts. Far from sweeping, a draft version of the regulations would allow degree programs for-profit colleges and other vocational schools to remain fully eligible for federal aid money even if less than half of their students are repaying the principal on their loans. Some could remain eligible even if only a third of students are in repayment. Programs that fail to meet certain requirements could lose access to federal student loan and grant money — crucial revenues for the for-profit sector. Data released by the Department of Education earlier this year showed that a quarter of all students enrolled at for-profit schools defaulted on federal student loans within three years — more than double the rate of those who attend non-profit institutions. For-profit college students make up less than 15 percent of enrollment nationwide but comprise nearly half of all student loan default rates. The Department of Education has not yet released a final version of the gainful employment rules, but is expected to do so within months.

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Video: Birge Says Google’s Agreement on ITA to Protect Kayak: Video

April 8, 2011

April 8 (Bloomberg) — Robert Birge, chief marketing officer at Kayak.com, talks about the U.S. Justice Department’s approval of Google Inc.’s $700 million purchase of ITA Software Inc. The acquisition was approved on condition that Google makes travel data available to search-engine rivals and lets the government review any complaints it’s acting unfairly. Birge speaks with Emily Chang and Cory Johnson on Bloomberg Television’s “Bloomberg West.” (Source: Bloomberg)

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Video: Google Said to Reach Agreement With U.S. Over ITA Deal

April 8, 2011

April 8 (Bloomberg) — Google Inc. has agreed with the U.S. Justice Department to provide compulsory licensing, establish firewalls on client data and submit to government monitoring of travel search and services as a condition of its purchase of ITA Software Inc., according to two people familiar with the matter. Bloomberg’s Jeff Bliss reports. (Source: Bloomberg)

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Wisconsin Judge Declares Union Law Not In Effect

March 31, 2011

MADISON, Wis. — A Wisconsin judge on Thursday did what thousands of pro-union protesters and boycotting Democratic lawmakers couldn’t, forcing Republican Gov. Scott Walker to halt plans to implement a law that would strip most public workers of their collective bargaining rights and cut their pay. Dane County Circuit Judge Maryann Sumi, who had issued an order intended to block implementation of the law while she considered a challenge to its legitimacy and warned of sanctions for noncompliance, amended her order Thursday to clarify that the law had not taken effect, as Republican leaders argued it had. The governor’s top aide, Department of Administration Secretary Mike Huebsch, later issued a statement saying Walker would comply with Sumi’s order and halt preparations that were under way to begin deducting money from most public workers’ paychecks, but that the governor’s administration still believes the law took effect after a state office unexpectedly published online. “While I believe the budget repair bill was legally published and is indeed law, given the most recent court action we will suspend the implementation of it at this time,” Huebsch said. The law would require most public sector workers to contribute more to their health care and pensions, changes that amount to an average 8 percent pay cut. The measure also strips them of their right to collectively bargain any work conditions except wages. Walker signed the proposal into law earlier this month after weeks of large pro-union protests in and around the state Capitol and after the Senate’s Democrats fled Wisconsin in an attempt to deny Republicans the quorum needed to vote on the measure. Several lawsuits challenging the law are pending, including the one before Sumi filed by Dane County District Attorney Ismael Ozanne. His lawsuit contends that Republican legislative leaders violated the state’s open meetings law in the run-up to a vote on the plan. Sumi issued an order blocking Secretary of State Doug La Follette from publishing the law, typically the last step before it can take effect while she considers the case. But Republicans convinced another state office to publish the law online on Friday and declared the law took effect the following day. The state Department of Administration has begun preparations to start taking the deductions out of state workers’ paychecks. Sumi issued another restraining order on Tuesday after a day of testimony that reiterated her initial order. She warned anyone who violated it would face sanctions. But state Justice Department attorneys and Huebsch said they didn’t believe that order applied to the Walker administration since it wasn’t named as a defendant in Ozanne’s lawsuit. They continued work to implement the bill. Early Thursday morning, Sumi added the non-effect declaration to her restraining order clarifying that the law has not been published and is therefore not in effect. She is expected to take more testimony at a hearing on Friday. Ozanne said Thursday that Sumi’s ruling speaks for itself. Justice Department spokesman Bill Cosh had no immediate comment. A spokesman for Republican Assembly Speaker Jeff Fitzgerald said he had nothing new to say beyond his previous statement that he didn’t believe the judge had the authority to interject herself into the affairs of the Legislature given the separation of powers. The Legislature was scheduled to be in session Tuesday to pass other parts of Walker’s plan to balance the current year’s budget that faces a $137 million shortfall. There were no immediate plans to take up the collective bargaining piece again. The judge has said lawmakers could avoid the legal fight by passing it a second time, but legislative leaders have said they are confident it was done correctly the first time and it will prevail in court. The law would require that about $30 million be saved by the state by July 1 through increased pension and health care contributions. If enactment of the law is delayed, the deductions from state workers would have to increase in order to get those savings by that time.

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Taxpayer Billions Could Fall Short In Creating New Jobs, More Efficient Cars

March 31, 2011

By Ronnie Greene and Matthew Mosk The Center For Public Intergrity An Energy Department loan program meant to create jobs and spur development of fuel-saving cars — bestowed with $25 billion in public money — lacks clear benchmarks to ensure taxpayers’ dollars are properly spent or that the goals are achieved, a new Government Accountability Office report concludes. Short of funds, the program might not even be able to lend the full $25 billion approved by Congress — creating even fewer jobs than envisioned. This latest criticism of Energy Department grants and loans follows earlier inquiries that have raised questions about whether the Obama administration is favoring certain companies in awarding federal aid, including money intended to stimulate the economy by creating jobs. As the Center for Public Integrity has reported , a number of green firms financed by major fundraisers to President Obama’s 2008 campaign — such as California politician-turned-venture capitalist Steve Westly — obtained hundreds of millions of dollars in federal grants, loans and stimulus money. After Westly raised more than half a million dollars for Obama’s campaign, companies in his venture firm portfolio secured half a billion dollars in Energy Department grants and loans. White House and energy officials say those awards were won on merit, and that political support plays no role in the process. The report by the GAO, the investigative arm of Congress, focuses on the Advanced Technology Vehicles Manufacturing (ATVM) loan program, which has infused five companies with more than $8 billion in loans. Those dollars are intended to help the likes of the Ford Motor Co. and Nissan North America, as well as cutting-edge electric carmakers Tesla Motors and Fisker Automotive, expand their fleets of fuel efficient autos. By helping companies develop more efficient cars, the Obama administration said it hoped to encourage other companies and consumers to sell and buy them. Obama has said he aims to put 1 million electric vehicles on the road by 2015. In addition to grants and loans, he proposes a $7,500 tax credit for consumers — expected to spur sales of vehicles made by companies such as Tesla. The Energy Department, which has supplied the ATVM loans since 2009, had three goals: To boost fuel economy in U.S. passenger cars and advance American auto technology while protecting the financial interest of taxpayers. But whether the government can determine if the program has achieved those goals is more than open to question. The Energy Department “lacks sufficient performance measures that would enable it to fully assess whether the ATVM program has achieved its three goals,” the GAO concluded. In particular, investigators found the department “lacks performance measures” allowing it to assess success in “advancing automotive technology and protecting taxpayers’ financial interests.” The GAO also concluded that the department may not be able to loan the full $25 billion because of higher-than-expected credit subsidy costs associated with earlier loans, “in part, a reflection of the risky financial situation of the automotive industry at the time the loans were made. “As a result of the higher credit subsidy costs, the program may be unable to loan the full $25 billion allowed by statute.” The report comes amid escalating scrutiny of spending in a department infused with $35 billion in federal stimulus money to complement its annual $28 billion budget. Last year, the GAO chided the Energy Department for its handling of other loan programs geared toward new technologies and reducing emissions, finding that the department “had treated applicants inconsistently in the application review process, favoring some applicants and disadvantaging others.” The Energy Department’s inspector general, Gregory Friedman, said his office has 64 open investigations centered on stimulus spending. They include “the directing of contracts and grants to friends and family,” Friedman told the House Energy and Commerce Subcommittee on Oversight and Investigations earlier this month. And, a joint investigation by the Center for Public Integrity and ABC News found that department grants, loans and loan guarantees have flowed to energy firms financially supported by fundraisers for President Barack Obama. The White House said political connections play no factor in the contract awards. The ATVM program has faced questions from companies shut out from its money flow. To date, 130 companies have applied for funding yet just a handful have won the loans. One of the firms turned down for funding in that loan pool complained in a five-page letter to Energy Secretary Steven Chu in September 2009 that it had been given no reason for its rejection and had to call the Energy Department multiple times to learn what happened. “DOE reviewers never even talked to the founder, inventor, engineers, project leads or primary contractors to obtain additional information,” said the letter from the California electric car maker, XP Vehicles, Inc., obtained under the Freedom of Information Act. Efforts to analyze the criteria the Energy Department has used to select the companies that have received federal loans or loan guarantees have proved challenging, even for government auditors. The author of the GAO’s recent energy reports, Frank Rusco, said in an interview that Energy Department officials used an opaque process to select loan recipients in programs the GAO explored last year. He said the agency could not, or would not, explain why some companies were given a quick green light for approval, while others waited years for a response. “I think it’s problematic,” Rusco said. “I think they need to have a systematic, transparent and equitable process. And I think if they’re not seen to have that, it’s going to create issues, it’s going to create perception problems. And there may be real problems underlying this as well that we haven’t uncovered yet.” Top energy officials say that the loan program took time to get rolling, but is now overseen by 175 professionals who rigorously scrutinize applicants and attempt to support companies with the best hope of creating sustainable jobs. In the ATVM program, the GAO suggested the Energy Department retain more engineering expertise to “to verify that borrowers are delivering projects as agreed” and develop more quantifiable performance goals. The Energy Department disagreed with those suggestions, saying it has the appropriate engineering expertise at this early stage of the projects, and that GAO’s suggestions involving expanded performance goals would “greatly expand the scope of the program and do not appear consistent with the intent of Congress.” Jonathan M. Silver, executive director of the Energy Department’s loan programs office, told the GAO the department set up a rigorous application screening process and closely monitors the financial condition of borrowers. The GAO, however, said the department should be doing more, particularly with so much money at stake. “By not engaging engineering expertise to aid ATVM staff in monitoring the projects, DOE has not taken appropriate steps to become adequately informed about the technical progress of the projects,” GAO concluded. “Thus, DOE cannot be assured that the projects are on track to deliver the vehicles as agreed nor be in a position to require the borrowers to make any corrections in a timely and efficient manner.” Matthew Mosk is a reporter for ABC News. This story was a collaboration between the network and the Center for Public Integrity.

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GOP Congressman vs. Elizabeth Warren

March 31, 2011

By Simon Johnson The Baseline Scenario Representative Spencer Bachus, Republican chair of the House Financial Services Committee, famously remarked in December, “in Washington, the view is that the banks are to be regulated, and my view is that Washington and the regulators are there to serve the banks.” With regard to the Consumer Financial Protection Bureau (CFPB), this apparently now implies that Mr. Bachus will use any means possible to change the topic away from substance – how banks treat their customers – to imagined procedural issues. Specifically, Mr. Bachus is wrongly accusing Elizabeth Warren of misleading Congress with regard to the role of the CFPB in the negotiations over how to settle allegations that mortgage foreclosure practices have been abusive (see also this news coverage ). On March 16, 2011, Ms. Warren told the House subcommittee on Financial Institutions and Consumer Credit that the CFPB provided advice in these negotiations. Mr. Bachus and his colleagues have just discovered some specific slides that were apparently used as part of this advice. Impressed by the lucidity of these seven (7) slides, Mr. Bachus and Ms. Shelley Moore Capito (chair of that subcommittee) have jumped to the conclusion that the CFPB must be the primary architect of the government’s position. This is patently ludicrous. First, there is no settlement agreement yet firmly on the table . Second, there is obviously no unified federal government position on this issue – in fact, the Office of the Comptroller of the Currency (OCC) is most definitely not taking advice from Ms. Warren or anyone sensible. Third, the CFPB is very far from being any kind of decision maker in this process; that power rests with Attorney Generals, the Department of Justice, the OCC, and other federal agencies. Either you have the legal power to offer a settlement or you don’t. The CFPB does not. Fourth, a close look at Ms. Warren’s calendar ( by Ben Protess of the NYT ) suggests she is not the prime architect of the settlement agreement – not unless she can mastermind a complex legal document while spending very little time on it. Fifth, although the Bachus-Moore letter cites the Protess NYT article, it does so in a way that is selective and misleading. Specifically, Representatives Bachus and Moore quote Iowa Attorney General Tom Miller – to whom the CFPB slides are apparently addressed – as saying that Ms. Warren has been a “very active participant’. But here is the full quote from the article in context ( see the final paragraphs ): “In a recent interview, Mr. Miller said Ms. Warren’s involvement was “appropriate” given the consumer bureau’s “expertise” in mortgage servicing. “It would be strange to say, ‘We’re going to quarantine you.’” “He acknowledged that Ms. Warren has been a “very active participant” in talks about the servicing settlement, but he said the proposal ultimately was the creation of the state attorneys general – not Ms. Warren.” “We form our own opinions and make our own decisions about the foreclosure and servicing case,” he said.” Sixth, read the transcript of the March 16 hearing (which follows the Bachus-Capito letter in the same pdf, as posted on the committee’s website ) and determine for yourself who is misrepresenting what. This is how the exchange between Representative Bachus and Ms. Warren actually reads (pp.34-35): “Chairman BACHUS. You have engaged in – you have given input and advice into these [mortgage servicing standards]. Is that correct?” “Ms. WARREN: When we have been asked by the Secretary, by the Department of Justice and others, we have given advice about mortgage servicing. Yes, sir.” And here is her exchange with Representative McHenry directly on the question at hand (pp.53-54). “Mr. MCHENRY: I am reclaiming my time. Are you engaged in these discussions on the settlement?” “Ms. WARREN: The negotiations with private parties are entirely directed by the Department of Justice, by the State Attorneys General, by other Federal agencies.” “Mr. MCHENRY: So you are not engaged in these discussions?” “Ms. WARREN: We do not negotiate with private parties. We have been asked for advice, Congressman. And wherever we can be helpful, we are not only glad to be helpful, we are proud to be helpful.” On top of all this, the first paragraph of the Bachus-Capito letter is beyond bizarre. The Representatives argue that “political appointees” should not be involved in the “regulatory enforcement process.” But surely all the people responsible for the financial sector, inside and outside Treasury – e.g., heads of the OCC, FDIC, SEC, Chair of the Federal Reserve Board and of course the Treasury Secretary – are political appointees and therefore subject to congressional confirmation and scrutiny (which is, generally speaking, a good thing). Representatives Bachus and Capito claim to be concerned that “When political appointees involve themselves in enforcement matters, they may pressure regulatory officials to take actions benefitting a particular political constituency or advancing a particular agenda at the expense of sound policy.” But the real issue here is how a powerful politician – proudly holding the explicit view that “Washington and the regulators are there to serve the banks” – is pressuring regulatory officials of all kinds to take actions that benefit his particular political constituency.

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$24 Billion Remains Untouched In U.S. Nuclear Waste Fund

March 30, 2011

From ProPublica’s Joaquin Sapien: While the nuclear crisis in Japan has focused attention on the risks of spent fuel piling up at the U.S.’s reactors, one curious fact has gone largely unnoted: There is $24 billion sitting in a “nuclear waste fund” that can’t actually be used to pay for a safer way to store the waste at reactors. In 1982, Congress passed the Nuclear Waste Policy Act, and the federal government effectively struck a deal with the nuclear industry: Reactor operators and their customers would pay a tax on the waste they produced, and the government would use the money to create a safe place to store it for generations. The idea at the time was to build a repository inside volcanic rock on Yucca Mountain, about 100 miles northwest of Las Vegas. That plan proved to be wildly controversial and was eventually abandoned by the Obama administration in 2010. After 29 years, there are billions of dollars in the fund and no plan for the waste. To compound the problem, the 1982 law only allows the money to be spent on a permanent solution, such as Yucca, and it can’t be used for what many experts say is the best interim solution: taking spent fuel out of increasingly crowded cooling pools and encasing them in concrete and steel. So, nuclear companies have begun doing that themselves — and have been suing the government for not holding up its side of the bargain. The companies have filed dozens of lawsuits, for $6.4 billion in total claims, according to figures maintained by the Department of Justice. The government has already paid out $956 million. It’s also spent nearly $170 million simply defending itself against the claims. “Basically lawyers are getting rich and nobody is really better off, as far as I can tell. That seems to be the bottom line,” Allison MacFarlane, a professor at George Mason University, said at a February meeting of the Blue Ribbon Commission on America’s Nuclear Future , a federal advisory committee on which she sits. Department of Energy statistics show that new lawsuits and other costs could eventually push the government’s legal liability to $16.2 billion. Senate Majority Leader Harry Reid, D-Nev., who opposes storing waste at Yucca Mountain in his home state, introduced legislation in 2007 to amend the law so the fund could be used for interim waste storage. But the bill never came to the floor for a vote. Reid’s office didn’t respond to questions about whether he intends to re-introduce the bill. “The whole story is a black mark on the system,” said Jay Silberg, a Washington, D.C.-based attorney who has been representing utilities in these cases for more than a decade. “It’s bad for society, bad for taxpayers, bad for ratepayers and bad for the government.” Spent fuel is contained in zirconium-clad rods that remain highly radioactive for years after they’ve been heated inside a reactor core to produce energy. In order to cool, the rods first have to be immersed in large pools of water. There is about 70,000 tons of spent fuel stored at reactor sites around the country. Three-quarters of the material sits in cooling pools. Reactor operators have been re-racking the rods so they can fit more of them in the pools — a practice that makes the pools more radioactive and potentially more dangerous in the event of an accident. The pools in the United States have been criticized by nuclear industry watchdogs who say they are too crowded and in some cases have been known to leak low levels of radioactive water . Some reactor operators have begun building large tomb-like structures called dry casks to contain the waste after the rods have cooled for five years or more in the pools. The dry casks are considered a safer way to store the rods. But the industry has been reluctant to use dry casks on a large scale because it’s extremely expensive to transfer the radioactive rods. A 2003 study by a former Energy Department official and a team of nuclear experts concluded it would cost at least $3.5 billion to move all rods that had been in pools for over five years. Critics of the industry have urged the Nuclear Regulatory Commission to require reactor operators to begin moving all spent fuel that has cooled for five years or more into dry casks, because the pools are more vulnerable to terrorist attacks and the loss of a small amount of water could cause a radiation field to grow large enough to prevent emergency workers from mitigating a full-blown meltdown in the pool. But the NRC has argued that the safety risks of keeping the fuel in pools aren’t severe enough to warrant the amount of money it would cost to move the rods into dry storage. Follow on Twitter: @jbsapien

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Wisconsin Judge Blocks Implementation Of Union Law

March 29, 2011

MADISON, Wis. — The showdown over Wisconsin’s explosive union bargaining law shifted from the Statehouse back to the courthouse on Tuesday, but it remained unclear when or even whether the measure would take effect. Republican lawmakers pushed through passage of the law earlier this month despite massive protests that drew up to 85,000 people to the state Capitol and a boycott by Democratic state senators. Opponents immediately filed a series of lawsuits that resulted in further chaos that might not end until the state Supreme Court weighs in. That appeared even more likely after a hearing on Tuesday, when a Dane County judge again ordered the state to put the law on hold while she considers a broader challenge to its legality. She chastised state officials for ignoring her earlier order to halt the law’s publication. “Apparently that language was either misunderstood or ignored, but what I said was the further implementation of (the law) was enjoined,” Dane County Circuit Judge Maryann Sumi said during a hearing. “That is what I now want to make crystal clear.” Sumi is set to hear additional arguments Friday on the larger question of whether GOP legislative leaders violated the state’s open meetings law during debate on the measure. She also is considering Republican claims that the law technically took effect last weekend after a state agency unexpectedly published it online. Whether she decides it did or didn’t become law on Saturday, the measure’s legitimacy will likely be decided by the state Supreme Court, which is already considering whether to take up an appeals court’s request to hear the case. The back and forth amplified the often angry debate between new Gov. Scott Walker, his Republican allies in the Legislature and the state’s public sector unions. Walker and the GOP have aggressively pushed forward their effort to remove the bargaining rights of state workers, using a surprise parliamentary maneuver to break a weeks-long stalemate to get it passed and then finding another route to publish the law after Sumi’s order blocked the secretary of state from doing so. State Department of Justice spokesman Steve Means said the agency continues to believe the law was properly published and is in effect. Wisconsin Department of Administration Secretary Mike Huebsch, Walker’s top aide, issued a statement saying the agency will evaluate the judge’s order. Earlier this month Sumi issued an emergency injunction in the case that blocked Secretary of State Doug La Follette from publishing the law. Republican leaders sidestepped the order, convincing the Legislative Reference Bureau, another state agency, to post the law on its website on Friday. The GOP declared that move amounted to publication and said the law would take effect Saturday. Dane County Democratic District Attorney Ismael Ozanne – the plaintiff in the lawsuit heard Tuesday – argued the reference bureau can’t publish a law without a date from the secretary of state. Attorneys for the state Department of Justice, which is representing the Republicans, argued the case means nothing because legislators are immune from civil lawsuits and the law is in effect. The district attorney asked Sumi to declare that the law had not been published, but she refused to rule, saying she wanted to hear more testimony. But she issued the new restraining order, warning anyone who violates this one will face sanctions. “Wisconsin working families hope that (Gov.) Scott Walker and his Republican allies in the legislature will finally begin to respect our state’s judicial process and reverse any damage they’ve done to the working families of our state, Stephanie Bloomingdale, secretary-treasurer of the Wisconsin State AFL-CIO, said in a statement. Justice Department attorneys maintain Sumi has no authority to intervene in the legislative process. And Assembly Speaker Jeff Fitzgerald, R-Horicon, said in a statement that once again Sumi has improperly injected herself into the legislative process. “Her action today again flies in the face of the separation of powers between the three branches of government,” Fitzgerald said. The law has been a flashpoint of controversy since Walker introduced it in February. The measure requires most public workers to contribute more to their pensions and health insurance. It also strips away their rights to collectively bargain for anything except wages. Walker, who wrote the law, insists the measure is necessary to help close the state’s budget deficit. But Democrats see the law as a political move to cripple unions, who are traditionally among their strongest campaign supporters. Tens of thousands of people staged almost non-stop demonstrations at the state Capitol for nearly three weeks and Senate Democrats fled the state for Illinois to block a vote in that chamber. Republicans who control the Legislature ended the stalemate by removing what they said were the fiscal elements from the plan on March 9, allowing the Senate to vote without a quorum. The Assembly passed the measure the next day and Walker signed the measure into law on March 11. Dane County Executive Kathleen Falk, a Democrat, and several unions have filed lawsuits challenging the Senate vote, arguing the final law still contains fiscal components. Those lawsuits are still pending.

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Donald Trump Releases Birth Certificate, Take Two

March 29, 2011

Donald Trump released his official birth certificate to ABC News on Tuesday, the network reports . The document, issued by the New York City Department of Health, surfaces one day after Trump provided what was described as his official birth certificate to Newsmax. That document , however, turned out to be a “certificate of live birth,” likely given to his family by the New York hospital where he was born, not his actual “birth certificate.” An image of the document released by Trump on Tuesday and posted on the ABC News website indicates the potential presidential candidate was born at the Jamaica Hospital in New York on June 14, 1946. The same information was featured on the form relayed by Newsmax one day earlier. While the difference between the documents may seem trivial to some and simply a matter of technicalities, a Trump staffer explained in an e-mail to ABC News that there is a clear distinction between the two. Michael Falcone reports : “A ‘birth certificate’ and a ‘certificate of live birth’ are in no way the same thing, even though in some cases they use some of the same words,” wrote Trump staffer Thuy Colayco in a message to ABC News. “One officially confirms and records a newborn child’s identity and details of his or her birth, while the other only confirms that someone reported the birth of a child. Also, a ‘certificate of live birth’ is very easy to get because the standards are much lower, while a ‘birth certificate’ is only gotten through a long and detailed process wherein identity must be proved beyond any doubt. If you had only a certificate of live birth, you would not be able to get a proper passport from the Post Office or a driver’s license from the Department of Motor Vehicles. Therefore, there is very significant difference between a ‘certificate of live birth’ and a ‘birth certificate’ and one should never be confused with the other.” In releasing his birth records to Newsmax on Monday, Trump called on President Barack Obama to do the same. The billionaire and potential presidential candidate has sparked controversy in recent weeks by questioning whether the president was born in the United States. “It took me one hour to get my birth certificate,” Trump said of what now appears to be his “certificate of live birth.” “It’s inconceivable that, after four years of questioning, the president still hasn’t produced his birth certificate. I’m just asking President Obama to show the public his birth certificate. Why’s he making an issue out of this?” Politico’s Ben Smith noted on Monday: As I wrote earlier, an official copy of Obama’s birth certificate — the same thing Trump would have to prove his own birth — has been available and online for more than three years. Trump questioned whether the president was born in the United States during a phone interview on “Fox and Friends” earlier this week. “He could have been born outside of this country,” he said before asking, “Why can’t he produce a birth certificate?” Trump said during the segment that the issue of the president’s birthplace has him “really concerned.”

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Maine Governor Taken To Task After Removal Of Labor Mural

March 29, 2011

PORTLAND, Maine — The president of Mount Holyoke (HOH’-lee-ohk) College in Massachusetts has sent a scathing letter to the governor of Maine for removing a mural from the Department of Labor headquarters that included an image of 1902 graduate and former U.S. Labor Secretary Frances Perkins. Lynn Pasquerella faxed a letter Tuesday outlining “grave concerns” about Gov. Paul LePage’s decision to remove the 36-foot mural from the lobby and to rename departmental conference rooms now named for labor leaders, including Perkins. Pasquerella was surprised to hear LePage was influenced by an anonymous letter comparing the mural to North Korean political propaganda. It depicts mill workers, shipbuilders, labor strikes and child laborers. Pasquerella said removing the mural “conjures thoughts of the rewriting of history prevalent in totalitarian regimes.” LePage says it’s biased in favor of organized labor.

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Timothy Karr: Five Things Wrong with AT&T’s Mega-Merger

March 24, 2011

AT&T’s $39 billion takeover of T-Mobile USA is yet another in the series of large telecom mergers that over time are slowly reassembling the Ma Bell monopoly of old. It’s now left to federal regulators at the Department of Justice and the Federal Communications Commission to decide what’s really best for Americans. Should they let two national wireless carriers dominate our mobile world? Would giving AT&T and Verizon near complete control benefit smart phone users, create more jobs, make broadband access widespread and affordable, and fuel our sputtering economy? It seems unthinkable to suggest that taking one of the most innovative sectors ” back to the future ” would help us. Consolidation of the scale proposed by AT&T and their boosters in Washington resembles the old railroad and oil trusts of the 19th century. Why go there? Yet AT&T wields unparalleled political power in Washington, and stands a good chance of “convincing” regulators and Congress to discard with common sense , stand aside and let this mega-merger sail through on approval. Here are five reasons that all Americans – and not just T-Mobile and AT&T customers — should be concerned by the return of the new, old Ma Bell: 1. The merger would further erode what little competition exists in the wireless market. The merger hands two companies, AT&T and Verizon, control over nearly 80 percent of the wireless market. That translates to widespread abuses of market power, something AT&T is already known for. In any other industry, allowing this much concentration, especially without any meaningful oversight or regulatory protections, would be unthinkable. By comparison, the top 10 oil producing firms combined control less than 80 percent of the U.S. market, but this merger will give that level of market dominance to just two companies. Imagine if ExxonMobil were to merge with BP, Shell, Chevron-Texaco, and Citgo. That would net ExxonMobil the same level of market control as AT&T will have with this deal. And unlike the gasoline market, where consumers can just drive another block to choose another station, wireless users are locked into long-term contracts. 2. The merger would result in higher prices and fewer choices for wireless consumers. AT&T and Verizon currently control nearly two-thirds of the market and have a long history of raising prices in concert, as they both did early last year by requiring all customers on feature phones to add data plans. Sprint and T-Mobile (the third and fourth largest of the four national carriers) were meant to exert some competitive discipline on the big two. The average fee for AT&T users ($63 per post-paid subscriber) is some 20 percent more than the amount T-Mobile users pay ($52 per T-Mobile &T subscriber). You take T-Mobile’s lower cost structure out of our wireless equation and the remaining providers have even fewer checks against raising prices on every user. And prices have risen steadily, according to J.D. Power and Associates . In December 1998, the monthly Average Revenue Per User (ARPU) for wireless companies was $39.43. By the end of 2010, this has risen to more than $49. This steady price increase comes despite the fact that carriers’ own operating costs have declined substantially, as their profits have risen. This change will be particularly acute for the 34 million people who now subscribe to T-Mobile. Even if AT&T agrees to honor their existing contracts for their remaining length, they will surely see higher prices when those contracts expire or when they need to buy a new handset or make changes to their contracts. 3. This merger will kill tens of thousands of U.S. jobs. When was the last time a merger actually created jobs for Americans and not more pink slips? This merger is no different. And yet that hasn’t stopped AT&T from wrapping itself in the flag by noting that T-Mobile is a subsidiary of a German company. But T-Mobile USA is based in Bellevue, Washington and employs nearly 40,000 U.S. citizens. The plain fact is that AT&T plans to put these American jobs at risk. Their executives say the plan to save $40 billion through merger “synergies.” This means that many of the T-Mobile jobs at retail stores and call centers will be eliminated. The planned shuttering of thousands of wireless towers will result in the firing of an untold number of technicians. And there will be more jobs lost as the cost-cutting effects of this merger ripple through the broader economy. 4. This merger is a raw deal for American innovation. AT&T has a history of making handset manufactures cripple features like WiFi on devices, and of blocking the use of certain applications like Google Voice and Slingbox. The merger would stifle innovation both in devices and on the network. The combined carriers would be able to leverage an unfair amount of market power to prioritize which handsets get used, what technologies work on those handsets and which Apps you’ll be able to upload from the network (Imagine AT&T prioritizing it’s own inferior voice recognition and navigation applications over those offered by Google or a innovating startup). According to the Wall Street Journal , handset manufacturers are remaining mum on the deal, possibly out of a “fear of angering a powerful customer” in AT&T, which can make or break a device by simply deciding to allow it on its network. Would a merged AT&T permit any device innovation that challenges its bottom line? Using history as a guide, the likely answer would be, “no.” 5. The merger is a threat to free speech and openness on the wireless web. AT&T along with Verizon has fiercely opposed any wireless Net Neutrality requirements, with AT&T brokering a deal with the FCC to ensure they have the legal right to block online content and charge application developers additional tolls just to reach AT&T customers. The FCC’s weak Net Neutrality decision was the result — exempting mobile services from openness protections based on Chairman Julius Genachowski’s assumptions that competition existed in wireless. With further consolidation AT&T and Verizon will be in an even stronger position to play gatekeeper on the wireless web, picking winners and losers, limiting our ability to connect and share information and ultimately slowing the pace of the mobile Internet innovation. The fact of this merger shows how the U.S. must have strong Net Neutrality rules, according to Sen. Dick Blumenthal of Connecticut: “Regulatory approval should contain strict conditions to ensure that consumer concerns about cost, access, choice, and competition are adequately addressed. Moreover, such high wireless market concentration raises serious potential net-neutrality concerns that should be addressed. The largest mobile network in the nation must not be allowed to limit access to content in a discriminatory manner.” — Co-authored with S. Derek Turner, Free Press research director.

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Maine Gov. Orders Labor History Mural Taken Down

March 24, 2011

It’s Diego Rivera Redux in Maine, as Governor Paul LePage is taking down a mural in the state Department of Labor building depicting the history of the labor movement and changing the names of conference rooms that he deems too pro-labor.

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Timothy Karr: AT&T Takes America Back to the Future

March 22, 2011

AT&T’s plan to take over T-Mobile has set the stage for Washington’s high-tech policy battle of 2011. But that’s not all that’s at stake. This proposed deal paints a dark scenario for the future of all communications — a future that looks increasingly like a bygone era of monopoly control. If AT&T succeeds it will form a communications colossus to rival Ma Bell. Two companies, AT&T and Verizon, would control close to 80 percent of the mobile marketplace in America — a figure that could exceed 90 percent, if, as many anticipate , Verizon buys Sprint. For the hundreds of millions of American people who rely on handheld phones and wireless Internet devices this equation spells disaster. Ma Bell Muscle As more and more people are turning to handheld devices to go online they face fewer options in a marketplace dominated by massive, vertically and horizontally integrated companies. The net result for consumers is higher prices for fewer choices. Competitors trying to innovate in this space with open networks and devices will face formidable obstacles to entry put in place by a duopoly that sees openness as anathema to profits. AT&T is poised to exert its full political might to get this merger done, and the communications giant is accustomed to getting its way in Washington. Its lobbyists have their own hall pass at the FCC, where they’ve visited more than any other corporation. It has spent more on congressional campaigns than any other corporation in documented history. And AT&T even has the ear of the president — in the person of telecom-lobbyist-cum-White-House-Chief-of-Staff William Daley . Merger Myths AT&T’s PR machine is spinning like crazy to convince Americans that they’ve got our best interests at heart… and that their friends at the Department of Justice and FCC should rubber-stamp this merger. AT&T executives and flacks now say the “synergies” of the deal will lower prices and improve “quality of service for customers,” and that it will “expand America’s workforce” providing thousands of new jobs for our economy. But when was the last time a merger actually created jobs for Americans and not more pink slips? This merger is no different. It puts the jobs of nearly 40,000 U.S. T-Mobile employees at risk. Many of the jobs at retail stores and call centers will be eliminated, and there will be more jobs lost as the cost-cutting effects of this merger ripple through the broader economy. They say the T-Mobile takeover “strengthens and expands U.S. mobile broadband infrastructure,” and that it helps us “achieve policymaker goals of deploying broadband to 95 percent of the country, including smaller, rural communities.” But according to recent Commerce Department data , wireless services are already available to 95 percent of Americans. If this merger goes through, industry analysts speculate that AT&T will decommission as many as 40,000 wireless towers, reducing the quality of coverage for hundreds of thousands of Americans. They say the merger “enables the next era of American innovation and continued growth of U.S. high tech industry.” But the merger would allow AT&T to exert even greater gatekeeper control over what happens on the wireless Web. In the past, the company has been caught blocking competing services — like Skype, Google Voice and Slingbox . AT&T’s expanded control over the handset market would stifle innovation in devices. Look no further than AT&T’s own record of “crippling” handheld phones – like the Motorola Backflip — that can do more than what the company wants. They say the overall average price-per-minute for wireless services has declined 50 percent since 1999, “during a period which saw five major wireless mergers.” But that figure is highly misleading. While the cost to consumers for voice services has dropped, the sum total of charges on mobile phone bills has steadily increased, according to J.D. Power and Associates . Added costs include spiraling rates for texting and data services as well as hidden handset subsidies. With less competition among carriers, we can expect AT&T to charge you even more. (Those who will feel this worst are the 34 million T-Mobile customers who pay on average 20 percent less for mobile service than AT&T customers. Should AT&T agree to honor existing T-Mobile contracts for their remaining length, these customers will surely see higher prices when those contracts expire.) There is nothing about having less competition that will benefit the new generation of smart phone users. Before rushing to sign off on yet another mega-merger, the FCC and the Justice Department should confront the very real problems of runaway consolidation in the wireless market. The Obama administration, which is keenly aware of this deal, has yet to say no to a massive corporate merger … despite a June 2008 pledge by then-candidate Obama to act “against the excessive concentration of [media] power in the hands of any one corporation, interest or small group.” But the negatives of AT&T’s takeover of T-Mobile are too large for even this president to ignore. As more people learn about — and speak up against — this raw deal, politics as usual may take a back seat to the public interest. At last.

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U.S. Approves 1st Deepwater Oil Exploration Since BP Spill

March 21, 2011

WASHINGTON – The Interior Department said on Monday it approved Shell’s plan for deepwater oil and natural gas exploration in the Gulf of Mexico, the first such exploration plan with a complete environmental assessment since the BP oil spill. The department imposed tougher safety and environmental review requirements for exploration plans and drilling permits following the massive oil spill last summer. “This exploration plan meets the new standards for environmental review and marks another important step toward safer deepwater exploration,” said Interior Secretary Ken Salazar. Shell’s exploration plan is for its leased Auger field located 130 miles off the Louisiana coastline. The company wants to drill three exploratory wells in nearly 3,000 feet of water. There are 13 other deepwater plans pending approval, the department said. (Reporting by Tom Doggett; Editing by Marguerita Choy and Sofina Mirza-Reid) Copyright 2011 Thomson Reuters. Click for Restrictions .

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