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The 10 Most Prosperous Thanksgivings

November 25, 2010

Thanksgiving is one of the few national holidays which is distinctly American — although, there is a “Turkey Day” in Canada, too. The date of the first Thanksgiving is put at 1621 in Plymouth, Massachusetts, but the history of the holiday is not terribly clear. 24/7 Wall St. set out to look at the most prosperous Thanksgivings in American history. We found that it was hard to compare what prosperity meant at the turn of the last century, when the U.S. was largely an agricultural society, and how the word is used in today’s industrialized world. Further, reliable government statistics before 1929 are difficult to find. So, we chose to look at the “modern” era after the Great Depression.

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Warren Helped Shoot Down Bill That Would Have Sped Foreclosures, Calendar Shows

November 24, 2010

Elizabeth Warren was the first senior Obama administration official to recognize the potentially incendiary impact of a bill that would have made it significantly easier for mortgage companies to foreclose on homes, and her subsequent warnings played a crucial role in persuading the President to veto the measure, according to freshly released documents and people familiar with the deliberations. The disclosure that Warren was instrumental in halting a bill that would have streamlined the foreclosure process comes as she confronts fierce criticism from Republicans on Capitol Hill for the way she was appointed to construct a new consumer financial protection bureau, and characterizations that she is inclined to take an overly punitive tack with Wall Street. A long-time advocate for greater regulation of the financial system and a prominent critic of predatory lending, Warren now finds herself at the center of an intensifying debate over the relationship between the Obama administration and the business world. For consumer advocates, who have long decried what they portray as Wall Street’s outsized influence in Washington, Warren represents their greatest hope that big banks will be more tightly supervised following the worst financial crisis since the Great Depression. For a vocal group of business leaders and their Republican allies, Warren has become Exhibit A in their case that the Obama administration is anti-business. The decisive way in which she labored behind the scenes to stymie a bill that would have eased requirements for documentation in the foreclosure process underscores how her arrival has altered the administration’s relationship with major banks. The bill, which passed both houses of Congress and awaited President Obama’s signature to become law, essentially would have compelled notaries to accept out-of-state notarizations, regardless of the rules in those states. State officials across the country–who have been pursuing probes looking into wrongdoing within the foreclosure process– feared that those jurisdictions with lax standards could have become hotbeds for foreclosure documentation fraud. Lenders and mortgage companies could have used those states as central clearing houses to produce bogus foreclosure paperwork, and then export those documents to other states with more stringent regulations–an expedient bypass around the strictures. Obama ultimately declined to sign the law, and the House of Representatives failed to override the veto. Officials said Warren was among the first federal officials to recognize the significance of the notary bill, titled the Interstate Recognition of Notarizations Act of 2010. She met with authorities from several states and then relayed their concerns to influential administration officials. During the morning of Oct. 6, Warren’s team at the Treasury Department wrote the first memos on the bill, raising questions about the possible consequences if it became law, these people said. That evening, Warren met for 30 minutes with Peter Rouse, Obama’s interim chief of staff, her calendar shows. She later spent an hour on the phone with Illinois Attorney General Lisa Madigan, who once sued Countrywide Financial and exacted an $8.4 billion multi-state settlement. The next day, Warren participated in an afternoon meeting on the bill, her calendar shows. During that meeting one of Obama’s top spokesmen, Dan Pfeiffer, posted an entry on the White House Blog explaining why Obama would not sign the bill. On Oct. 8, Obama declined to sign the bill into law, citing the need for “further deliberations about the possible unintended impact” of the bill on “consumer protections, including those for mortgages.” Documents released Wednesday show that Warren met or spoke with at least eight state officials leading a 50-state investigation into possibly-fraudulent mortgage documentation practices. The state attorneys general, secretaries of state and bank supervisors are probing the way in which major mortgage companies have pushed through thousands of foreclosure cases at a time, as if on a factory assembly line, by short-cutting the required documentation process. Recent weeks have featured a host of unsavory disclosures about how mortgage companies employed so-called robo-signers– people whose sole job was to sign foreclosure documents without reading them or confirming basic facts, as required by law. The volume of cases and shoddy handling of paperwork is reflective of the messy and indiscriminate lending practices that characterized the nation’s housing boom, as Wall Street eagerly handed mortgages to seemingly anyone willing to sign off. The states’ investigation and a parallel multi-agency federal probe are now roiling the mortgage industry, heightening the possibility that major lenders could face potentially huge fresh losses as bad loans continue to emerge. With legal and regulatory uncertainty now enshrouding the industry and public outrage trained on foreclosures, the banks could have trouble limiting those losses by selling off the homes pledged against bad mortgages. The nation’s biggest lender, Bank of America, has seen its share price drop 18 percent through yesterday’s market close since the day before the states announced their joint inquiry. Warren serves as an assistant to Obama and a special adviser to Treasury Secretary Timothy Geithner as she leads the effort to create the new Bureau of Consumer Financial Protection, a watchdog designed to protect borrowers from abusive lenders. Her calendar from Sept. 20 to Nov. 2 was released per a Freedom of Information Act request. The longtime Harvard Law School professor and consumer advocate met or spoke with the state attorneys general from Iowa, Illinois, Texas, North Carolina, Massachusetts and Ohio, her calendar shows. She also met with Ohio Secretary of State Jennifer Brunner, and spoke with New York’s top banking regulator, Richard H. Neiman. They are among the leaders of the combined state probe. Warren has long chided federal regulators for their lax oversight of the financial industry and slipshod protection of consumers. She’s championed state regulators, however, who have often been ahead of their federal counterparts when it comes to consumer finance issues. Warren’s calendar also shows numerous meetings with bankers and their representatives. Financial executives and lobbyists have noted that Warren was reaching out to them more than they initially expected. The calendar confirms her outreach. On Sept. 20, the same day she took a photo for her Treasury Department badge, Warren spent an hour and a half meeting with bankers from Oklahoma, her calendar shows. She spent an hour having lunch with Geithner that day as well. Since then she’s met with the chief executives of the nation’s largest banks, including Vikram Pandit of Citigroup; Jamie Dimon of JPMorgan Chase; John Stumpf of Wells Fargo; James Gorman of Morgan Stanley; Richard Davis of U.S. Bancorp; W. Edmund Clark of TD Bank Financial Group; David Nelms of Discover Financial Services; Niall Booker of HSBC North America Holdings; and Kenneth Chenault of American Express. The calendar entry for Chenault’s one-hour meeting on Oct. 13 notes that “He’s flying here for us.” Warren also met with officials from Goldman Sachs and Deutsche Bank, Germany’s biggest lender and one of the world’s biggest financial institutions. Notably absent from Warren’s calendar are officials from Bank of America, the biggest bank in the U.S. by assets and branches, including its chief executive, Brian Moynihan. Warren’s calendar includes meetings with investors and trade groups, like the Consumer Bankers Association, the Independent Community Bankers of America, the Financial Services Roundtable and the Securities Industry and Financial Markets Association. Though Warren is known for her vigorous advocacy on behalf of consumers, she’s spent more time with bankers and their lobbyists than with consumer groups and advocates during her roughly two months on the job. Warren’s 2007 journal article calling for the creation of a dedicated consumer agency inspired policymakers to enact it into law. Big banks opposed it. Warren has also met with nearly two dozen members of Congress from both sides of the aisle, including the likely incoming chair of the House Financial Services Committee, Rep. Spencer Bachus, and the top Republican on the Senate Banking Committee, Richard Shelby. The Alabama Republicans have been particularly critical of Warren and her new agency. Warren’s calendar features numerous White House meetings, like a two-hour dinner on Sept. 23 with top Obama adviser David Axelrod and breakfasts and lunches with another top Obama counselor, Valerie Jarrett. She’s also met with the heads of all the major federal financial regulatory agencies, including Federal Reserve Chairman Ben Bernanke. Among Warren’s early initiatives are efforts to make credit card disclosure forms shorter and easier to read, and simplifying mortgage documents. Her first major speech since joining the administration was a Sept. 29 address to the Financial Services Roundtable, a Washington trade group representing firms like JPMorgan Chase, BlackRock and State Farm. She asked the assembled executives to work with her to create a new system of consumer regulation focused on core principles rather than a mountain of specific rules. ************************* Shahien Nasiripour is the business reporter for The Huffington Post. You can send him an e-mail ; bookmark his page ; subscribe to his RSS feed ; follow him on Twitter ; friend him on Facebook ; become a fan ; and/or get e-mail alerts when he reports the latest news. He can be reached at 646-274-2455.

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Video: MIT’s Rigobon Says Fed Doing `Right Thing’ With QE2: Video

November 18, 2010

Nov. 18 (Bloomberg) — Roberto Rigobon, an economics professor at the Sloan School of Management at the Massachusetts Institute of Technology, talks about the outlook for inflation and the Federal Reserve’s policy of quantitative easing. Rigobon speaks with Carol Massar on Bloomberg Television’s “Street Smart.” (Source: Bloomberg)

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Video: MIT’s Rigobon Says Fed Doing `Right Thing’ With QE2: Video

November 18, 2010

Nov. 18 (Bloomberg) — Roberto Rigobon, an economics professor at the Sloan School of Management at the Massachusetts Institute of Technology, talks about the outlook for inflation and the Federal Reserve’s policy of quantitative easing. Rigobon speaks with Carol Massar on Bloomberg Television’s “Street Smart.” (Source: Bloomberg)

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San Francisco Bay Area Agency’s Robert Fakhimi Elected to Head MassMutual’s General Agents Association

November 9, 2010

WALNUT CREEK, CA–(Marketwire – November 9, 2010) –  The San Francisco Bay Area Insurance Agency LLC ( www.sfbaa.com ), a Massachusetts Mutual Life Insurance Company (MassMutual) general agency based in Walnut Creek, today announces that General Agent and CEO Robert Fakhimi has been elected president of the MassMutual General Agents Association. During his one-year term, Fakhimi will head the 90-member independent Association which helps provide MassMutual corporate with information from the field, among other responsibilities.

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Ellen Brown: To Nationalize or Bail Out?

November 8, 2010

For two years, politicians have danced around the nationalization issue, but ForeclosureGate may be the last straw. The megabanks are too big to fail, but they aren’t too big to reorganize as federal institutions serving the public interest. In January 2009, only a week into Obama’s presidency, David Sanger reported in The New York Times that nationalizing the banks was being discussed. Privately, the Obama economic team was conceding that more taxpayer money was going to be needed to shore up the banks. When asked whether nationalization was a good idea, House speaker Nancy Pelosi replied: “Well, whatever you want to call it… If we are strengthening them, then the American people should get some of the upside of that strengthening. Some people call that nationalization. “I’m not talking about total ownership,” she quickly cautioned — stopping herself by posing a question: “Would we have ever thought we would see the day when we’d be using that terminology? ‘Nationalization of the banks?’ ” Noted Matthew Rothschild in a March 2009 editorial: [T]hat’s the problem today. The word “nationalization” shuts off the debate. Never mind that Britain, facing the same crisis we are, just nationalized the Bank of Scotland. Never mind that Ronald Reagan himself considered such an option during a global banking crisis in the early 1980s. Although nationalization sounds like socialism, it is actually what is supposed to happen under our capitalist system when a major bank goes bankrupt. The bank is put into receivership under the FDIC, which takes it over. What fits the socialist label more, in fact, is the TARP bank bailout, sometimes called “welfare for the rich.” The banks’ losses and risks have been socialized but the profits have not. The bankers have been feasting on our dime without sharing the spread. And that was before the foreclosure crisis — the uncovering of massive fraud in the foreclosure process. Investors are now suing to put defective loans back on bank balance sheets. If they win, the banks will be hopelessly under water. “The unraveling of the foreclosure-gate could mean banking crisis 2.0 ,” warned economist Dian Chu on October 21, 2010. Banking Crisis 2.0 Means TARP II The significance of foreclosure-gate is being downplayed in the media, but independent analysts warn that it could be the tsunami that takes the big players down. John Lekas , senior portfolio manager of the Leader Short Term Bond Fund, said on The Street on November 2, 2010, that the banks will prevail in the lawsuits brought by investors. The paperwork issues, he said, are just “technical mumbo jumbo”; there is no way to unwind years of complex paperwork and securitizations. But Yves Smith , writing in The New York Times on October 30, says it’s not that easy: The banks and other players in the securitization industry now seem to be looking to Congress to snap its fingers to make the whole problem go away, preferably with a law that relieves them of liability for their bad behavior. But any such legislative fiat would bulldoze regions of state laws on real estate and trusts, not to mention the Uniform Commercial Code. A challenge on constitutional grounds would be inevitable. Asking for Congress’s help would also require the banks to tacitly admit that they routinely broke their own contracts and made misrepresentations to investors in their Securities and Exchange Commission filings. Would Congress dare shield them from well-deserved litigation when the banks themselves use every minor customer deviation from incomprehensible contracts as an excuse to charge a fee? Chris Whalen of Institutional Risk Analytics told Fox Business News on October 1 that the government needs to restructure the largest banks. “Restructuring” in this context means bankruptcy receivership. “You can’t prevent it,” said Whalen. “We’ve wasted two years, and haven’t restructured the top banks, but for Citi. Bank of America will need to be restructured; this isn’t about the documentation problem, this is because [of the high] cost of servicing the property.” Profs. William Black and Randall Wray are calling for receivership for another reason — the industry has engaged in flagrant, widespread fraud. “There was fraud at every step in the home finance food chain,” they wrote in The Huffington Post on October 25: [T]he appraisers were paid to overvalue real estate; mortgage brokers were paid to induce borrowers to accept loan terms they could not possibly afford; loan applications overstated the borrowers’ incomes; speculators lied when they claimed that six different homes were their principal dwelling; mortgage securitizers made false reps and warranties about the quality of the packaged loans; credit ratings agencies were overpaid to overrate the securities sold on to investors; and investment banks stuffed collateralized debt obligations with toxic securities that were handpicked by hedge fund managers to ensure they would self destruct. Players all down the line were able to game the system, suggesting there is something radically wrong not just with the players but with the system itself. Would it be sufficient just to throw the culprits in jail? And which culprits? One reason there have been so few arrests to date is that “everyone was doing it.” Virtually the whole securitized mortgage industry might have to be put behind bars. The Need for Permanent Reform The Kanjorski amendment to the Banking Reform Bill passed in July allows federal regulators to preemptively break up large financial institutions that pose a threat to U.S. financial or economic stability. In the financial crises of the 1930s and 1980s, the banks were purged of their toxic miscreations and delivered back to private owners, who proceeded to engage in the same sorts of chicanery all over again. It could be time to take the next logical step and nationalize not just the losses but the banks themselves, and not just temporarily but permanently. The logic of that sort of reform was addressed by Willem Buiter , chief economist of Citigroup and formerly a member of the Bank of England’s Monetary Policy Committee, in The Financial Times following the bailout of AIG in September 2008. He wrote: If financial behemoths like AIG are too large and/or too interconnected to fail but not too smart to get themselves into situations where they need to be bailed out, then what is the case for letting private firms engage in such kinds of activities in the first place? Is the reality of the modern, transactions-oriented model of financial capitalism indeed that large private firms make enormous private profits when the going is good and get bailed out and taken into temporary public ownership when the going gets bad, with the tax payer taking the risk and the losses? If so, then why not keep these activities in permanent public ownership? There is a long-standing argument that there is no real case for private ownership of deposit-taking banking institutions, because these cannot exist safely without a deposit guarantee and/or lender of last resort facilities, that are ultimately underwritten by the taxpayer. Even where private deposit insurance exists, this is only sufficient to handle bank runs on a subset of the banks in the system. Private banks collectively cannot self-insure against a generalised run on the banks. Once the state underwrites the deposits or makes alternative funding available as lender of last resort, deposit-based banking is a license to print money. [Emphasis added.] Nearly all money today is created as bank credit or debt. (That includes the money created by the Federal Reserve, a bank, and lent to the federal government when it buys federal securities.) Credit or debt is simply a legal agreements to pay in the future. Legal agreements are properly overseen by the judiciary, a branch of government. Perhaps it is time to make banking a fourth branch of government. That probably won’t happen any time soon, but in the meantime we can try a few experiments in public banking, beginning with the Bank of America, predicted to be the first of the behemoths to be put into receivership. Leo Panitch , Canada Research Chair in comparative political economy at York University, wrote in The Globe and Mail in December 2009 that “there has long been a strong case for turning the banks into a public utility, given that they can’t exist in complex modern society without states guaranteeing their deposits and central banks constantly acting as lenders of last resort.” Nationalization Is Looking Better David Sanger wrote in The New York Times in January 2009: Mr. Obama’s advisers say they are acutely aware that if the government is perceived as running the banks, the administration would come under enormous political pressure to halt foreclosures or lend money to ailing projects in cities or states with powerful constituencies, which could imperil the effort to steer the banks away from the cliff. “The nightmare scenarios are endless,” one of the administration’s senior officials said. Today, that scenario is looking less like a nightmare and more like relief. Calls have been made for a national moratorium on foreclosures. If the banks were nationalized, the government could move to restructure the mortgages, perhaps at subsidized rates. Lending money to ailing projects in cities and states is also sounding rather promising. Despite massive bailouts by the taxpayers and the Fed, the banks are still not lending to local governments, local businesses or consumers. Matthew Rothschild, writing in March 2009, quoted Robert Pollin, professor of economics at the University of Massachusetts at Amherst: Relative to a year ago, lending in the U.S. economy is down an astonishing 90 percent. The government needs to take over the banks now, and force them to start lending. When the private sector fails, the public sector needs to step in. Under public ownership, wrote Nobel Prize winner Joseph Stiglitz in January 2009, “the incentives of the banks can be aligned better with those of the country. And it is in the national interest that prudent lending be restarted.” For a model, Congress can look to the nation’s only state-owned bank, the Bank of North Dakota. The 91-year-old BND has served its community well. As of March 2010 , North Dakota was the only state boasting a budget surplus; it had the lowest default rate in the country; it had the lowest unemployment rate in the country; and it had received a 2009 dividend from the BND of $58.1 million, quite a large sum for a sparsely populated state. For our newly-elected Congress, the only alternative may be to start budgeting for TARP II.

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David Isenberg: The Louis Berger Group: It May Be a Crook But At Least Its Our Crook

November 6, 2010

Are charges that private military contractors commit egregious acts of fraud overblown? Not according to recent news. McClatchy Newspapers reports that the Louis Berger Group, one of the U.S. government’s highest profile American contractors in Afghanistan has agreed to pay tens of millions of dollars to settle allegations that it overbilled the U.S. government. In return, the Justice Department will end its investigation into allegations that Louis Berger was intentionally overcharging American taxpayers. The settlement, which is just over $69 million, includes civil and criminal penalties. Louis Berger’s alleged overbilling, a practice that dates to at least the mid-1990s, swelled to tens of millions in lost tax dollars. In 2006, a former Louis Berger employee handed the government evidence against the company, two months before the U.S. Agency for International Development tapped Louis Berger to jointly oversee $1.4 billion in reconstruction contracts in Afghanistan. Court documents reveal that the Justice Department has been negotiating a deal that would “aid in preserving the company’s continuing eligibility to participate” in federal contracting in Afghanistan and elsewhere. According to McClatchy Louis Berger is accused of manipulating overhead cost data and overhead rate proposals submitted to the U.S. government and several states including Massachusetts, Nevada and Virginia. In some instances the company is accused of shifting overhead costs from private clients to federal and state contracts, where they were less likely to be noticed. A press conference was held in Newark, NJ today to announce developments in the government’s investigation. According to Paul J. Fishman, United States Attorney for the District of New Jersey, where the Berger Group is headquartered, Rod J. Rosenstein, U.S. Attorney for the District of Maryland, and Tony West, Assistant Attorney General of the Civil Division of the Department of Justice two former senior LBG employees pleaded guilty this morning to their roles in the scheme. Salvatore Pepe, LBG’s former Chief Financial Officer, and Precy Pellettieri, the former Controller, admitted to conspiring to defraud USAID by obtaining contract payments billed at falsely inflated overhead rates. According to documents filed in these cases and statements made in court: LBG provides engineering and other consulting services to private and public entities, including federal agencies, state agencies, and foreign governments. Several of LBG’s largest contracts were with USAID, an independent federal government agency that advances U.S. foreign policy by supporting economic growth, agriculture, trade, global health, democracy, and humanitarian assistance in developing countries – including countries destabilized by violent conflict. USAID awarded several multimillion-dollar contracts to LBG for rehabilitative and reconstructive work in Iraq and Afghanistan. From at least 1999 through August 2007, LBG, through its former executives and management employees, intentionally overbilled the U.S. government in connection with contracts for work performed overseas. The scheme to defraud the government was carried out by Pepe and Pellettieri, at the direction of a former executive. Pepe directly supervised Pellettieri, who supervised LBG’s general accounting division. Both were responsible for ensuring the integrity of LBG’s cost data with respect to the calculation of overhead rates that LBG charged to USAID and other agencies. LBG charged the federal government these rates on “cost plus” contracts, which enabled contractors to pass on their overhead costs to the agency in general proportion to how much labor LBG devoted to the government contracts. Pepe and Pellettieri admitted that from September 2001 through August 2007, they agreed with each other and others to bill USAID and other federal agencies for LBG’s overhead costs at falsely inflated overhead rates. They agreed to target an overhead rate above 140 – meaning that for every dollar of labor devoted to a USAID contract, LBG would receive an additional $1.40 in overhead expenses and total profits allegedly incurred by LBG. As part of this conspiracy, Pepe and Pellettieri agreed to classify non-federal overhead as federal overhead, which had the effect of increasing the rate charged to the government. For example, Pepe supervised Pellettieri in reclassifying the work hours of LBG’s corporate employees, such as those in the general accounting division, to make it appear as if they worked exclusively on federal projects when they did not. The defendants reclassified these hours without the employees’ knowledge and without investigating whether the employees had correctly accounted for their time. While it is great the U.S. government has investigated and fined the Berger group it is important to note that this came about because of a whistleblower lawsuit under the False Claims Act and not because of the superb auditing capabilities of the feds. And it seems unlikely the Berger Group is the only perp. The sheer number of contracts in Afghanistan makes that unlikely. An October 27 report from the Special Inspector General for Afghanistan Reconstruction (SIGAR) found that DOD, State, and USAID reported more than $17.7 billion in obligations made against contracts, cooperative agreements, and grants for Afghanistan reconstruction during fiscal years 2007-2009. SIGAR identified about 7,000 contractors and other entities, including for-profit and non-profit organizations and multilateral organizations. Given that the Justice Department has been negotiating a deal that would “aid in preserving the company’s continuing eligibility to participate” in federal contracting in Afghanistan and elsewhere it appears that the government regards Louis Berger in the same light as the Bush and Obama administrations regarded Wall Street investment firms, i.e., too big to fail. I wonder how that fits in with the concept of ethical contracting.

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Robert Stinson, Penn. Businessman, Charged With $17 Million Ponzi Scheme

November 5, 2010

PHILADELPHIA — A businessman who authorities describe as a repeat offender in securities fraud was arrested Friday and charged with overseeing a $17 million Ponzi scheme. Robert Stinson Jr. of Berwyn fleeced more than 260 investors over the past four years while claiming to operate several real estate hedge funds, according to a federal indictment. The funds boasted returns of up to 16 percent a year, but authorities allege that Stinson diverted most of the money for personal use, including expensive cars, meals and vacations. Some investors who received “dividends” from funds managed by Stinson’s company Life’s Good Inc. were actually paid using money from new clients, the indictment said. Stinson also lied to investors about having degrees from the Massachusetts Institute of Technology and Penn State University, and falsely claimed big experience in currency trading, investment management and other businesses, authorities said. In addition, Stinson concealed previous fraud convictions and two bankruptcy filings, according to the indictment. He was also the target of fraud complaints by the Securities and Exchange Commission in 1990 and this past June. On June 29, the FBI raided several of Stinson’s business locations and seized two Mercedes bought with proceeds from the alleged scheme. Stinson then obstructed justice by wiring money out of Life’s Good accounts, authorities said. Stinson was charged with fraud, money laundering, obstruction and other offenses. His attorney did not immediately return a call for comment.

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HTA to Acquire Three-State MOB Portfolio For $196M

November 1, 2010

Healthcare Trust of America, Inc. has agreed to acquire a nine-building medical office portfolio in New York, Massachusetts and Florida for about $196.6 million. If it closes, the transaction for the 98% leased Class A portfolio consisting of about 960…

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GlaxoSmithKline To Pay $475 Million To Settle Charges From Tainted Drugs

October 26, 2010

BOSTON — British pharmaceutical company GlaxoSmithKline PLC will pay $750 million to settle allegations that it knowingly manufactured and sold adulterated drugs, including the popular antidepressant Paxil, federal prosecutors in Massachusetts said Tuesday. U.S. Attorney Carmen Ortiz announced that the London-based company will pay $150 million in criminal fines and $600 million in civil penalties related to faulty manufacturing processes at its plant in Cidra, Puerto Rico. The company allowed several drugs to be adulterated between 2001 and 2005, including Paxil CR, a skin-infection ointment called Bactroban, and an anti-nausea drug called Kytril, and a diabetes drug called Avandamet, Ortiz said. GlaxoSmithKline said in a statement that it regrets operating the plant in a manner that violated good manufacturing practices. The company said the plant closed in 2009 due to declining demand for the medicines made there. Executives disclosed a $750 million charge to the company’s second-quarter 2010 earnings on July 15 in connection with the agreement. Ortiz said that no patients appeared to have been harmed by the quality problems at the plant, which included failing to ensure that Bactroban and Kytril were free of contamination from microorganisms and causing Paxil controlled release tablets to split, causing the potential distribution of tablets that did not have any therapeutic effect. The investigation began after Cheryl Eckard, the company’s global quality assurance manager, went to the Puerto Rico plant in August 2002 to lead a team of scientists and quality experts to correct manufacturing violations cited by the FDA. Eckard discovered numerous violations, including a contaminated water system and an air system that allowed for cross-contamination between different products being made there. She reported the problems to her superiors and the company’s compliance department, her lawyers said. Eckard eventually went to the Food and Drug Administration to report the problems and later filed a whistleblower lawsuit. Eckard, who worked at the company’s offices in North Carolina, said she was fired in 2003 after repeatedly reporting the problems to the company. “This is not something I ever wanted to do, but because of patient safety issues, it was necessary,” she told reporters after the settlement was announced Tuesday. As a whistleblower under the federal False Claims Act, Eckard will receive $96 million of the settlement paid by the company. The $600 million civil penalty will be paid to the federal government and the states to cover false claims submitted to the Medicaid program and other health care programs. The agreement between SB Pharmco Puerto Rico Inc. – an indirect subsidiary of GlaxoSmithKline – is the fourth-largest amount ever paid by a pharmaceutical company to the government to resolve civil and criminal allegations, said Tony West, assistant attorney general for the civil division at the U.S. Department of Justice. “At the end of the day, consumers have a right to rely on the representations companies make about the products they sell,” said West, who joined Ortiz at a news conference in Boston to announce the settlement.

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G.W. Schulz: With Border Surveillance in Trouble, a New Defense Contractor Lines Up

October 26, 2010

At a mid-October conference in Dallas that drew thousands of security industry professionals and government officials, defense mega-contractor Raytheon Co. unveiled its latest pricey product for keeping the nation safe, a bid to remotely detect would-be border crossers before they enter the country illegally. Command-and-control centers staffed by border patrol agents would swiftly collect and analyze mountains of data pouring in from surveillance cameras, radar systems, ground sensors and thermal-image devices busily monitoring possible intruders as they streamed toward the nation’s border. If all of this is starting to sound familiar, it should. Taxpayers have already shelled out at least $615 million to another major defense firm, Boeing Co., which made strikingly similar promises five years ago when it partnered with the Bush administration to create SBInet, a high-tech leg of the larger Secure Border Initiative . SBInet, also referred to as the “virtual fence,” called for filling the desert with modern observation widgets, including a string of towers topped by digital eyes capable of vastly expanding the miles of border that enforcement officers could otherwise effectively secure. The project has since fallen short of expectations, to put it lightly. A series of harsh reviews from congressional investigators at the Government Accountability Office and the Department of Homeland Security’s inspector general have criticized SBInet since its earliest days, pointing to poor planning, cost overruns, scheduling setbacks, technical failures and weak contractor oversight. The latest negative assessment surfaced just days after Raytheon’s announcement. GAO watchdogs called the deficient policing of SBInet’s prime contractor “a major contributor to the program’s well-chronicled history of not delivering promised system capabilities on time and on budget.” Word came Oct. 22 that the Department of Homeland Security would not continue work under Boeing’s contract, and the next day news surfaced that Obama administration officials planned to halt SBInet altogether. Connecticut Sen. Joe Lieberman, chair of the powerful Homeland Security and Governmental Affairs Committee, at an April hearing , called SBInet “a classic example of a program that was grossly oversold.” Colleague John McCain — hardly soft-spoken on the issue of border security this election year — piled on. “There’s been a lack of oversight. There’s been a lack of accountability. And by most reports, this virtual fence has been a complete failure.” So why is Raytheon charting a course toward border surveillance after so many costly headaches? For one thing, the Massachusetts-based company was among several that lost an earlier bid for the SBInet contract to Boeing in 2006. Raytheon may now be looking for a second chance to prove itself and simply take over where Boeing has been unsuccessful, rather than offer an entirely different solution with new hardware. (Requests for comment from Raytheon went unanswered.) Plus, the company is smarting over attempts to ink border security deals with Saudi Arabia and the U.K. worth a combined $4.5 billion that fell through. It’s also the case that 20,000 border patrol officers just aren’t enough to cool the ongoing national furor over illegal immigration and drug-cartel violence, even if the estimated price tag of each new hire is $160,000 for background checks, salaries, night-vision goggles and additional necessities. The promise of modern technology continues to be powerfully tempting, and if taxpayers will pony up more, then Raytheon wants a cut. While SBInet appears doomed, lawmakers and federal officials are still talking about what options may be available. GOP Congressman Michael McCaul of Texas sits on the House’s Homeland Security Committee and has said he’ll push for Defense Department technology being used in Afghanistan and Iraq. A DHS spokesman told the Los Angeles Times that border officials will determine “if there are alternatives that may more efficiently, effectively and economically meet our nation’s border security needs.” What exists on the border now is piecemeal. For the total investment so far from taxpayers, which is somewhere in the neighborhood of $800 million or more, two SBInet deployments cover about 53 miles in Arizona, a sliver of the almost 2,000 miles of border the nation shares with Mexico and far from what was originally envisioned. Homeland Security Secretary Janet Napolitano earlier this year yanked $50 million in economic stimulus funds from SBInet, vowing to use it for truck-mounted cameras and other detection gear authorities believed could produce better results. A $600 million border security bill passed by Congress this summer included hiring additional agents and buying new pilotless drones, with $100 million of it coming from canceled SBInet funds. Raytheon says its own “Clear View,” as they’re calling the system, can be integrated with software and devices built by others. But the process of tying together, or integrating, SBInet’s array of highly technical components along a geographically diverse border — from laser range-finders to surveillance cameras to command centers — proved to be exceedingly difficult for Boeing. Trade publications say Raytheon doesn’t limit the application of Clear View just to government clients. It could also be used by private companies to secure sensitive manufacturing facilities, for example. But Washington always has money to spend, and Raytheon emphasizes Clear View’s potential value to the Department of Homeland Security. A former deputy chief of the Border Patrol, who now consults for Raytheon, told Government Security News the company had briefed senior federal officials about Clear View. Raytheon specifically mentioned SBInet at the conference where it showcased the system, arguing Clear View is superior to what Boeing has done because Raytheon’s software can not only “see” those headed for the border but track their movements, all while “correlating thousands of pieces of ever-changing data and presenting a clear and coherent picture of what’s happening at any given moment,” according to GSN . SBInet wasn’t even the first time we forked over substantial sums in an attempt at digital border security. The Clinton administration launched its lesser-known ISIS program in 1997, a planned network of seismic and infrared sensors combined with surveillance cameras. Auditors blasted it, too. For their part, Boeing executives defend SBInet and say the technology had begun to perform reliably, leading to the seizure of narcotics and interception of illegal border crossers. “In terms of performance on the program, progress is evident,” Boeing’s president of network and space systems, Roger Krone, told Congress in March. Apparently that wasn’t enough for Washington — SBInet is now an expensive lesson taxpayers had to learn the hard way. How much more would Raytheon charge for the privilege? G.W. Schulz joined the Center for Investigative Reporting in 2008 to launch its ongoing homeland security project. Read the project’s blog, Elevated Risk, here .

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University of Mass Sells 438M In Debt

October 23, 2010

The University of Massachusetts is seeking to raise 438 million in a sale of Build America Bonds

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Migration Bust: Fast-Growing U.S. Areas Show Big Income Drop, Census Reports

October 13, 2010

WASHINGTON — Call it the migration bust: Many of the fast-growing U.S. areas during the housing boom are now yielding some of the biggest income drops in the economic downturn. That could have broad impact on the political map in the coming weeks. Voters discontent over the economy and related issues such as immigration head to the polls on Nov. 2 to decide whether to keep Democrats in Congress. Whites and blacks have taken big hits since 2007 in once-torrid Sunbelt regions offering warm climates and open spaces, including Florida, Colorado, Arizona and Nevada, according to 2009 census data. Hispanics suffered paycheck losses in many “new immigrant” destinations in the interior U.S., which previously offered construction jobs and affordable housing, such as Tennessee, Georgia and North Carolina. The few bright spots: Washington, D.C., San Jose, Calif., San Francisco and Boston. Their household incomes remained among the highest in the nation last year partly due to steady demand for government and high-tech work. “As a whole, the income changes represent a sharp U-turn from the mid-decade gains,” said William H. Frey, a demographer at the Brookings Institution who reviewed the household income data. “The last two years have left those who couldn’t move stuck in place with lower incomes.” In December, the Census Bureau will release 2010 population counts, which trigger a politically contentious process of divvying up House seats. In all, Southern and Western states are expected to take seats away the Midwest and Northeast. But last-minute shifts could affect a handful of states hanging in the balance, including California, which is hoping to avoid losing its first seat ever, and Arizona, which may now gain just one seat rather than two based partly on slowing Hispanic population growth. The census data show that Hispanics, the nation’s largest and fastest-growing minority group, are helping drive growth in several Southern states. Five states have seen their numbers double over the last decade – South Carolina, Tennessee, Alabama and Arkansas in the South and South Dakota in the Upper Midwest. Other big gainers include Georgia and North Carolina. Several of those states, South Carolina, Georgia and possibly North Carolina, stand to gain House seats based partly on that fast growth. At the same time, the Latino population remains a relatively smaller share of the population in those states, numbering about 8 percent or less. There, they also tend to be disproportionately low-income workers who lack a high-school education, speak mostly Spanish and don’t vote in elections, which analysts say may be driving some of the tensions over immigration and jobs. In recent months, the rhetoric has ranged from a call for English-only policies in states and localities that wish to minimize the use of Spanish and other languages, to a call to strip birthright citizenship for illegal immigrants. “Hispanics’ recent growth and sharp disparity with existing white populations may have something to do with the anti-immigrant backlash now being observed in large parts of the country,” Frey said. Hispanics had the highest income in metro areas such as Washington, D.C., Baltimore, Dayton, Ohio, and Virginia Beach, where they also were more likely to have a college degree. Lower-educated Hispanics also had strong earnings in San Francisco and San Jose, Calif., two areas with high costs of living where more-affordable immigrant labor tends to be in greater demand. Nationally, the government reported last month that median household incomes dipped to $49,777, the lowest since 1997, with the sharpest drop-offs in the Midwest and Northeast. Broken down by race, blacks had the biggest income losses, dropping to $32,584. They were followed by non-Hispanic whites, whose income fell to $54,461. Asian incomes remained flat at $65,469. Income among Hispanics edged higher but lagged whites significantly at $38,039. The findings are part of a broad array of 2009 data released over the past month that have highlighted the impact of the recession – from soaring poverty and a widening gap between rich and poor to record levels of food stamp use. On Tuesday, the Census Bureau posted additional 2009 findings. Among them: _Declining home values. Median values for owner-occupied homes dropped 5.8 percent last year to $185,200. They ranged from a high of $638,300 in San Jose, Calif., to a low of $76,100 in McAllen, Texas. In all, five of the 10 highest property values were located in California, with the rest in New York, Washington, D.C., Boston, Seattle and Baltimore. _Increased welfare payments. About 2.6 percent of U.S. households, or 3 million, received government cash payments for the poor, up from 2.3 percent in 2008. States whose residents received the most aid were Alaska, Maine, Washington and Michigan. _Growth of college sciences. About 36.4 percent, or 20.5 million, of college graduates in the U.S. had a degree in the science and engineering fields. Five states – California, Maryland, Massachusetts, Virginia, Washington – as well as the District of Columbia had science and engineering degrees above 40 percent. The 2009 figures come from the Census Bureau’s Current Population Survey and the American Community Survey, which gathers information from 3 million households. The surveys are separate from the 2010 census. ___ Online: http://www.census.gov

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Video: Diamond, Obama’s Fed Pick, Shares Nobel Economic Prize: Video

October 11, 2010

Oct. 11 (Bloomberg) — Peter Diamond, an economics professor at the Massachusetts Institute of Technology and President Barack Obama’s choice for a post on the Federal Reserve Board, is one of three co-winners of the 2010 Nobel Prize in Economic Sciences. Diamond shares the prize with Dale Mortensen and Christopher Pissarides for research into the difficulties of matching supply and demand, particularly in the labor market. Diamond’s Fed nomination is subject to confirmation by the Senate. Bloomberg’s Peter Cook reports. (Source: Bloomberg)

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Fed’s $2 Trillion May Buy Few Jobs

October 8, 2010

For $2 trillion, Federal Reserve Chairman Ben S. Bernanke may buy little improvement in growth, employment or inflation over the next two years. Firms with large-scale models of the U.S. economy such as IHS Global Insight, Moody’s Analytics Inc. and Macroeconomic Advisers LLC project only a moderate impact from additional Fed asset purchases. The firms estimate that the unemployment rate will remain around 9 percent or higher next year whether the Fed buys $500 billion or $2 trillion of U.S. Treasuries in a second round of unconventional stimulus. “This is not a game changer for the economic outlook,” said Nigel Gault, chief U.S. economist at IHS Global Insight in Lexington, Massachusetts, whose models show that $500 billion of purchases would boost growth 0.1 percentage point in 2011 and leave the unemployment rate at 9 percent or above for the next two years. “There is clearly a risk that people start to perceive monetary policy as impotent.”

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Richard Zombeck: Homeowner Activists and Attorneys Vindicated after Years of Being Ignored

October 4, 2010

There’s a huge buzz out there among homeowner activists who are feeling vindicated for the hard work they’ve done over the past couple of years and in many cases even longer. The recent news inundating the headlines of blatant fraud on the part of lenders and servicers has offered proof that their actions and fight have not been in vain. Many of the people who’ve been battling foreclosure, loan servicers, banks, and legal firms bent on taking homes have done so at considerable cost to their sanity, reputation, and finances. They’ve been lambasted by the other side and by their neighbors, called leeches, welfare freaks, and losers. They’ve been accused of having bought beyond their means and blamed for being the cause of the financial crisis, when the majority of homeowners have been victimized and scammed. In extreme cases some have been labeled whack job conspiracy theorists and alarmists by the media and elected officials. Mike Dillon of New Hampshire has been fighting an illegal foreclosure against Fairbanks Capitol Corporation/Select Portfolio Servicing for nine years. “I didn’t buy more house than I could afford. I had my evidence. I had a court order from a judge. Despite this, I still had to get used to being looked at like a guy standing out in a cornfield describing how the lights came down out of the sky and stole my cow. As devastating as this level of fraud has been, it was nice to finally get that confirmation that I really wasn’t crazy,” Dillon said referring to the rash of articles and testimonies proving his claims. For some the obvious just has a way of slapping you in the face. As Martin Andelman, founder of Mandelman Matters said to me in a conversation that I’ll never forget: “Do you know why poor people don’t buy houses they can’t afford? Because they don’t want to move refrigerators! And don’t tell me that one idiotic story about a 14-year-old kid who bought a McMansion with the money from his paper route. Do they really expect us to believe that eight million people got up one morning and became irresponsible?” It made perfect sense and needs no explanation. Andelman was referring to what can only be described as propaganda on the part of the banks to blame homeowners for the mortgage crisis. Apparently, listening to some of the rhetoric from Fox News, the banks, and members of the GOP over the past couple of years that’s exactly what happened. Greedy homeowners went out in droves and scooped up McMansions they knew they couldn’t afford by duping seemingly innocent bankers and naive mortgage brokers who were just trying to do the right thing and help these crooked homeowners achieve a little piece of the American dream. Meanwhile, again according to those same “experts”, the liberal big government was strong arming the banks to make it happen. Maybe that’s why we saw record deregulation during Bush’s two terms. Sorry, not quite. As it happens the banks have in fact been fraudulently foreclosing on homeowners for a while now and in the last couple of weeks I’ve been inundated with emails, phone calls, and links to stories recounting how Bank of America , GMAC , and JPMorgan Chase have stalled foreclosures as a result of allegations that each “robo signer” was signing off on close to 10,000 documents a month without ever knowing what the paperwork contained. Related articles have appeared about banks knowingly selling subpar mortgages to investors , ignoring proof that loans were unsafe , and deliberately destroying documents . Those of us who have been following the meltdown saw it coming, experienced it, and have pleaded with legislators to listen. We have been waiting for the day to come when the media would finally pick up on it. The evidence has been there all along in the hundreds of stories submitted by homeowners at www.shamethebanks.org and other sites detailing how they’ve been abused by the lending industry. Also prevalent in many of these stories is the lack of action by elected officials and the media when these stories have been brought to their attention. Homeowners who have reached out for help to their Congressional offices have received little more than a boilerplate letter in response. After numerous letters, emails, and phone calls explaining our situation, my wife and I received a voice mail from Rep. John Tierney’s office saying, “I didn’t realize you required or expected some kind of action.” Those of us who have been able to reach out to people higher in the chain of command have not had any more luck at being heard. In April, shortly after having founded shamethebanks.org , I went to D.C. and had the opportunity to speak with Treasury officials. I implored them to take a closer look at how banks and servicers were gaming the system . I confronted Diana Farrell, Deputy Director of the National Economic Council, and asked her why Treasury wasn’t looking more closely at the allegations of servicer and lender fraud and misuse of the HAMP program. She skirted the issue and responded that, “we’ll take that under advisement.” Homeowner advocate and loan fraud investigator Steve Dibert of MFI-Miami had a similar experience when he met with government staffers in the aftermath of the mortgage meltdown: 18 months ago, I had dinner with several staff members of the House Finance Committee. When I told them about all this they gave me the deer in headlights look. I remember approaching the mainstream media then who acted like I was nothing more than a Che Guevara wannabe. I had associates in the mid-west doing short sales and modifications who couldn’t figure out why they were getting nowhere with their files for 9-12 months, they finally came to me out of desperation. Within 3 weeks, I had the servicer begging to give the homeowner a modification because I was able to prove they lacked legal standing to foreclose and could face a fraud lawsuit. GMAC, Chase, and Bank of America have all made self-aggrandizing announcements that they are stalling foreclosures until they get to the bottom of this. Of course they’re only stalling the process in 23 states – the ones with judicial foreclosure laws that require lenders to show proof of legal standing in court. Those states are: Connecticut, Delaware, Florida, Hawaii, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Nebraska, New Jersey, New Mexico, New York, North Dakota, Ohio, Oklahoma, Pennsylvania, South Carolina, South Dakota, Vermont and Wisconsin. One would guess that in the other 27, non-judicial foreclosure states, it will be business as usual and since there’s no real oversight of how the banks do business, why bother? As much as these guys would like us to believe that they’re doing the right thing, they’re actually doing the bare minimum to avoid prosecution and continuing to take homes in over 50 percent of the country despite overwhelming evidence that they broke the law in every state. Simply because no one is watching. ” The general level of sloppiness is pervasive around the industry,” said Diane Thompson , counsel at the National Consumer Law Center. Two other big banks have been quick to distance themselves from the accusations. Wells Fargo and Citi have both announced that they are clean and that they, unlike the others, have followed necessary guidelines. Vickee Adams, a spokeswoman for Wells Fargo & Co., said Wells’ “policies, procedures and practices satisfy us that the affidavits we sign are accurate.” Mark Rodgers, a spokesman for Citigroup Inc., said the bank “reviews document handling processes in our foreclosure group on an ongoing basis, and we have strong training to ensure that appropriate employees are fully aware of the proper procedures.” We’ll just have to assume this wasn’t the same training that led to a $75 million fine by the SEC a couple of months ago for misleading investors by failing to disclose $40 billion in risky mortgage assets and eventually sent Citi to the brink of failure. As luck would have it, two days after Citi and Well Fargo made those claims, Abigail Field of Daily Finance , wrote a piece outlining that in fact Citi and Wells Fargo have been involved in the same practices. “For example, in one case I reviewed, Herman John Kennerty of Wells Fargo gave a deposition describing the department he oversees for Wells Fargo. It’s a department dedicated to simply signing documents. Kennerty testified that he signs 50 to 150 documents a day, verifying only the date on each,” she writes. So much for top notch training. Read the rest of the story at Daily Finance . After two years of failed modification programs, foreclosure prevention strategies, some members of congress are starting to take notice. In Florida, a state that’s been ravaged by foreclosure and foreclosure mill law firms that have made millions illegally foreclosing on properties , Representative Alan Grayson posted this video on his web site. In it he explains, in depth, how the foreclosure crisis works, complete with four real-world examples: a man who was foreclosed on when he didn’t have a mortgage and paid cash for the home; a home where two servicers claimed ownership of the title; a couple foreclosed on over a contested $75 late fee; and a story that sounds like many of the ones on www.shamethebanks.org –  in the end the servicer used forged documents to claim ownership of the title. “We are reaching a point where the easiest way to make a buck is to steal it,” Grayson says in the video. A couple other states also seem to be paying attention. Despite being a judicial foreclosure state, Connecticut Attorney General Richard Blumenthal on Friday ordered a moratorium on all foreclosures by all banks for 60 days . “This freeze should stop a foreclosure steamroller based on defective documents and enable effective remedies,” Blumenthal said. Massachusetts AG Martha Coakley is also calling on lenders to halt all Bay State foreclosures . Thanks to Coakley’s vigilance, Massachusetts has one of the more impressive track records when it comes to actively and proactively defending and protecting homeowners. “We are asking Bank of America and other major creditors to cease foreclosure proceedings for Massachusetts homeowners until they demonstrate that they have complied with Massachusetts law,” Coakley said on Friday. The move by both Attorney General’s followed word Friday that a Bank of America executive admitted in a Massachusetts deposition to signing thousands of documents in U.S. foreclosure cases without really looking at them. The Massachusetts Supreme Judicial Court plans to hear arguments next week on a paperwork-error case that has the potential to invalidate thousands of foreclosures dating as far back as 20 years. So what’s next? I, along with many homeowner advocates am hoping that the legal community will see this as evidence of the rampant fraud and illegal activity used by the banks to essentially throw people out of their homes for fun and profit. At some point the lawyers who have been happily taking payments from these crooks will realize that there’s more money in going after banks than there is in screwing homeowners. Much like the ridiculous medical malpractice suits that started in the 70′s we’ll start seeing lawyers wanting to defend homeowners. While I don’t agree with all of the views and advice on this site, Neil Garfield makes some interesting points in his post titled: ” YOU MAY BE ENTITLED TO CASH PAYMENT FOR WRONGFUL FORECLOSURE — Coming to a Billboard Near you .” Well it has finally happened. Three years ago I couldn’t get a single lawyer anywhere to consider this line of work. I predicted that this area of expertise in their practice would dwarf anything they were currently doing including personal injury and malpractice. I even tried to guarantee fees to lawyers and they wouldn’t take it. Now there are hundreds, if not thousands of lawyers who are either practicing in this field or are about to take the plunge. The attorney that will take on a bank or servicer to defend a homeowner is still unfortunately rare. Massachusetts attorney, Jamie Ranney of Jamie Ranney PC is doing just that and had this to say during a recent conversation I had with him: “It’s been a Sisyphean task, pushing that bolder up the hill and getting pushed back down. People in this country have been led to believe that the homeowner is the one to blame for the level of fraud that’s happened. It’s been extremely gratifying to see that we’re making some headway in convincing the courts that we’ve been right all this time.” The banks have gotten their bonuses despite what they’ve done to people, now it’s time for the homeowner to get their bonus for what they’ve had done to them. For too long, lawyers on the right side of the law have been eking out a living defending the little guy against enemies with unlimited funds; fighting against a judicial system and government that essentially sides with the money; and watching as the letter of the law gets trampled. The average Joe doesn’t stand a chance in a system that is no longer designed and has no desire to defend them. Maybe this will level the playing field and maybe attorneys, like Ranney will be compensated for doing the right thing – and get paid for a job well done. Mike Dillon had this to add: “I can’t help but think of the most likely hundreds of thousands of families who have already lost their homes to a fraudulent foreclosure. There is a “rule book” that everyone is supposed to play by. The borrowers are being held to those rules despite having had the deck stacked against them for years now. Regardless of whether a borrower is legitimately in default or not, the note holders and servicers need to be held to that same rule book. And that’s not just my own opinion. New York Supreme Court Judge Arthur Schack feels the same way .” The main problem is that we are dealing with a Congress that has not only given up on the middle class, but continues to assist in its pillaging. Twice since the economic disaster both parties have voted against bills that would have given bankruptcy judges the ability to renegotiate mortgages, also known as cram down. This would have provided needed relief to homeowners and potentially prevented millions of foreclosures. Ironically it would probably also have helped avert many of these investigations and potential fraud suits. The fact that they’ve shot themselves in the foot is made clearer by the recent announcement that Old Republic National Title Insurance, among the nation’s largest title insurance companies, will no longer write new policies for foreclosed homes . As Dick Durbin (D-Ill) exclaimed after one of those votes, “And the banks — hard to believe in a time when we’re facing a banking crisis that many of the banks created — are still the most powerful lobby on Capitol Hill. And they frankly own the place.”  Of course, much like the bills Congress passed during the Bush years protecting oil companies from law suits after oil spills and airlines after 9/11 it wouldn’t be surprising if they sprang into action to defend the banks. The banks have yet to be held accountable for the destruction they’ve caused and the lives they’ve affected on a massive scale. But as Jamie Ranney also pointed out, “they can try and they probably will, but you can’t legislate away fraud.”   Join the hundreds of others who have told their bank horror story at www.shamethebanks.org

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Bank Of America Exec Signed, But Didn’t Read Up To 8,000 Foreclosure Papers Per Month

October 1, 2010

WASHINGTON (AP, ALAN ZIBEL) — A Bank of America official acknowledges in a legal proceeding that she signed up to 8,000 foreclosure documents a month and typically didn’t read them. The executive’s admission adds the nation’s largest bank to a growing list of mortgage companies whose employees signed documents in foreclosure cases without verifying the information in them. Two other companies, Ally Financial Inc.’s GMAC Mortgage unit and JPMorgan Chase, have halted tens of thousands of foreclosure cases after similar problems became public. The Bank of America executive said in a February deposition in a Massachusetts bankruptcy case that she signed 7,000 to 8,000 foreclosure documents a month. “I typically don’t read them because of the volume that we sign,” the executive said. The disclosure comes two days after JPMorgan said it would temporarily stop foreclosing on more than 50,000 homes so it can review documents that might contain errors. Last week, GMAC halted certain evictions and sales of foreclosed homes in 23 states to review those cases after finding procedural errors in some foreclosure affidavits. After GMAC’s announcement, state attorneys general in California and Connecticut told the company to stop foreclosures until it proves it’s complying with their state laws. The Ohio attorney general this week asked judges to review GMAC foreclosure cases. And in Florida, the state attorney general is investigating four law firms, two with ties to GMAC, for allegedly providing fraudulent documents in foreclosure cases. In some states, lenders can foreclose quickly on delinquent mortgage borrowers. But 23 states use a lengthy court process for foreclosures. They require documents to verify information on the mortgage, including who owns it. Florida, New York, New Jersey and Illinois are the biggest states with this process.

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Andrew Sum: Is Rising Structural Unemployment a Problem?

October 1, 2010

In recent months, a number of national economic analysts have referred to the persistence of high unemployment rates as the “new normal,” and some, including Narayana Kocherlakota, a regional Federal Reserve Bank President, have blamed rising structural unemployment as a source of the problem. This supposed rise in structural unemployment results from a mismatch between the skills required for available job openings and skills of unemployed workers. Yet very little substantive evidence has been offered in support of this hypothesis. The total number of job vacancies in the U.S. has been increasing modestly, in recent months, rising above 3 million in July. This still represents a vacancy rate of only slightly above 2% versus the massively greater number of unemployed, underemployed, and mal-employed workers (over 40 million). Knowledge of where those job vacancies are, their occupational/skill requirements, their durations, and reasons for remaining unfilled are critical to a proper interpretation of what is going on in the labor market. Unfortunately, available national job vacancy data do not provide any substantial answers to these important policy questions. However, several states including Florida, Massachusetts, and Minnesota do collect detailed information on existing vacancies. In the most recent vacancy surveys, between 32 and 45 percent of job vacancies in five states providing such data were part-time. In these states, there were approximately 8 unemployed workers seeking full-time jobs for every full-time job opening. Another issue that is critical to the validity of the mismatch hypothesis is evidence on the occupational characteristics of available job openings and their education/experience requirements. Skill mismatches imply the existence of a large pool of vacancies in high skill occupations (engineers, scientists, doctors, systems analysts, high level managers) with either above average formal educational requirements or long training durations that can lead to lags in producing a new set of qualified entrants. The available evidence from five states (Florida, Kansas, Massachusetts, Minnesota, Washington) on the educational requirements of job vacancies indicates that only 36% of the available job vacancies require the applicants to possess an Associate’s or higher degree. Applying this ratio nationally would yield just about 1 million job vacancies requiring an Associate’s or higher degree in June of this year. At that time there were 5.2 million unemployed U.S. workers with some years of college or an Associate’s or higher academic degree. When we add in mal-employed college graduates working in jobs that do not require a college degree, there were 17 million unemployed or mal-employed college graduates for these 1 million job vacancies. If skill mismatches were a serious problem in U.S. labor markets, then one would expect to find that many job openings were remaining vacant for a fairly long period of time. However, data on the durations of existing job vacancies available from three states reveal that the overwhelming share of job vacancies are very short-term in duration. Between 80 and 90 percent of the job vacancies in these three states were open for two months or less, with the vast majority of them (70%) open for less than 30 days. There are very few job vacancies that were open for more than two months (15%). The six month definition of long-term is that used by labor economists and the BLS in defining long-term unemployment. If we compare the estimated number of long-term unemployed in the U.S. in recent months (6.5 million) with the estimated number of long-term job vacancies, the ratio is 43-1. There is another approach to measuring whether labor markets are providing adequate job opportunities and experiencing serious mismatch problems. Ask the public. Repeatedly, over the first six months of this year, national public opinion polls have found an extraordinarily high degree of pessimism about the performance of the national economy and the state of U.S. or local labor markets. In a June 2010 ABC poll, 88% of the respondents rated the overall state of the U.S. economy as “not so good/poor”. Only 12% classified the economy as being in an excellent or good situation. Despite the official view announced in September by the National Bureau of Economic Research that the national recession ended sometime in June 2009, a May 2010 NBC /Wall Street Journal poll found that 76% of the public believed that the nation was still in a recession a year later. A March 2010 Pew Research Center poll on the public’s perception of job opportunities in their local home area revealed that 85% reported that “jobs are difficult to find” while only 10% though that there were plenty of jobs available. The 85% response was the highest since the national recession started at the outset of 2008. In a 2010 Pew Research Center poll, 28% of adults claimed that they had their hours reduced during the recession, 11% said they were forced to switch to a part-time job, and 23% reported a pay cut. All of these findings combined do not reveal anything close to a labor market experiencing a mismatch problem. Today, there are five official unemployed persons per every job vacancy in the nation, about 8 full-time unemployed per full-time vacancy, 10 unemployed or underemployed persons per every job vacancy, and 14 unemployed, underemployed, and mal-employed persons per job vacancy. The current degree of surplus is also likely the worst in the entire post-World War II era. In his classic 1944 text, Full Employment in A Free Society , the late William Beveridge of Great Britain noted that full employment of labor existed when “there were more available jobs than men. Jobs should wait not men.” How far removed we are from that situation today. To be worried about structural unemployment or labor mismatches with the massive degree of labor surplus currently prevailing in U.S. labor markets is not only intellectually dishonest but detracts from the more immediate need for active and comprehensive job creation efforts across the country to put the unemployed and underemployed back to work. The only labor shortage that exists today is “Honest Abes” in national economic reporting. Andrew Sum a Professor Economics and the Director of the Center for Labor Market Studies at Northeastern University.

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Andrew Sum: Is Rising Structural Unemployment a Problem?

October 1, 2010

In recent months, a number of national economic analysts have referred to the persistence of high unemployment rates as the “new normal,” and some, including Narayana Kocherlakota, a regional Federal Reserve Bank President, have blamed rising structural unemployment as a source of the problem. This supposed rise in structural unemployment results from a mismatch between the skills required for available job openings and skills of unemployed workers. Yet very little substantive evidence has been offered in support of this hypothesis. The total number of job vacancies in the U.S. has been increasing modestly, in recent months, rising above 3 million in July. This still represents a vacancy rate of only slightly above 2% versus the massively greater number of unemployed, underemployed, and mal-employed workers (over 40 million). Knowledge of where those job vacancies are, their occupational/skill requirements, their durations, and reasons for remaining unfilled are critical to a proper interpretation of what is going on in the labor market. Unfortunately, available national job vacancy data do not provide any substantial answers to these important policy questions. However, several states including Florida, Massachusetts, and Minnesota do collect detailed information on existing vacancies. In the most recent vacancy surveys, between 32 and 45 percent of job vacancies in five states providing such data were part-time. In these states, there were approximately 8 unemployed workers seeking full-time jobs for every full-time job opening. Another issue that is critical to the validity of the mismatch hypothesis is evidence on the occupational characteristics of available job openings and their education/experience requirements. Skill mismatches imply the existence of a large pool of vacancies in high skill occupations (engineers, scientists, doctors, systems analysts, high level managers) with either above average formal educational requirements or long training durations that can lead to lags in producing a new set of qualified entrants. The available evidence from five states (Florida, Kansas, Massachusetts, Minnesota, Washington) on the educational requirements of job vacancies indicates that only 36% of the available job vacancies require the applicants to possess an Associate’s or higher degree. Applying this ratio nationally would yield just about 1 million job vacancies requiring an Associate’s or higher degree in June of this year. At that time there were 5.2 million unemployed U.S. workers with some years of college or an Associate’s or higher academic degree. When we add in mal-employed college graduates working in jobs that do not require a college degree, there were 17 million unemployed or mal-employed college graduates for these 1 million job vacancies. If skill mismatches were a serious problem in U.S. labor markets, then one would expect to find that many job openings were remaining vacant for a fairly long period of time. However, data on the durations of existing job vacancies available from three states reveal that the overwhelming share of job vacancies are very short-term in duration. Between 80 and 90 percent of the job vacancies in these three states were open for two months or less, with the vast majority of them (70%) open for less than 30 days. There are very few job vacancies that were open for more than two months (15%). The six month definition of long-term is that used by labor economists and the BLS in defining long-term unemployment. If we compare the estimated number of long-term unemployed in the U.S. in recent months (6.5 million) with the estimated number of long-term job vacancies, the ratio is 43-1. There is another approach to measuring whether labor markets are providing adequate job opportunities and experiencing serious mismatch problems. Ask the public. Repeatedly, over the first six months of this year, national public opinion polls have found an extraordinarily high degree of pessimism about the performance of the national economy and the state of U.S. or local labor markets. In a June 2010 ABC poll, 88% of the respondents rated the overall state of the U.S. economy as “not so good/poor”. Only 12% classified the economy as being in an excellent or good situation. Despite the official view announced in September by the National Bureau of Economic Research that the national recession ended sometime in June 2009, a May 2010 NBC /Wall Street Journal poll found that 76% of the public believed that the nation was still in a recession a year later. A March 2010 Pew Research Center poll on the public’s perception of job opportunities in their local home area revealed that 85% reported that “jobs are difficult to find” while only 10% though that there were plenty of jobs available. The 85% response was the highest since the national recession started at the outset of 2008. In a 2010 Pew Research Center poll, 28% of adults claimed that they had their hours reduced during the recession, 11% said they were forced to switch to a part-time job, and 23% reported a pay cut. All of these findings combined do not reveal anything close to a labor market experiencing a mismatch problem. Today, there are five official unemployed persons per every job vacancy in the nation, about 8 full-time unemployed per full-time vacancy, 10 unemployed or underemployed persons per every job vacancy, and 14 unemployed, underemployed, and mal-employed persons per job vacancy. The current degree of surplus is also likely the worst in the entire post-World War II era. In his classic 1944 text, Full Employment in A Free Society , the late William Beveridge of Great Britain noted that full employment of labor existed when “there were more available jobs than men. Jobs should wait not men.” How far removed we are from that situation today. To be worried about structural unemployment or labor mismatches with the massive degree of labor surplus currently prevailing in U.S. labor markets is not only intellectually dishonest but detracts from the more immediate need for active and comprehensive job creation efforts across the country to put the unemployed and underemployed back to work. The only labor shortage that exists today is “Honest Abes” in national economic reporting. Andrew Sum a Professor Economics and the Director of the Center for Labor Market Studies at Northeastern University.

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

September 22, 2010

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

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Al Norman: Is It Wal-Mart, Or Small-Mart?

September 21, 2010

Smaller Stores Just A Necessary Adjustment By Al Norman The Wal-Mart corporation is like the guy who buys a huge SUV and drives it proudly into his driveway—only to find that the damn thing won’t fit into his garage. Instead of trying to build a new garage, he goes back to the dealership to trade in his SUV for a compact model. This week the media was driving stories about Wal-Mart’s “aggressive push” towards smaller stores that would fit into tight urban markets that don’t have 30 acre parcels of land lying around anymore. The traditional 185,000 square foot superstore just won’t squeeze into that urban garage. For Wal-Mart, this is a back to the future script. Sam Walton wrote proudly of his 35,000 square foot store in Springdale, Arkansas, which opened in 1964 and “quickly became our number one store in sales.” When David Glass, former Wal-Mart CEO, first went to visit a Wal-Mart in Harrison, Arkansas, the store he visited was 12,000 square feet. If Wal-Mart had stayed with 35,000 square foot stores, they would not have become the most reviled retailer in America today. Walton wrote years later, “It turned out that the first big lesson we learned was that there was much, much more business out there in small-town America than anybody, including me, had ever dreamed of.” But Walton himself was also afraid of getting too big. He once wrote: “Being big also poses dangers. It has ruined many a fine company–including some giant retailers—who started out strong and got bloated or out of touch or were slow to react to the needs of their customers.” But Walton’s small town dream is over. Same store sales are on the skids, domestic sales in the U.S. are harder and harder to mine, and the giant retailer is betting its dividend on foreign markets like China and India. In the U.S., the urban market is the new frontier for Wal-Mart, and that means shifting the paradigm from big stores in small towns, to small stores in big towns, like Chicago, Manhattan, and San Francisco. Next month Wal-Mart is going to spell out its small plans at its annual retail analyst’s meeting at the company’s headquarters in Bentonville. The store size being bandied about is a 20,000 square foot grocery store—about half the size of Wal-Mart’s Neighborhood Markets, of which there were only 181 units at the start of the corporation’s 2011 fiscal year. Hardly a successful roll out. But small boxes are not a new story. Last year at this time, Eduardo Castro-Wright, who was then Wal-Mart’s Vice Chairman of American stores, told the media, “The writing is on the wall, we are going to smaller stores.” Six years ago, Forbes carried a story about Wal-Mart’s 99,000 square foot superstore prototype, called the “Urban 99″ store. The article quoted Merrill Lynch as projecting that by 2013, 90% of Wal-Mart’s 200 new supercenters would be some variation of that Urban 99 model. Of course Merrill Lynch had no way of forecasting the coming recession, and the sharp drop in new store growth in American Wal-Mart units. In 2008, a real estate planner at Wal-Mart admitted, “We can generate as much sales, as much profit, from a smaller” store. And CFO Tom Schoewe told the retail analyst conference two years ago that Wal-Mart would be “migrating to a smaller footprint for the stores that we’re adding, more efficient, smaller stores.” So this latest media stir about 15,000 square foot “Marketside” grocery stores is not new news—but its still good news for Wal-Mart opponents. Wal-Mart will find much less opposition to 15,000 square foot stores than to 150,000 square foot stores, and the reasons are self-evident: residents want Wal-Mart to build outside of the box—to scale down their over-sized superstores. In urban areas, Wal-Mart has no choice: they have to scale down or sit it out. But the fight over scale is far from over. There are currently several dozen Wal-Mart big box battles raging across the country–all of them provoked by the large scale of stores being proposed. Despite what you are reading this week about smaller footprints—Wal-Mart is still shutting down 135,000 square foot stores to open up 200,000 square foot superstores. This suburban/rural strategy has not been abandoned. My own town of Greenfield, Massachusetts is now battling a Wal-Mart, having defeated them once 17 years ago. The 2010 version of Wal-Mart in Greenfield began at 160,000 square feet. After three years of spinning wheels, the project has been reduced to 135,000 square feet. But residents want to trim it down to 80,000 square feet—which is still nearly one and a half times bigger than a football field. Roughly 20 miles away, Wal-Mart is building a 200,000+ square foot store in the tiny town of Hinsdale, New Hampshire. It’s leaving a 100,000 square foot dead store just minutes away. Wal-Mart’s unsustainable policy of abandoning stores to build larger ones across the street has led to one of the most wasteful cast-off policies of any company in American retailing. The ‘dark stores’ that Wal-Mart has left—like a snake crawls out of its skin—are always orphaned because the company wanted bigger footprints. The scale-mania at Wal-Mart rages on. The truth is that the Small Mart movement is simply the latest strategy for busting into the urban markets that will not accept the classic over-the-top superstore. In rural America, Wal-Mart is still pursing a Big Mart strategy, proposing stores in the 160,000 to 203,000 square foot range. Mercifully, the recession has kicked a big hole in Wal-Mart’s rural growth plans—so the urban areas are now the focus of attention. Big stores or small, Wal-Mart remains one of the most profligate corporations in history, blanketing hundreds of thousands of acres with asphalt and concrete, and then leaving their dead stores for Wal-Mart Realty to sell. Public officials in urban markets should not be fooled by Wal-Mart’s “smaller is beautiful” change of heart. Wal-Mart will always be big at heart, and the damage it does to the local economy is anything but ‘small.’ Wal-Mart has become the bloated, out of touch company that dogged the dreams of Sam Walton. Al Norman is the founder of sprawl-busters.com, and the author of “The Case Against Wal-Mart. The Wall Street Journal called him a ‘one man anti-Wal-Mart cottage industry.”

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Art Brodsky: Purists and Zealots for Internet Freedom

September 10, 2010

To hear some big-time business columnists tell it, fighting for freedom is a bad thing. The usually sensible Steve Pearlstein at the Washington Post notes that, “net neutrality zealots” (also known as “ayatollahs of net neutrality”) worked themselves into a “self-righteous lather” over the Verizon-Google compromise on Net Neutrality, caring more about “principles” than the “real world.” For Joe Nocera over at the New York Times , the Verizon-Google deal was a “well-meaning proposal,” that is being set upon by ” fierce, unyielding proponents ” of an open Internet, a group that includes Public Knowledge as part of the “net neutrality purists.” These two columns by respected writers point to an unfortunate tendency among reporters who peer down from Olympian heights onto the world of mortals to bless a compromise as a way to settle a dispute, regardless whether the compromise is productive. There is the surface “pox on both their houses” approach, although it seems as if in practice the tendency further is distinguished by the pejorative descriptions of liberal or progressive parties, and rarely of conservative or business-oriented opinions or groups. (The progressive blogosphere calls this “Broderism” after Washington Post columnist David Broder, who for decades has preached for the non-existent middle ground.) For example, while calling public interest groups names, rarely are telephone and cable companies called out for spending millions of dollars in an attempt to gain control over what had been the most open and free platform for expression and commerce ever invented. Rarely, if ever, are rules seen as a solution to curbing bad corporate behavior — it’s always rules and regulations are seen as the tools of the radical fringe that wants to curb big businesses’ progress. It’s as if the Gulf disasters, the financial/mortgage meltdown and the contaminated eggs had never happened. Had this tendency been in existence a couple of hundred years ago, we might have seen this from prominent columnists: “The angry words from hotheads throughout the colonies, principally from Massachusetts and Virginia, are an affront to good sense. While some of what they want might be helpful, their attitudes are not. There must be a good middle ground, such as allowing Colonial legislatures to exist and to make rules in some areas, but not in others, which should be left to the Crown. Taxation and defense are properly the duty of the King and of Parliament, to be enforced by the Governor. Other items may be delegated to Colonial assemblies, subject to veto.” Then again, there was the dispute between abolitionists and those who favored the “peculiar institution” that existed 150 years ago. There were some compromises attempted, (See Missouri Compromise, Kansas-Nebraska Act) all of which failed. Would the equivalent of today’s columnists have written: “Somewhere between the rantings of abolitionists like William Lloyd Garrison and Henry Ward Beecher, who are peddling the nonsense slavery is evil, and the southern politicians like John C. Calhoun, who cling to the argument of states rights, is this stubborn reality: The southern economy needs to exist, supported by cheap labor. Instead of slavery, one compromise should be widespread adoption of long-term indentured servitude. The slaves of today would be freed, yet their labor would be tied to the land for years, ensuring the continued productivity of the southern economy.” Before all the flaming starts, take note: We are not comparing Net Neutrality to either colonial freedom or to slavery. This is an allegorical analysis of the foolhardiness of the faux evenhandedness and worthless compromise combined with a dose of irrelevant factoid and opinion. In this case, there is the small picture of Net Neutrality and the bigger picture of moving the economy to a broadband basis. Nocera, for example, repeats the Verizon/industry talking point that it’s “unrealistic” that all traffic should be treated the same, particularly in the wireless environment with “bandwidth hogs.” No one has said that telephone and cable companies can’t manage their networks. The issue is whether the company providing the network can favor one company’s content over another’s on the basis of a financial arrangement, i.e., payoff so that one service works better than another on the Internet. It has nothing to do with amount of bandwidth consumed – that’s the network provider’s problem. (And blaming customers for actually using the bandwidth they bought is not smart. It’s AT&T’s fault that it can’t keep up with the iPhone customer base, not the customers, as Nocera argues.) There is one Internet. People access it through a wire or from a wireless connection. Consumption of bandwidth is irrelevant to the discussion whether favoritism should exist. That’s why we “purists” don’t like the Verizon-Google “compromise.” It may be fine for Google, with its Android phones, and for Verizon, with its wireless network, but not for consumers who have one set of rules if connected by a network and another if connected through the air. That’s why we opposed it. The best story on the Verizon-Google deal is this one from AOL Daily Finance, which puts it into perspective. The whole point of the Internet is that customers choose what they want to do online, and companies, which offer services and features, have the opportunity to supply them. It is not a cable system; it is, to use Nocera’s sarcastic term, the “sacred Internet.” It’s sacred because no one has yet the ability to control it as cable operators choose what goes onto their networks. Yes, it’s necessary to prevent a company like Comcast from throttling the bandwidth of BitTorrent users (regardless of the amount of bandwidth they were using or what they were using it for — see Nocera again). They didn’t throttle streaming video, which uses a lot more network capacity. That’s why rules are needed, so that if a company does violate the openness principles, another company or a consumer can bring a complaint and the agency will have the authority to resolve it. There is no peril for a carrier now, or even a threat of one. Consumers don’t have great choice in broadband carriers and the legal status is uncertain. This is not “much ado about very little.” It’s much ado about keeping the Internet as it is based on law, not on corporate good will. That’s why the issue has to be decided in the public interest of everyone, not in the private interest of carriers. In her new book, Internet Architecture and Innovation , Stanford Professor Barbara van Schewick writes, “Leaving the evolution of the network to network providers will significantly reduce the Internet’s value to society.” That’s why the ” Third Way ” proposed by FCC Chairman Julius Genachowski makes sense. It would take back FCC jurisdiction over what is a service it should have jurisdiction over, yet without the burdens of all of the other regulation that accompanied the old “common carrier” regimes of the past. (Yes, future FCCs could change that, but that possibility exists any time.) It is a comprehensive solution that not only takes care of the issue of the open Internet, but opens the way for the Federal Communications Commission (FCC) to have the legal authority it needs to deal with affordable broadband, public safety, cybersecurity and a host of other issues. Yes, there are principles involved, principles that shape the real world and should be enforced in order for the “sacred Internet” based on freedom for consumers and web developers and service innovators to continue to exist. If that makes us “purists” and “zealots” and whatever else, then fine.

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Joan Blades: A Virtually Perfect Labor Day

September 7, 2010

I work from home. So do all the people who work with MomsRising.org and MoveOn.org , the two organizations I co-founded. It works great for us and has for years, and so, when I read that the number of U.S. telecommuters dipped to 8.7 million in 2009 from 9.2 million in 2006 (according to the IDC, a Framingham, Massachusetts research concern), I did a double take. What is going on? Word is that this drop is not due to job loss or employers discouraging virtual work. Rather, employees are too anxious to ask for any kind of special work arrangement in uncertain economic times. Social scientists explain that when we are fearful, we are less creative and tend to hunker down with what is familiar and feels safe. But I know, as an employer, what substantial research finds: that virtual work is a great way for small organizations to do more with less and for any workplace to boost the bottom line . I worry, this Labor Day, that employers and employees frozen in a defensive crouch are going to miss an opportunity for all of us to be more successful and improve our working lives. Though this might surprise people who opine about the influence of MoveOn.org (and MomsRising.org ), these organizations are entirely virtual. They have no physical headquarters. Offices cost money, and we choose to spend the funds we have on advocacy and education, instead of walls and floors. We also find that trusting our employees to work wherever it works for them means we get great people who are happy and remarkably productive. When my daughter gets sick, I don’t have to choose between getting my work done and being there for her, and if I want to go for a hike on Tuesday afternoon, I can. I work when the time is best for me and for the work I’m doing. I know from experience that intelligently structured virtual work is incredibly good for business and cost effective. We are not the only organizations that have discovered this. Most virtual workers work for traditional organizations with which we are all familiar. A recent study from Brigham Young University reports that telecommuting, coupled with flexibility, dramatically reduces work/life conflict and has saved millions of dollars for IBM. AT&T saved over 6 million dollars in real estate costs in New Jersey and realized millions of dollars in productivity gains when they embraced virtual work. Jet Blue’s call center is not in India; it is in homes in Utah, which lets the company realize cost savings while keeping jobs in the United States. Virtual and flexible work are management opportunities . While some organizations are embracing virtual work, even more people would like to try it. One survey on worker productivity found that nearly 60% of employees believe that telecommuting at least part time is the ideal work situation. 60% of federal agencies include virtual work in their emergency and continuity of operations plans in 2007. Yet only 7% of eligible federal employees regularly telecommute. The Employment Policy foundation suggested that 65% of jobs could be done remotely, yet less than 30% of managers and professionals work virtually even one day a week and far fewer in more blue-collar jobs. Clearly, we have a long way to go. The data about the benefits of virtual work are compelling. Is it really just unthinking fear that is stopping us? Change does create risk and new challenges. Individuals, managers, and even chief executives are feeling risk averse. It is not surprising that employees fear asking for flexibility or the ability to work virtually when they are fearful that their jobs might be cut. Likewise, managers who have the benefit of a hungry labor pool may not experience a strong push to make their employees’ lives better at the risk of having that change create unforeseen challenges. But businesses must recognize that there is a flipside to the risks of change – which is that there are risks in not changing, too. I have a hard time imagining a more efficient, environmentally sound, family-friendly work practice for a surprisingly broad swath of jobs in this country than virtual work. This is not the kind of opportunity business can afford to overlook. It is time for those of us that have experienced the benefits of these non-traditional work practices to reassure others that embracing these new practices is not only good for the bottom line, but necessary for success in the coming decade . Working virtually is what has enabled MoveOn.org and MomsRising.org to do so much with the resources we have. So I’m speaking out, and I hope others will too. This Labor Day, it is time to get serious about embracing virtual work. This blog is part of the Peaceful Revolution series that explores innovative ideas to strengthen America’s families through public policies, business practices, and cultural change. Done in collaboration with MomsRising.org , read a new post here each week.

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Joe Hansen: Restoring Pride and Fairness to American Jobs

September 5, 2010

If the past is prologue, what can we say about the future of American jobs this Labor Day? Rosy is not a term that comes to mind. Over the last 30 years we have seen workers’ wages remain essentially flat while worker productivity skyrocketed by 75 percent. The Economic Policy Institute refers to this phenomenon as a ” broad-based collapse of wage growth .” For three decades, American workers have been producing more, but taking home paychecks that don’t reflect their hard work. Consequently, we see the biggest pay gap in nearly a century. If this trend holds for another 30 years, a grim future awaits the next generation of American workers. But low-wage jobs don’t have to be our future, and a new national poll conducted by Lake Research for the United Food and Commercial Workers International Union (UFCW) shows that American voters want economic policies that address these inequities and seek to level the playing field for all Americans. Voters have a clear vision of what kind of economy they want. Voters understand the current economic situation is difficult, but they still believe that all jobs should pay a living wage, come with affordable, quality health care, and offer real retirement security. The poll, taken among 700 randomly-selected registered voters nationwide, shows: Eighty-seven percent of voters are very or somewhat concerned that America’s future jobs will be low wage and low benefit — including 65% who are very concerned Eighty-nine percent of voters agree that economic development should result in jobs with good wages and benefits that can support a family Eighty-four percent of voters agree that economic recovery means creating jobs with good benefits so people can afford to take care of their families, not low wage jobs with no benefits Eighty-four percent of voters favor requiring that government contracts go to companies that provide good paying jobs and benefits so that their employees don’t end up on welfare programs like Medicaid and food stamps At some point, we may see the restoration of high-paying manufacturing jobs, but in order to make jobs better for Americans now, we must look to the retail industry where immediate job growth will occur. A recent Department of Labor study confirms that the service sector will see the greatest job growth in the next decade. That means jobs for cashiers, clerks, and salespeople, among other service-sector positions. Unfortunately, Walmart provides the predominant model for retail jobs today. Companies like Walmart pay low wages and benefits, and provide mostly part-time jobs–practices that lower standards for all retail workers. These companies claim that retail jobs should be “starter jobs,” or “temporary jobs,” when in reality these jobs are the future of our economy, and already employ millions of Americans of all ages, educational levels, and economic backgrounds. The number one job in America, according to the Bureau of Labor Statistics, is retail salesperson–a position held by some 4.2 million people as of May 2009. Most of the 1.3 million UFCW members work in the retail industry: at grocery stores, retail clothing stores, or other retail jobs. They know firsthand that union retail jobs can be stable, middle-class jobs–the kind that come with affordable, quality health care, wages that pay the bills, and real retirement security. But the vast majority of the growing retail workforce is non-union, making it more and more difficult for union members to raise wages and benefits throughout the industry. And the economy is only making things more difficult. As the New York Times noted recently : With the country focused on job growth and with unemployment continuing to hover above 9 percent, comparatively little attention has been paid to the quality of the jobs being created and what that might say about the opportunities available to workers when the recession finally settles. There are reasons for concern, however, even in the early stages of a tentative recovery that now appears to be barely wheezing along. For years, long before the recession began, job growth had become increasingly polarized in this country. High-paid occupations that require significant amounts of education and training grew rapidly alongside low-wage, service-type jobs that do not, according to David Autor, a labor economist at the Massachusetts Institute of Technology …The recession appears to have magnified that trend… We can’t let this trend continue. It’s up to all of us, workers, shoppers, community members, and political leaders, to ensure that economic policies provide the opportunity to make all retail jobs good, career jobs. According to the Lake poll, a majority of voters believe job growth must be good job growth. In a number of polls Lake Research has found that a key economic frame for Americans is to have good-paying job no matter what the sector. To make that happen we must actively engage in the policy decisions that guide economic growth and job creation, and we must correct the current wage gap so that as worker productivity increases paychecks also increase. The future of work, and the future of America, is in our hands. Clearly, American voters want and expect good jobs — the kind that will keep families secure and America strong and competitive. If retail jobs are going to be a crucial part of America’s future, then retail jobs need to be the kind of jobs that support American families and communities. They must be the kind of jobs that Americans can be proud to work at — the kind that give more of us a shot at the American Dream.

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Joe Hansen: Restoring Pride and Fairness to American Jobs

September 5, 2010

If the past is prologue, what can we say about the future of American jobs this Labor Day? Rosy is not a term that comes to mind. Over the last 30 years we have seen workers’ wages remain essentially flat while worker productivity skyrocketed by 75 percent. The Economic Policy Institute refers to this phenomenon as a ” broad-based collapse of wage growth .” For three decades, American workers have been producing more, but taking home paychecks that don’t reflect their hard work. Consequently, we see the biggest pay gap in nearly a century. If this trend holds for another 30 years, a grim future awaits the next generation of American workers. But low-wage jobs don’t have to be our future, and a new national poll conducted by Lake Research for the United Food and Commercial Workers International Union (UFCW) shows that American voters want economic policies that address these inequities and seek to level the playing field for all Americans. Voters have a clear vision of what kind of economy they want. Voters understand the current economic situation is difficult, but they still believe that all jobs should pay a living wage, come with affordable, quality health care, and offer real retirement security. The poll, taken among 700 randomly-selected registered voters nationwide, shows: Eighty-seven percent of voters are very or somewhat concerned that America’s future jobs will be low wage and low benefit — including 65% who are very concerned Eighty-nine percent of voters agree that economic development should result in jobs with good wages and benefits that can support a family Eighty-four percent of voters agree that economic recovery means creating jobs with good benefits so people can afford to take care of their families, not low wage jobs with no benefits Eighty-four percent of voters favor requiring that government contracts go to companies that provide good paying jobs and benefits so that their employees don’t end up on welfare programs like Medicaid and food stamps At some point, we may see the restoration of high-paying manufacturing jobs, but in order to make jobs better for Americans now, we must look to the retail industry where immediate job growth will occur. A recent Department of Labor study confirms that the service sector will see the greatest job growth in the next decade. That means jobs for cashiers, clerks, and salespeople, among other service-sector positions. Unfortunately, Walmart provides the predominant model for retail jobs today. Companies like Walmart pay low wages and benefits, and provide mostly part-time jobs–practices that lower standards for all retail workers. These companies claim that retail jobs should be “starter jobs,” or “temporary jobs,” when in reality these jobs are the future of our economy, and already employ millions of Americans of all ages, educational levels, and economic backgrounds. The number one job in America, according to the Bureau of Labor Statistics, is retail salesperson–a position held by some 4.2 million people as of May 2009. Most of the 1.3 million UFCW members work in the retail industry: at grocery stores, retail clothing stores, or other retail jobs. They know firsthand that union retail jobs can be stable, middle-class jobs–the kind that come with affordable, quality health care, wages that pay the bills, and real retirement security. But the vast majority of the growing retail workforce is non-union, making it more and more difficult for union members to raise wages and benefits throughout the industry. And the economy is only making things more difficult. As the New York Times noted recently : With the country focused on job growth and with unemployment continuing to hover above 9 percent, comparatively little attention has been paid to the quality of the jobs being created and what that might say about the opportunities available to workers when the recession finally settles. There are reasons for concern, however, even in the early stages of a tentative recovery that now appears to be barely wheezing along. For years, long before the recession began, job growth had become increasingly polarized in this country. High-paid occupations that require significant amounts of education and training grew rapidly alongside low-wage, service-type jobs that do not, according to David Autor, a labor economist at the Massachusetts Institute of Technology …The recession appears to have magnified that trend… We can’t let this trend continue. It’s up to all of us, workers, shoppers, community members, and political leaders, to ensure that economic policies provide the opportunity to make all retail jobs good, career jobs. According to the Lake poll, a majority of voters believe job growth must be good job growth. In a number of polls Lake Research has found that a key economic frame for Americans is to have good-paying job no matter what the sector. To make that happen we must actively engage in the policy decisions that guide economic growth and job creation, and we must correct the current wage gap so that as worker productivity increases paychecks also increase. The future of work, and the future of America, is in our hands. Clearly, American voters want and expect good jobs — the kind that will keep families secure and America strong and competitive. If retail jobs are going to be a crucial part of America’s future, then retail jobs need to be the kind of jobs that support American families and communities. They must be the kind of jobs that Americans can be proud to work at — the kind that give more of us a shot at the American Dream.

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E. Coli Outbreak Puts Focus On Meat Oversight

September 3, 2010

ST. PAUL, Minn. — The first known U.S. outbreak linked to a rare strain of E. coli in ground beef is prompting a fresh look at tougher regulations to protect the nation’s meat supply. Three people in Maine and New York became ill this summer after eating ground beef traced back to a Cargill plant in Wyalusing, Pa. Cargill Meat Solutions, a subsidiary of Minneapolis-based Cargill Inc., recalled about 8,500 pounds of ground beef on Saturday, and regulators warned consumers to throw out frozen meat purchased at BJ’s Wholesale Clubs in eight eastern states. The ground beef had a use-by-or-freeze-by date of July 1. Dr. Elisabeth Hagen, who was appointed undersecretary of food safety at the U.S. Department of Agriculture nine days before the recall, has signaled interest in expanding federal oversight of meat beyond the most prevalent strain of E. coli. “In order to best prevent illnesses and deaths from dangerous E. coli in beef, our policies need to evolve to address a broader range of these pathogens,” Hagen said in a statement. The New York Times first reported the USDA interest in federal oversight of other strains of E. coli following the Cargill recall. The federal government currently requires meat plants to test for the most virulent strain of E. coli, O157:H7, which causes an estimated 70,000 illnesses a year. They don’t have to test for six other less common strains of E. coli, including the O26 version that sickened those involved the Cargill recall. Industry officials said tests aren’t widely available to detect the other strains of E. coli. They also said more testing isn’t the most effective way to keep meat safe. J. Patrick Boyle, who heads the American Meat Institute, warned Agriculture Secretary Tom Vilsack in a letter last month that more testing would cause “more harm than good” by imposing new costs and diverting attention from efforts to prevent toxins from getting into the food supply. “Testing doesn’t make food safe in and of itself. You have to have some preventive measures in place,” said James H. Hodges, the trade group’s executive vice president. Cargill spokesman Mike Martin said Friday that the latest outbreak shows the need to keep searching for solutions to reduce the potential health risks. He said Cargill worked with disease investigators to trace the outbreak and voluntarily recalled the product. He added that none of the three people who became sick were hospitalized. “Certainly I think we need to take a fresh look at this because of the apparent linkage of O26 to beef,” Martin said. Hundreds of varieties of E. coli live naturally in the intestines of cattle and other animals without making them sick. For people, symptoms of E. coli infection include bloody diarrhea, dehydration and in severe cases, kidney failure. Consumers can avoid getting infected from tainted meat by cooking it thoroughly and using a meat thermometer to make sure it reaches an internal temperature of at least 160 degrees. The BJ’s Wholesale Clubs affected by the voluntary recall are in Connecticut, Maine, Maryland, Massachusetts, New Hampshire, New York, New Jersey and Virginia, according to the company’s website.

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Video: Bloomberg’s Moroney on Massachusetts Earl Preparations: Video

September 3, 2010

Sept. 3 (Bloomberg) — Bloomberg’s Tom Moroney talks about the situation on the Massachusetts coast as Hurricane Earl approaches. Earl, still a Category 1 storm with 80-mph winds, is “losing its punch” as it heads north toward the Massachusetts coast, the National Hurricane Center said at 5 p.m. Moroney speaks with Carol Massar on Bloomberg Television’s “Street Smart.” (Source: Bloomberg)

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Video: Deutsche Bank’s Waugh Says M&A Is Starting to `Heat Up’: Video

September 2, 2010

Sept. 2 (Bloomberg) — Seth Waugh, chief executive officer of Deutsche Bank AG’s Americas division, talks with Bloomberg’s Melissa Long about investor confidence and merger and acquisition activity. Waugh speaks at Deutsche Bank’s Labor Day golf championship in Norton, Massachusetts, which is co-sponsored by the Tiger Woods Foundation. (Source: Bloomberg)

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Charlotte Dennett: "Let Them Eat Fish:" Reflections on Deceptive Advertising by Entergy and BP

September 1, 2010

As campaign season heats up in my home state of Vermont, environmentally conscious voters have been remarking on the similarity between media ads on local TV by Entergy, owner of the radiation-leaking Vermont Yankee nuclear plant, and BP, responsible for the worst environmental catastrophe in American history. Both Louisiana-based giants are trying to assure the public that the worst is past, that they are responsible corporate citizens cleaning up their respective messes, and the public has nothing to fear. But like the proverbial Pinocchio whose nose gets longer every lie, their respective PR teams have made their mutual cover-ups even more obvious. Consider the homey testimonial of a Vermont Yankee manager telling Vermonters how much he loves living near the Connecticut River, which runs adjacent to the aging plant where elevated levels of radioactive tritium and strontium 90 have been found in monitoring wells, in the groundwater and now, in the river itself. “The river is my home,” says site manager Russ Rusinki on camera. “I like to fish on it. I like to eat fish out of this. I like watching my daughter follow in my footsteps on this river. I have absolutely no concerns about my family living near Vermont Yankee. It’s a healthy environment. It’s a safe environment.” I’ve been sampling responses from Vermonters. They aren’t buying it. Remarks Mary Gagnon, a video store owner in Hardwick, Vermont: “It is one thing to say ‘I LIKE to eat fish out of this.’ It is another to actually eat the fish. Let’s see him eating the fish on a regular basis. Then we can talk.” Even if the fish were safe to eat, Vermonters cannot feel encouraged by the news released in May by radiochemists at the University of Waterloo in Canada that baby teeth of children living near the plant show Strontium-90 concentrations 62% greater than those in the general populations of Vermont and New Hampshire children. And this comes from samples taken during the last decade, before the reports in January 2010 of known radiation leaks. You know the saying, “Fool me once, shame on you; fool me twice, shame on me.” Most Vermonters are no longer fooled. They know that Entergy officials were caught lying to state officials, denying that Vermont Yankee had underground pipes leaking radionuclides when, in fact, the pipes were discovered in 2010 to be the source of not only the most recent leaks, but leaks going back to1998. Perhaps this explains why, according to The Center for Disease Control, Vermont has the highest cancer incidence rate among the young of any US state from 1999-2004. Windham County, where Vermont Yankee is located, has the highest death rate from cancer between 1999 and 2005 of any Vermont county (741 deaths). Equally significant, from 1996-2005 there was a fivefold increase in thyroid cancer in Vermont women. The Vermont Department of Health acknowledged this particularly finding as being statistically significant” given that thyroid cancers are linked to “excess radiation exposure.” News of the radiation leaks and Entergy’s lies dominated headlines in Vermont last February and convinced the Vermont Senate to vote against re-licensing the plant last spring. But the battle isn’t over yet. Entergy, mindful that the future of nuclear energy (like that of offshore oil drilling) hangs in the balance, will do everything possible to win back Vermonters’ trust. After all, it’s been 35 years since the Three Mile Island meltdown. The much vaunted “nuclear renaissance” under the Obama administration seems to be on hold until the Vermont Yankee issue is resolved. No wonder Entergy officials have vowed after losing the Senate vote that they would remain “determined to prove our case to the legislature, state officials and the Vermont public” that the plant is a “vital, safe and reliable source of clean power.” BP, meanwhile, has its own shareholders worrying about rising legal costs and evidence of liability. Ever since it was able to cap the breach of its Deepwater Horizon rig, it has been putting out “all is well” signals through the media, with the federal government often acting as a willing partner. Thus, on August 9, the New York Times quoted government sources as saying “Three quarters of the oil from the Deepwater Horizon leak has already evaporated, dispersed, been captured or otherwise eliminated – and that much of the rest is so diluted that it does not seem to pose much additional risk of harm.” But local fishermen and independent journalists disagreed. They reported that the 1.8 million gallons of highly toxic dispersant that made oil disappear is profoundly affecting the health of their fellow workers and families, turned the entire Gulf into an eery green color, and killed off far more wildlife than was being reported. On August 23, even the Times had to reverse itself, challenging the government’s “rosy narrative” by citing a study by the University of Georgia saying the rate of evaporation and biological breakdown “had been greatly exaggerated.” The editorial also cited a report in Science magazine that a team of scientists had found an underground oil plume the size of Manhattan. The government, the Times went on, “finds itself challenged” on another front, by its insistence on the safety of fish caught in the water. “Senior government officials announced flatly …that it is safe to eat fish and shrimp caught in the 78 percent of federal waters in the Gulf that are open to fishing – an assertion reinforced by photo-ops of President Obama eating seafood during a visit to the Gulf.” Should we be reassured? The Times , having been hoodwinked previously, reserved some skepticism, noting that oil spill critic Rep. Ed Markey of Massachusetts thought that “seafood now available is risk free” but that the government had not been testing enough in “off limits areas where oil still exists.” Above all, the editorial concluded, the Obama administration’s “larger problem is one of credibility, which can only be fixed with much clearer answers about the spill.” Meanwhile, clearer answers continue to pour in from around the Gulf, where local fishermen report finding shrimp coated with oil, and seeing crabs, stingrays, and dolphins desperately trying to escape the water, whose oxygen has been depleted by the use of chemical dispersants. This brings me to the role of whistleblowers in defying the PR spin of both corporations. Thanks to EPA whistleblower Hugh Kaufman, we learn that “The sole purpose…for dispersants is to keep a cover up going for BP to try to hide the volumes of oil that has been released and save them hundreds of millions, if not billions, of dollars of fines.” In Vermont, the heroes of the day are Arnie and Maggie Gunderson, whose Fairewinds consultancy firm succeeded in providing enough sound evidence of Vermont Yankee’s problems to break through industry lies and help convince the Vermont Senate to vote against re-licensing Vermont Yankee. Now the Gundersons are questioning the “credibility of the whole nuclear regulatory process in the state of Vermont,” providing evidence in a recent report to the legislature that the Department of Health and the Department of Public Service had been “actively communicating with Entergy in an attempt to discredit” the efforts of Fairewinds to analyze the plant. The Gundersons have an important ally in this ongoing battle: Vermont Senate ProTem President Peter Shumlin, who helped shepherd the anti-relicensing vote in the Vermont Senate last spring and on August 24th emerged as the winner in a highly contested, five-way race in the Democratic Party primary for governor. Pending a recount requested by runner-up Doug Racine, who is also opposed to extending Vermont Yankee’s license beyond 2012, Shumlin will be facing down Republican gubernatorial candidate Mark Dubie, who supports Vermont Yankee. As the battle lines are tightly drawn, Vermonters will be hearing from another candidate as well: this writer, who is running on the Progressive Party ticket for attorney general. I’ll be challenging the incumbent on his failure to deal with consumer fraud in Entergy’s advertising, and will strive for whistleblower protection in Vermont, which has the worst record in the country. It should be an interesting campaign with national ramifications. Stay tuned. You can find out more about Charlotte’s campaign for Vermont attorney general at www.chardennett.org . Journalist and attorney Charlotte Dennett is the author of The People v. Bush: One Lawyer’s Campaign to Bring the President to Justice and the National Grassroots Movement She Encounters Along the Way , published by Chelsea Green.

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Block Island Wind Farm Proposal Approved By Rhode Island Energy Commission

August 11, 2010

WARWICK, R.I. — The Rhode Island Public Utilities Commission on Wednesday approved a power purchase agreement for a proposed wind farm off the coast of Block Island, ruling over the objection of critics who slammed the arrangement as a sweetheart deal meant to benefit one developer. Attorney General Patrick Lynch vowed to appeal the decision to the state Supreme Court, saying in a statement that the deal makes ratepayers buy “grossly overpriced electricity.” The agreement between Deepwater Wind, LLC, a New Jersey-based developer, and National Grid, the state’s dominant utility, involves a proposed eight-turbine pilot project connected by a transmission cable to the mainland. The three-member commission, a quasi-judicial body, approved the agreement after weighing economic and environmental benefits and whether the terms were reasonable for ratepayers. The 20-year agreement calls for National Grid to buy the energy generated from the wind farm at 24.4 cents per kilowatt hour. Deepwater Wind CEO Bill Moore said in a statement that the company was pleased with the decision, which he said solidifies “Rhode Island’s leadership position in offshore wind development.” The commission unanimously agreed that wind energy could reap an environmental benefit but split 2-1 on other issues. Commissioner Mary Bray repeatedly voiced skepticism, saying the agreement would prove a long-term detriment to the economy by hurting ratepayers and small businesses that are already struggling. “Would any reasonable person invest a substantial amount of money into something they know will at best cost three times what they will possibly get out of it?” Bray asked. “That is what we have here.” The commission in March rejected a similar agreement as too costly for ratepayers. The decision led the General Assembly to come up with new legislation, passed at the end of the legislative session and signed into law by Gov. Don Carcieri, aimed at speeding the regulatory approval process. The law requires the commission to issue a written decision approving the agreement within 45 days of it being filed, provided that the deal was commercially reasonable for ratepayers, contained economic and environmental benefits and included provisions allowing for a decrease in pricing. Critics say the bill essentially mandated the approval of the agreement without giving the utility commission enough time to review it. “I think the commission did exactly what the Legislature dictated it to do,” said Tricia Jedele, a vice president of the Conservation Law Foundation and director of its Rhode Island Advocacy Center. Lynch said the project was unfair and anti-competitive. “The dreadful impact that this will have on the state is not something that I will take lying down,” he said in an interview after the vote. The federal government in April approved plans for the nation’s first offshore wind farm – a 130 turbine project in Nantucket Sound. National Grid has agreed to pay 18.7 cents per kilowatt hour, starting in 2013, for half the power produced by the project. That deal, which has the backing of Attorney General Martha Coakley, still needs to be approved by Massachusetts regulators.

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Marty Zwilling: Who Is Getting Venture Capital Money This Year?

August 3, 2010

I’m a strong believer that investors invest in people, before they invest in a business plan, or an idea. But until now, I’ve never seen a study of exactly how that plays out for start-up founders for current venture-backed companies, specifically: race, age, experience and the number of founders per company. A new study, just published by CB Insights, titled Venture Capital Human Capital Report , summarizes these three characteristics for private early-stage Internet ventures funded in the US during the first six months of 2010. The significant findings include the following: Founders need to live in the right place. No surprises here. California (Silicon Valley), New York (NYC), and Massachusetts (Boston) are the places to be in the US for venture capital attention. Almost 80% of the funding handed out in the US consistently comes from these three locations. Whites and Asians lead the race. 87% of funded founders are white, which is not too far above the US population of 77% white. More notably, the second largest group receiving funding was Asians, at 12%, despite comprising only 4% of the population. All-Asian founding teams raise the largest rounds. Asian teams in California raised median funding rounds of $4.4M, significantly higher than the $3M raised by mixed or all-white founding teams. In other locations, the trend was more equal, even somewhat reversed in New York and Boston. Wunderkinds don’t have the magic touch. The average age of founding teams getting funded is in the Gen-X, 35-44 year age range. However, the highest median funding did go to those in age range 26-34 years old. Amazingly, no founding teams in the Gen-Y 18-25 year range received any funding in California. Experience does count. Fully 39% of founders funded were formerly CEOs or had founded prior companies. Other common previous roles were executives in Sales, Marketing, and Product Management, all suggesting that VCs back experience. More founders generally means more money. Overall the majority of companies have two or more founders, but over a third are led by one founder. More founders does not necessarily result in larger funding rounds, but the highest median funding generally goes to companies which have two or more founders. Going solo works better on the East Coast. Co-founder companies are the norm in California, but 40-50% of the start-ups in New York and Massachusetts have only one founder. In New York, these solo efforts even raised more money, with a median of $4M. If you don’t live in these corridors, don’t assume that you can simply incorporate in the state, or email your proposals there and be considered like a local. At minimum, you need to get an introduction from a local player, or better yet, set up a local office and network there. Investing is all about people-to-people relationships. If you are from outside the US, especially Asia, experts tell me that the focus is even more on relationships. George Wang, founder and chairman of the Beijing-based Chinese Professional Network (CPN), recommends that anyone from the West wanting to get involved in Chinese start-ups slow the pace down and “Spend six months and get to know the place and the people.” If you need funding, focus first on the human side of venture capital, before you rush to pitch your plan. The evidence confirms that from a funding perspective, a successful start-up is more about the right people being in the right place at the right time, versus the technology or solution.

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Video: Kerry Says Broad Climate-Change Bill Is `Not Dead’: Video

July 23, 2010

July 23 (Bloomberg) — U.S. Senator John Kerry, a Massachusetts Democrat, says his comprehensive climate-change bill is “not dead” after Senate Majority Leader Harry Reid introduced a more limited energy bill that doesn’t include a cap on greenhouse gas emissions. Kerry spoke in an interview on Bloomberg Television’s “Political Capital With Al Hunt” airing this weekend. Hunt discusses the Kerry interview and new House ethics charges against U.S. Representative Charles Rangel on “InBusiness With Margaret Brennan.” (Source: Bloomberg)

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Foreclosures Reduce A Home’s Value By 27%, MIT Study Finds

July 21, 2010

Thinking about defaulting on your mortgage? You might be putting a serious damper on the value of neighbor’s home. A single foreclosure can decrease value of homes within 250 feet to drop by an average of one percent, according to a recent MIT study . The study, which examined 1.8 million home sales in Massachusetts from 1987 to 2009, also found that the typical foreclosed home has its post-foreclosure price slashed by an average of 27 percent. (That number tends to be larger for houses with “low-priced characteristics in low-priced neighborhoods,” the study found.) By contrast, the authors note, if a house is sold after the death of an owner, the value drops five to seven percent. If a homeowner declares bankruptcy, the study shows, the price only falls three percent. Why do foreclosures cause such a large decline in a home’s price relative to other kinds of forced sales? In the study’s working paper, MIT economist Parag Pathak and two Harvard researchers, John Y. Campbell and Stefano Giglio say that foreclosed houses sell at such low prices “both because they may have been physically damaged during the foreclosure process, and because financial institutions have an incentive to sell them quickly.” Read the whole report below: Forced Sales –

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Ray Brescia: Judging the Bankers: The Financial Crisis and the Courts

July 19, 2010

July 15th, the day that the financial reform bill passed the Senate, will likely serve as a critical milestone in the campaign to create a new legal infrastructure for the financial industry, one that, hopefully, will serve as a bulwark against risky conduct and future financial crises. Much work remains to be done, however. What’s more, financial reform legislation, the new regulations that need to be generated as a result of the law, and the creation of a Consumer Financial Protection Agency will do little to compensate for the losses caused by the present financial crisis. If those responsible for the financial crisis are to be held accountable, grassroots efforts, like the Move Your Money campaign, will be well served by complementary efforts launched in the courts. Along those lines, another important event occurred on July 15th, one that may serve as a key turning point in the campaign to hold banks accountable for their responsibility for bringing about the present crisis. As the whole world now knows, last week, the Securities and Exchange Commission announced that it was settling its landmark securities fraud case against Goldman Sachs for some of the investment bank’s shady securities practices. The practices challenged by the SEC included allegations that the investment bank created investment vehicles doomed to fail: vehicles that were created in large part for some clients to bet that they would fail, while still other clients were led to believe they would not. The settlement, for over $500 million, is one of the largest securities fraud settlements in history. While some may see it as a slap in the wrist for Goldman, the settlement may have profound repercussions across bank board rooms and litigation war rooms across the country. Many on Wall Street might hope that the Goldman settlement closes the book on accountability for the banking industry for its role in bringing about the financial crisis. While it may indeed be the beginning of the end for Wall Street accountability, it is more likely that this is, as Winston Churchill once said in the depths of World War II, only the end of the beginning. Over the last few weeks, in addition to the Goldman settlement, a few critical events have also unfolded. Attorney General Richard Cordray of Ohio announced a $725 million settlement with AIG in a lawsuit over losses by Ohio pension funds due to that company’s misdeeds. In addition, for $102 million, Attorney General Martha Coakley of Massachusetts settled its suit with Morgan Stanley over its practices in funding risky and abusive subprime lending in that state. And the Federal Housing Finance Agency filed dozens of subpoenas with an undisclosed list of investment banks that specialized in marketing mortgage-backed securities and sold such securities to Freddie Mac and Fannie Mae, perhaps under faulty marketing materials and false pretenses. Those subpoenas may reveal information that could force the investment banks to buy back certain securities, compensating the GSEs for the losses they (i.e., American taxpayers) have suffered due to those investments. The cost of such buybacks could run in the tens of billions of dollars. Finally, in a closely watched race, the Democratic candidate for Texas Attorney General, Barbara Ann Radnofsky, has made her argument that the state should sue the investment banks–like Texas and many other states did successfully against tobacco companies in the 1990s–a campaign issue with her Republican rival, current Attorney General Greg Abbott. Rather than taking the air out of such campaigns, the Ohio AIG agreement, Coakley’s settlement with Morgan Stanley and the Goldman agreement will likely embolden efforts to identify investment banks’, mortgage banks’ and credit ratings agencies’ complicity in, and unjustified profits from, the lead up to the financial crisis. As the old saying goes, a lie gets half way around the world before the truth gets its boots on. Perhaps the lies that “no one saw this coming,” “the fault lies with low-income borrowers who had no business thinking they could be homeowners,” and “America needs Wall Street to bathe in profits,” may have gotten half way around the world. It seems, however, that the truth may have its good shoes on and is marching up the courthouse steps.

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Wall Street Reform Bill Heads To Final Vote This Week

July 14, 2010

“This reform is good for families, it is good for businesses, it’s good for the entire economy,” Obama said as he prodded the Senate to act quickly. Passage would represent a signature achievement for the president just four months after he signed massive health care legislation into law. The final vote comes amid lingering public resentment of Wall Street, but the legislation’s symbolic and political impact is likely to be diminished by anxiety across the country over jobs and the economy. Reid as much as acknowledged that political reality Tuesday, blaming “greed on Wall Street” for the country’s economic troubles. “It triggered the recession,” he said. “It’s what suffocated the job market and robbed trillions of dollars of people’s savings – trillions.” Support for the bill jelled Tuesday after conservative Democratic Sen. Ben Nelson of Nebraska announced he would vote for the bill after raising concerns the previous day. Obama noted that the bill is getting backing from Republican Sens. Scott Brown of Massachusetts and Olympia Snowe and Susan Collins, both of Maine. Snowe and Brown announced their support on Monday. “Three Republican senators have put politics and partisanship aside to support this reform, and I’m grateful for their decision,” Obama said as he announced his nomination of Jacob Lew to be the new director of the White House budget office. The 2,300-page bill aims to address regulatory weaknesses blamed for the 2008 financial crisis that fueled the worst recession since the 1930s. It gives regulators broad authority to rein in banks, limit risk-taking by financial firms and supervise previously unregulated trading. It also makes it easier to liquidate large, financially interconnected institutions, and it creates a new consumer protection bureau to guard against lending abuses. While Democrats are ready to cast the GOP as an ally of Wall Street, Republicans have portrayed the bill as government overreach that would make lending more expensive, increase costs for consumers and hurt U.S. businesses. Republicans repeatedly and fruitlessly tried to expand the bill to include changes to government-controlled mortgage finance giants Fannie Mae and Freddie Mac. “The vast majority of our members felt that it was not a step in the right direction, that it perpetuated too-big-to-fail, that it was supported by Goldman Sachs and opposed by our community banks,” Senate Republican leader Mitch McConnell of Kentucky said. A trade association representing community bankers, however, circulated a memo Tuesday saying some criticism that the bill would harm small banks “is so extreme it practically implies the end of life as we know it.” The commentary from top Independent Community Bankers Association officials Jim MacPhee, Mike Menzies and Sal Marranca argues that the bill contains important exemptions for smaller institutions. “Some of those provisions will directly benefit community banks’ bottom lines. Others are designed to buffer community banks from the actions lawmakers were intent on taking to rein in the megabanks and nonbank financial firms,” they wrote to association members. Senate Banking Committee Chairman Christopher Dodd, D-Conn., who helped write much of the bill with House Financial Services Committee Chairman Barney Frank, said the Senate had arrived at a “historic moment,” and urged senators to “set up a regulatory structure that makes it possible for us to address future economic crises, as certain as they will occur.” The House approved the bill last month, with just three Republicans voting in favor. But opposition to the bill from Democratic Sen. Russ Feingold of Wisconsin, and the death of Sen. Robert Byrd, D-W.Va., created new uncertainty for the bill in the Senate. After Collins, Snowe and Brown decided to break with their party and support the bill, passage seemed assured. Then Nelson, who voted for a Senate version of the bill, surprised Democratic leaders Monday by voicing his concerns. A day later, Nelson was back on board after receiving assurances that financing of the consumer protection bureau would not be open-ended and that the head of the bureau would be accountable to Congress. That means the three Republican supporters, 55 Democrats, and two independents now add up to the precise number of votes needed to beat back potentially fatal procedural votes. “It is in America’s best interests that risks to our financial system are identified and addressed before they threaten our nation’s financial stability again,” Nelson said in a statement. The three Republicans in the Senate won crucial concessions to secure their votes. Collins insisted on tougher rules on the assets that banks keep in their reserves to guard against losses. Snowe helped insert a provision that gives small businesses a greater say in any rules written by the consumer protection bureau. And Brown persuaded lawmakers to ease restrictions on banks investing in hedge funds and private equity – a step designed to help Massachusetts-based institutions.

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Segue Manufacturing Services Renews Focus on Quality and Welcomes New VP of Engineering and Quality

July 13, 2010

LOWELL, MA–(Marketwire – July 13, 2010) –  Segue Manufacturing Services (Segue) is proud to announce Brian Desmarais as the new Vice President of Engineering and Quality. Brian comes to Segue with a wealth of knowledge and experience in the field, centering on and around quality management, product development, program management, systems engineering, and customer relationship management. With Brian’s experience and previous positions in the business, Segue strengthens and renews its commitment to quality and strives to win a future Massachusetts Quality Award.

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Olympia Snowe Says She’ll Vote For Financial Reform

July 12, 2010

WASHINGTON (AP) — Sens. Olympia Snowe and Scott Brown pushed sweeping financial legislation to the edge of final passage Monday, both announcing they intend to support the regulatory overhaul despite initial misgivings. Snowe of Maine and Brown of Massachusetts join Susan Collins of Maine as three crucial Republican votes for the legislation. “While not perfect, the legislation takes necessary steps to implement meaningful regulatory reforms, create strong consumer protections and restore confidence in the American financial system,” Snowe said in a statement Monday evening. In breaking with the rest of the Republican Party, the three lawmakers appeared to give Democratic leaders the 60 votes needed to overcome procedural hurdles facing the legislation. Majority Leader Harry Reid of Nevada said the legislation would be wrapped up this week. “We will finish our work on this bill this week to ensure that these critical protections and accountability for Wall Street are in place as soon as possible.” Reid said in a statement. He commended the three Republicans. “Despite the difficult political climate, these Republicans have joined Democrats to support these common-sense protections for consumers, investors and financial institutions that will help prevent another financial crisis,” Reid said. Democratic Sen. Ben Nelson of Nebraska kept the vote count in limbo Monday, saying he remained undecided on the legislation. Nelson voted for an earlier Senate version of the bill. “We’ve got some concerns that some of the banks in Nebraska have raised,” Nelson said Monday. “We also have some banks in Nebraska saying vote for it. We’re trying to balance out the concerns that have been raised. There’s a certain amount of uncertainty. You don’t have regulations written. You don’t know who’s going to be the head of the consumer protection bureau.” A fourth Republican who voted for the Senate version in May, Charles Grassley of Iowa, has indicated he has reservations as well. The legislation attempts to rein in banks, police previously unregulated markets and provide a new array of consumer protections. It aims to avoid a recurrence of the 2008 financial crisis that helped drive the country into the worst recession since the Great Depression. Without Nelson, Democrats would have to wait for West Virginia Gov. Joe Manchin, who is a Democrat, to fill the vacancy created by the death of Sen. Robert Byrd. Manchin said Monday that he would fill the vacancy as early as Friday and no later than Sunday. Manchin’s appointment would be expected to vote for the legislation. Like Snowe, Brown won concessions in the bill and said Monday that the legislation “is a better bill than it was when this whole process started.” “While it isn’t perfect, I expect to support the bill when it comes up for a vote,” he said in a statement. “It includes safeguards to help prevent another financial meltdown, ensures that consumers are protected and it is paid for without new taxes.”

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Video: Elliott Says Congress Will Pass Financial Rules Overhaul: Video

July 12, 2010

July 12 (Bloomberg) — Douglas Elliott, a fellow at the Brookings Institution, talks about the outlook for legislation to overhaul U.S. financial regulation. Senator Scott Brown, a Massachusetts Republican, says he will back the bill when it comes up for final approval in the Senate, moving Democrats closer to the 60 votes needed to pass the measure. Elliott talks with Carol Massar and Matt Miller on Bloomberg Television’s “Street Smart.” (Source: Bloomberg)

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ITA Software: Google Buys Travel Software Maker For $700M

July 2, 2010

SAN FRANCISCO — Google Inc. plans to buy travel technology company ITA Software Inc. in a $700 million deal that would enable the Internet search leader to steer more of the airline reservations booked on the Web. The all-cash acquisition announced Thursday signals Google’s intention to challenge flight-comparison services that are ITA customers, including Kayak, FareCompare, Hotwire and Microsoft Corp.’s Bing Travel. The deal is likely to face a rigorous review by federal antitrust regulators. “There is clearly more room for competition and innovation” in online travel, Google CEO Eric Schmidt said in a conference call. “We will improve the way flight information is organized.” ITA Software, a 500-employee company created in 1996 by computer scientists at the Massachusetts Institute of Technology, sells technology that helps run the reservation systems of many airlines, including American, Southwest, Alaska and Continental. Its software also powers the tools that other travel websites use to track air fares. The widespread reliance on ITA’s technology means federal regulators are likely to spend six months to a year trying to determine whether the acquisition will give Google an unfair advantage in the rapidly growing online travel market, said Ted Henneberry, an antitrust lawyer in Washington for Orrick, Herrington & Sutcliffe. “This is going to raise a lot of eyebrows,” he said. Schmidt declined to predict when the deal might close, but said he expected Google would ultimately win approval after regulators take a “fair amount” of time to review the deal. “We are pretty confident that this is pro-competitive and pro-consumer,” Schmidt said. He declined to say how much Google will have to pay if the proposed purchase is blocked by regulators. Both the Federal Trade Commission and U.S. Justice Department declined to comment Thursday. Online travel industry analyst Henry Harteveldt predicted the acquisition will be cleared because ITA Software isn’t a direct competitor to Google. If it clears the antitrust hurdle, Google will be picking up expertise that will help improve the quality of its search results in one of electronic commerce’s biggest markets. Consumers and small-business travelers in the U.S. will spend about $45 billion on airline tickets booked online this year, and that figure is expected to rise to $59 billion by 2014, Harteveldt said. And with thousands of engineers at its disposal, Google conceivably could build upon ITA’s success in the airline industry to expand into hotel, rental car and cruise reservations. Google is counting on ITA’s expertise to improve the quality of its search results when people are looking to make airline reservations. Schmidt predicted the biggest winners in this deal would be consumers, but he also predicted Google would be able to drive more traffic to airlines and travel agencies such as Orbitz and Expedia. Google would profit from ITA’s technology by selling more ads alongside the flight data. Bing has been picking up more traffic with features that help people figure out whether the prices of airline tickets are likely to increase or decrease. Like other search engines specializing in travel, Bing checks multiple sites at once for the best deals and sends users to those sites to book there. Travel websites generally earn fees for sending traffic to flight booking sites, but Google appears more interested in improving its travel search service so that it can retain users and sell more ads. “That’s the allure for them,” said Gary Reback, an antitrust attorney who has been trying to convince regulators that Google has been abusing its power. “They want to control all that traffic” that has been going to the specialty travel sites. Google intends to honor all of ITA’s existing contracts if the acquisition is approved. It’s unclear whether Google would still want to work with some of its rivals after the contracts expire. This isn’t the first Google acquisition to come under intense scrutiny. Regulators took nearly a year to approve the company’s $3.2 billion purchase of online ad service DoubleClick in 2008 and six months to OK its recent $750 million takeover of mobile ad service AdMob. Those successes may have emboldened Google to buy ITA Software, too, Henneberry and Reback said in separate interviews. “If the government lets this one go through, then I don’t know what it will take for them to stop any deal” by Google, Reback said. Shares in Google rose 40 cents to $439.89 in extended trading Thursday after the announcement. Earlier, its shares ended the regular session down $5.46, or 1.2 percent, to close at $439.49. ___ AP Business Writer Marcy Gordon in Washington contributed to this report.

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Flying Car Slated For Sale Next Year

July 1, 2010

WASHINGTON — If cars had wings, they could fly – and that just might happen, beginning next year. The company Terrafugia, based in Woburn, Mass., says it plans to deliver its car-plane, the Transition, to customers by the end of 2011. It recently cleared a major hurdle when the Federal Aviation Administration granted a special weight limit exemption to the Transition. “It’s the next ‘wow’ vehicle,” said Terrafugia vice president Richard Gersh. “Anybody can buy a Ferrari, but as we say, Ferraris don’t fly.” The Transition is a long way from cartoon dad George Jetson’s flying car zooming above traffic, or even the magical Chitty Chitty Bang Bang. “There is no launch button on the (instrument) panel,” Gersh noted. Rather, the car-plane has wings that unfold for flying – a process the company says takes one minute – and fold back up for driving. A runway is still required to takeoff and land. The Transition is being marketed more as a plane that drives than a car that flies, although it is both. The company has been working with FAA to meet aircraft regulations, and with the National Highway Traffic Safety Administration to meet vehicle safety regulations The company is pitching the Transition to private pilots as a more convenient – and cheaper – way to fly. They say it eliminates the hassle trying to find another mode of transportation to get to and from airports: You drive the car to the airport and then you’re good to go. When you land, you fold up the wings and hit the road. There are no expensive hangar fees because you don’t have to store it at an airport – you park it in the garage at home. The plane is designed to fly primarily under 10,000 feet. It has a maximum takeoff weight of 1,430 pounds, including fuel and passengers. Gas mileage on the road is about 30 mpg. Terrafugia says the Transition reduces the potential for an accident by allowing pilots to drive under bad weather instead of flying into marginal conditions. The Transition’s price tag: $194,000. But there may be additional charges for options like a radio, transponder or GPS. Another option is a full-plane parachute. “If you get into a very dire situation, it’s the ultimate safety option,” Gersh said. So far, the company has more than 70 orders with deposits, he said. Terrafugia is Latin for “escape from the land.” The company was founded in 2006 by five Massachusetts Institute of Technology grad students who were also pilots. They received some seed money from the school. The concept of a car-plane has been around since at least the 1950s, but it’s possible that Terrafugia may become the first company to mass-produce one, FAA spokeswoman Laura Brown said. “We’re working very closely with them, but there are still some remaining steps,” Brown said. ___ On the Net: Terrafugia http://www.terrafugia.com/ Federal Aviation Administration http://www.faa.gov

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Flying Car Slated For Sale Next Year

July 1, 2010

WASHINGTON — If cars had wings, they could fly – and that just might happen, beginning next year. The company Terrafugia, based in Woburn, Mass., says it plans to deliver its car-plane, the Transition, to customers by the end of 2011. It recently cleared a major hurdle when the Federal Aviation Administration granted a special weight limit exemption to the Transition. “It’s the next ‘wow’ vehicle,” said Terrafugia vice president Richard Gersh. “Anybody can buy a Ferrari, but as we say, Ferraris don’t fly.” The Transition is a long way from cartoon dad George Jetson’s flying car zooming above traffic, or even the magical Chitty Chitty Bang Bang. “There is no launch button on the (instrument) panel,” Gersh noted. Rather, the car-plane has wings that unfold for flying – a process the company says takes one minute – and fold back up for driving. A runway is still required to takeoff and land. The Transition is being marketed more as a plane that drives than a car that flies, although it is both. The company has been working with FAA to meet aircraft regulations, and with the National Highway Traffic Safety Administration to meet vehicle safety regulations The company is pitching the Transition to private pilots as a more convenient – and cheaper – way to fly. They say it eliminates the hassle trying to find another mode of transportation to get to and from airports: You drive the car to the airport and then you’re good to go. When you land, you fold up the wings and hit the road. There are no expensive hangar fees because you don’t have to store it at an airport – you park it in the garage at home. The plane is designed to fly primarily under 10,000 feet. It has a maximum takeoff weight of 1,430 pounds, including fuel and passengers. Gas mileage on the road is about 30 mpg. Terrafugia says the Transition reduces the potential for an accident by allowing pilots to drive under bad weather instead of flying into marginal conditions. The Transition’s price tag: $194,000. But there may be additional charges for options like a radio, transponder or GPS. Another option is a full-plane parachute. “If you get into a very dire situation, it’s the ultimate safety option,” Gersh said. So far, the company has more than 70 orders with deposits, he said. Terrafugia is Latin for “escape from the land.” The company was founded in 2006 by five Massachusetts Institute of Technology grad students who were also pilots. They received some seed money from the school. The concept of a car-plane has been around since at least the 1950s, but it’s possible that Terrafugia may become the first company to mass-produce one, FAA spokeswoman Laura Brown said. “We’re working very closely with them, but there are still some remaining steps,” Brown said. ___ On the Net: Terrafugia http://www.terrafugia.com/ Federal Aviation Administration http://www.faa.gov

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Richard Zombeck: Scott Brown Has Put the People’s Seat Up For Sale

June 30, 2010

Now that Scott Brown has managed to score the same backroom deals he opposed during his campaign run for Senator of Massachusetts he’s threatening to vote against the financial reform bill he’s said he was for. Sound confusing? It really isn’t when you consider Brown is among the top five congressional recipients of “contributions” from the finance/insurance/real estate industry. An impressive rank to have achieved compared to the other four who have spent years in the Senate. The usual story of Scott Brown’s election to the Senate in MA is that he was put there to kill health care reform. But all the money he’s getting from the finance industry makes it clear that they may be hoping he will also be the 41st Republican to kill financial reform. According to his profile on OpenSecrets.org all of his top campaign contributors are financial companies. In April of this this year, Brown was asked for his opinion on the financial regulatory reform bill. ” I can’t support it ,” he said. When asked what areas he thought should be fixed, he replied: “Well, what areas do you think should be fixed? I mean, you know, tell me. And then I’ll get a team and go fix it,” he said, talking to a reporter who wanted to know what kind of changes he hoped to see. Brown said one of his main concerns is that the legislation is “going to be an extra layer of regulation,” which is true. That’s the point of the legislation. The financial industry nearly destroyed the global economy as a result of lacking regulation. That’s why this legislation is being argued: to bring oversight and accountability through regulation. Brown went on to say that he finds the notion of a Consumer Financial Protection Agency problematic because “it’s more government.” He added, “Is that good? … If it’s an area we need to fix, then I’m certainly open to it. But I haven’t heard that that’s the biggest thing that’s problematic with it.” Sen. Dick Durbin (D-Ill), has been quoted repeatedly as saying, “And the banks — hard to believe in a time when we’re facing a banking crisis that many of the banks created — are still the most powerful lobby on Capitol Hill. And they frankly own the place.” Brown, who has, by his own admission, carved out deals for Fidelity Investments, State Street, and MassMutual, among other Massachusetts based financial institutions can’t make Durbin’s point any clearer. In addition he’s argued for major loopholes in the Volker Rule that would allow firms to continue to gamble with taxpayer-backed capital. In the meantime, Brown recently blocked a bill extending unemployment. As a result of this vote 1.2 million people lost access to the extended unemployment benefits. Several hundred thousand are being added to that number every week. Fifty million Medicare claims from June are currently in process at the reduced rate, according to AARP. The Center on Budget and Policy Priorities estimates that dropping the $24 billion in aid to states will lead to cuts in services and thousands of layoffs, and that spending cuts to close states’ aggregate budget shortfall  in 2011 would lead to 900,000 public- and private-sector layoffs. On a Tuesday morning WBUR interview with Deborah Becker, Barry Bluestone , dean of the School of Social Sciences, Urban Affairs and Public Policy at Northeastern University, speculated that over two million people will be without benefits once the program expires. According to Bluestone, 10,000 people will lose crucial funds every week in Massachusetts alone. This decision sparked a rally on Monday in front of his Boston office by an estimated 500 protester representing dozens of activist, education, and labor organizations urging Brown to stop blocking a vote on the FMAP bill, containing $700 Million in federal relief. “Let Senator McConnell, let Senator Collins, let Senator Brown and every other Republican explain why one of their own constituents doesn’t deserve to keep their job, shouldn’t be able to send their kid to college, can’t put food on their table without maxing out their credit cards,” said Lori Lodes an employment and labor activists with SEIU. “Rooting against America, Republicans are taking pride in keeping families out of work as their only strategy for winning elections.” Brown’s latest argument and rhetoric when it comes to financial reform is that the fees and assessments that the bill requires banks to pay amount to a tax and that he has vowed never to vote for a tax increase. Of course when Massachusetts residents voted for him they were assuming he meant their taxes, not those of Wall Street. Statements like those make it apparent that Brown is no less confused by financial reform than he was in April during an interview with the Boston Globe or when I and other Bay-State activists met with his staffer Nat Hoopes in D.C. and were told the only things in the bill Brown was opposed to was the so called “slush fund” in respect to the resolution authority designed to ensure that the banks themselves – not the taxpayers will have to pay for future failings. Now, according to Brown, it’s a “tax”. Brown and others in the GOP can call it a tax as much as they want. The truth, which they seem to conveniently avoid, is that it is a fee of $3-4 Billion per year (less than 10 percent of their yearly bonuses) to be collected until the sum reaches $20 Billion. After 25 years the fund would go towards the deficit. A small price to pay for an $800 billion tax-payer bailout and having almost brought the world economy to its knees. Any time someone alludes to Brown having filled or taken Sen. Ted Kennedy’s seat, Brown quickly responds coyly with, “it’s the people’s seat.” It’s become apparent that the people’s seat is for sale.

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Scott Brown STILL Won’t Say If He’ll Vote For Financial Reform Bill

June 30, 2010

WASHINGTON — Despite lawmakers’ last-minute change to win his vote, Republican Sen. Scott Brown said Wednesday he needs more time to study a sweeping overhaul of financial regulations before committing his vote. His stance leaves Democrats short, for now, of the 60 votes they need to overcome procedural hurdles to the bill. Senate Majority Leader Harry Reid said the Senate will have to wait until after the weeklong July 4 congressional break to take up the bill. The House was expected to vote on a final, combined House-Senate bill, late Wednesday afternoon. Congressional Democrats have been inching closer to passage of a major rewrite of financial industry regulations, making fixes as they go in hopes of securing the votes of straying Republicans. On Tuesday, House and Senate negotiators reconvened to remove a $19 billion fee on large banks and hedge funds after Brown threatened to vote against the bill. Brown, of Massachusetts, supported a Senate version of the bill last month but said he objected to the fee, inserted by negotiators last week. In a statement Wednesday, Brown said he appreciated the removal of the fee, but said he would review the bill over next week’s recess. “I remain committed to putting in place safeguards to prevent another financial meltdown, ensure that consumers are protected, and that this bill is paid for without new taxes,” he said. President Barack Obama on Wednesday said Congress was on the verge of passing “the most comprehensive financial reform since the Great Depression” and decried Republican opposition to the bill. In an advance text of his remarks in Racine, Wis., Obama took aim at House Republican leader John Boehner of Ohio for remarking in a newspaper interview that the financial regulation bill was like using a nuclear weapon on an ant. “If the Republican leader is that out of touch with the struggles facing the American people, he should come here to Racine and ask people if they think the financial crisis was an ant,” Obama said. Brown was one of only four Senate Republicans to vote for a Senate version of the bill last month. That bill did not contain the $19 billion bank fee. House and Senate Democrats had already made changes to the bill to ensure Brown’s vote, adding exceptions to limits on bank trading that would help Massachusetts financial institutions such as Boston-based State Street Corp., a bank holding company with about $150 billion in assets. The death of Sen. Robert Byrd, D-W.Va., this week and fresh objections from Brown and Republicans Susan Collins and Olympia Snowe of Maine had threatened to derail the bill, already a year in the making. Brown, Snowe and Collins were three of 61 senators who had previously backed a Senate version of the bill. Eager to salvage one of President Barack Obama’s legislative priorities, Democrats dropped the fee that would have helped pay for the legislation. Banks with assets of over $50 billion and hedge funds with assets of more than $10 billion would have footed the bill. Instead, House and Senate negotiators, voting along party lines, agreed to pay for the bill with $11 billion generated by ending the unpopular Troubled Asset Relief Program – the $700 billion bank bailout created in the fall of 2008 at the height of the financial scare. They also agreed to increase premium rates paid by commercial banks to the Federal Deposit Insurance Corp. to insure bank deposits. The premiums would increase from 1.15 percent of insured deposits to 1.35 percent by September 2020. The additional premium would be paid by banks with assets greater than $10 billion. The bank fee was proposed by Rep. Barney Frank, the chairman of the House Financial Services Committee, as a way to meet House rules that require spending cuts or revenue increases to pay for the costs of legislation. Neither the House nor the Senate had voted for the bank assessment. By reluctantly ending TARP early, Democrats lost any hope of using some of the money toward unemployment extensions and other job related spending. It also prevented any savings realized by ending the program from being used toward lowering the deficit. Republicans complained the solution was budget gimmickry and that it went against Congress’ desire to use TARP repayments to reduce the debt. “I’m getting caught in the middle of an intra-Republican debate here,” Frank said after hearing Republicans on the House-Senate conference committee angrily deride the TARP-FDIC plan. Besides the three Republicans, Democrats also were working to win the support of Sen. Maria Cantwell, D-Wash., who voted against the Senate version last month. She complained the bill was not tough enough on banks. If unable to secure 60 votes, Democrats would have to wait for West Virginia’s Democratic governor, Joe Manchin, to appoint Byrd’s successor. Manchin has said he has no timetable for his decision.

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Tracey Ann Foley, Accused Russian Spy, Was ‘Well-Liked’ And ‘Friendly,’ Her Boss Says

June 29, 2010

The boss of Massachusetts resident Tracey Ann Foley, who was arrested in connection with a massive Russian spy ring, has responded to the arrest on his company’s blog. (Hat tip to Portfolio .) Glenn Kelman , the CEO of the online real estate brokerage, Redfin , which is based in Seattle, wrote on his company’s blog that Foley was “well-liked” and “friendly.” He also defended his company’s hiring practices. Here’s Kelman : Before we hired Ms. Foley in February of this year, at least two Redfin employees interviewed her, using a template that focuses on character, specifically situations where the candidate has put customers’ interests ahead of her own, and where the candidate has worked on a team. She interviewed well. According to her application, she had worked since 2007 for the real estate brokerages Weichert and Channing Real Estate. As with every agent we hire, Redfin validated her social security number, her deal history and that her real estate license was in good standing; as with every agent we hire, we ran a criminal background check, which came up clean. The Washington Post referred to Foley, who lived in Cambridge, Massachusetts, as an “attractive, vaguely European blonde .” Foley lived with her husband, Donald Heathfield, in a $900,000 duplex near Harvard, the paper notes. Kelman added : We learned of her arrest by reading about it in the newspaper this afternoon, and haven’t communicated with her since. Because we don’t have a large human resources department to advise us on privacy matters, and since she has been accused of a grave crime, we have disclosed the facts of our relationship with Ms. Foley here, and would rather not venture opinions beyond that.

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Scott Brown’s Opposition To Bank Fee Throws Wrench In Wall Street Reform

June 29, 2010

WASHINGTON (AP) — Top Democratic House and Senate negotiators who worked out a deal on a sweeping overhaul of financial regulations regrouped Tuesday to eliminate a $19 billion fee on banks that had threatened to derail the legislation. Eager to salvage one of President Barack Obama’s legislative priorities, lawmakers replaced the bank fee with budget adjustments involving the $700 billion bank bailout and increased premiums on bank deposit insurance. The bill’s fate was thrown into doubt this week following the death of Sen. Robert Byrd, D-W.Va., and after Republican Sen. Scott Brown of Massachusetts vowed to abandon his support for the bill if it retained the assessment on large banks and hedge funds. The money would be used to pay for the costs of the legislation. Uncertainty surrounding the bill raised doubts about Congress’ ability to complete the bill this week – a target both the White House and Democratic leaders. The House was still expected to vote on the bill Wednesday, but the Senate likely would take up the bill in two weeks following a recess. The legislation would rewrite financial regulations by putting new limits on bank activities, creating an independent consumer protection bureau and adding new rules for largely unregulated financial instruments. Besides Brown, Republican Sens. Olympia Snowe and Susan Collins of Maine, both of whom also voted for the Senate bill last month, said they, too, had qualms about the bank assessment that negotiators inserted into the bill last week. Without Byrd’s vote, the support of the three Republicans would be crucial to overcome 60-vote procedural hurdles that could defeat the legislation. Seeing nearly a year of work crumbling, Senate Banking Committee Chairman Chris Dodd, D-Conn., proposed Tuesday to replace the bank fee and pay for the bill with $11 billion that would be freed by ending the government’s authority to use the $700 billion bank bailout fund. Under that plan, the balance of the cost could be covered by increasing premium rates paid by commercial banks to the Federal Deposit Insurance Corp. to insure bank deposits. The additional FDIC premium would be paid by banks with assets greater than $10 billion. The bailout fund, known as the Troubled Asset Relief Program or TARP, was scheduled to expire in October. The new proposal would end TARP when the bill is enacted, essentially cutting Congress’ spending authority from $700 billion to $475 billion. That creates an accounting adjustment that would help cover the bill’s costs. Senate Republicans on the House-Senate conference committee angrily denounced Dodd’s proposal as “smoke and mirrors” that violated Congress’ intent to devote TARP repayments to reducing the deficit. “The American taxpayer should be affronted by this little bit of sleight of hand and gamesmanship,” said Sen. Judd Gregg, R-N.H. “What a piece of misleading, misdirected financial management this is.” The House Financial Services Committee chairman, Rep. Barney Frank, D-Mass., who said the new proposal was worked out with Brown, Collins and Snowe, said he preferred the bank fee, which would be assessed on banks with assets greater than $50 billion and hedge funds of more than $10 billion. “I’m getting caught in the middle of an intra-Republican debate here,” he said. “The criticism by the Republican senators was aimed at a provision aimed at satisfying Sens. Snowe, Collins and Brown.” He added: “Why anyone would think that the large financial institutions should not pay the administrative costs, I don’t know, but apparently you couldn’t get 60 senators.”

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Without Byrd, Senate Financial Reform Vote In Doubt

June 28, 2010

WASHINGTON — A sweeping overhaul of financial regulations faced new obstacles in the Senate on Monday – the loss of one and potentially more crucial votes to guarantee its passage. The death of Sen. Robert Byrd, D-W.Va., and new misgivings by Republican senators who previously supported the legislation put the bill’s fate in doubt. Democrats scrambled to secure votes for one of President Barack Obama’s top priorities. Last month, 61 senators backed an original Senate version of the bill; only four of them were Republicans. On Monday, three of them – Scott Brown of Massachusetts and Susan Collins and Olympia Snowe of Maine – complained about a $19 billion fee on large banks and hedge funds that House and Senate negotiators added to the bill last week to pay for the cost of the legislation. With Byrd’s death, Democrats can’t afford to lose any votes to overcome the 60-vote procedural hurdles that could defeat the legislation. Brown was the most adamant about his opposition. “I can’t support adding another $19 billion of pass-through taxes to individual consumers, especially in the middle of a two-year recession,” he said Monday shortly after officially introducing Supreme Court nominee Elena Kagan to the Senate Judiciary Committee. Asked whether his stance meant he would vote against a filibuster of the bill, Brown said: “I’m not sure.” The legislation would rewrite financial regulations, putting new limits on bank activities, creating an independent consumer protection bureau, and adding new rules for largely unregulated financial instruments. The House was likely to vote on the bill as early as Tuesday; the Senate vote would follow, though no date has been set. Congressional leaders had wanted to send the bill to Obama by July 4, but the final vote may now be delayed. While Collins said she was pleased with a series of provisions in the bill, she said she was “not happy” that the $19 billion fee had not been considered in the original Senate bill. She said she was looking at the new bill before deciding how to vote. Snowe said she found the bank fee “regrettable” but said she would weigh it against the bill’s benefits. It was also unclear when Byrd’s seat would be filled. West Virginia Gov. Joe Manchin, a Democrat, said Monday he had no timetable to consider a replacement for Byrd. Senate Democrats have been in this situation before. They had to scour for votes to pass the Senate’s version last month. To secure Brown’s vote, Senate Majority Leader Harry Reid of Nevada assured him that the bill would not hurt financial institutions in Massachusetts that trade with their own money and that invest in hedge funds and private equity funds. The House-Senate conference committee that combined the final bill added exemptions in the bill to permit some trading and investing within limits. Negotiators also made sure provisions backed by Snowe and Collins remained in the bill for fear of losing them as well. Two Democrats – Sens. Russ Feingold of Wisconsin and Maria Cantwell of Washington – voted against the Senate version last month, saying it wasn’t tough enough on banks. Feingold on Monday reiterated his position. “My test for the financial regulatory reform bill is whether it will prevent another crisis,” he said in a statement. “The conference committee’s proposal fails that test and for that reason I will not vote to advance it.” Cantwell spokesman John Diamond said she was reviewing the new bill and had not taken a position. Cantwell did vote with Democrats on one procedural vote last month but resisted other entreaties to support the bill. Cantwell is likely to hear a pitch for the bill Tuesday when she attends a White House meeting with senators working on energy legislation.

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Financial Reform Bill Passes: Banks Keep Derivatives Units, Volcker Rules Softened; House-Senate Conference Passes Financial Reform Bill After Marathon Session

June 25, 2010

After nearly 20 hours over two final days filled with backroom dealing, House and Senate negotiators struck a grand compromise to merge the two chambers’ competing bills to reform the nation’s financial system in a party-line vote. But the long hours of closed-door meetings also appear to have fulfilled Wall Street’s greatest wish : Many of the measures that offered the greatest chances to fundamentally reshape how the Street conducts business have been struck out, weakened, or rendered irrelevant. Democrats unanimously supported passage; Republicans unanimously voted against it, warning that the bill doesn’t accomplish its central objective: ending the perception that some financial firms are too big to fail. The two most high-profile provisions were the last items to be considered. Neither emerged intact. One would have forced banks to stop trading financial instruments with their own capital and give up their stakes in hedge funds and private equity funds, named after their original proponent, former Federal Reserve Chairman Paul Volcker. The other would have compelled banks to raise tens of billions of dollars because they’d have to spin off their derivatives-dealing operations into separately-capitalized affiliates within the bank holding company, pushed by Senate Agriculture Committee Chairman Blanche Lincoln. As currently practiced both activities are highly lucrative, annually generating billions for the nation’s megbanks. The proposals were launched after perceived political vulnerabilities — the Obama administration announced the “Volcker Rules” after Massachusetts Republican Scott Brown won Ted Kennedy’s old Senate seat, while Lincoln announced her proposal under threat by a liberal challenger in Arkansas for her Senate seat. Both came to become litmus tests used to gauge whether policymakers were for Main Street or for Wall Street. Ultimately, despite widespread approval among those pushing for fundamental reform in the wake of the worst financial crisis since the Great Depression, yet perhaps aided by near-unanimous revulsion among those on Wall Street, both were watered down in front of C-SPAN cameras beginning around 11 p.m. ET. Democratic lawmakers had been rushing to complete the bill by Friday morning under a self-imposed deadline. The final vote was recorded at 5:40 a.m. The conference began their final day just before 10 a.m. on Thursday. The so-called Volcker Rules originally banned banks from using their own taxpayer-backed cash to speculate in the financial markets. The federal government stands behind bank deposits, and banks have access to cheap funds from the Federal Reserve. Volcker argued that banks shouldn’t use that subsidy to speculate. After days of leaks to the news media that the Senate was looking to ease the restrictions, on Thursday afternoon Senate conferees confirmed the rumors: banks could invest up to three percent of their tangible common equity in hedge funds and private equity firms. Tangible common equity — considered to be the strongest form of bank capital — is comprised of shareholder equity. A few hours later, the Senate amended its proposal, changing the metric from tangible common equity to Tier One capital. Banks have more Tier One capital than they have tangible common equity, so changing the requirement to the weaker form of capital allows banks to invest more of their cash in hedge funds and private equity funds. The concession was confirmed by Steven Adamske, spokesman for House Financial Services Committee Chairman Barney Frank. Using JPMorgan Chase, the nation’s second-largest bank by assets with more than $2.1 trillion, as an example, the bank would be able to invest an additional 40 percent of its cash, or more than $1.1 billion, in the activities that Volcker wanted to prohibit banks from engaging in, according to the firm’s latest annual filing with the Securities and Exchange Commission. Rep. Paul Kanjorski became visibly angry. The longtime Pennsylvania Congressman tried to reverse, at least partly, the Senate’s watering down of its own provision, calling it a “significant change.” “Some of our friends that are in the Senate … are annoyed with that enlargement, as I am,” Kanjorski said. Noting of the Senate’s new proposal that the House conferees “only had their offer for 20 minutes,” Kanjorski added that his counter-proposal was a midway point between tangible common equity and Tier One capital. Also, he noted, his compromise was “for purposes of getting along, but not to be taken advantage of, quite frankly.” His measure failed. Senate negotiators also announced they were carving out a class of financial institutions from the restrictions. The most immediate beneficiaries are State Street Corp., the nation’s 19th-largest bank with $153 billion in assets, and BNY Mellon, the nation’s 13th-largest bank with $221 billion in assets. The exemptions were granted to secure the support of Brown, the Senator from Massachusetts. That loophole survived. As for the measure’s proposed ban on banks trading with their own money, also known as proprietary trading, the agreed-upon provision calls for federal financial regulators to study the measure, then issue rules implementing it based on the results of that study. It could be anything from an outright ban to a barely-there limit. Lincoln’s provision, under fierce assault by the Treasury Department , the Obama administration, and a group of Wall Street-friendly Democrats called the New Democrat Coalition, also was softened. Lincoln’s proposal would have compelled the nation’s megabanks to move their swaps-dealing units, which deal and trade in a type of financial derivative product, into a separately-capitalized institution within the larger bank holding company. The affected firms collectively would have to raise tens of billions of dollars to protect their swaps desks in case their bets went bad. Or, they could have disband the activity altogether. Along with a few foreign banks, the nation’s largest domestic banks essentially control the swaps market in the U.S. By forcing them to divest their units into separate affiliates, which in turn would compel them to raise money to capitalize these affiliates, Lincoln’s measure could have forced them to scale down their operations. At the least, supporters say, it would have compelled them to have enough cash on hand in case their bets begin to sour, saving taxpayers from having to step in to prop up the banks like they did in 2008 — taxpayer support that continues today. Though Lincoln’s measure had the support of three regional Federal Reserve Bank presidents — James Bullard of St. Louis, Richard Fisher of Dallas, and Thomas Hoenig of Kansas City — representing the Fed and bankers in the broad middle of the country from Kentucky to Colorado, they ultimately were outmatched. The Fed’s Board of Governors, led by the nation’s central banker, Ben Bernanke; Federal Deposit Insurance Corporation Chairman Sheila Bair; Treasury Secretary Timothy Geithner; and the nation’s largest banks were united in their opposition. Two minutes before midnight, Collin Peterson, a Minnesota Democrat, announced that a deal over Lincoln’s divisive measure had been reached. “There’s been some work done by the administration and some of the senators on a potential compromise, I guess you could call it,” said Peterson, chairman of the House Agriculture Committee, in a reference to the Obama administration. The negotiations were not public. Rather than banks being forced to spin off their swaps desks, they’d be allowed to keep those units dealing with “the biggest part of all these derivatives,” Peterson said. The rest would be pushed out to an affiliate. Under the agreement, reached late Thursday, banks would continue to be allowed to deal interest rate and foreign exchange swaps, “credit derivatives referencing investment-grade entities that are cleared,” derivatives referencing gold and silver, and the firms would be allowed to hedge “for the banks’ own risk.” Banks would be forced to push out to their affiliates derivatives referencing “cleared and uncleared commodities, energies and metals (with the exception of gold and silver), agriculture, credit derivatives referencing non-investment grade entities and all equities, and any uncleared credit default swaps,” Peterson said. “Frankly, the biggest part of all these derivatives, by far, are the ones that I named that are going to be able to stay in the bank,” Peterson added. “Interest rate and foreign exchange are by far the greatest part of the amount of business that’s involved here.” Lincoln, while praising the overall bill, acknowledged that there was only so much she could do. “Our financial system is complicated and integrated and our time so limited that we couldn’t afford to dig in our heels, but must do something,” she said.

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Financial Reform Bill Passes: Banks Keep Derivatives Units, Volcker Rules Softened; House-Senate Conference Passes Financial Reform Bill After Marathon Session

June 25, 2010

After nearly 20 hours over two final days filled with backroom dealing, House and Senate negotiators struck a grand compromise to merge the two chambers’ competing bills to reform the nation’s financial system in a party-line vote. But the long hours of closed-door meetings also appear to have fulfilled Wall Street’s greatest wish : Many of the measures that offered the greatest chances to fundamentally reshape how the Street conducts business have been struck out, weakened, or rendered irrelevant. Democrats unanimously supported passage; Republicans unanimously voted against it, warning that the bill doesn’t accomplish its central objective: ending the perception that some financial firms are too big to fail. The two most high-profile provisions were the last items to be considered. Neither emerged intact. One would have forced banks to stop trading financial instruments with their own capital and give up their stakes in hedge funds and private equity funds, named after their original proponent, former Federal Reserve Chairman Paul Volcker. The other would have compelled banks to raise tens of billions of dollars because they’d have to spin off their derivatives-dealing operations into separately-capitalized affiliates within the bank holding company, pushed by Senate Agriculture Committee Chairman Blanche Lincoln. As currently practiced both activities are highly lucrative, annually generating billions for the nation’s megbanks. The proposals were launched after perceived political vulnerabilities — the Obama administration announced the “Volcker Rules” after Massachusetts Republican Scott Brown won Ted Kennedy’s old Senate seat, while Lincoln announced her proposal under threat by a liberal challenger in Arkansas for her Senate seat. Both came to become litmus tests used to gauge whether policymakers were for Main Street or for Wall Street. Ultimately, despite widespread approval among those pushing for fundamental reform in the wake of the worst financial crisis since the Great Depression, yet perhaps aided by near-unanimous revulsion among those on Wall Street, both were watered down in front of C-SPAN cameras beginning around 11 p.m. ET. Democratic lawmakers had been rushing to complete the bill by Friday morning under a self-imposed deadline. The final vote was recorded at 5:40 a.m. The conference began their final day just before 10 a.m. on Thursday. The so-called Volcker Rules originally banned banks from using their own taxpayer-backed cash to speculate in the financial markets. The federal government stands behind bank deposits, and banks have access to cheap funds from the Federal Reserve. Volcker argued that banks shouldn’t use that subsidy to speculate. After days of leaks to the news media that the Senate was looking to ease the restrictions, on Thursday afternoon Senate conferees confirmed the rumors: banks could invest up to three percent of their tangible common equity in hedge funds and private equity firms. Tangible common equity — considered to be the strongest form of bank capital — is comprised of shareholder equity. A few hours later, the Senate amended its proposal, changing the metric from tangible common equity to Tier One capital. Banks have more Tier One capital than they have tangible common equity, so changing the requirement to the weaker form of capital allows banks to invest more of their cash in hedge funds and private equity funds. The concession was confirmed by Steven Adamske, spokesman for House Financial Services Committee Chairman Barney Frank. Using JPMorgan Chase, the nation’s second-largest bank by assets with more than $2.1 trillion, as an example, the bank would be able to invest an additional 40 percent of its cash, or more than $1.1 billion, in the activities that Volcker wanted to prohibit banks from engaging in, according to the firm’s latest annual filing with the Securities and Exchange Commission. Rep. Paul Kanjorski became visibly angry. The longtime Pennsylvania Congressman tried to reverse, at least partly, the Senate’s watering down of its own provision, calling it a “significant change.” “Some of our friends that are in the Senate … are annoyed with that enlargement, as I am,” Kanjorski said. Noting of the Senate’s new proposal that the House conferees “only had their offer for 20 minutes,” Kanjorski added that his counter-proposal was a midway point between tangible common equity and Tier One capital. Also, he noted, his compromise was “for purposes of getting along, but not to be taken advantage of, quite frankly.” His measure failed. Senate negotiators also announced they were carving out a class of financial institutions from the restrictions. The most immediate beneficiaries are State Street Corp., the nation’s 19th-largest bank with $153 billion in assets, and BNY Mellon, the nation’s 13th-largest bank with $221 billion in assets. The exemptions were granted to secure the support of Brown, the Senator from Massachusetts. That loophole survived. As for the measure’s proposed ban on banks trading with their own money, also known as proprietary trading, the agreed-upon provision calls for federal financial regulators to study the measure, then issue rules implementing it based on the results of that study. It could be anything from an outright ban to a barely-there limit. Lincoln’s provision, under fierce assault by the Treasury Department , the Obama administration, and a group of Wall Street-friendly Democrats called the New Democrat Coalition, also was softened. Lincoln’s proposal would have compelled the nation’s megabanks to move their swaps-dealing units, which deal and trade in a type of financial derivative product, into a separately-capitalized institution within the larger bank holding company. The affected firms collectively would have to raise tens of billions of dollars to protect their swaps desks in case their bets went bad. Or, they could have disband the activity altogether. Along with a few foreign banks, the nation’s largest domestic banks essentially control the swaps market in the U.S. By forcing them to divest their units into separate affiliates, which in turn would compel them to raise money to capitalize these affiliates, Lincoln’s measure could have forced them to scale down their operations. At the least, supporters say, it would have compelled them to have enough cash on hand in case their bets begin to sour, saving taxpayers from having to step in to prop up the banks like they did in 2008 — taxpayer support that continues today. Though Lincoln’s measure had the support of three regional Federal Reserve Bank presidents — James Bullard of St. Louis, Richard Fisher of Dallas, and Thomas Hoenig of Kansas City — representing the Fed and bankers in the broad middle of the country from Kentucky to Colorado, they ultimately were outmatched. The Fed’s Board of Governors, led by the nation’s central banker, Ben Bernanke; Federal Deposit Insurance Corporation Chairman Sheila Bair; Treasury Secretary Timothy Geithner; and the nation’s largest banks were united in their opposition. Two minutes before midnight, Collin Peterson, a Minnesota Democrat, announced that a deal over Lincoln’s divisive measure had been reached. “There’s been some work done by the administration and some of the senators on a potential compromise, I guess you could call it,” said Peterson, chairman of the House Agriculture Committee, in a reference to the Obama administration. The negotiations were not public. Rather than banks being forced to spin off their swaps desks, they’d be allowed to keep those units dealing with “the biggest part of all these derivatives,” Peterson said. The rest would be pushed out to an affiliate. Under the agreement, reached late Thursday, banks would continue to be allowed to deal interest rate and foreign exchange swaps, “credit derivatives referencing investment-grade entities that are cleared,” derivatives referencing gold and silver, and the firms would be allowed to hedge “for the banks’ own risk.” Banks would be forced to push out to their affiliates derivatives referencing “cleared and uncleared commodities, energies and metals (with the exception of gold and silver), agriculture, credit derivatives referencing non-investment grade entities and all equities, and any uncleared credit default swaps,” Peterson said. “Frankly, the biggest part of all these derivatives, by far, are the ones that I named that are going to be able to stay in the bank,” Peterson added. “Interest rate and foreign exchange are by far the greatest part of the amount of business that’s involved here.” Lincoln, while praising the overall bill, acknowledged that there was only so much she could do. “Our financial system is complicated and integrated and our time so limited that we couldn’t afford to dig in our heels, but must do something,” she said.

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