pennsylvania

Leo W. Gerard: Time to Wield the Foreign Policy Stick

January 20, 2011

America plays the role of abused partner in its relationship with China. Although the Asian giant repeatedly injures U.S. industry by violating international trade rules, America has responded, almost exclusively, by pleading and begging for China to stop. China says it’s sorry. And continues to violate the rules. America respectfully beseeches China to discontinue manipulating its currency, and China says it will. Then it allows the value to increase a completely insignificant amount. Still America does nothing. Nothing. It simply accepts the abuse. U.S. Sen. Bob Casey, D-Pa., and Michael Williams, senior vice president of U.S. Steel stood with me Wednesday at a press conference in Pittsburgh to urge President Obama in his meetings this week with Chinese President Hu Jintao to announce that America is done with soft talk. We want President Obama to tell President Hu that America has heard enough promises; the United States is bucking up and pulling out that big stick that Teddy Roosevelt carried in foreign policy negotiations. This is a rare issue on which politicians, Republican and Democrat, manufacturers and organized labor all agree. Here’s what Sen. Casey said at the press conference, “In my estimation, and that of a lot of Americans, the time for talking is over. The time for action is now.” He, Sen. Sherrod Brown, D-Ohio, and Sen. Debbie Stabenow, D-Mich., plan to introduce legislation next week to force the federal government to hold China accountable, to enforce compliance with World Trade Organization (WTO) rules – rules that China agreed to comply with when WTO countries permitted it to join even though it is a non-market economy. Mr. Williams described the effect of China’s unchallenged trade practices on American steel production: “Our facilities in Pennsylvania and throughout the United States are among the most advanced in the world: We make the highest quality steel for the most demanding applications; Our technology is world competitive; and Our workers are second to none in skill and know-how. However, the more than 21,000 U.S. Steel employees nationwide, and the more than 4,700 employees here in Pennsylvania, know all too well that we do not always operate in a fair global marketplace. Instead, we are often faced with the reality of a distorted market – a market where we have to compete against job-stealing dumped and subsidized imports from countries that abuse the rules to gain a false competitive advantage. No country more than China hurts all American manufacturing by the way it artificially undervalues its currency – making its exports artificially cheap and making competitive imports from the U.S. and elsewhere artificially expensive.” Here are the facts: American industries have found that they can produce products, ship them to China and price them lower than Chinese competitors. But all too often, China prohibits sale of the American-made products on the mainland. Sen. Casey gave an example, C.F. Martin & Co., which manufacturers its world-famous guitars in Eastern Pennsylvania. Martin tried to register its mark to sell its instruments in China. But it has been unable to do that because a Chinese manufacturer already registered the mark and is counterfeiting the guitars. “To say it is unlawful does not begin to describe the gravity of it,” the senator said. In addition to countenancing counterfeiting, China provides illegal subsidies to its export industries, violates international regulations forbidding forced technology transfer when American companies seek to manufacture in China and deliberately undervalues its currency to falsely lower the price of its exports. When Mr. Williams, Sen. Casey and I all said this must be stopped with enforcement of international regulations, someone in the audience asked if that would prompt a dreaded trade war. That won’t happen because we already are in a trade war. The United States simply is not fighting back. We are playing the passive partner in a perverted relationship, repeatedly allowing the abuser to pound us. Mr. Williams said it best: “U.S. Steel wants a strong America. To have a strong America, we need a strong manufacturing base. To have a strong manufacturing base, we need strong enforcement of international trade regulations.” Sen. Casey agreed, “Our government must take every step necessary. It is not enough to say to the unemployed, ‘We are trying and we are asking.’” Wield the stick, President Obama.

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Brown & Brown, Inc. Names Scott Penny as Chief Acquisitions Officer

January 6, 2011

DAYTONA BEACH, FL and TAMPA, FL–(Marketwire – January 6, 2011) – The Board of Directors of Brown & Brown, Inc. ( NYSE : BRO ) today announced that J. Scott Penny, CIC, Regional President, has been named to the position of Chief Acquisitions Officer. Mr. Penny, who has served as one of the Company’s Regional Presidents since July 2010 and previously served as a Regional Executive Vice President since 2002, will continue to be responsible for oversight of retail profit center operations of certain of the Company’s subsidiaries in Connecticut, Illinois, Indiana, Kentucky, Massachusetts, New Hampshire, New Jersey, Pennsylvania and Washington. Mr. Penny will also continue to oversee the operations of Axiom Re, Inc. in Florida and North Carolina, and will assume responsibility for the oversight of Florida Intracoastal Underwriters, LLC. 

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More Business School Students Turn Toward A Degree In Doing Good

January 2, 2011

Business school students today may not have their eyes set on big bonuses quite like their predecessors. Studies show that they’re turning their finance and entrepreneurial skills towards founding socially responsible businesses. MSNBC reports that more and more students pursuing business school degrees are basing their courses on an eventual career in the nonprofit sector. The Wharton School of Business at University of Pennsylvania has seen an increase in applicants who want a degree in social enterprise. Emily Cieri, the director of Wharton’s entrepreneurial program, told MSNBC : “Ten years ago our students were primarily interested in working in finance and consulting. We’re seeing a large increase in the number of students with entrepreneurial backgrounds…They are saying they’ve come to school to understand how to run an entrepreneurial company with much higher growth and have a greater impact.” Individuals are now taking a business-model approach to solving social problems. Ashoka , a nonprofit that’s helped social entrepreneurs start charitable businesses for 30 years, visited the University of Maryland recently to hear students from its business school’s Center for Social Value Creation pitch social business plans. David Wish attended the event to promote his organization, Little Kids Rock , which provides instruments and music instructions free to schools. He also wants to become an Ashoka fellow . Wish told NPR : “Being in the presence of people who have devoted their life’s work to that is really an inspiring thing.” LISTEN: Read more about the trend towards socially responsible degrees and businesses at MSNBC .

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Video: Wachter Says U.S. Housing Market Double-Dip Is Unlikely

December 31, 2010

Dec. 31 (Bloomberg) — Susan Wachter, a real estate professor at the Wharton School at the University of Pennsylvania, talks about her expectation for a “bumpy” U.S. housing market for 2011. Wachter, speaking with Scarlet Fu on Bloomberg Television’s “InBusiness,” also discusses the government’s role in stemming the housing crisis and the impact employment may have on the market. (Source: Bloomberg)

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Robert Kuttner: The Stimulus That Isn’t

December 20, 2010

On signing the tax-cut deal December 17, President Obama jubilantly declared “We are here with some good news for the American people this holiday season. This is progress and that’s what they sent us here to achieve.” So how have Republicans repaid Obama’s willingness to meet them three-quarters of the way? Bipartisanship evidently lasted about as long as the signing ceremony. First Republicans refused to approve the routine stop-gap bill to keep the government funded at current levels pending the budget resolution and next round of appropriations. They killed the DREAM Act, for decent treatment of well-behaved children of undocumented immigrants. Repeal of Don’t Ask Don’t Tell squeaked through the senate with the votes of a few socially moderate Republicans defying their leadership. The Republicans on the Financial Crisis Inquiry Commission, in a massive denial of reality, issued their own separate report, denying that the financial collapse had anything to do with deregulation or speculation. Coming along next is a set of Republican demands in the budget resolution for much deeper cutting of public outlay. So it’s clear that “bipartisanship,” even on heavily Republican terms, produces no follow-through and no reciprocity. This is bipartisanship in the spirit of Neville Chamberlain. You give, and immediately they are after you for more. It is astonishing how the Beltway echo-chamber, most egregiously the editorial page and news columns of the Washington Post (hard to tell the difference), thinks this deal is good for the Republic. The Post has become a cheerleader for policies that fail to cure the economy and show off Obama as a weakling waiting to be rolled again. The tax deal, re-branded as a stimulus program, is paltry and ineffective as economic tonic. What hardly anyone seems to have grasped is that the deal basically continues the status quo with almost no stimulus. If the tax rates on the books in 2010 did not produce a recovery, why should we expect that the very same rates will change the economy in 2011? The deal not only continues 2010 income tax rates into 2011 and 2012. It actually increases estate taxes slightly, since estate taxes lapsed entirely for one year in 2010. It also basically continues current unemployment benefits. Even the temporary 2-point tax break on Social Security taxes is a substitute for a more progressive and effective Obama tax break from the original stimulus of February 2009 that the Republicans refused to extend — the Making Work Pay tax credit. About the only new stimulus in the bill is a business tax break that increases the value of tax write-offs for new investment, valued at about $55 billion. Does anyone seriously believe that a $55 billion net tax cut in a $15 trillion economy will have more than trivial effect? Using Congressional Budget Office estimates of GDP growth, the deal might produce as many as two million jobs if businesses respond by investing more and consumers feel more confident about increasing their spending. Lovely, but the economy is currently short at least fifteen million jobs. The small stimulus effect will soon be undermined by the spending cuts that are already the Republicans’ next demand. Even the stopgap spending measure to continue spending next year at this year’s levels, which Republicans just blocked, is already a cut when you factor in inflation. Deeper spending cuts, about to be imposed by incoming Republican House leaders, will overwhelm any stimulus effect of the tax deal. Obama, according to well-placed sources, plans to introduce a “tax-simplification” scheme in the State of the Union address — get rid of tax preferences and lower tax rates, as proposed by the Bowles-Simpson commission, with no net stimulative effect. This is a classic case of trying to change the subject. This might or might not be sensible policy depending on the specifics. But what ails the economy has little to do with the particulars of the tax code. I don’t understand how Obama’s political advisers think this formula can produce his re-election. The tax deal was popular at a superficial level. Voters, when asked about the deal in a vacuum, apart from other economic issues, approve of bipartisan cooperation and they like tax relief when nothing else is on offer. (In that context, it’s noteworthy that the one part of the tax deal that respondents to the ABC- Washington Post poll did not like was the temporary cut in payroll taxes. The vast majority of Americans don’t want to weaken Social Security, even when the bait is tax relief.) But such polls tell us nothing about the President’s prospects for 2012. The 2010 off-year election was the second largest swing away from the incumbent party in the past 130 years (1930 produced a slightly worse swing against the Republicans), according to the political scientist Walter Dean Burnham. It was the worst mid-year swing against the Democrats ever. Ground Zero of this disastrous defeat was the Midwest. This is hardly surprising, because the working middle class in the industrial heartland, which provisionally voted for Obama in 2008, is facing devastation in states like Ohio, Pennsylvania, Michigan, Wisconsin and Minnesota. The 2010 swing there was huge. Without carrying the heartland of the Midwest, Obama does not stand a prayer of re-election, even if the broad public says it approves of his bipartisanship. But bipartisanship to what end? There is simply no way that the combination of upwardly tilted and puny tax breaks, spending cuts, and a re-jiggering of tax rates and loopholes is going to make a serious dent in either unemployment rates or underwater housing values in the Midwest. Joblessness and losses of household assets in these states will continue at depression levels, even if the national unemployment comes down modestly. Obama and his advisers are left with the vain hope that Republicans will nominate someone so lunatic that Obama will somehow squeak through. But be careful what you wish for. I vividly remember 1980, when some Democrats cheered the nomination of Ronald Reagan because he was too rightwing to get elected. The watershed year 2008 was a political moment when an incoming Democratic president had all the raw material for a dramatic break with the old order — when Republicans, Wall Street, and laissez-faire ideology were primed to take a richly deserved fall for the economic collapse. Obama chose not to pursue that course. Instead, he identified himself with reviving Wall Street and pursued a feckless bipartisanship and a feeble recovery program. Last spring, Obama and his aides were on the road assuring everyone that the administration’s economic program would produce a “Recovery Summer,” which never came. Now, Obama is repeating the mistake. Adviser Larry Summers’ valedictory message is that the even weaker tonic of the tax deal will somehow restore economic jobs and growth. Crying recovery, when recovery doesn’t come, is even riskier than crying wolf. Six months from now, when the economy is still in the doldrums, either Obama or some other Democrat had better stand up for a real economic recovery program — or no Republican will be too grizzly to be elected president in 2012. Robert Kuttner is co-editor of The American Prospect and a senior fellow at Demos. His latest book is A Presidency in Peril.

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NY Bans Controversial Gas Drilling Technique For 7 Months

December 13, 2010

ALBANY, N.Y. — Environmental groups and energy companies both claimed victory after Gov. David Paterson ordered a seven-month moratorium on some natural gas drilling in the state, although environmentalists would have preferred the broader ban that the Legislature had approved. The outgoing Democratic governor vetoed a bill on Saturday that would have suspended all new natural-gas drilling permits until May 15. Instead, he issued an executive order prohibiting high-volume hydraulic fracturing of horizontally drilled wells, such as those in the Marcellus Shale region of southern New York. The order stands until July 1. High-volume hydraulic fracturing, also known as fracking, involves blasting millions of gallons of chemical-laced water thousands of feet underground to crack shale and release natural gas trapped inside it. The Environmental Protection Agency is examining the process to see if it imperils drinking water supplies, as opponents claim. Permitting of gas wells in New York’s part of the Marcellus region, which also underlies parts of Pennsylvania, Ohio, and West Virginia, has already been on hold for two years while the state Department of Environmental Conservation reviews its potential effects on the environment. In vetoing the Legislature’s oil and gas-drilling moratorium, Paterson said it would have applied to all conventional, low-volume, vertically drilled wells, effectively shutting down an industry that has been operating safely for decades. Low-volume hydraulic fracturing of conventional, vertical wells uses several thousand gallons of water per well, versus up to 8 million gallons per horizontal well with high-volume fracturing. Paterson’s budget office estimated that such a broad ban would cost thousands of industry jobs, stop landowner payments and significantly reduce state and local revenues from permit fees and taxes. The Independent Oil and Gas Association of New York said the Legislature’s moratorium would have threatened the viability of more than 300 producing companies and the jobs of their 5,000 employees. The state Farm Bureau also lobbied for Paterson’s veto, saying its members have benefited from vertical gas drilling for many years and invested the royalty payments into their farms. The oil and gas association said the Legislature’s bill would have cut in half the number of months drilling could take place next year, resulting in a net loss of nearly $800,000 in real property taxes and $1.4 million in royalty payments. “The moratorium bill would have forced me to evaluate my company’s future in New York,” said John Holko, president of Lenape Resources, a gas-drilling company in Genesee County. A coalition of about a dozen environmental groups released a statement praising Paterson’s moratorium while warning that it creates a “loophole” that industry can exploit. That is, it doesn’t apply to vertical wells, “exactly the kind of wells that were responsible for ruining nine square miles of aquifer and poisoning the drinking water of more than a dozen families in Dimock, Pa.,” the groups said. In Dimock, homeowners sued last year after Houston-based Cabot Oil & Gas Corp. drilled faulty wells that allowed methane and, possibly, toxic drilling chemicals to escape into their drinking water aquifer. The environmental groups, which include Environmental Advocates, Earthjustice, the Natural Resources Defense Council, Sierra Club and others, said they would call on Gov.-elect Andrew Cuomo to “fix the loophole.”

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Dave Johnson: 9.8%: The Number That The Deficit Commission Left Out

December 4, 2010

This post originally appeared at Campaign for America’s Future (CAF) at their Blog for OurFuture as part of the Making It In America project. I am a Fellow with CAF. 9.8%! It’s still all about jobs. It’s still an emergency. And the DC elite still don’t get it — or don’t care. They give us a “deficit commission” not a jobs commission. They’ve got it nice while the rest of us have it not-so-nice. Maybe we should move the Congress out of DC so they can see for themselves what is happening to America. If you visit DC (and don’t go to the “wrong” areas) you see nice buildings, nice stores, nice houses, nice hotels, nice trains, nice cars and lots and lots of nice and very expensive restaurants. You see lots of nice nicely-dressed people walking in a hurry to their nice jobs. Lots of nice jobs. Nice, very expensive houses. Nice cars. Nice life. Nice fantasy. But if you leave DC you see something very, very different. Congress clearly doesn’t see what the rest of us see . If they did, how could they possibly do the things they are doing? There is an absolute emergency going on in the country and Congress refuses to even see it. With 9.8% of us jobless — that is the official rate, not counting the people who have given up or are “under”employed or took pay cuts or whatever — Congress is debating tax cuts for the rich and cutting back on programs for the rest of us. Congress actually did act on jobs last week: with unemployment near 10% they killed unemployment benefits for people out of work more than 26 weeks! What You See Outside Of DC This fall I spent some time driving around Michigan, Ohio, Pennsylvania and West Virginia. I was covering some of the events on the Keep It Made In America Tour . I am from Silicon Valley, and it’s still pretty nice right here, so the extent and breadth of the decline of our cities and towns was somewhat of a surprise to me. Of course I know what is going on, but when you actually come from somewhere that is still pretty nice and see it firsthand – and everywhere – the abrupt transition makes its point. Here is what you see in town after town. As you approach the town the first thing you encounter is the vulture circle that surrounds it. This is the circle of Wall Street-owned chains emulating the Wal-Mart model of sucking cash out of the area, and sending it to the wealthy elites who own … almost everything now. Nice stores near highway exits. National chains, all the same… Next is the circle of home equity extraction, the newer houses with the big first and second Wall Street mortgages. These houses mostly look OK — except the foreclosures with the brown lawns and grass growing in the cracks in the driveway. This area has the car dealers and strip malls that used to sell the nice cars or nice goods that feasted on those “take money out of your house” refinancings or second mortgages. Now they have nail and hair salons or are just “for lease.” Then you get to the areas of older houses, more of them boarded up than you want to see, boarded up stores on a few of the corners of the larger streets. Lots of the still-occupied houses have bars on the windows. Then you get to the old, crumbling downtown where there are many empty storefronts, some boarded, a few government buildings here and there. And somewhere is “the old plant.” One or more closed-up, fenced-off, rusting old factories or mills with broken windows, maybe part of it falling down, where the people used to work, the jobs moved to Mexico or China. Much of the country is like this now . So many of the older small towns, crumbling, the money sucked out by the Wall Street elite. The factories sold off, closed. The people can’t make a living, the towns can’t make a living, the country can’t make a living, the Wall Street elite making a killing. As I said, I am from Silicon Valley, and it’s still pretty nice here, but you can see it starting here, too . One of every four or five office or light-industrial buildings has an “Available” sign. The region has the same number of manufacturing jobs as it had when the “tech revolution” began – the rest moved to China. Even exclusive Palo Alto has empty storefronts on the main drag. It is even happening here. It will get worse. But it is not happening yet in the parts of New York and DC where the well-to-do elite spend their time . So they don’t see or feel or care what is happening to the country. And these plutocrats control all of the levers of power, making it impossible for the rest of us to participate in the system to fix the situation. Which means that people are starting to talk about moving outside of the system. Tea Party, for example. Militias, for example. Nonvoting, for example. Deficit Commission Instead of Jobs Commission? The priorities of the plutocratic DC elite do not reflect America’s problems. DC gives us a deficit commission instead of a jobs commission. Their deficit commission proposes to cut the lifeline of retirement. There is nothing about investing in our crumbling infrastructure or education or the new green industries that move us away from the oil/coal economy that is draining us and threatening our climate and coastlines. There is nothing about an economic/industrial policy to restore our competitiveness in the world economy. Perhaps moving the Congress would help, so they can see the gap that has formed between the DC elite and the rest of us. I suggest Lorain, Ohio . Then after a month, Wheeling, West Virginia . Month after that, Canton, Ohio . Next, Erie, Pennsylvania . Then move it permanently to Flint, Michigan . About the video . And, of course, the chart that no one in DC is able to understand: Sign up here for the CAF daily summary .

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Video: Siegel Doubts 10-Year Treasury Yields Will Fall Further

November 19, 2010

Oct. 19 (Bloomberg) — Jeremy Siegel, a finance professor at the University of Pennsylvania’s Wharton School, talks about the outlook for the U.S. Treasury market. Siegel also discusses the Bush-era tax cuts and the Troubled Asset Relief Program. He talks with Julie Hyman on Bloomberg Television’s “Street Smart.” Larry Shover of Efficient Capital Management also speaks. (Source: Bloomberg)

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Douglas M. Branson: Women CEOs in the Fortune 500 — A Single Step Forward, Four Steps Back

November 18, 2010

My book, The Last Male Bastion – Gender and the CEO Suite at America’s Public Companies (Routledge 2010), appeared just last March. The book featured profiles of the 21 women who actually have reached the corner officer at large U.S. public companies, including references to the 22nd (Ursula Burns at Xerox). Ms. Burns took office after the manuscript had gone to print. There have been several twists and turns since that time, with the overall effect being a distinct setback. The total number of women CEOs has fallen, from 15, or 3% of the Fortune 500, which represented the high point, to 12, then in September back up to 13, then most recently back to 12, or 2.4%, where it now rests. When in 2009 Ursula Burns took office it was a historic moment, not because the number of women in office had reached a new high. It hadn’t: Burns replaced another woman, Anne Mulcahy, who had been Xerox’s CEO since 2002. The female CEO number stayed at 15. What was historic was that Ms. Burns became our first African American woman CEO. Very rapidly, though, three women CEOs resigned their positions. Mary Sammons, CEO of Rite Aid, Camp Hill, Pennsylvania, resigned, perhaps be she was tired. Once a high flier in the 1990s stock market, Rite Aid has fallen further and further behind the industry leaders, CVS and Walgreens. For a time the stock has flirted with a price under $1.00, which could mean delisting from the New York Stock Exchange. Sammons and her team seemed never able to pull the company out of its tail spin. Christina Gold, CEO of Western Union, re-located to outside Denver, stepped down later this spring. She simply retired. Then, in early summer came word that Brenda Barnes, CEO of Sara Lee, Downer’s Grove, Illinois, herself a widely publicized corporate CEO, had a severe stroke in her mid-50s. In June she took a leave of absence, followed in August by her resignation. Kohlberg Kravis & Roberts (KKR), the buyout firm has expressed interest in acquiring Sara Lee and taking the company private but, initially at least, Sara Lee’s management rejected the overtures. So, quite rapidly, the number of women CEOs had dropped from 15 to 12. The number rebounded slightly in late September when Campbell’s Soup, of Camden, New Jersey, announced the selection of Denise Morrison as CEO, succeeding Douglas R. Conant. Ms. Morrison is a food industry veteran, who rose through jobs at Proctor & Gamble, Pepsico, Nestle S.A., Nabisco, and Kraft Foods, before joining Campbell’s. She also evidences a common pattern of women who have made it to the top. They side stepped from one company to another, often several times in their careers, before they reached senior management. Only Anne Mulcahy at Xerox and Susan Ivey at Reynolds America are female CEOs who spent most all of their careers with a single company. The number of women on corporate boards of directors in the U.S. has been basically flat for 5 years now, according to Catalyst, the leading women’s advocacy organization. Catalyst, too, inflates the number, counting the number of directorships which are held by women as the number of female directors. The latter number is significantly less, as numbers of women, many of them prominent, allow themselves to be token, or corporate governance ornaments, serving on 4, 5, 6 or 7 corporate boards. The number of women trophy directors has rapidly increased as of late whereas the species has all but disappeared among men. Then, most recently, in late October, 2010, Susan Ivey at Reynolds America announced her retirement from the CEO position. Her stepping down is quite confounding, as she is only 51 and her leadership at RAI has been unparalleled. She led the company into smokeless tobacco, where future growth will be. She resurrected defunct premium brands, marketing them with premium panache but non-premium prices. The stock’s price hovers near an all-time high and the dividends are robust, to say the least. So, in the immediate year almost past, we have had one new appointment (Morrison) and four resignations (Sammons, Gold, Barnes and Ivey); one step forward, four steps back.

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Amazon Hiring Thousands To Help Fill Holiday Orders

November 12, 2010

NEW YORK — Amazon.com Inc. said Friday it is hiring more than 15,500 people to fill temporary holiday jobs at shipping centers around the country, more than it hired last year. The online retail giant said in news releases that it will hire more than 5,000 people in Phoenix and Goodyear, Ariz., and 4,000 in Pennsylvania at locations including Allentown, Hazleton and Lewisberry. In Indiana, it will hire more than 2,500 people in Whitestown and Plainfield, and it will hired more than 2,000 each in Hebron, Ky. and Fernley, Nev. The Seattle company said it is hiring more people this year than last but not how many more. Many retailers are increasing their hiring this season. Kohl’s Corp., Macy’s Inc., Toys R Us, Pier 1 Imports Inc., American Eagle Outfitters Inc. and others plan to hire more temporary holiday workers. Retailers will add between 550,000 and 650,000 jobs this holiday season, according to an updated forecast from the national outsourcing firm Challenger, Gray and Christmas. That’s significantly more than the 501,400 added last year. But it’s still well below the 720,800 added in 2007 as the recession began. About 10 percent of U.S. holiday sales are made online, but the sector is growing fast. Research firm comScore Inc. expects it to grow 7 to 9 percent compared with a year ago, when online holiday sales were 4 percent higher than the previous year. Earlier this month Amazon.com also announced thousands of temporary holiday jobs in Campbellsville and Lexington, Ky. and Las Vegas. The company has 31,200 permanent employees worldwide. Shares fell $4.55 or 2.7 percent to $165.82 on Friday.

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G.W. Schulz: Is Your Boss Spying Off the Clock?

November 11, 2010

Remember that hazy trip to Cabo San Lucas with old friends a few years ago? Those margaritas were huge. You just had to post photos of them on Facebook, along with a few other Kodak moments. Then you mostly forgot about them. Even if you don’t recall all of the sordid details from that weekend of debauchery, your employer may know all about it. That’s because a new company called Social Intelligence billing itself as a social media private eye will observe your Twitter, Facebook, LinkedIn and other online accounts on behalf of employers to make certain you’re not a liability. Background checks involving criminal records and credit histories are typical and even expected of many major employers responsible for children, nursing homes or public safety. But the Santa Barbara, Calif.-based company takes this concept to a new level offering an automated tool that mines social media content for troubling signs. Search filters can be customized “to reflect corporate culture,” and additional manual reviews are conducted by “social media experts.” A display tells the human resources manager in your workplace how many “negative” hits are uncovered, placing the names of both job applicants and active employees next to red flags like “drugs/drug lingo,” “gangs,” “poor judgment” and “demonstrating potentially violent behavior.” Social Intelligence is the latest in an ever-expanding movement by both corporations and government agencies, including the Department of Homeland Security, to use new communications tools for surveillance purposes. Some of the most provocative examples yet emerged only in recent weeks. The trend raises fresh questions about how standards enforcing privacy online can withstand the rush of data about you and everyone else that courses through the Internet. After finally landing a job, the information gathering has only just begun. From there, Social Intelligence will carry out near “real-time surveillance” of your behavior with screenshots and customizable reports used to document activity and keep the front office informed. Its marketing materials play into larger fears every employer could have. According to the company’s website: Once employees have been hired, their online behavior poses a possible threat to your company. Employees may criticize managers or coworkers on a social networking site, post questionable photos on a blog, or regularly update personal sites while on the clock. … Consistent monitoring creates awareness and strict adherence among employees, thereby reducing ‘cyber slacking,’ fraud and negative company publicity. Internet.com pointed out Sept. 29 that Social Intelligence doesn’t actively “friend” users to surreptitiously access more private posts online. The goal is to shield companies from job seekers and employees who turn out to be dangerous or untrustworthy. Litigation following violent episodes in the workplace can hinge on warning signs an institution may have been aware of in advance. But clearly bloodshed isn’t the only thing Social Intelligence is promising to help prevent. Government investigators, meanwhile, will quietly friend you and more generally use social media to seek out evidence of possible security threats and spy on political organizations. New documents unearthed recently in Pennsylvania show that state homeland security officials used Twitter accounts to watch people who had not violated any laws, including elderly anti-war protesters linked to Quaker activism. The news came shortly after Pennsylvania’s homeland security director resigned amid revelations that the state paid a private contractor thousands of dollars to monitor gay and lesbian groups, environmentalists and even a nonprofit tied to the governor. Findings from the surveillance were compiled in intelligence reports ostensibly designed to inform authorities about potential terrorism. But the public reacted angrily. Gov. Ed Rendell apologized, calling the intel-gathering “ludicrous” and insisting he wasn’t aware of it. Then in October, the Electronic Frontier Foundation obtained documents through a Freedom of Information Act lawsuit showing that the federal government created a special center prior to Barack Obama’s inauguration for analyzing oceans of data passing through Facebook, Twitter and other sites in an attempt to identify hazards. Further records turned over to EFF revealed that federal investigators were taught how they could deceptively “friend” people applying to become citizens and snoop for relationship details meeting the government’s standard of a legitimate marriage. According to one internal memo: Narcissistic tendencies in many people fuels a need to have a large group of ‘friends’ link to their pages, and many of these people accept cyber-friends that they don’t even know. .. Once a user posts online, they create a public record and timeline of their activities. In documents made publicly available earlier this year by the Department of Homeland Security, officials described another new program for maintaining “situational awareness” that involved tracking social media sites and other online destinations. Personnel at the department’s National Operations Center scan the web using dozens upon dozens of key search terms and phrases, among them “militia,” “cops,” “riot,” “dirty bomb,” “Mexican army,” “decapitated,” “Iraq,” “radicals” and many more. The NOC stores and analyzes its results before determining what tips should be distributed to other government agencies and even private companies authorized to receive such information. As for Social Intelligence, attempting to expose online criticism from employees could become its own liability. The National Labor Relations Board is arguing that condemnation of your boss on Facebook doesn’t justify termination. Lawyers for the labor board alleged in late October that an ambulance company violated the law when it fired an employee for disparaging remarks made on the web. Observers are calling the case ground-breaking. What’s the Department of Homeland Security watching online? Examples below. Click here for a report on the department’s Social Media Monitoring Initiative. 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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Robert Teitelman: Kahan and Rock and the problem with proxy access

November 11, 2010

In the world of corporate governance, there are moments of sense that flash like lightning across the sky. Mostly, though, it’s unrelievedly dark. The lightning flash this time comes from two of the legal eminences of governance research, Marcel Kahan from New York University Law School and his frequent collaborator, Edward Rock of the University of Pennsylvania Law School, in a post to the Harvard Law School School Forum on Corporate Governance and Financial Regulation. The pair tackle the question of proxy access for shareholders, a proposal that got a shove forward in the Dodd-Frank financial reform legislation. The Securities and Exchange Commission then passed new rules in August, only to delay implementation in October. Proxy access is this year’s must-have governance policy (closely followed by the related say-on-pay). Allowing shareholders to easily nominate directors represents the latest attempt to explain why, despite steady progress (though that is a slippery term for an elusive subject) in shareholder rights, companies keep going wrong, from too much risk to too much comp. The heart of that “wrong,” governance orthodoxy now insists, stems from the difficulty and expense that shareholders — always portrayed as a sort of monolithic mob with a single interest — must shoulder to place candidates for directorships into nomination. Shareholders, in other words, cannot be at fault; all sin lurks within senior managements and boards. Proxy access comes down to this: If you give long-term shareholders (meaning those who own 3% of the shares for three years) easy access to board nominations, they will finally be able to perform their monitoring function adequately. This, Kahan and Rock write, is “the conventional wisdom,” adding: “Because proxy access is viewed as dramatically lowering the costs of an election contest, both proponents and opponents of these rules predict that they will have a significant impact.” The pair, however, summarily reject that notion. “We argue,” they write, “that proxy access will lead to few shareholder nominations, that most of the nominees will be defeated, and that the occasional nominee who does get elected will have little impact.” Boom. Why the rejection? Kahan and Rock tick off factors that are so well known by this point that it’s almost embarrassing to bring them up: Most mutual funds and private pension funds have never shown an interest in corporate activism. A few large public pensions, like CalPERS, they admit, “have shown a modest interest,” but that doesn’t inspire them. And the most activist of shareholders — hedge and union-affiliated funds — “will generally not satisfy the ownership and holding period requirements.” For the most part, proxy access won’t help here-today-gone-tomorrow Carl Icahn. We’re back to where we started from: Shareholder democracy doesn’t work effectively because most shareholders are, often for their own good reasons, profoundly passive. Kahan and Rock argue that compared with current systems of “withhold-vote campaigns,” cost savings in proxy access campaigns aren’t significant, higher levels of shareholder support are required, and running “positive campaigns” (vote for my nominee not withhold your vote for theirs) opens shareholders up to unwanted attack for conflicts of interest or lack of qualifications. And again, many of these funds are publicity- and cost-averse. “Overall, we believe that proxy access will have some undesirable effects — it will result in some increase in company expenses and may rarely increase the leverage of shareholders whose interest conflict with those of shareholders at large — and some desirable ones — it may occasionally lead to the election of nominees at recalcitrant boards, where such nominees may have a modest impact on governance and a marginal impact on company value … the net effect is likely to be zero.” That’s a pretty bad grade. Again, Kahan and Rock are hardly stealth stakeholder theorists or initiates into the Marty Lipton school of entrenched management. They are very near the center of governance thought, academic division. Their conclusions thus raise the obvious question: If proxy access is a big fat dud, where does governance go from here? Robert Teitelman is editor in chief of The Deal.

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Robert Auerbach: Why the Federal Reserve’s Contribution to Unemployment and Price Discrimination Continues

October 27, 2010

As I described earlier, the Fed began paying banks interest on their reserves one month after the September 2008 financial crisis struck the United States economy and spread throughout the world. The Fed (actually taxpayers) paid the banks more than $2 billion in 2009 at a small, but risk free, rate of one-quarter of 1 percent. Economists inside and outside the Fed said these payments would be an incentive for banks to sit on their reserves rather than loan the money to businesses in a risky environment. This was the Bernanke Fed’s contribution to unemployment. I suggested that interest payments on reserves should be lowered and short term interest rates targeted by the Fed be allowed to rise to maintain a moderate rate of increase in the money supply. However, Fed policy still persists as the banks sit on $1.047 trillion in reserves on September 1, 2010. This is 53.4 percent of the money (the monetary base) the Fed has issued. Compare this to 5.3 percent on August 1, 2008 before the financial collapse and the interest payments on bank reserves were paid. So what does the Fed want to do now? Three Fed officials, Federal Reserve Bank Presidents, William C. Dudley (New York), Charles L. Evans (Chicago) and Eric S. Rosengren (Boston) have signaled their views making headlines: “Fed Officials Signal New Economic Push.” (New York Times, 10/1/10) The officials reportedly suggest buying longer term Treasury bonds and thus issuing more money. Once such transactions are made the sellers will deposit the money in a bank account. The banks may continue to hold more than half of the new money in reserves and collect more risk free interest. Instead of buying bonds why not follow the suggestion to lower interest payments on bank reserves and raise target interest rates to allow the money supply to increase at a modest rate? Temporary attempts to change long term interest rates on U.S. Treasury bonds have many collateral effects, such as changing the current (spot) and future exchange rates, inducing outflows of capital from the U.S. and causing turbulence in the international money markets. I do not recall that the previous four Fed Chairmen (Arthur Burns, G. William Miller, Paul Volcker and Alan Greenspan) discussed these collateral effects of Fed policies in House Banking hearings where I assisted in preparing questions. Hello, the U.S. is affected by changes in the international money markets that respond to Fed policies. The banks certainly favor the Fed’s interest payments if they can continue to earn sufficient risk free interest on their reserves. Naturally, these Fed Bank presidents would be expected to have a strong incentive to please the banks that elected them to their office and may wish to be reelected at the end of their five-year terms. Two thirds of the nine board of directors that elect the presidents at each of the twelve Federal Reserve district banks are elected by Fed member banks in the district. (All national banks must be member banks. It is optional for banks chartered by state governments.) The election must be approved by the Board of Governors in Washington, but first the applicants must win over the votes of the bankers. I had experience with this political process when a lawyer at the Kansas City Fed bank successfully ran to be its president. I was one of his staff tutors on monetary policy and general economics. It is an important political process that is also a major conflict of interest for the nation’s most powerful bank regulators to be elected by the banks they will regulate. When I testified against the payment of interest at a Congressional hearing, Congressman Pat Toomey (now running for the Senate in Pennsylvania) made a compelling and common argument for the payment of interest on bank reserves required by the Federal Reserve. (3/5/2005) If banks are required to hold reserves, it is a tax on their earnings, from money they cannot invest, that should be offset with interest payments to the banks. Surplus reserves (reserves that are not required) do not qualify under this rationale. Economists have also said that the interest payments on reserves would be passed on to the depositors so that people could earn interest on money rather than wasting resources searching for secure investments that pay market rates of interest. These arguments are not applicable in the current U.S. banking system. First, the interest payments on reserves are unlikely to be fully passed on to “ordinary” depositors by most banks. Rather, it would be a gift to bank stock holders estimated to have a present value of $16.7 billion. The reason interest payments are not fully passed on to depositors is another story about bank pricing practices. An underlying fact is often ignored. Reserve requirements imposed by the Fed on banks are actually optional for many depositors. Vice President Richard G. Anderson of the St Louis Federal Reserve Bank calls them a “voluntary tax.” (“Economic Synopses”, 2008, No. 30) One reason is that many business depositors have “retail deposit sweep programs.” These are zero balance accounts because the money is taken off the banks’ books before the banks close and interest is paid overnight. Then the money is put back into the accounts. That is all phony accounting to pretend there is no money in the account that would require the banks to hold reserves. The banks can pay a higher interest on these accounts because the Fed does not require reserves to be held against the accounts. This a deplorable form of price discrimination that treats the “ordinary” depositors as fools who receive regular accounts that pay lower interest, currently often near zero. The Fed should stop this price discrimination, but why would they hurt the banks that elect the Fed Bank presidents? Sweep accounts are not the only method banks have used to reduce reserve requirements. One example is an accounting scheme called “The Eurodollar Game” that large banks with offshore branches can use to reduce their reported deposits and thus their required reserves. (The game includes counting Friday as three days in calculating average deposits. The deposits can be transferred to offshore accounts so they don’t appear on Friday and then brought back on Monday, another phony accounting trick.) Fed Chairman Paul Volcker replied to a request from Banking Committee Chairman/Ranking Member Henry B. Gonzalez to stop the Eurodollar game. Volcker replied that since there were other ways to bypass reserve requirements it would not be desirable to fix this one problem.

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The New Tax Man From Ancient Rome

October 22, 2010

Sheila Rice, who sold her Maryland home to avoid foreclosure, was surprised to learn JPMorgan Chase was her property tax collector. But the bank can’t claim to be the first private company to play the role of tax man: It’s taken part in a more than 2,000-year-old tradition that, from its very start, has been tainted by abuse. As the Huffington Post Investigative Fund reported this week, big banks and hedge funds in the U.S. have been quietly collecting taxes on hundreds of thousands of homes. The process, called “tax farming,” is simple: A company goes to a local government and reimburses it for taxes that citizens aren’t paying. In return, the company gets to act like an old-fashioned tax thug — the kind rabbis condemn in the Bible — charging up to 18 percent interest and thousands of dollars in legal fees, simply because it can. As the District of Columbia attorney general told the HuffPost Investigative Fund, there’s “no oversight at all.” Like many great American traditions, the tax farming game was perfected by the ancient Romans. Provincial governors, and later Rome itself, sold tax-collection rights to private companies called publicani. As in modern America, this was a speculative bet — a company paid a local government’s tax debt, and then tried its own hand at recouping the loss. The Roman version was plainly brutal. In ours, the brutality is subtle. But in the estimation of one expert in ancient finance, it’s just as bad: In our own way, we’re sliding toward the conditions of ancient Rome, where private tax collectors employed soldiers to wring excessive amounts of cash from debtors. “I fear that we’re soon going to be where the Romans once were,” New York University classics professor Michael Peachin said in an interview with HuffPost. “We’re liable to rue the day — not we, probably, but somebody will someday.” Peachin was being facetious, but his exaggeration seems actually like understatement. In certain important ways, it’s not a question of “someday” — some of our hedge funds and banks, which strong-arm debtors like Rice with threats of foreclosure, are already there. Modern American tax farms, like their Roman counterparts, lack government oversight. But the Romans, at least, had an excuse. The republic, and later the empire, was huge, and ancient technologies made transportation and communication difficult. As Edgar Kiser, of the University of Washington, and Danielle Kane, then of the University of Pennsylvania, say in a 2007 paper , that hugeness motivated Roman governments to turn to privatized tax collection in the first place. With tax farms, the government knew it would get paid. It didn’t care — it couldn’t afford to care — how the publicani came up with the money. “They want their taxes, and they want people not to make trouble. And that’s it,” Peachin said, referring to Roman local governments. “Otherwise, they just don’t do much of anything.” The major losers here, of course, were the taxpayers. Not only were they overtaxed, but publicani were free to be creative with enforcement. Violence was common. Peachin believes the publicani could even borrow troops from local governments. In the end, a focus on short-term profit undercut long-term strength . “Overtaxation only decreased tax revenue to the state in the long term through its negative effects on the tax base,” Kiser and Kane write. Modern U.S. tax farms don’t use violence, but they do have the power to take their debtors’ homes — even for what starts as just a few hundred dollars in unpaid bills. And whereas ancient publicani physically couldn’t communicate with regulatory powers, today’s tax farms intentionally hide information. Banks and hedge funds, according to the HuffPost Investigative Fund, create dozens of companies that they use as fronts, obscuring their true identities. Today’s regulators aren’t located an empire away. They just haven’t been regulating. In both ancient and modern times, the guilt gets spread around. Publicani took investments, and investors shared in the profits, much like at JPMorgan or Bank of America today. The key difference was that Roman publicani accepted investments from senators who were ostensibly their regulators. Since this was in fact illegal, senators made sure their shares were unregistered. As Ernst Badian, Harvard history professor emeritus, puts it in a 1972 book, “The traditional division of functions between government and public contracting was dead.” There have been no allegations of this type of conflict of interest in modern-day tax farms. But the U.S. government today, as the Roman government did back then, enjoys what is often called a “revolving door” relationship with the financial sector. This passage from Kiser and Kane about senators and publicani sounds familiar: “Revolving doors exist when actors move back and forth between roles as principals and roles as agents. This causes an increasing likelihood of collusion between principals and agents, leading to poor monitoring.”

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Dave Johnson: Erie, PA Town Hall: "No Country Ever Went Broke Investing in Its Own People"

October 19, 2010

Last night’s “Keep It Made In America” Town Hall meeting was at the Bayfront Convention Center in Erie, Pennsylvania. Kyle Foust, Chairman of the Erie County Council welcomed the attendees and led off the Town Hall meeting, quoting Hubert Humphrey: “No country ever went broke by investing in its own people.” I recently spoke with a Tea Party member who did not know that it is government that builds the roads, airports, sewer systems, etc. that make up the infrastructure that is the foundation of our country’s ability to have companies at all. He actually thought that private companies do this, and that “government spending” just “takes money out of the economy.” Maybe this is why so many candidates in this election say that “government spending” is bad but will not say, no matter how hard they are pressed , what spending they plan to cut in their quest for “smaller government.” The Town Hall Following a Unitarian invocation by Rev Steve Aschmann, Scott Paul of the Alliance for American Manufacturing (AAM) — the organization that is putting on these “Keep It Made In America” Town Hall events — explained what AAM is about, strengthening manufacturing in this country. Scott gave the audience several facts about manufacturing: 74% of Tea Party supporters support more manufacturing, as do 82% of union members. 563,500 in Pennsylvania work in the manufacturing sector This is down from 864,000 in 2000 And represents a 35% cut in manufacturing jobs. Candidates Speak Two local House candidates spoke at this meeting. Mike Kelley, Republican candidate for Congress spoke first. “We can’t control unfair competition. Just make it fair, that’s all, make it fair. Enforce the rules. We play by the rules, other people don’t. Chinese currency.” Q: “Will you support buy American policies?” A: Who would not? Especially in taxpayer-funded projects. Q: “Hold China accountable?” A: The world has been waiting for America to take the lead. China has to be held accountable when they break the rules. Q: “Policies?” Competition, we never back away from competition. We need to get a national strategy in place. Taxes — need a VAT. Others all do it. (Note, Kelley’s answer is good for manufacturing. Short explanation: Other countries use a VAT to boost their manufacturing sector. Their manufacturers get a VAT rebate, but goods imported from the US do not, so in effect a VAT is a either a subsidy of their companies or a tariff on imports from us.) Next up was his opponent in the race, Congresswoman Kathy Dahlkemper: We need to get back to a manufacturing economy, to provide that good family-sustaining wage. How to keep it made in America, three points: 1) Close the loopholes, Republicans’s did not vote with us on this. My opponent has pledged, signed a pledge no to remove the tax advantages given to companies for moving factories out of the country and outsourcing American jobs. (Note see my post on this today.) 2) Stop China’s cheating. Everyone knows China cheats. The currency bill, voted for it, the Chamber of Commerce — that’s the national Chamber which is a very different thing from the local Chambers — is against it. We also have to stop China’s illegal trade practices and dumping (selling below cost to capture markets). 3) Invest in our domestic manufacturing base. The COMPETES act has passed the House, but Senate… Education. Raw materials — rare earth elements, China is saying they can get these IF they bring manufacturing to their country. We can produce them here, but don’t. Because China subsidizes, it is not profitable to start production here. The Panel This Town Hall’s panel of local experts: • Kenneth Boothe Jr., General Manager, Donjon Ship Builders • Reverend Jeffery Priscaro, St. Ann’s church • Ron Oliver, Community Labor Leader • Tim Ryan President, Apex Offshore Wind. • David J. Rosenberg, Head of Marketing, North America Gamesa Energy • Hillary Bright, Blue/Green Alliance Field Organizer. Priscaro — When people make things It create sjobsm, revenue, they buy houses, participate in economy. Ryan — Windmills, local wind turbines on old steel mill site, made in the US. Sun Ray project in Texas used GE wind turbines, GE Transport made the gearboxes. Gemasa, of Sain, has set up manufacturing near here. The Export/Import bank financing requires high local content. We need a national Renewable Energy Standard , then there is a tremendous opportunity for American manufacturing in wind energy. Oliver — the effect on people of losing job, moving, move in with mom, manufacturing is the heartbeat of America. Boothe — Donjon has recently gone from 13 employees, in 10 months have 118. 125 by end of year, 150 then up to 250. Bright — Labor and environmentalists share common goals Hadn’t recognized how intertwined manufacturing is with a healthy community, environment, wages, families, healthy communities. And healthy environment. The way we see America in future generations, manufacturing is key to recognizing that. Q: “Where are we going to get jobs? We need the infrastructure rebuilt, everything reconstructed. How?” Bright — AAM, others have recognized that one of the largest opportunities is in clean energy. The stimulus was a down payment. Opportunity at federal policy level like Renewable Energy Standard to create the market and the demand to get it going, otherwise we lose the race to countries like China. Oliver — We need to create the jobs here, the stimulus was using money to buy windmills made in China. Ryan — We need new power plants as well as wind energy power plants. National policy has been up and down up and down, industry can’t survive on federal programs that last 6 months or a year, we need national policy that looks at the next 20 years or so. Priest, we lost jobs because of legislation, we can gina jobs by legislation. Q: “What can we do to stop the leak of jobs from US?” Scott Paul: Stop tax breaks to ship jobs overseas. (Note — All pictures by Ike Gittlen, USW, with permission. Click any pic for enlargement, see the entire collection here .) This post originally appeared at Campaign for America’s Future (CAF) at their Blog for OurFuture as part of the Making It In America project. I am a Fellow with CAF. Sign up here for the CAF daily summary .

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Chilean Miner Rescue: Pennsylvania Drilling Firm Finds Itself In The Middle Of Chilean Miner Rescue

October 13, 2010

PITTSBURGH — Proud employees of a small drilling company too remote to have cable television found themselves Wednesday at the center of the world’s biggest news story – but they still had to get the day’s work done. As rescuers brought 33 Chilean miners one by one in a metal capsule through a 2,000-foot hole bored by drill bits made by Center Rock Inc. of Berlin, Pa., workers in the small southwestern Pennsylvania community occasionally paused their daily routines to follow computer news feeds. Lunch was brought in to help them celebrate. But machines still needed to be oiled, floors still needed to be swept – and somebody still had to answer the phones, which were ringing off the hook. “We still have customers who still need products today, so we’re working and we’re celebrating,” inside sales manager Becky Dorcon told The Associated Press. Center Rock has a brief, but storied, history. Founded in 1998, the company’s profile rose appreciably in July 2002, when it pitched in during a similar rescue to free nine miners trapped underground for more than three days in the flooded Quecreek Mine a few miles away. Tom Foy, 61, who still lives in Berlin, was one of the Quecreek miners but has worked for Center Rock for nearly five years. “The kids won’t let me go back,” said Foy, a married father referring to his four children, ages 34 to 38. “I gave the mining up. I wasn’t about to put them through that again.” Although Quecreek helped put Center Rock on the map, it was the company’s LP Drill – or low-profile drill – developed five years ago that has seen the company grow from 16 to 75 employees and put the company at the center of the Chilean rescue, Dorcon said. Schramm Inc. of West Chester, Pa., makes the T-130 drill used to make the hole; Center Rock makes the 28-inch wide canisters that function as the bit. Each canister contains four air hammers and four drill bits that move in tandem to dig through rock. Center Rock owner Brandon Fisher, just back Tuesday night from Chile, fielded dozens of interview requests – and hoped to sneak away for some sleep. In an exclusive interview with the Daily American of Somerset, Fisher said he and wife, sales director Julie Fisher, were back in Berlin in time to watch on television as the first miner was pulled from the hole where he and his colleagues had been trapped since Aug. 5. Fisher, 38, and Richard Soppe, 58, his director of construction and mining tools, spent 37 days with scant sleep drilling the rescue shaft. Julie Fisher joined them about two weeks ago, and relatives and friends gathered to welcome them home Tuesday. “When I saw the first guy looking healthy, that’s what it’s all about,” Fisher told the newspaper. “But the mission is not over until the last guy is out.” Fisher was especially drawn to miner Mario Sepulveda Espina, with whom Fisher interacted by video during the drilling process. Espina, the second miner pulled from the shaft, made made a bizarre request while still underground: wigs. Officials granted Espina’s request, Fisher told the Daily American, and the miner wore one in front of a video monitor, joking about what shampoo did to his hair – perhaps a reference to a commercial in which a wig-clad Troy Polamalu blames his big hair on shampoo. Once rescued, Espina ran along high-fiving those above ground. “He was a practical joker; he used humor to keep the morale up,” Fisher told the newspaper. Dorcan said the company took “tremendous pride” in the rescue. “Everybody here has been giving 110 percent since the day Brandon got in contact with the people of Chile and it was thought he was going and our tools were going to be used,” she said. Foy said Center Rock volunteered to help in Chile after officials there confirmed the miners were still alive Aug. 22, but said soon afterward that they expected it would take until Christmas to dig a rescue shaft. “They said, ‘Well, heck, they ain’t getting out till Christmastime, and I know and Brandon knows and we all knew we could get down to them faster than that,” Foy said. “We proved that Center Rock is a little company, but they do big things.”

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Zach Carter: Obama Must Reject The Foreclosure Fraud Bailout

October 7, 2010

Unbelievably, the U.S. Senate has approved legislation making it easier for banks to get away with foreclosure fraud. The bill would make it much harder for consumer advocates to show that banks are engaging in fraud, bailing out megabanks who cut corners in order to boost bonuses and slap borrowers with massive, illegal fees. The political fight between big banks and troubled homeowners is on, and President Barack Obama must take a side . If President Obama signs this legislation into law, he’s sending a clear signal that his administration stands ready to bailout the banks again, whatever the consequences for American homeowners. The new legislation is a clear attempt to provide legal cover to GMAC’s robo-signing scandal, and should be firmly opposed by Obama. Banks are running into big trouble in foreclosure courts right now because they have kept shoddy mortgage records for years in order to cut costs and boost bonuses. Those records are so bad that banks routinely cannot prove that they have the legal right to foreclose on the homes they attempt to foreclose on. That’s a major problem, because banks have repeatedly demonstrated that they cannot be trusted to figure out their own foreclosures for themselves. They’ve foreclosed on people who haven’t missed any mortgage payments, and even on borrowers who have fully paid off their loans. So banks and their lawyers have been fabricating documents, forging signatures, and lying to judges in order to go through with foreclosures. All of this is fraud– especially when committed systematically, en masse by large corporations and their clients. It gets even worse when banks try to use fraudulent documents to slap borrowers with thousands of dollars in illegal fees . The legislation currently awaiting President Obama’s signature tries to bailout banks on one aspect of this documentation problem. Banks push through a lot of bogus documents with the help of corrupt notaries. Notaries are people who witness some legal event, like the signing of a contract, and then testify in print that they saw the contract being signed. It’s one way for courts and lawyers to show that documents have not been forged. But the major foreclosure fraud scandal at bailout behemoth GMAC that ignited the current furor involved what appear to be totally bogus notaries. One GMAC employee, Jeffrey Stephan, signed thousands of affidavits and had them all notarized in Pennsylvania, even though they were being used in foreclosure cases in many different states. Since different states have different standards for notary approval, these documents should have been unacceptable in the vast majority of state courts. That made the GMAC scandal illegal in most states. But the GMAC scandal got much worse once Stephan acknowledged that he had never actually examined the affidavits before approving them. All of Pennsylvania’s notaries who signed off on the Stephans Documents were totally unreliable. They were approving fraudulent documents en masse. So for the Stephens Documents, there are two levels of impropriety–the notaries who didn’t do their homework, and Stephens, who illegally robo-signed hundreds of thousands of documents. The bill approved by the Senate on September 30 addresses the notary side of things. It says that all states must accept a notary from any other state, and even allows notaries to sign-off on electronic documents. That means notaries don’t have to be present at the signing of documents–somebody can forge a document, scan it into a computer, and ship it off to a notary for approval, replicating the GMAC scam online. The good news is that the GMAC documents were still illegal even without the false notarizations. The fact that Stephans robo-signed these without examining them was itself an act of fraud (barring other extenuating circumstances). So even if this bill is signed by Obama, wronged homeowners have some hope for redress. But the legislation would still create a major new hurdle for borrowers seeking relief. If a bogus notarization is deemed legal, it’s much harder to prove that the document itself is just a big fat fraud. Most states only accept notarizations from their own state–this makes perfect sense for mortgages. Nobody from Pennsylvania needs to fly-in to witness my mortgage closing in Virginia–a Virginian notary will do just fine. By requiring any state’s notarizations to be acceptable nationwide, the bill establishes a new race-to-the-bottom in standards: Whichever state has the weakest notary rules gets all the business. It means all of the crap Pennsylvania notaries on the GMAC robo-signings would be deemed acceptable in any state. Borrowers could still challenge the GMAC robo-signings, but it would be much harder to win the challenge, since an official, authorized notary had stated that the fraudulent robo-signings were in fact legitimate. The bill is an obvious attempt to bailout banks from the consequences of their own bonus-fueled shortcuts–shortcuts which are being used to slap individual American families with tens of thousands of dollars in illegal fees . President Obama has no business bailing out our biggest banks again–especially on the backs of troubled borrowers those banks are attempting to defraud. And the future political ramifications are dire. If this bill proves insufficient to bailout GMAC, JPMorgan, Bank of America, and the other major banks implicated in the foreclosure fraud scandal, there will be future legislative efforts to help them. If this bill becomes law, then politicians will have created political cover for the next round of bailouts, which will be characterized as a mere “technical fix” to this attempt. President Obama must veto this bill. American homeowners deserve to be protected from fraud. The American government shouldn’t be bailing out fraud.

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Video: Siegel Sees S&P 500 Index Up by 10 Percent for the Year: Video

October 5, 2010

Oct. 5 (Bloomberg) — Jeremy Siegel, a professor of finance at the University of Pennsylvania’s Wharton School, talks about the outlook for the U.S. stock market. Siegel also discusses corporate earnings and Federal Reserve monetary policy. He talks with Carol Massar, Matt Miller, Julie Hyman, Adam Johnson and Dominic Chu on Bloomberg Television’s “Street Smart.” Timothy Mulholland, managing partner at China-America Capital Co., also speaks. (Source: Bloomberg)

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How Pat Toomey Was At The Forefront Of Risky Wall Street Deals

October 5, 2010

You’ve probably heard a lot about wacky, radical candidates like Carl Paladino, Christine O’Donnell, Paul LePage, Sharron Angle, and Rand Paul. But lost in all the media finger-pointing is the fact that Pat Toomey, who in any other year would be among the most conservative candidates in the country, is on a glide path to take Arlen Specter’s old Senate seat. The former congressman and Wall Street banker has led in the Pennsylvania polls for months. And despite some apparent tightening in recent weeks, polling guru Nate Silver gives Toomey a 92 percent chance of beating his Democratic opponent, Rep. Joe Sestak.

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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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Video: Schankel Doesn’t See Harrisburg Filing for Bankruptcy: Video

October 4, 2010

Oct. 4 (Bloomnerg) — Alan Schankel, managing director at Janney Montgomery Scott, talks about the financial woes facing Pennsylvania’s capital city of Harrisburg. Harrisburg Mayor Linda Thompson requested enrollment in Pennsylvania’s recovery and oversight program for distressed municipalities, saying the capital city stands “on the precipice of a full-blown financial crisis.” Schankel talks on Bloomberg Television’s “In the Loop With Betty Liu.” (Source: Bloomberg)

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After Bailout, Business Groups Now Turning On Former Allies

October 4, 2010

WASHINGTON — During the worst of the economic crisis, the nation’s most powerful business lobby pleaded with Congress to prop up financial institutions and stimulate the economy with hundreds of billions of dollars in borrowed money. “Make no mistake: When the aftermath of congressional inaction becomes clear, Americans will not tolerate those who stood by and let the calamity happen,” wrote Bruce Josten, the U.S. Chamber of Commerce’s vice president in September 2008, who at the time pressed lawmakers before their vote on a $700 billion bailout for Wall Street. A few months later, Congress faced a similar reckoning – whether to pass an $814 billion economic stimulus package consisting of about one-third tax breaks and two-thirds additional government spending. Again, Josten wrote to lawmakers: “The global economy is in uncharted and dangerous waters and inaction from Washington is not an option.” ___ EDITOR’S NOTE – An occasional look behind the rhetoric of political campaigns. ___ Fast forward to the present. The chamber is now spending millions of dollars on ads trying to elect candidates whose campaigns are based on opposing the very bank rescue and stimulus law it once supported. Lawmakers who voted with the chamber on the two crisis-era measures are now getting the back of its hand: Sen. Barbara Boxer in California, and Reps. Joe Sestak in Pennsylvania, Paul Hodes in New Hampshire and Brad Ellsworth in Indiana. “What they want is one of their own,” said Sestak, now running for the Senate against former Rep. Pat Toomey, who denounced bank rescue and the economic stimulus as ill-advised government interventions. “So back when we were salvaging the nation, that was then.” The chamber’s strategy underscores an all-or-nothing approach to lobbying, where partial support of their agenda is not sufficient and where recent clashes trump past agreements. Since the bank bailout and stimulus program, the four Democrats have taken stances contrary to what the business lobby wanted. They voted for President Barack Obama’s health care initiative and a consumer financial protection bureau. They supported reducing greenhouse gases and backed bills to make organizations like the chamber disclose donors who help pay for political ads. “The chamber looks at an endorsement on a broad range of issues, certainly not just one or two issues alone,” said J.P. Fielder, a chamber spokesman. “Looking at this so narrowly is like looking at the wrong end of a telescope. We need to consider all the factors that impact businesses.” The bank rescue initiated by former President George W. Bush and Obama’s recovery program aimed at stimulating economic growth have become two of the most popular Republican targets this election season, cited by some candidates as examples of misguided policies. One Senate candidate backed by the chamber, Republican Rand Paul in Kentucky, so opposed the bank bailout that he refused during the primary to accept financial backing from senators who voted for it. Another critic is Carly Fiorina, the California Republican Senate candidate who is challenging Boxer. The stimulus spending is one of Fiorina’s main avenues of attack against the three-term incumbent, saying it has not led to promised job growth while sticking taxpayers with a huge tab. “When the stimulus was passed, the California unemployment rate was 10.2 percent. It is now 12.4 percent. The stimulus was a failure,” Fiorina said in a recent telephone interview. The chamber has endorsed Fiorina and spent more than $2 million on TV ads criticizing Boxer. “I think it’s hypocritical with a capital H,” Eric Schultz, spokesman for the Democratic Senatorial Campaign Committee, said of the chamber’s campaign effort. Fielder, the chamber’s spokesman, said the group scored Boxer favorably on three of the seven votes it used to rank lawmakers on how friendly they were toward business. All votes get equal weight, so votes on the stimulus bill and health care overhaul are measured equally with less momentous legislation, such as a bill to promote the U.S. travel industry. But the effects of the bills are not equal, as the chamber seemed to recognize in an Oct. 1, 2008, letter to lawmakers about the financial bailout: “Failure to approve this legislation will wreak intolerable hardship on average Americans. The chamber urges you not to stand by and let this happen but to make a courageous stand to preserve the flow of credit to the economy. The American people will recognize your act of courage.” Not one of the political ads the chamber has rolled out across the country this year commends a lawmaker for voting for the stimulus bill and the bailout. The chamber’s $75 million planned for campaign ads in this year’s elections will go, in part, to criticize candidates who voted for both measures. For example, Hodes, who is running for the Senate in New Hampshire, voted for the stimulus bill and is now being attacked by the chamber as someone whose “out-of-control spending helped push America’s debt to $13 trillion.” Hodes voted against the bailout. Ellsworth, who is running for the Senate in Indiana, is accused in the chamber’s latest ad of voting for trillions of dollars in government spending. The ad asks viewers to “tell Ellsworth Hoosiers can’t afford his big-government agenda.” Both ads directly refer to the candidates’ votes for a Democratic-led overhaul of health care, a bill the chamber strongly opposed. But they also tap into voters’ concerns about growing federal budget deficits. Fielder said the ads highlight the federal budget and support for that budget by Hodes and Ellsworth. “When we look race by race, we have to say which candidate has a policy platform that’s going to address where the economy is right now and help businesses create jobs,” Fielder said. ___ Associated Press writer Jim Kuhnhenn contributed to this report. (This version CORRECTS to show that Hodes voted against the bailout.) Multimedia: An interactive with highlights of the midterm races is in the wdc/politics_timeline folder. This story is part of AP’s financial and general news services.)

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JPMorgan Foreclosure Disputed, Casting Wider Doubts

September 27, 2010

The integrity of thousands of foreclosure notices issued by JPMorgan Chase could be cast in doubt, as a court battle over one Florida homeowner’s foreclosure might implicate numerous similar filings, reports Bloomberg News . It’s the latest example of a situation that could stall foreclosures across the nation. Last week, the Washington Post reported that Jeffrey Stephan, a document processor for Ally Financial, who lives in a “modest” two-story house in a small Pennsylvania town, had approved up to 10,000 foreclosure documents a month without actually reading them. The news came to light after Ally said it was putting the brakes on foreclosures in 23 states, citing “corrective action” it needed to take. And when, at the end of the week, Ally began to withdraw foreclosure documents reviewed by another employee, Kristine Wilson , it appeared there might be yet another “robo signer.” Now, lawyers for a Florida homeowner are using a May statement by JPMorgan executive Beth Ann Cottrell to claim that the homeowner’s foreclosure isn’t valid. In her statement, Cottrell said she was part of an eight-person team that approved about 18,000 documents a month without seriously reviewing them. “My review is more or less signing the document unless it’s questionable,” she said, according to Bloomberg , where “questionable” is meant literally: “somebody has a question and brings it to me and says, ‘Beth, can you take a look at this?’” These increased doubts about foreclosure filings come as the nation’s total volume of foreclosures is itself increasing. More Americans lost their homes to foreclosure in August than in any other month on record, according to data from RealtyTrac. While the document-processing scandals may seem like good news for homeowners dealing with foreclosure, Bloomberg notes that the doubts could delay the housing market’s recovery. Home prices continue to fall, and foreclosure controversies, which create uncertainty in the market, may delay their hitting bottom.

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Mars, IBM & USDA Successfully Map Chocolate Genome

September 15, 2010

Two competing studies have unlocked the cacao tree’s complete genome, which could yield a stable supply of chocolate beans and could one day lead to tastier, more nutritious candy bars. Mars, the company behind M&Ms and Milky Way, spent $10 million on a project, which also involved the U.S. Agriculture Department and computer megalith IBM, to produce the Cacao Genome Database. As of today, the genome map will be available on the Web, free of cost, for interested readers, scientists and chocolate manufacturers. But the announcement from that consortium is expected to be met by a similar one from Hershey, which worked with the French government and Pennsylvania State University to create its own version of the cacao tree genome.

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Department Of Energy Awarding $575 Million In Carbon Capture Research-And-Development Grants

September 8, 2010

WASHINGTON — The Energy Department said Tuesday it was awarding $575 million for carbon capture research-and-development projects in 15 states. The experimental technique involves storing carbon dioxide emissions from coal plants and other sources underground, in an attempt to reduce pollution blamed for contributing to global warming. “This is a major step forward in the fight to reduce carbon emissions from industrial plants,” said Energy Secretary Steven Chu. “These new technologies will not only help fight climate change, they will create jobs now and help position the United States to lead the world in clean coal technologies, which will only increase in demand in the years ahead.” All told, he said, the department has invested more than $4 billion in carbon storage and capture, matched by more than $7 billion in private investments. The newest money will fund 22 projects in 15 states, ranging from evaluation of geologic sites for carbon storage to development of turbo-machinery and engines to help improve carbon capture and storage. The projects, in states including California, Pennsylvania, Colorado, New York and Texas, are being funded from the economic stimulus law. President Barack Obama wants a cost-effective deployment of carbon capture and storage within 10 years – despite questions about the technology and skepticism about its feasibility. He created a task force this year charged with coming up with a plan to overcome barriers to such deployment. One issue identified by the task force was liability, because a sudden release of large amounts of carbon dioxide can kill by asphyxiation. The task force called for several options to be considered: maintaining the current legal framework; putting limits on claims; establishing an industry-financed trust fund to pay damages after a site is closed; or transferring of liability to the federal government following a site closure, under certain conditions. ____ On the Net: Full list of projects: http://www.energy.gov/news/documents/ICCS_Project_Selections.pdf

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Elizabeth Warren Meets With Bank Lobbyists

August 18, 2010

Elizabeth Warren, a top candidate to lead the new Bureau of Consumer Financial Protection, met quietly last week with some of her sharpest critics: big bank lobbyists. Before the Harvard law professor visited the White House on Thursday to talk with Obama advisers about the consumer bureau job, she spent an hour just down Pennsylvania Avenue at the Financial Services Roundtable, which represents the nation’s largest financial firms, said people familiar with the meeting.

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Steve Parker: GM Sets Volt Price While Toyota Delays US-Built Prius

July 28, 2010

There was big electric vehicle and hybrid news Tuesday, as General Motors stuck by their guns, but Toyota seems to be acknowledging that they expect sales of all their cars, including Prius, to slow for quite some time. First, GM has announced the their “extended range hybrid EV” low emission/high mileage Chevrolet Volt will sell for $41,000 when it is introduced later this year –and that’s just the base price. We can be certain that in the great car dealer tradition, there will be a good amount of options available for the car (dealers make a lot of money on those extras and car-makers like to keep their dealers happy). That $41K tab is in somewhat stark contrast to Nissan’s recent announcement that their Leaf EV will cost under $33,000. That’s an amount which, with federal, state and local incentives, might see its true base price drop to as low as near $25,500 after those credits are applied (the incentive amount all depends what state and municipality you’re living in). Former GM vice-chairman Bob Lutz introduces the first version of the Volt to be presented to the public at the Detroit Auto Show So a base Volt, even given a buyer being able to take advantage of the full $7,500 federal incentive, and let’s say $1,500 from the state and, perhaps, county or even city, will still tip the money scales at a price very near $32,000. And that’s near the base price of Leaf before any incentives are applied. But GM, apart from Volt’s high technology, edgy styling and oh-my-gosh interior, will be depending on one main thing to draw buyers to Volt from less-expensive “pure electrics” (like Leaf and Mitsubishi’s i-MiEV), and it’s called “range anxiety.” It’s a new term in the auto world, but it means just what it says: people driving cars which use any fuel other than gasoline worry about how far they can go without running out of that fuel. Volt’s gee-whiz interior, gauges and controls should impress buyers Here’s where Volt starts to sound like a great idea: While Nissan predicts a 100-mile range per charge-up for Leaf, GM says their car will have a range of around 600 miles per gasoline tankful, that gasoline powering an engine which keeps Volt’s battery charged. Volt will also have the ability to charge its battery by plugging into an electric outlet, so it appears an owner would have a tough time running out of range in Volt. Most car-makers plan on their initial EVs being second or third commuter-type cars. And because the average American’s round-trip work commute is said to be 40 miles or under, a 100-mile range should allay any range anxiety. But Volt, at its price, size and features, is clearly being aimed at buyers as a primary family car. That $32K which an incentivized base-level Volt may actually cost, is right smack dab in the middle of the biggest part of the marketplace, where Taurus and Camry and Accord are located. GM first called Volt an “extended-range hybrid” because Volt has a small on-board gasoline engine which is used to keep Volt’s battery charged. Because there is no direct connection between the gasoline engine and the electric drivetrain, GM decided they could legitimately call Volt an electric vehicle. It seems they’ve gotten their way even though in many minds the issue is still somewhat confused. GM has seen the media pick up on the EV claim (probably because “extended-range hybrid” is long and hard to explain in articles), making their EV claim, so far, successful. Volt, which, with its small gasoline engine and electric motor and drivetrain, seems more-or-less an interim vehicle until GM comes up with their own pure EV and we’d love to see that product. Now that we know more about Volt’s price, it makes it easier to see where GM is aiming this new car and gives the competition some fodder when it comes to the cost of ownership. Prius Won’t Be Built in US In addition to GM’s pricing announcement for Volt, Toyota said on Tuesday that plans for building the Prius in the US, the car’s biggest market, have been delayed. Delayed for possibly as long as (get this) six years! The Los Angeles Times reports that, “Toyota had intended to let a thousand Priuses bloom from its new Mississippi plant. The new plan is to wait until the car is remodeled and, more to the point, to wait until the global economy is a bit more sales-friendly.” Sure, but six years!? Putting-off the Prius being built in the US is no big surprise; the very Mississippi plant where Toyota planned on putting these cars together has seen its own construction stop-and-start due to the worldwide recession and a very uncertain car market (last month, on June 17th, Toyota announced construction has resumed on the plant and the factory will produce Corollas starting in Fall, 2011). Toyota’s plug-in Prius has yet to become a reality In May, 2008, Toyota announced sales of over 1,000,000 Prius gas/electric hybrids worldwide. Sales began in 1997 in Japan and in 2000 throughout much of the rest of the world. North America was by far the largest Prius market, with almost 600,000 of those initial million being sold here. So slowing the ability to build those cars in the US shows Toyota’s worries about the future; and not only their own future specifically, but that of the entire industry. Beginning in the 1980′s, the largest import car companies decided to “build ‘em where we sell ‘em” and in theory it was a good idea. It would cut all sorts of costs from building the vehicles and get them to markets much less expensively than shipping them across an ocean. Car-makers went on a tear, opening plants all over the world (and experts say the average car-making plant costs about $1 billion). In the US, import companies have set-up shop in what the industry calls “greenfield” areas of the country like Mississippi. But now they are seeing their rapid growth through the 1980′s and ’90s and early part of this century challenged by the realities of the worldwide economy. Interior of the new 2010 Prius Greenfield describes, to car makers, an area low on jobs and as devoid of unions as much as possible, mostly in our nation’s Southeast and Midwest. For instance, Toyota has plants in, among other places, Indiana and Texas, Honda is a major economic force in Ohio and Nissan builds many of the cars and trucks it sells in the US in Tennessee. Some may remember that even Volkswagen had a plant (which they’d bought from Chrysler) in the US during those years in Pennsylvania which built their ill-fated pickup truck. The plant closed in 1987 but now they’re coming back to build in the US –in Tennessee. But many of these plants are now being seen possible future white elephants. As the world gets greener, but the recession hangs on (and maybe comes back), even the building of the world’s most popular low emissions/high mileage car has been put on hold in its largest market.

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Arianna Huffington: Fear Factor: What’s Keeping the President From Picking the Best Person to Protect Consumers?

July 27, 2010

On Monday, White House spokesman Robert Gibbs lauded Elizabeth Warren as “a terrific candidate” to lead the new Consumer Financial Protection Bureau: “I don’t think any criticism in any way by anybody would disqualify her.” So why isn’t the White House rushing to nominate her for the position? In a word: fear. The same fear-based approach that caused the administration to throw Shirley Sherrod under the bus before her name had even been uttered on Fox News is once again rearing its head in the decision-making process over Warren. This time, it’s not the ire of Glenn Beck that has Team Obama’s backbone turning to mush — it’s the fear of angering the bankers by appointing a consumer advocate who might actually advocate for consumers (the same consumers who, in their role as taxpayers, have spent hundreds of billions bailing the bankers out). According to the National Journal , the banking industry “privately grumbles that Warren would be their least favorite candidate to head the agency.” Or, as Floyd Norris put it in the New York Times , “whether or not she is named to run the bureau may depend on how willing the president is to anger the banks.” Warren is far and away the best person for the position. Picking her is a no-brainer. For many high-level positions, such as a Supreme Court justice, a president will often say he’s looking for the “best candidate” when, in fact, there isn’t one “best candidate.” But this is that rare occasion when there truly is a single best candidate. When it comes to heading the Consumer Bureau, there is Elizabeth Warren — and there is everybody else. Not only is she one of the country’s foremost experts on bankruptcy law and the multiple ways in which banks trick and trap consumers, she’s been the leading advocate for the creation of the agency, which the banking industry worked night and day to kill. In fact, it was Warren who came up with the idea for the agency in the first place, in a paper she wrote in 2007. Her entire career has been devoted to the issues the agency is being created to address. So obvious is the choice of Warren as the inaugural head of the Consumer Bureau that nearly a dozen senators and over 60 members of the House have already publicly come out in her favor. And over 200,000 people — i.e. consumers — have signed a petition urging her nomination. Here are a few examples of the support she’s getting: Sen. Al Franken : “In my consideration, I think Elizabeth would be the best.” Rep. Barney Frank (chair of the House committee that drafted the financial reform bill): “She’s far and away the best candidate.” Sen. Bernie Sanders : “No one in our nation could do a better job.” Rep. Rosa DeLauro : “In my living room with many members of congress, she predicted what was going to happen several years ago. As she put it in 2007, consumers cannot buy a toaster that has a one in five chance of bursting into flames but they can enter into a mortgage that has the same one in five chance of putting them out onto the street…Professor Warren we cannot, Ma’am, do it without you.” Sen. Jeff Merkley : “I support Elizabeth Warren…She has both the clarity of the need for an agency that has as its top mission protecting citizens against tricks, traps and scams, and she has the ability to articulate that vision. She has the leadership skills and the knowledge of the financial world. She has the full set of requirements to be an effective leader.” Sen. Tom Udall : “Should [the president] decide to nominate her to lead the Bureau, it will be a clear sign that the Bureau will be a champion for the American consumer, will stand up to unscrupulous actors and will not shrink from…fulfilling its mission under pressure.” Then there was this argument in her favor: She is an enormously effective advocate for reform. Probably the most effective advocate for consumer protection in the country. She has huge credibility and she played a decisive role in helping make the public case for reform and she was early on this, way ahead of everybody else. That, as it happens, was Treasury Secretary Tim Geithner, speaking Sunday on ABC’s This Week . So why has Geithner stopped short of endorsing Warren (and, indeed, privately argued against her)? And why, as HuffPost’s Jason Linkins put it , is the White House still “hesitating, looking for all the world like it is going to veer away from tapping Warren for the sort of job she was born to do?” Fear. You know what they say: give a man some fear, and you make him fearful for a day — teach a man to scare himself, and you make him fearful for life. The administration has taken the lesson to heart. And the courage-killing virus isn’t confined just to one end of Pennsylvania Avenue. Sen. Chris Dodd told NPR’s Diane Rehm, “The question is, ‘is she confirmable?’ And there’s a serious question about it.” And today he challenged Robert Gibbs’ assertion that Warren is “very confirmable”: “How does he know that?” Dodd said to TPM. Nothing fortifies your opponents like signaling your willingness to surrender. A different approach would be to do the right thing, welcome the fight, and make your case to the American people. “Are the Republicans, when we bring her name up, going to argue that she shouldn’t be confirmed because she’s too tough on the big banks and too tough on the financial industry?” asked Sen. Tom Harkin. “Boy, that’ll get them a lot of votes in November!” And if Senate Democrats don’t have the stomach for the fight, there is a provision in the financial reform bill the president signed into law last week that allows the Treasury Secretary to name someone to head the Consumer Bureau until the Senate confirms a presidential nominee. And there is no deadline on how long the Secretary’s appointee may serve. “The statute gives the Treasury Secretary the obligation to get it done, but doesn’t tell him how to get it done,” says Gail Hillebrand of the Consumers Union. “Consumers have been waiting a long time. The sooner we can get it off the ground the better.” So the administration has no excuses left for not nominating Warren — including the threat of a Republican filibuster. And given that her opponents, shameless though they are, can’t just come out and say, “We’re against her just because we’re doing the banks’ biding,” what argument can they make? One currently being test-marketed is that because Warren is such a zealous advocate for consumers she would somehow be bad for “innovation.” You know, the kind of innovation that brought us credit default swaps, teaser rates, 600 percent payday loan rates, and that led to widespread foreclosures and bankruptcies. This line of reasoning is akin to saying that we don’t want our police force to be very vigilant, lest it diminish criminal innovation. Warren herself addressed this ludicrous claim in a paper in 2008: Thanks to effective regulation, innovation in the market for physical products has led to greater safety and more consumer-friendly features. By comparison, innovation in financial products has produced incomprehensible terms and sharp practices that have left families at the mercy of those who write the contracts. Which, of course, is exactly why the Consumer Financial Protection Bureau was created in the first place. If someone with Warren’s skill set and perspective isn’t named to head it, why even bother creating it? Just so another banking industry shill has a place to cool his heels before adding a few zeros to his salary when he quits and joins the companies he was ostensibly regulating? Given that this is the usual M.O. of how regulatory agencies in Washington work, it’s all the more important to name Warren so she can start the Consumer Bureau off on the right foot — as a true voice for the people. So which way will Obama go? If he makes his decision on the merits, Elizabeth Warren will be the first head of the Consumer Bureau. If he makes his decision out of fear, she won’t be. For guidance, he should listen carefully to these words: All too often — our government made decisions based upon fear rather than foresight, and all too often trimmed facts and evidence to fit ideological predispositions. Instead of strategically applying our power and our principles, we too often set those principles aside as luxuries that we could no longer afford. And in this season of fear, too many of us — Democrats and Republicans; politicians, journalists and citizens — fell silent… if we continue to make decisions from within a climate of fear, we will make more mistakes. That was Barack Obama in May of last year, talking about the Bush administration’s approach to national security in the wake of 9/11. As he finds himself in a different kind of “season of fear,” will he use his insights as a guide to his decision? Appointing Elizabeth Warren will demonstrate that the detour his administration took to Feartown with Shirley Sherrod was a lesson learned. P.S. Check out this post by HuffPost’s Social News editor Adam Clark Estes, to learn all about our new pairing with Meetup that, as Adam puts it, aims “to turn the conversations about the news on our site into face-to-face encounters.”

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Ad Industry Teams Up With University Of Missouri For New Ethics Institute

July 23, 2010

COLUMBIA, Mo. — From gimlet-swilling adulterers on TV’s “Mad Men” to seven-figure fines for deceptive ads touting cold remedies and credit scores, the ad industry sure could use an image makeover of its own. Industry leaders are teaming up with the nation’s oldest journalism school to launch the Institute for Advertising Ethics. Among the research center’s goals is to improve the public image of a business that spent $125 billion last year but isn’t exactly known for its bedrock principles and unwavering scruples. Whether it’s the duplicitous exploits of fictional television character Don Draper or the latest penalties levied by the Federal Trade Commission, the ad industry struggles to put its best face forward. A 2007 Gallup survey ranked advertisers among the least trustworthy professionals – barely beating out lobbyists and car salesmen. “Because it is persuasion, advertising is viewed in a questionable way by a lot of people,” said Margaret Duffy, a former ad executive who now teaches at the University of Missouri School of Journalism and is helping to organize the ethics institute. But even though the industry’s fundamental purpose is to convince shoppers to buy a product they may not actually need, such persuasion can be done in an “ethical and tasteful” way, she added. The research center’s leader is visiting professor Wally Snyder, a former FTC lawyer and American Advertising Federation president. While acknowledging the need to improve the industry’s reputation, he emphasized that the institute will also benefit the people who view ads. Snyder pointed to research that suggests consumers are more likely to do business with companies they consider ethical, ones that don’t use deceptive ads. “This is what consumers want, and expect,” he said. The ethics institute is just part of a broader PR campaign envisioned by the industry. The Washington-based trade group once led by Snyder is shopping a reality TV show featuring young ad reps – a “Mad Men” for the modern age. The federation also wants to shift its industry Hall of Fame, an online entity, to a physical location in New York City. According to the oft-cited 2007 survey, the industry can use the help. Just 6 percent of respondents ranked advertisers’ ethics as “high” or “very high,” with 42 percent ranking their ethics as “low” or “very low.” Nursing, the top-ranked of the 22 professions listed, received an 83 percent trustworthy ranking. Even nursing home operators (21 percent), lawyers (15 percent) and members of Congress (9 percent) scored higher. The research center will be affiliated with Missouri’s Reynolds Journalism Institute, a nonprofit think tank and futures lab intended to help the struggling industry figure out new ways to make money while embracing technology and re-engaging a skeptical and time-pressed citizenry. Its priorities include developing a voluntary code of ethics, honoring businesses for ethical behavior and examining the effects of social media and digital technology on the ad world. The first principle of the ethics code, as envisioned by Snyder, outlines advertising’s purpose as “to provide commercial information that will assist consumers in their purchase decisions in a truthful, fair and cost-effective manner.” A group of the industry’s heaviest hitters will serve on the institute’s advisory board, including executives from Procter & Gamble, Omnicom Group, Interpublic and Ketchum. Both Duffy and Snyder acknowledge that the effort must overcome initial skepticism – much of it from within the ad industry itself. Mark Fleisher, owner of a small advertising agency in central Pennsylvania near Harrisburg, says the industry doesn’t need to be reminded of the importance of ethical behavior. It just needs to increase the honesty quotient. “The industry has become more ethical because the clients have become smarter,” he said. “Agencies are still going to pull whatever they need to (clinch a deal). And those agencies will run roughshod over the honest ones. That’s been going on for years.” Business journalist Jim Edwards, a former Adweek managing editor who still writes about the industry, is also dubious about the latest effort. He notes there have been no fewer than four other attempts to codify industry ethics, including one generated by the American Association of Advertising Agencies in 1924. “History does not suggest that these things catch on very well,” he said. “There’s a structural problem in the advertising business. The entire industry is engaged in a race to the bottom. Whoever can do it the cheapest and the fastest wins.”

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Unemployment Benefits Bill Approved By House, 272-152

July 22, 2010

WASHINGTON — Federal checks could begin flowing again as early as next week to millions of jobless people who lost up to seven weeks of unemployment benefits in a congressional standoff. President Barack Obama on Thursday signed into law a restoration of benefits for people who have been out of work for six months or more. Congress approved the measure earlier in the day. The move ended an interruption that cut off payments averaging about $300 a week to 2 1/2 million people who have been unable to find work in the aftermath of the nation’s long and deep recession. At stake are up to 73 weeks of federally financed benefits for people who have exhausted their 26 weeks of state jobless benefits. About half of the approximately 5 million people in the program have had their benefits cut off since its authorization expired June 2. They are eligible for lump-sum retroactive payments that are typically delivered directly to their bank accounts or credited to state-issued debit cards. Many states have encouraged beneficiaries to keep updating their paperwork in hopes of speeding payments once the program was restored. In states like Pennsylvania and New York, the back payments should go out next week, officials said. In others, like Nevada and North Carolina, it may take a few weeks for all of those eligible to receive benefits. The 272-152 House vote Thursday will send the measure to the White House, where Press Secretary Robert Gibbs said Obama would sign it as soon as it arrived. The House vote came less than 24 hours after a mostly party-line Senate vote Wednesday on the measure, which is just one piece of a larger Democratic jobs agenda that has otherwise mostly collapsed after months of battles with Republicans. “Americans who are working day and night to get back on their feet and support their families in these tough economic times deserve more than obstruction and partisan game-playing,” Obama said Wednesday night. The measure is what remains of a Democratic effort launched in February to renew elements of last year’s economic stimulus bill. But GOP opposition forced Democrats to drop $24 billion to help state governments avoid layoffs and higher taxes, as well as a package of expired tax cuts and a health insurance subsidy for the unemployed. Wrangling over the larger measure consumed about four months. The jobless benefits portion picked up enough GOP support in the Senate – Maine moderates Susan Collins and Olympia Snowe – only after it was broken off as a stand-alone bill. It would have passed last month were it not for the death of Robert Byrd, D-W.Va.; Byrd’s replacement, Democrat Carte Goodwin, cast the key 60th vote Tuesday to defeat a GOP filibuster. Most Republicans opposed the measure because it would add $34 billion to a national debt that has hit $13 trillion, arguing that it should have been paid for with cuts to other programs, such as unspent money from last year’s economic stimulus bill, which is earning mixed grades at best from voters as unemployment stands at 9.5 percent nationwide. Thirty-one House Republicans, about one in six, voted for the measure Thursday, while 10 Democrats opposed it. “The other side says that these unemployment benefits stretching to almost two years are needed and must be added to the $13 trillion debt, even as they claim their trillion-dollar stimulus plan has been a success at creating millions of jobs,” said Rep. Charles Boustany, R-La. “It makes you wonder if they’re looking at the same jobs data as the rest of us.” Opposition marked a change of heart for many Republicans who had voted for deficit-financed unemployment benefits in the past, including twice during George W. Bush’s administration. Earlier this year, Republicans twice allowed temporary unemployment measures to pass without asking for a roll call vote. Opinion polls show that deficits and debt are of increasing concern to voters, especially Republicans’ core conservative supporters and the tea party activists whose support the GOP is courting in hopes of retaking control of Congress. Republicans winced in February when Sen. Jim Bunning, R-Ky., blocked a temporary benefits measure for several days, only to relent amid a wave of bad publicity. But just a few weeks later, all but a handful of Republicans were opposed to renewing benefits unless they were paid for with cuts elsewhere in the $3.7 trillion federal budget. Democrats countered that many economists say unemployment benefits boost the economy since most beneficiaries spend them immediately. But any such effects are likely to be modest when measured against a $14.6 trillion economy. “Unemployment benefits protect those who have lost their jobs through no fault of their own but would lead to more jobs, higher wages and a stronger economy for all Americans,” said Speaker Nancy Pelosi, D-Calif. “The money will be spent immediately on necessity, injecting demand into the economy, creating jobs.” The program is being renewed through the end of November. The White House signaled earlier this week that another extension may be sought if the jobless rate remains high, as many expect.

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Unemployment Extension In Agonizing Endgame Slog: When Will The Checks Go Out?

July 21, 2010

As Congress enters the final stage of an agonizing slog to reauthorize unemployment benefits, the 2.5 million long-term jobless who missed checks because of congressional dithering want to know: How soon are we going to get our money? There’s no good answer. “Once the President signs the bill, states will move as quickly as possible to resume Emergency Unemployment Compensation payments, but it will not happen overnight,” Rich Hobbie, who heads the National Association of State Workforce Agencies, said in a statement to HuffPost. “Because the program has lapsed for over a month, state workforce agencies need to ensure that claimants qualify for all retroactive payments. In addition, the time it takes will vary from state to state because states use various technologies, some of which are quite antiquated.” Meanwhile, on Capitol Hill, Republicans and Democrats spent Wednesday dueling over which party is wasting the most time. Republicans, sore from the other side’s name-calling earlier in the day over the GOP’s delay tactics, which the White House said would cause “30 more hours of suffering,” eagerly seized on news that members of House Democratic leadership would be attending a birthday fundraiser Wednesday evening for Rep. Jim Clyburn (R-S.C.). “How will Washington Democrats look themselves in the face tomorrow morning if — after using Americans who are struggling to find work as a political bludgeon — they skip out on their responsibilities tonight to party with lobbyists and raise campaign cash?” asked Michael Steel, an aide to House Minority Leader John Boehner (R-Ohio). House Democrats countered that the party’s not holding up the bill. Because the Senate won’t vote on final passage until mid evening, the bill wouldn’t make it onto the House floor for its final-final vote until after midnight. “Are you serious?” said Nadeam Elshami, spokesman for House Speaker Nancy Pelosi (D-Calif.), in an email response regarding Steel’s comment. “The Senate hasn’t passed it yet. It takes 4-5 hours to go through rules, debate, floor and final passage. House Democrats passed UI 7 weeks ago and now all of a sudden Republicans are concerned about the plight of the unemployed? Give me a break. It will be signed into law and it will be clear Republicans were the ones responsible for pain and suffering they caused families all across America.” Whether the House votes Wednesday or not, like Rich Hobbie said, the checks aren’t going out overnight. David Smith, a spokesman for the Pennsylvania Department of Labor & Industry, told HuffPost he couldn’t say how soon unemployment claimants who missed checks will be paid. “We will file all claims as expeditiously as possible,” he said. “The most paramount thing is to get this money into hands of claimants as quickly and as efficiently as possible. We do ask all claimants to be patient.” Norm Isotalo of the Michigan Unemployment Insurance Agency told HuffPost, “We’re ready to go … We have teams of staff ready to begin processing these claims.” But he couldn’t say how quickly payments would be distributed.

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Unemployment Aid Won’t Be Enough To Turn Around The Economy

July 21, 2010

WASHINGTON — For jobless Americans struggling to pay their bills and keep their homes, the restoration of unemployment benefits could keep their crisis from getting worse. The same might be said of the broader economy. The Senate is expected to vote Wednesday to keep providing unemployment benefits for up to 99 weeks to more than 5 million long-term unemployed. The injection of an estimated $33 billion into a $14.6 trillion economy over the next five months won’t be enough to energize the recovery. But economists say it could at least help sustain it. The vote comes as evidence mounts that growth is slowing. Consumers, facing lower home values and high unemployment, are saving more and spending cautiously. The housing market is slumping again after a tax credit expired in April. And the impact of last year’s $787 billion stimulus package has begun to fade. By extending the unemployment aid, Congress will remove one potential drag on the economy, analysts say. “It reduces the likelihood of a double-dip recession,” said Gus Faucher, an economist at Moody’s Analytics. During the recession, Congress provided up to 73 extra weeks of unemployment aid, paid for by the federal government. They came on top of the 26 weeks customarily provided by the states. But the extra benefits expired in early June. They had been routinely extended during the worst parts of the recession. But Congress reached an impasse last month. Republicans demanded that the extension be paid for with leftover stimulus money. Democrats countered that unemployment benefits are normally considered an emergency need and paid for by adding to the deficit. About 2.5 million people ran out of jobless aid during the political battle. They will now have the aid restored retroactively. That could create chaos if state unemployment offices are flooded with people seeking to reapply. An additional 3 million people were still receiving aid under the extended benefits program. They will be able to keep doing so. The legislation Congress is expected to approve will inject $33 billion into the economy by renewing the extra benefits through the end of November. That money will likely be spent quickly and generate extra economic activity, economists say. Jobless aid is widely seen as providing more “bang for the buck” than many other stimulus programs. “It recycles very quickly into the economy,” said David Wyss, chief economist at Standard & Poor’s. “If that’s your only source of money, you’re going to spend it.” Moody’s Analytics estimates that every dollar of unemployment aid generates $1.61 in economic activity. Still, that translates into a boost of only $54 billion – less than one-half of 1 percent of the overall economy. “It’s not going to make or break” the recovery, Faucher said. Weekly unemployment checks average about $309, though they vary widely by state. Benefit levels also depend on how much a recipient earned while working. The checks are financed through a tax on employers. Many of those out of work don’t receive unemployment benefits. Only those who have lost jobs through no fault of their own are eligible. Applicants must also have earned certain minimum pay, set by the states. Partly because of the extensions, about two-thirds of the nearly 15 million unemployed are receiving unemployment aid. That’s a greater proportion than in previous downturns. The Obama administration’s stimulus package encouraged many states to expand eligibility to part-time workers and other groups. In recessions, Congress usually adds extra weeks as unemployment rises and hiring slows. The federal government also pays for the extensions to lessen the burden on states, which are required to balance their budgets. Many experts argue that the program, begun in the 1930s, is ill-equipped to handle extended downturns. One result is that the program has been extended in almost every recession and often gets tangled in political fights. The current benefit extensions are the longest on record. Of the 2.5 million people whose benefits will be restored, nearly 430,000 are in California, nearly 200,000 are in New York, 175,000 are in Florida and 174,000 are in Pennsylvania, the Labor Department estimates. Georgia, Illinois, Michigan, Ohio and Texas also have more than 100,000 recipients who were cut off. Unlike with some previous extensions, Congress isn’t adding extra weeks. It’s just keeping the extended program going. For those who have exhausted all their 99 weeks, the Senate’s vote Tuesday provides little hope. They face the prospect of looking for work even as hiring remains slow, with the unemployment rate at 9.5 percent. “There’s a lot more people than jobs out there right now,” Wyss said. __ AP Economics Writer Jeannine Aversa contributed to this report.

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Raymond J. Learsy: Natural Gas Replacing Coal Fired Power Plants- A Major Step Toward Diminishing CO2 Emissions

July 14, 2010

Last week at an Aspen Institute Ideas Festival session Marvin E. Odum, the President of Shell Oil was in conversation with Andrea Mitchell. The major theme of the day was, of course, the Gulf Oil disaster, how it might have been prevented, steps to be taken in the future, topics of urgent and immediate importance. In the course of the discussion Mr. Odum brought into focus another important issue. The role that natural gas should play in the abatement of CO2 emissions. He made the audience aware of the newly defined and abundant deposits of natural gas termed as ‘shale gas’ accessed through novel techniques of horizontal drilling and hydraulic fracturing. He went on to discuss the potential of this new resource abundance were it to be used as a substitute for coal, replacing in significant measure, coal fired power generating plants and what it would achieve in the abatement of greenhouse gas emmisions. According to Mr. Odum, converting from coal to gas fired electricity plants would eliminate 50% to 70% of current CO2 emissions depending on the coal burning systems being replaced, and therefore an issue that needs come to the forefront of our Energy policy (pleae see “Our Lob(otomized)bied Congress’ Energy Bill Excludes Our Most Efficient, Cleanest, Newly Plentiful Energy Source: Natural Gas” 06.28.09). Mr Odum advised that Shell has just committed $5 billion to taking an important stake in the Marcellus Shale, a staggeringly rich shale gas field containing some 500 trillion cubic of gas that lies within the Appalachian Basin extending from eastern Ohio, West Virginia, Pennsylvania and into New York State. Mr. Odum further advised that Shell was fully aware of the environmental issues related to shale gas drilling such as the risk os shallow fresh water aquifer contamination yet Shell is confident the environmental impact issues can be managed through careful and fully transparent procedures to the satisfaction of government and oversight agencies, policies his company will follow rigorously and that oversight agencies need enforce universally. Coincidently just over a month ago the Massachusetts Institute of Technology’s MIT Energy Initiative issued a singularly informative report, informative to all interested in the subject of fossil fuel consumption, its environmental impact and desirous of having a hands on understanding of one of the key elements that will unquestionably be at core of the nation’s energy future. Its dimension and importance were made clear from the very outset as MITEI Director ErnstJ.Moniz introduced the report stating: -”Much has been said about natural gas as a bridge to a low carbon future, with little underlying analysis to back up this contention. The analysis in this study provides the confirmation – natural gas truly is a bridge to a low carbon future” The report, a comprehensive review clearly brings into focus the future importance of natural gas as an element of the fossil fuel equation. The study shows a baseline global estimate of recoverable gas resources reaching some 16,200 trillion cubic feet (Tcf), enough to last over 160 years at current global consumption rates. The report was conducted by a study group of 30 MIT faculty members, researchers and graduate students. It is publicly available at: rhttp://web.mit.edu/mitei/research/studies/naturalgas.html It is will be well worth your while to access this important study where there is an interest in the future of fossil fuel consumption and their environmental impact.

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Al Norman: Another Billionaire Bailout for Wal-Mart Developer

July 9, 2010

By Al Norman Kroenke Gets Millions In Public Welfare Bridgeton, MO. On July 7, 2010, one of the richest people in America was given millions in public welfare to build an unnecessary Wal-Mart. This “bailout for Billionaires” was the work of the Bridgeton, Missouri City Council, where economic illiteracy trumps common sense. Developer Enos Stanley Kroenke, sports mogul, Walton family son-in-law, and sprawl-developer, was actually paid more than $7 million in public funds to bring low-wage jobs to this community which describes itself as the “strong and viable economic engine for the St. Louis metropolitan area.” As a result of public subsidy, Kroenke’s development company, THF Realty (the “THF” stands for “To Have Fun”) will build a new Wal-Mart roughly two miles away from an existing, smaller Wal-Mart on the same road. The smaller store will close—leaving another “dark store” by the roadside. The Bridgeton City Council voted 6-1 to pay Kroenke to leave them with an empty Wal-Mart. Only one city councilor dissented, arguing that Wal-Mart should have to pay its own way, and not be subsidized. The development agreement with Kroenke also allows the city to use eminent domain powers if necessary to complete the project. This tax bailout came over the objection of officials in St. Louis County. A state-mandated TIF Commission recently voted 6-6 on the TIF plan–with all six St. Louis County appointees on the commission voting against the bailout. A tie vote rejected the TIF. The city was able to overturn the TIF Commission with a supermajority vote of its members. The Mayor of Bridgeton, Conrad Bowers, warned that if Wal-Mart and Kroenke were not given what they asked for—Wal-Mart would leave Bridgeton entirely, dragging with it a million dollars in tax revenue from its “old” store just minutes down the road. “We got the best deal for the city we could get,” the Mayor told The St. Louis Post-Dispatch . But it is Kroenke who got the best deal. Kroenke inherited a fortune in Wal-Mart stock when he married the daughter of Sam Walton’s deceased brother Bud. Kroenke’s wife, Ann Walton Kroenke is one of the richest women in America, with an inheritance valued at $2.6 billion. Kroenke owns the Denver Nuggets basketball team, hockey’s Colorado Avalanche, is part owner of the St. Louis Rams and the English soccer team Arsenal. He was the 117th richest American, with an estimated worth of $2.7 billion in 2009. He could have built a new Bridgeton Wal-Mart without one penny of Tax Increment Financing, but the money was there for the taking. There are 19 Wal-Marts within 25 miles of Bridgeton, including a Wal-Mart right on the border of Bridgeton and St. Ann, and 7 miles away in St. Charles, Missouri. Bridgeton is a city that has been losing population. Compared to 1990, the population in Bridgeton has dropped 15%. The answer to the city’s economic stagnation is not to build more retail stores that make nothing, and sell Chinese everythings. THF Realty of St. Louis, was founded in 1991. It owns 100 properties comprising more than 20 million square feet of leaseable area in 23 states. A concentration of THF properties exists in Missouri, Illinois, Pennsylvania and West Virginia. The company says its mission is to be the “best private developer in America.” They are quite good at spending public money. Over the years, Kroenke and THF have been at the center of many controversial Wal-Mart developments in places like St. Peters, Columbia, High Ridge, Maplewood, and North St. Louis County, Missouri, as well as Glen Carbon, Illinois, Wheeling, West Virginia, and Buffalo, Minnesota. Add officials in neighboring St. Ann, Missouri to that list. Part of the “older” Wal-Mart store sits on the border of St. Ann and Bridgeton–so it was a partial source of sales tax revenue for St. Ann. Officials in St. Ann warn that their city will lose a major sales tax source when the ‘old’ Wal-Mart shuts down. St. Ann gets a 10% slice of the sales tax revenue generated by the current Wal-Mart. Mayor Bowers said the supercenter would not happen without TIF money because of the site’s demolition costs—which the city failed to get from the former property owners. So now the Mayor wants taxpayers to pay for it. The $7.2 million in sales and property taxes that will be given back to the billionaire developer in the form of site infrastructure costs, is money the taxpayers will never get to help pay for the on-going police and fire protection that this new superstore will demand. But Charles Dooley, a St. Louis County Executive said the Mayor and council should “stand together and protect the public from these strong-arm tactics” by Wal-Mart. One radio station said Wal-Mart had “bullied” the Mayor into supporting the welfare subsidy for THF. There are six dead Wal-Marts in Missouri today. The company had to demolish its store in Blue Springs, Missouri. But stores in House Springs, Kansas City, Maryville, Raytown, and Town & Country, are all still up for sale. The dead store in Town & Country, at 154,453 s.f., is almost as big as the proposed supercenter in Bridgeton. A spokesman for THF Realty, told the Bridgeton City Council that the debate over the TIF agreement was not unusual. “These are the same issues facing many communities,” he said. “It happens to cities who rely on sales taxes for their budgets. If you want to take any comfort, you’re not alone.” Because cities like Bridgeton are chasing sales tax revenue, instead of planning for sustainable land use, mistakes like the Bridgeton welfare deal get made–and neighboring towns get hurt. To build a Wal-Mart you have to be rich. Kroenke is beyond rich. His small business competitors will never get a TIF to open a store on Main Street. The real estate market in America today is an insider’s game played by the wealthy. Public subsidies to the big players are just one more incentive that leaves the smaller merchant at a competitive disadvantage. TIFs should never be used for retail. But for now, THF is “having fun” with its TIF—at taxpayers’ expense. Al Norman is the founder of Sprawl-Busters. He has been helping communities fight big box sprawl for 16 years. He is the author of “The Case Against Wal-Mart.”

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SEC Settles With Fired Lawyer Who Accused Agency Of Blocking Hedge Fund Investigation

June 30, 2010

WASHINGTON — The Securities and Exchange Commission is paying $755,000 to settle a lawsuit with a former staff lawyer who accused the agency of blocking his investigation of a prominent hedge fund. The SEC settlement of Gary Aguirre’s wrongful termination claim resolved a long-running controversy that prompted scrutiny in Congress and by the SEC inspector general. The settlement was announced Tuesday by the Government Accountability Project. Aguirre was fired by the SEC in September 2005. He went public in 2006 with allegations of interference by SEC officials in the probe of Pequot Capital Management and improper deference to a Wall Street executive whom Aguirre wanted to interview. That prompted an investigation by Republican staff of the Senate Judiciary and Finance Committees. The SEC initially took no enforcement action in the case, which was started in 2004 and closed in 2006. The agency reopened it in January 2009 after documents emerged in a divorce proceeding showing that Pequot began paying $2.1 million to a key witness in the case in mid-2007. Last month, Pequot and its founder and chairman, Arthur Samberg, agreed to pay a total of $28 million to settle the SEC’s charges of insider trading of Microsoft Corp. shares. The SEC alleged that the hedge fund traded Microsoft shares on confidential information provided by a former employee of the technology giant whom it later hired. Pequot, whose core hedge fund was liquidated last year, and Samberg, a well-known money manager and philanthropist, neither admitted nor denied wrongdoing. The $755,000 being paid to Aguirre represents his salary for four years and 10 months plus his attorneys’ fees, according to the Government Accountability Project, a group that works with whistleblowers. The group said it may be the largest settlement of its kind. Under terms of the settlement, which was approved by a judge at the federal Merit Systems Protection Board, Aguirre agreed to drop two related cases against the SEC. SEC spokesman John Nester said the settlement “resolves all outstanding litigation between the parties and reflects the agency’s determination to focus on its core mission of protecting investors.” Aguirre, in a statement, said “I think it’s fair to the public that the SEC pays for my work over the past four years and 10 months, since it generated $28 million to the U.S. Treasury. But it’s a shame the team I worked with at the SEC did not get to complete the Pequot investigation. The filing of the case in 2005 or 2006, before the financial crisis, would have been exactly what the Wall Street elite needed to hear at the perfect moment: the SEC goes after big fish too.” In August 2007, the Republican staff of the two Senate committees published a scathing report criticizing the SEC’s decision to fire Aguirre and close the first Pequot investigation. Sens. Charles Grassley, R-Iowa, and Arlen Specter of Pennsylvania, then a Republican, spoke critically on the Senate floor that year about the SEC’s handling of the Pequot investigation. The SEC inspector general, David Kotz, in a report issued in late 2008, found there were “serious questions” about the impartiality and fairness of the agency’s probe of Pequot. “The settlement with Mr. Aguirre shows that the SEC is finally acknowledging its mistake,” Specter said in a statement Tuesday.

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SEC Paying $755,000 To Settle With Gary Aguirre, Lawyer Fired While Investigating Hedge Fund

June 29, 2010

WASHINGTON — The Securities and Exchange Commission is paying $755,000 to settle a lawsuit with a former staff lawyer who accused the agency of blocking his investigation of a prominent hedge fund. The SEC settlement of Gary Aguirre’s wrongful termination claim resolved a long-running controversy that prompted scrutiny in Congress and by the SEC inspector general. The settlement was announced Tuesday by the Government Accountability Project. Aguirre was fired by the SEC in September 2005. He went public in 2006 with allegations of interference by SEC officials in the probe of Pequot Capital Management and improper deference to a Wall Street executive whom Aguirre wanted to interview. That prompted an investigation by Republican staff of the Senate Judiciary and Finance Committees. The SEC initially took no enforcement action in the case, which was started in 2004 and closed in 2006. The agency reopened it in January 2009 after documents emerged in a divorce proceeding showing that Pequot began paying $2.1 million to a key witness in the case in mid-2007. Last month, Pequot and its founder and chairman, Arthur Samberg, agreed to pay a total of $28 million to settle the SEC’s charges of insider trading of Microsoft Corp. shares. The SEC alleged that the hedge fund traded Microsoft shares on confidential information provided by a former employee of the technology giant whom it later hired. Pequot, whose core hedge fund was liquidated last year, and Samberg, a well-known money manager and philanthropist, neither admitted nor denied wrongdoing. The $755,000 being paid to Aguirre represents his salary for four years and 10 months plus his attorneys’ fees, according to the Government Accountability Project, a group that works with whistleblowers. The group said it may be the largest settlement of its kind. Under terms of the settlement, which was approved by a judge at the federal Merit Systems Protection Board, Aguirre agreed to drop two related cases against the SEC. SEC spokesman John Nester said the settlement “resolves all outstanding litigation between the parties and reflects the agency’s determination to focus on its core mission of protecting investors.” Aguirre, in a statement, said “I think it’s fair to the public that the SEC pays for my work over the past four years and 10 months, since it generated $28 million to the U.S. Treasury. But it’s a shame the team I worked with at the SEC did not get to complete the Pequot investigation. The filing of the case in 2005 or 2006, before the financial crisis, would have been exactly what the Wall Street elite needed to hear at the perfect moment: the SEC goes after big fish too.” In August 2007, the Republican staff of the two Senate committees published a scathing report criticizing the SEC’s decision to fire Aguirre and close the first Pequot investigation. Sens. Charles Grassley, R-Iowa, and Arlen Specter of Pennsylvania, then a Republican, spoke critically on the Senate floor that year about the SEC’s handling of the Pequot investigation. The SEC inspector general, David Kotz, in a report issued in late 2008, found there were “serious questions” about the impartiality and fairness of the agency’s probe of Pequot. “The settlement with Mr. Aguirre shows that the SEC is finally acknowledging its mistake,” Specter said in a statement Tuesday.

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Richard (RJ) Eskow: Financial Reform: The Road Behind, the Way Forward

June 25, 2010

The House and Senate have reached an agreement and we have a financial reform bill. That means we’ll see significant improvements over the status quo as it existed yesterday. It also means we still haven’t addressed the gravest risks to the economy. And for those of us who care about this country, it means that we still have work to do. We must be the voices of reason, the ones who praise what’s been accomplished but call for even deeper reforms going forward. This bill has a number of very positive features, and progressive voices helped build the momentum for them: We’ll see an audit of the Federal Reserve, which will shine a light on the hidden workings of the crony-ized banking system. A Consumer Protection Bureau will be created to protect people from bank predators. We’ll see an end to the cynical speculation in food and fuel prices that have wreaked havoc on household budgets throughout the nation. We’ll also have a new provision that gives the SEC authority to ensure that brokers act with “fiduciary responsibility” toward their clients (after a period of study). While this most directly benefits wealthier investors, it will help end abuses like the Goldman Sachs ABACUS program that nearly destabilized the entire economy. Those who want to fall into cynicism and despair can find material to feed that worldview, if they’re so inclined. This legislation will not stop Wall Street speculation in derivatives, and our financial system will still be dominated by a few “too big to fail” banks, which means our economy is still in danger. Auto dealers got their sleazy carve-out from the consumer protection bureau. It was a frustrating spectacle to watch elected officials on the Hill shoot down amendments that would have solved these problems. And cynics might be forgiven for believing that Treasury Undersecretary Neal Wolin’s blog post yesterday , where he overpraised the bill’s accomplishments and said “we don’t have to wait until (the bill’s done) to know what reform will look like,” was a signal to Hill negotiators that they could gut the Lincoln amendment without White House objection – which they promptly did. But, to those who would take that route, consider the words of labor leader Joe Hill: Don’t mourn, organize. We’ve learned that elected officials in Washington will respond to eloquent and impassioned voices calling for change, whether those voices are raised on phone calls to representatives, in letters and commentary, or in voting booths in Pennsylvania and Arkansas. But remember that elected leaders are human. If they come to see the progressive movement or any other voting bloc as relentlessly negative, they’ll stop listening. And, for those who celebrate what this bill accomplishes, a Joe Hill variation: Celebrate, then organize. The two activities aren’t mutually exclusive. In fact, that should be the preferred approach. Without the principled stand of some Democratic leaders in the White House and on the Hill, coupled with some surprise moves by courageous Republicans, we wouldn’t have the reforms we have today. So, by all means, celebrate. Reward our leaders for what they’ve done right, just before we go about the business – our business, as citizens – of pushing them to do more. What can we do to frame the argument going forward and build momentum for deeper reform? It seems to me that there are five things that must be done: 1. Create the right context Are people saying that President Obama is no FDR? Let them know that FDR was no FDR either – at least not at first. Zach Carter is right to point out that it took years for Roosevelt to enact all his banking reforms. In an equally strong historical parallel, a conservative bank-oriented faction persuaded FDR to focus prematurely on the deficit, as Obama is being persuaded now by the ” AmericaSpeaks ” contingent. It took years of trial and error before FDR came to realize that this concession was undermining the recovery he had put into motion. 2. Criticize – but don’t lose perspective Let people know that the President is right when he says that this is the most significant financial reform since the 1930s. And remind them that it took several years for FDR and Hill leaders to get that right, too. Imagine how different – and how much worse – history might have been if Roosevelt and his allies had gone down to defeat in the polls because nobody bothered to balance their criticisms with recognition of their accomplishments. FDR became a great leader because he had the capacity and the willingness to learn – from his critics, from events, and even from his own mistakes. That’s the standard to which we should hold our leaders. 3. Keep framing the moral argument Too often we forget that there are basic issues of right and wrong involved here. We’re perpetrating an unethical system as long as bankers can gamble with discounted Federal Reserve money or other public subsidies, and as long as they know taxpayers will bail them out whenever they lose. When financiers can make more money speculating than they can serving consumers and smaller businesses, the system isn’t working for its intended purpose. California readers were outraged to read yesterday that welfare recipients can use the debit cards issued by the state at ATMs in casinos , making it possible to receive a public subsidy and immediately gamble with it. Isn’t it ironic that more voters don’t feel the same level of outrage when bankers do it? Bankers, who hardly need the money, receive far more in public funds for their gambling – and they endanger the entire system when they do it. Concerned citizens can and must keep making the case for financial reform as a moral issue. 4. Keep pointing out the risks Those of us who keep warning that we’re still at risk must feel sometimes like Kevin McCarthy in Invasion of the Body Snatchers, screaming “they’re here! they’re here!” as indifferent drivers whiz past in their comfortable cars. Keep those warnings coming anyway. Our system is just as much at risk as it was before this bill was finalized. Millions of people are still victims of the last crisis. There are those who suggest another downturn may be coming soon. Historical trends suggest that crises will keep returning every seven years on average – unless and until we do something to change things. From a risk management point of view, we’re flying a plane with our eyes closed and congratulating ourselves that we haven’t crashed into anything … lately. There are political risks, too, and we shouldn’t hesitate to point those out. If we experience another crisis after this bill passes, voters will be ruthless toward the incumbents who celebrated its passage. Polls show that the public despises big banks, so the concessions we’ve seen will be a political liability – that is, until tougher reforms are enacted. 5. Look for teachable moments There will be a temptation to put this issue behind us now that the bill has passed. But history has a way of offering teachable moments – another economic downturn, a ” flash crash ” like the one Wall Street experienced a few weeks ago, or the conviction of a malefactor like Bernie Madoff. Negative events are tragic, but the hard truth is that they will keep coming until we make systemic changes . They are “teachable moments” for voters and elected officials alike, and should be opportunities to speak out. The Federal Reserve audit will provide additional opportunities to inform the public. Activists and concerned citizens should be pushing for indictments of corrupt bankers, too. There are a number of signs of malfeasance, with so many potential crime scenes to investigate that half the buildings on Wall Street should be marked with yellow police tape. A perp walk is a very teachable moment. ___________________________ So, if someone were to ask me what to do now, I’d say keep those letters, emails, and calls coming – to your Representatives, to the White House, to newspapers and talk shows. Keep talking to people around you. Be unstinting in your praise for what’s been accomplished and unhesitating in your demands for demand more. Their job is to respond to pressure. Our job is to provide pressure for the right things. Financial reform has been passed. Long live the movement to demand financial reform. Let’s pause for a moment of celebration … and then get back to work. ___________________________ Richard (RJ) Eskow, a consultant and writer (and former insurance/finance executive), is a Senior Fellow with the Campaign for America’s Future. This post was produced as part of the Curbing Wall Street project. Richard also blogs at A Night Light . He can be reached at “rjeskow@ourfuture.org.” Website: Eskow and Associates

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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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U.S. Economy Recovery Creates Few Jobs, No Inflation

June 17, 2010

By Shobhana Chandra and Courtney Schlisserman June 17 (Bloomberg) — The world’s largest economy will keep expanding in the second half of the year without stoking inflation or generating many jobs, reinforcing the Federal Reserve’s low-interest-rate policy, reports today showed. The index of leading indicators, a gauge of the outlook for growth over the next three to six months, climbed 0.4 percent in May, according to data from the New York-based Conference Board. Other figures showed the cost of living dropped, claims for jobless benefits unexpectedly increased to the highest level in a month and manufacturing in the Philadelphia Fed region cooled. “The recovery is intact,” said Ellen Zentner , a senior U.S. macroeconomist at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York, who correctly forecast the gain in the leading index. “With price data like we saw today, the Fed is absolutely able to stand pat through this year without any qualms about inflation. The labor market is still in a precarious position.” A late-day rally lifted stocks, helping overcome an early slump as the reports raised concern the European debt crisis may prompt American companies to rein in hiring. A drop in commodity prices brought on by the turmoil and price cuts by retailers including Wal-Mart Stores Inc. highlight the Fed’s forecast for “subdued” inflation. The Standard & Poor’s 500 Index rose 0.1 percent to close at 1,116.04, led by a rebound in technology and industrial shares. Treasury securities jumped, pushing the yield on the benchmark 10-year note down to 3.20 percent at 4:14 p.m. in New York from 3.26 percent late yesterday. More Claims Initial jobless claims increased by 12,000 to 472,000 in the week ended June 12, Labor Department figures showed. Economists surveyed by Bloomberg News projected the number of applications would drop to 450,000, according to the median forecast. The figures indicated firings are staying elevated even as the economy grows. Some companies are trimming payrolls to boost or maintain profits at the same time overall employment has grown each month this year. “The labor market is not improving,” said Steven Ricchiuto , chief economist at Mizuho Securities USA Inc. in New York. “If you really are going to have a sustainable recovery, you need the labor market to improve.” Manufacturing in the region covered by the Philadelphia Fed expanded in June at the slowest pace since August as a measure of factory employment contracted for the first time in seven months, the branch of the central bank reported today. Philadelphia Manufacturing Its general economic index , where readings greater than zero signal growth, dropped to 8 from 21.4 in May. The regional gauge covers eastern Pennsylvania, southern New Jersey and Delaware. Economists forecast the measure would fall to 20, according to the median projection. Manufacturing, which led the economy out of the worst recession since the 1930s, is easing into a more sustainable pace of growth as the need to replenish inventories becomes less pressing. The figures stand in contrast to a report this week showing New York factories expanded at a faster rate. Other data from the Labor Department showed consumer prices dropped 0.2 percent in May, a second consecutive decrease and the biggest since December 2008. Excluding food and fuel, the so-called core rate increased 0.1 percent. The figures matched the median forecasts of economists surveyed. Last month’s fall was led by a decrease in energy costs propelled by concern that efforts to rein in government debt in Europe will slow global growth. Gasoline prices declined 5.2 percent, the biggest drop since December 2008. Inflation Cools In the 12 months ended in May, consumer prices rose 2 percent following a 2.2 percent year-over-year gain the prior month. The core rate rose 0.9 percent from May 2009, matching the smallest year-over-year gain since 1966. Fed forecasters lowered their outlook for inflation, according to minutes of their April meeting. Officials “anticipated that inflation would remain subdued over the next several years,” the minutes released May 19 said. The deceleration in inflation prompted economists at JPMorgan Chase & Co. in New York today to push their forecast for a rate increase by the central bank to the fourth quarter of 2011 from the second quarter of that year. “The disinflation we have witnessed could be with us for some time,” Michael Feroli , JPMorgan’s chief U.S. economist, said in a note to clients, citing the smaller price gains in services and the lack of wage pressure. Shopping for Discounts Some lower-income customers in the U.S. are “still deeply in the recession” and are shopping various retailers for the cheapest prices, Jamie Sohosky, senior director of marketing for Wal-Mart’s U.S. stores, said this month. Shoppers at Wal-Mart, the world’s largest retailer, are also using more coupons than a year ago, Sohosky said. They’re worried about losing their jobs and paying mortgages, she said. The breadth of gains within the components of the index of leading indicators means there is little risk the rebound from the recession will be derailed by the European debt crisis. Five of the 10 indicators contributed to May’s increase, led by the spread between the yield on the benchmark 10-year Treasury note and the Fed’s target rate for short-term loans between banks. An increase in the money supply and a longer factory workweek also added. Five of the components declined, including slumps in stock prices and building permits . “The European crisis is having an extremely mild impact,” said Bank of Tokyo-Mitsubishi UFJ’s Zentner. “While there are some signs it’s affecting business sentiment, the effect is very limited at this time.” To contact the reporters on this story: Shobhana Chandra in Washington at schandra1@bloomberg.net ; Courtney Schlisserman in Washington at cschlisserma@bloomberg.net

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U.S. Economy’s Expansion Creates Little Job Growth as Inflation Controlled

June 17, 2010

By Shobhana Chandra and Courtney Schlisserman June 17 (Bloomberg) — The world’s largest economy will keep expanding in the second half of the year without stoking inflation or generating many jobs, reinforcing the Federal Reserve’s low-rate policy, reports today showed. The index of leading indicators, a gauge of the outlook for growth over the next three to six months, climbed 0.4 percent in May, according to data from the New York-based Conference Board. Other figures showed the cost of living dropped, claims for jobless benefits unexpectedly increased to the highest level in a month and manufacturing in the Philadelphia Fed region cooled. “The recovery is intact,” said Ellen Zentner , a senior U.S. macroeconomist at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York, who correctly forecast the gain in the leading index. “With price data like we saw today, the Fed is absolutely able to stand pat through this year without any qualms about inflation. The labor market is still in a precarious position.” Stocks dropped, halting a global rally, as the reports raised concern the European debt crisis may prompt American companies to rein in hiring. The drop in commodity prices brought on by the turmoil and price cuts by retailers including Wal-Mart Stores Inc. highlight the Fed’s forecast for “subdued” inflation. The Standard & Poor’s 500 Index fell 0.1 percent to 1,113.53 at 2:13 p.m. in New York. Treasury securities jumped, pushing the yield on the benchmark 10-year note down to 3.19 percent from 3.26 percent late yesterday. More Claims Initial jobless claims increased by 12,000 to 472,000 in the week ended June 12, Labor Department figures showed. Economists surveyed by Bloomberg News projected the number of applications would drop to 450,000, according to the median forecast. The figures indicated firings are staying elevated even as the economy grows. Some companies are trimming payrolls to boost or maintain profits at the same time overall employment has grown each month this year. “The labor market is not improving,” said Steven Ricchiuto , chief economist at Mizuho Securities USA Inc. in New York. “If you really are going to have a sustainable recovery, you need the labor market to improve.” Manufacturing in the region covered by the Philadelphia Fed expanded in June at the slowest pace since August as a measure of factory employment contracted for the first time in seven months, the branch of the central bank reported today. Philadelphia Manufacturing Its general economic index , where readings greater than zero signal growth, dropped to 8 from 21.4 in May. The regional gauge covers eastern Pennsylvania, southern New Jersey and Delaware. Economists forecast the measure would fall to 20, according to the median projection. Manufacturing, which led the economy out of the worst recession since the 1930s, is easing into a more sustainable pace of growth as the need to replenish inventories becomes less pressing. The figures stand in contrast to a report this week showing New York factories expanded at a faster rate. Other data from the Labor Department showed consumer prices dropped 0.2 percent in May, a second consecutive decrease and the biggest since December 2008. Excluding food and fuel, the so-called core rate increased 0.1 percent. The figures matched the median forecasts of economists surveyed. Last month’s fall was led by a decrease in energy costs propelled by concern that efforts to rein in government debt in Europe will slow global growth. Gasoline prices declined 5.2 percent, the biggest drop since December 2008. Inflation Cools In the 12 months ended in May, consumer prices rose 2 percent following a 2.2 percent year-over-year gain the prior month. The core rate rose 0.9 percent from May 2009, matching the smallest year-over-year gain since 1966. Fed forecasters lowered their outlook for inflation, according to minutes of their April meeting. Officials “anticipated that inflation would remain subdued over the next several years,” the minutes released May 19 said. The deceleration in inflation prompted economists at JPMorgan Chase & Co. in New York today to push their forecast for a rate increase by the central bank to the fourth quarter of 2011 from the second quarter of that year. “The disinflation we have witnessed could be with us for some time,” Michael Feroli , JPMorgan’s chief U.S. economist, said in a note to clients, citing the smaller price gains in services and the lack of wage pressure. Shopping for Discounts Some lower-income customers in the U.S. are “still deeply in the recession” and are shopping various retailers for the cheapest prices, Jamie Sohosky, senior director of marketing for Wal-Mart’s U.S. stores, said this month. Shoppers at Wal-Mart, the world’s largest retailer, are also using more coupons than a year ago, Sohosky said. They’re worried about losing their jobs and paying mortgages, she said. The breadth of gains within the components of the index of leading indicators means there is little risk the rebound from the recession will be derailed by the European debt crisis. Five of the 10 indicators contributed to May’s increase, led by the spread between the yield on the benchmark 10-year Treasury note and the Fed’s target rate for short-term loans between banks. An increase in the money supply and a longer factory workweek also added. Five of the components declined, including slumps in stock prices and building permits . “The European crisis is having an extremely mild impact,” said Bank of Tokyo-Mitsubishi UFJ’s Zentner. “While there are some signs it’s affecting business sentiment, the effect is very limited at this time.” To contact the reporters on this story: Shobhana Chandra in Washington at schandra1@bloomberg.net ; Courtney Schlisserman in Washington at cschlisserma@bloomberg.net

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Natural Gas Price Spreads Trigger New Amaranth Speculation Energy Markets

June 17, 2010

By Alexander Kwiatkowski and Stephen Voss June 17 (Bloomberg) — Trading patterns in natural-gas futures are fanning speculation of a repeat of the collapse four years ago of U.S. hedge fund Amaranth Advisors LLC. The premium for futures expiring in March 2011 over the April 2011 contract surged to 43.3 cents per million British thermal units June 15 on the New York Mercantile Exchange, the highest level since Feb. 19. The spread was 24.8 cents per million Btu as recently as the end of last week, before jumping more than 50 percent on June 14. The rally came even as U.S. inventories rose to their highest level for this time of year since at least 1993, when the government began collecting data. “This is peculiar behavior given that supplies are currently building at a comfortable pace,” Stephen Schork , president of consultant Schork Group Inc. in Villanova, Pennsylvania, wrote in a report yesterday. “We haven’t seen these particular spreads behave in such a manner since a prominent natural-gas trader morphed a $9 billion hedge fund, Amaranth, into a $3 billion fund in August 2006.” Greenwich, Connecticut-based Amaranth collapsed after losing about $6.6 billion on wrong-way trades in natural-gas futures. It had controlled more than half of the U.S. market for the commodity before it failed, according to a Senate report from June 2007. Amaranth agreed last August to pay $7.5 million to settle allegations from U.S. regulators that it tried to manipulate the market for natural-gas futures. Winter-Spring Bridge The March-April 2011 spread, a benchmark relationship because it covers the period from winter to spring, surged as much as 134 percent this month, according to data from Nymex. An increase of the March premium over April may signal speculators are anticipating tighter winter supplies, which would drive prices higher. “The rally of the spread in such a short period of time indicates that something besides fundamental data is driving it higher,” said Carl Neill , an energy analyst at Risk Management Inc. in Chicago. “Some big specs were really on the wrong side.” Trading volume for the spread jumped to more than 8,000 contracts on both June 14 and June 15, compared with an average 2,604 lots last week, Nymex data show. Traders may also be anticipating the U.S. moratorium on offshore drilling in the Gulf of Mexico following the Deepwater Horizon rig explosion will cut gas supplies, Schork said in a telephone interview yesterday. Alternatively, it may be the result of a single speculator taking a larger-than-normal position contrary to the consensus, he said. Wrong-Bet Possibility “As this trade continues to decouple, then Deepwater Horizon is indeed a paradigm shift,” Schork said. If the spread reverts, “then the fundamentals haven’t changed and we had a lot of people making a bet and it was a wrong bet,” he said. In September 2006, when Amaranth had to reverse its trades, the March-April spread tumbled to as low as 42 cents per million Btu from as high as $2.51 in August. At the time, the spread measured the difference between March 2007 and April 2007 prices. Hedge funds are mostly private pools of capital whose managers participate substantially in the profit from speculation on whether the price of assets will rise or fall. Nymex natural gas for July delivery rose 7.5 cents, or 1.5 percent, to trade at $5.053 per million Btu at 10:25 a.m. London time today, after tumbling 21.1 cents yesterday. Front-month gas futures have declined 9.3 percent this year. To contact the reporters on this story: Alexander Kwiatkowski in London at akwiatkowsk2@bloomberg.net ; Stephen Voss in London at sev@bloomberg.net

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U.S. Stocks Retreat as Treasuries, Dollar Gain on Housing Data

June 16, 2010

By Nick Baker June 16 (Bloomberg) — U.S. stocks fell, Treasuries gained and the dollar strengthened against the euro after reports showed American housing starts declined the most in 14 months and FedEx Corp.’s profit forecast trailed estimates. Oil rose to a one-month high. The Standard & Poor’s 500 Index slipped 0.1 percent to 1,114.61 at 4 p.m. in New York as about three stocks slumped for every two that rallied on U.S. exchanges. The measure had fallen as much as 0.7 percent earlier. Yields on 10-year Treasuries lost 4 basis points to 3.26 percent. The U.S. currency climbed 0.2 percent to $1.2312. Crude oil futures rose 0.9 percent to $77.67 a barrel. Retailers, manufacturers, transportation companies and commodity producers dropped in U.S. stock trading as FedEx’s full-year profit outlook and the biggest drop in housing starts since March 2009 overshadowed better-than-estimated growth in industrial production. BP Plc’s 1.4 percent gain in New York equity trading following an agreement to pay $20 billion to victims of the Gulf of Mexico oil spill wasn’t enough to turn the S&P 500 around. “The recovery is not accelerating, it’s decelerating, and there’s reasons for investors to take a step back and evaluate,” said David Kovacs , head of quantitative strategies at Turner Investment Partners in Berwyn, Pennsylvania, which manages $19 billion. FedEx “is a barometer of economic activity, and the fact that they missed relative to estimates indicates there are some clouds on the horizon.” To contact the reporters on this story: Nick Baker in New York at nbaker7@bloomberg.net .

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Stocks in U.S. Retreat as Treasuries, Dollar Gain on Housing Starts Report

June 16, 2010

By Nick Baker June 16 (Bloomberg) — U.S. stocks fell, Treasuries gained and the dollar strengthened against the euro after reports showed American housing starts declined the most in 14 months and FedEx Corp.’s profit forecast trailed estimates. Oil rose to a six-week high. The Standard & Poor’s 500 Index slipped 0.1 percent to 1,114.61 at 4 p.m. in New York as about three stocks slumped for every two that rallied on U.S. exchanges. The measure had fallen as much as 0.7 percent earlier. Yields on 10-year Treasuries lost 4 basis points to 3.26 percent. The U.S. currency climbed 0.2 percent to $1.2312. Crude oil futures rose 0.9 percent to $77.67 a barrel. Retailers, manufacturers, transportation companies and commodity producers dropped in U.S. stock trading as FedEx’s full-year profit outlook and the biggest drop in housing starts since March 2009 overshadowed better-than-estimated growth in industrial production. BP Plc’s 1.4 percent gain in New York equity trading following an agreement to pay $20 billion to victims of the Gulf of Mexico oil spill wasn’t enough to turn the S&P 500 around. “The recovery is not accelerating, it’s decelerating, and there’s reasons for investors to take a step back and evaluate,” said David Kovacs , head of quantitative strategies at Turner Investment Partners in Berwyn, Pennsylvania, which manages $19 billion. FedEx “is a barometer of economic activity, and the fact that they missed relative to estimates indicates there are some clouds on the horizon.” ‘Moderate’ Recovery FedEx, the world’s largest air-cargo carrier, declined 6 percent in U.S. stock trading for the biggest drop since December. The company forecast annual profit that trailed the average analyst estimate as labor costs climb in a “moderate” economic recovery. Indexes of consumer stocks in the S&P 500 lost more than 0.5 percent. Fannie Mae and Freddie Mac, the mortgage firms 80 percent owned by U.S. taxpayers, plunged after regulators told them to delist their common and preferred shares from the New York Stock Exchange. Fannie Mae dropped 39 percent and Freddie Mac slumped 38 percent. Speculation that BP would put the $20 billion into an escrow account helped its shares as well as the S&P 500 recover from losses. BP maintained gains even after canceling its $10- billion-a-year dividend for the first three quarters of 2010. Credit investors are pricing in a 36 percent chance BP Plc will default within five years as it tangles with the Obama administration over cleanup costs and claims for the biggest oil spill in U.S. history. BP Swaps The default risk implied by credit-default swaps is up from 7 percent a month ago, according to CMA DataVision prices using a standard model used to value the derivatives. BP swaps climbed 70.5 basis points to 576.5. BP debt due next year traded today at distressed levels, with investors demanding as much as 1,251 basis points in yield more than Treasuries. Oil rose to a six-week high after gasoline surged on a report that U.S. refineries cut operating rates and supplies of the motor fuel fell. Refineries operated at 87.9 percent of capacity, down 1.2 percentage points from the week before. Gasoline supplies fell 636,000 barrels to 218.3 million, the Energy Department said. Analysts surveyed by Bloomberg News were split over whether stockpiles of the fuel would rise or fall. Three erroneous orders in Washington Post Co. shares briefly caused the stock to double, making it the first U.S. company to be halted by circuit breakers imposed following the May 6 crash that erased $862 billion from equities in 20 minutes. Canceled Trades The trades totaling 766 shares at $919.18 or $929.18 crossed on NYSE Euronext’s NYSE Arca electronic platform, according to data compiled by Bloomberg. That compared with a price of $462.84 before the jump. The transactions were later canceled, the data show. The Securities and Exchange Commission trading curbs started going into effect on June 11. The program, which is being tested through December, pauses Standard & Poor’s 500 Index stocks for five minutes when they rise or fall 10 percent in five minutes or less. Washington Post jumped 103 percent to $929.18 before the halt, then traded at $458.19 as of 4 p.m. in New York after the trading ban stopped. To contact the reporter on this story: Nick Baker in New York at nbaker7@bloomberg.net .

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Thomas’ English Muffins Sues To Keep ‘Nooks & Crannies’ From Hostess

June 14, 2010

PHILADELPHIA — Chris Botticella knows the secret to those “nooks and crannies” in Thomas’ English Muffins – the way they cradle butter and jam, and after a good toasting, produce just the right crunch. It’s a secret that the muffins’ makers have gone to great lengths to protect over 75 years, allowing it to rack up $500 million in sales annually of the toaster treats. The company says only seven executives know all three parts of its winning formula for making the muffins – including how much dough to use, the right amount of moisture and the proper way to bake them. So it became alarmed and sued in January when Botticella, one of the trusted seven, decided to bolt and join rival Hostess, maker of Wonder Bread and Twinkies. Hostess Brands Inc. doesn’t make English muffins. But that doesn’t matter to the lawyers seeking to protect the trademarked “nooks and crannies” in a U.S. baking industry where four major players duke it out on supermarket shelves. “Botticella could produce an English muffin that might look a bit different, but that would nevertheless possess the distinctive taste, texture and flavor character that distinguish the Thomas’ English Muffin and that have been the foundation of the product’s success,” they argued in a brief submitted to the 3rd U.S. Circuit Court of Appeals. The Thomas’ brand is owned by Mexican food conglomerate Grupo Bimbo SAB. Bimbo Bakeries USA, its Horsham, Pa.-based U.S. unit, says it has good reason to believe Botticella may expose the secret to how its muffins toast up crunchy on the outside and soft on the inside. Bimbo’s lawyers say Botticella hid his new employment deal for months while attending high-level Bimbo meetings and debating strategies for competing with Hostess. They also accuse him of copying a dozen files onto a USB thumb drive in his final days, a charge he denies. U.S. District Judge R. Barclay Surrick issued an injunction in February barring Botticella, of Trabuco Canyon, Calif., from taking the job at Hostess until the court fight is settled, after finding his account of his actions dubious. Botticella appealed to the 3rd Circuit because he said he is unsure how long Hostess will hold the job open for him. In depositions, the industry veteran has said he accepted the Hostess offer last fall but stayed at Bimbo through January so he could get his 2009 bonus. He said he’d grown frustrated in the $250,000-a-year job as Bimbo’s vice president for operations for the western region so agreed to a $200,000 Hostess offer in Houston. He argued the confidentiality agreement he signed was valid “only during his employment” and does not bar him from working for Irving, Texas-based Hostess, a privately held company. Bimbo has other reasons to worry about his jump to Hostess. Botticella knows other secrets, as well; he had access to “code books” that spell out production formulas for other Bimbo products, such as its new line of Sandwich Thins. The bread at stake is considerable. Bimbo’s parent had nearly $900 million in sales in the U.S. in the first quarter and its English Muffins are a big part of that, along with its tortillas, snacks and cookies. Thomas’ fans understand why the company is so protective of its “nooks and crannies.” “The butter melts and those craters catch the butter, or anything else, whether it’s jam or honey,” said Elise Bauer, who operates simplyrecipes.com and has been eating the muffins since she was a child. “The honey can swim in the butter. It doesn’t drip through.” “You toast them and the tips of the craters get all toasty and brown,” she said. Robert McCarroll, who runs The Good Steer, a family restaurant on New York’s Long Island, said that Thomas’ English Muffins have been used to bookend its hamburgers since the eatery opened 53 years ago. “We’ve been doing pretty much the same thing since 1957,” he told The Associated Press. “They add a nice consistency,” he said. “The way they toast because of those nooks and crannies, it’s an English Muffin and not just a round piece of bread.” In the Pennsylvania court case, the issue on the table is whether a leak must be inevitable or merely probable before the judges can stop Botticella from taking his a new job. “It’s a horrible situation he finds himself in,” said one of his attorneys, Elizabeth K. Ainslie. “If the assistant coach of the Philadelphia Eagles moves to the Dallas Cowboys, is he supposed to forget all of the plays that he learned while at the Eagles?”

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Penn State Drilling Study Questioned Over Industry Tie

June 14, 2010

STATE COLLEGE, Pa. — A Penn State study that paints a rosy forecast on the economic potential of natural gas drilling has been greeted with skepticism from a citizens’ group and a think tank that favors a severance tax largely because the research was funded by an industry group. The Marcellus Shale Coalition will pay more than $50,000 for the study released last month co-authored in part by researchers at Penn State’s College of Earth and Mineral Sciences, the university said. The industry group, in a release on its website, has boasted that among key findings are that “safe and steady development of clean-burning natural gas” in Pennsylvania had the potential to create 212,000 new jobs over the next decade, along with thousands already created. The study also said gas drilling-related activities could create more than $1.8 billion in state and local tax revenues over the next 18 months. Skeptics are wary of results, especially at a time when lawmakers are weighing the merits of installing a severance tax on natural gas extracted from the rich reserve that lies deep underneath most of Pennsylvania. The study was an update of a report last summer from the same researchers, and the Marcellus Shale Coalition paid more than $43,000 for that work. The cover page of the study includes the Penn State name and logo. The second page notes the industry group paid for the study, and includes a disclaimer that opinions and conclusions “are those of the authors and not necessarily those of” the university or the coalition. “What they are doing is distorting the discussion in Pennsylvania,” Jon Bogle, a member of the Responsible Drilling Alliance, said in a phone interview, “because they’ve been able to use Penn State as an authority in what they say.” A separate study by the school in 2008 set off the current wave of public interest in the potential of natural gas drilling and burnished the school’s reputation as a go-to source for industry, lawmakers and citizens. Bogle, in a letter for his Williamsport-based citizens group, asked university president Graham Spanier to “publicly disavow” the recent research because of what he called “greatly exaggerated” results. The group’s letter also makes reference to questions about the research from the liberal-learning Pennsylvania Budget and Policy Center, which favors a natural gas severance tax to help fund drilling-related environmental and local costs, as well as education and health care. Michael Wood, research director for the Harrisburg-based center, said the issue is not so much with funding behind the study, as much as methods used by researchers. As an example, the center has noted that the U.S. Bureau of Labor Statistics estimated there were more than 10,000 people directly employed by the industry in Pennsylvania. A report last year from the Marcellus Shale Education & Training Center, at the Pennsylvania College of Technology in Williamsport – which is also affiliated with Penn State – estimated the number of full-time natural gas-related jobs in north-central Pennsylvania could more than double to between 3,200 and 5,400 positions by 2013, depending on the success of wells. A study earlier this year from the state’s Center for Workforce Information & Analysis estimated gas drilling jobs could grow 55 percent from 2006 to 2016 to more than 12,400 positions statewide. “This is great. … These are good paying jobs, but a lot different than the 200,000 jobs,” Wood said. State Rep. David Levdansky, D-Allegheny, who favors a severance tax and a moratorium on leasing public land for gas drilling, said he was disappointed his alma mater “has chosen to serve as a facade for an industry-sponsored project … It doesn’t meet the rigorous standards of good academic research as far as I’m concerned.” But it was not unusual for such technical or economic impact studies to be funded by industry, said one of the study’s authors, University of Wyoming energy economics professor Tim Considine, who taught at Penn State until 2008. Considine said while their work may serve as a lightning rod for a sensitive topic, “the methods we use are standard … our analysis can stand up to any sort of scrutiny.” The university has taken no position on the findings or recommendations. “At the end of the day our faculty try to stay out of the politics and just focus on the science,” Bill Mahon, vice president of university relations, said Monday. “Penn State is doing more than $765 million in annual research and the claim that we would jeopardize a stellar international research reputation over a small research project is a pretty big stretch,” he said.

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Stocks That Rise as Market Tanks May Tempt You Commentary by John Dorfman

June 14, 2010

Commentary by John Dorfman June 14 (Bloomberg) — The stock market decline that began April 23 lasted six weeks — if June 7 was the bottom, which we don’t know for sure yet, of course. It felt more like six years. Holders of some stocks, though, have reason to smile. Surprisingly, about 30 percent of U.S. stocks have gained 10 percent or more for the year to date. That’s true even though the total return on the Standard & Poor’s 500 Index, perhaps the best gauge of the overall U.S. stock market, is negative 1.2 percent for the year. About 800 stocks with a market value of $250 million or more have scored gains of 10 percent or more for the year. Prominent in the winner’s circle is SPDR Gold Trust , better known by its stock symbol GLD. It is an exchange-traded fund that owns gold bullion and intends to track the price performance of gold, minus fund expenses. State Street Corp. created GLD in late 2004. Since then, it has posted gains every year, ranging from 5 percent in 2008 to 30 percent in 2007. So far this year GLD is up about 12 percent. No wonder I got an e-mail last week that said, “Forget about your (expletive deleted) stocks! Just buy gold.” I rarely dabble in gold or gold stocks, because one can’t calculate a price-earnings or price-revenue ratio on gold bullion, and those ratios are usually high on gold mining stocks. Yet I must agree there is a fair chance that gold will do well the next several years. Gold Strategy Many investors are seeing their faith in paper currencies weakened as governments around the world run up big deficits. In my opinion, GLD is not a bad way to own gold because it is simple, direct, and doesn’t involve large costs for storage and insurance. Speaking of gold, Newmont Mining Corp. , the largest U.S. gold producer, is up about 19 percent year to date. Newmont, based in Greenwood Village, Colorado, doesn’t meet my valuation criteria. However, its ratios are more attractive than most gold-mining stocks. Another big company in this favored group is DirecTV of El Segundo, California, the largest U.S. provider of satellite TV services. On May 6 it posted 59 cents a share in earnings, beating analysts’ average estimate of 46 cents, with good results in both the U.S. and Latin America. The shares are up about 15 percent this year. I wouldn’t buy DirecTV stock. Debt is about 300 percent of equity, which raises the risk level. And DirecTV shares seem high-priced to me at 21 times earnings and 12 times book value. No ‘Winner’s Curse’ Hershey Co. of Hershey, Pennsylvania, has risen about 42 percent this year. I believe that investors breathed a sigh of relief when Hershey let Kraft Foods Inc. of Northfield, Illinois, win the hand of Cadbury Plc. Investors had feared a bidding war, in which Hershey might overpay and suffer what’s known as the “winner’s curse.” In addition, Hershey posted first-quarter earnings almost double last year’s, surprising analysts. It pushed through a price increase on about a third of its product line, and sold more candy bars nevertheless. Would I bite? Not at 21 times earnings. Also, I don’t relish the company’s debt level, at more than 200 percent of equity. More to my taste is Impax Laboratories Inc. of Hayward, California, which trades at only seven times earnings. Impax manufactures both proprietary and generic drugs. Public since 1995, the company posted a series of losses, then broke into the black in 2007. The stock is up about 53 percent this year. Drugs, Satellites Its earnings bounce around. Last year Impax earned 82 cents a share. This year it is headed for $3.13, analysts estimate. Their early guesses for 2011 call for $1.46 a share. This month the company settled a patent dispute with Endo Pharmaceuticals Holdings Inc. and Penwest Pharmaceuticals Co. over a generic version of a medicine for Parkinson’s disease. I also like GeoEye Inc. of Dulles, Virginia. It operates a satellite imaging service, taking pictures of earth from space. Google Inc. uses the company’s satellite images for its Google Maps and Google Earth services. GeoEye shares are up about 14 percent this year and trade at 11 times earnings. The company posted record revenue in the first quarter. Consider this recommendation speculative, as the company’s debt is higher than I usually prefer. SanDisk Corp. , located in Milpitas, California, appears to be coming out of the recession nicely. In the first fiscal quarter, it posted revenue of about $1 billion, up from $659 million a year earlier. Earnings were 99 cents a share, one of SanDisk’s best quarters. Shares are up about 54 percent this year. Disclosure note: Personally and for clients, I own shares in Endo Pharmaceuticals. I have no long or short positions in any of the other stocks mentioned in this week’s column. ( John Dorfman , chairman of Thunderstorm Capital in Boston, is a columnist for Bloomberg News. The opinions expressed are his own. His firm or clients may own or trade securities discussed in this column.) To contact the writer of this column: John Dorfman at jdorfman@thunderstormcapital.com .

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Obama Warns Of ‘Massive Layoffs Of Teachers, Police, And Firefighters’

June 13, 2010

WASHINGTON (AP) — If Chuck Lacasse had gotten his pink slip four days earlier, Uncle Sam would have covered most of his family’s health insurance while he looked for a new job. But Congress allowed emergency health care assistance for unemployed workers to expire May 31, and seems unwilling to renew it despite pleas from President Barack Obama. On Saturday night, the White House released a letter Obama sent to congressional leaders of both parties asking for nearly $50 billion in emergency aid to state and local governments to fend off “massive layoffs of teachers, police and firefighters” and to prevent a possible double-dip recession. “We are at a critical juncture on our nation’s patch to economic recovery,” the president warned. “It is essential that we continue to explore additional measures to spur job creation and build momentum toward recovery, even as we establish a path to long-term fiscal discipline. At this critical moment, we cannot afford to slide backwards just as our recovery is taking hold.” In an interview with the Washington Post, White House Chief of Staff Rahm Emanuel “said the letter is intended to settle the growing debate over the opposing priorities of job creation and deficit reduction and ‘ where you put your thumb on the scale .’” Not three months after lawmakers passed his $1 trillion insurance overhaul, Obama is facing a rare defeat on health care at the hands of his own divided Democrats. So-called “moderates” have rebelled against adding billions more to the deficit in a treacherous election year. “The same Congress that spent all this political capital trying to get people health insurance is going to take a crucial benefit away from unemployed people,” said Andrew Stettner, deputy director of the National Employment Law Project, which advocates for the unemployed. On June 4, Lacasse lost his job as advertising director for a company that makes nutritional supplements. He’ll soon have to pay the entire $1,500 monthly premium to keep his family covered under his former employer’s health insurance plan. Until May 31, under Obama’s economic stimulus law, the government provided a 65 percent subsidy. That would have lowered his cost to $525. “This really isn’t about welfare,” said Lacasse, 40. “It’s about buying people some time. In a position as specialized as mine, it would have been nice to know that I had some time to look for the right job.” He lives near Green Bay, Wis., with his wife and two children. Democratic Sens. Bob Casey of Pennsylvania and Sherrod Brown of Ohio have introduced a measure that would allow the program to continue helping people who get laid off through Nov. 30. That would cover Lacasse. The lawmakers, who are seeking a vote this coming week, want to attach their nearly $7 billion provision to must-pass legislation that would extend unemployment benefits and make changes in dozens of federal programs. But a similar proposal was dropped from the House-passed bill, and Senate Democratic leaders also omitted it from their version. “I’m concerned about it,” said Washington Sen. Patty Murray, a member of the Democratic leadership. “There will be people who fall through the cracks.” Under a 1980s law known as COBRA, laid-off workers generally can stay on their former employers health plan for up to 18 months, provided they pay the full premium plus a small administrative charge. But with family premiums averaging about $13,500, the cost is prohibitive for most people. That changed under the 2009 stimulus bill and subsequent expansions, which provided a 65 percent federal subsidy for up to 15 months. Workers laid off through May 31 can qualify for the benefit through their former employer. “It has been a significant program and it has helped many middle-class families to keep their health insurance at a time when maintaining health insurance was difficult because of the high rate of job loss,” said Alan Krueger, the Treasury Department’s chief economist. Official statistics on how many people were helped have yet to be compiled, but Krueger estimates that as many as one-third of eligible unemployed workers enrolled in subsidized coverage. Melanie Miller, 34, who suffers from debilitating neurological problems, said the COBRA program allowed her to maintain her independence after losing her ad agency job. “Without the subsidy, I probably would have had to move back and live in my mother’s house in the basement,” said Miller, an artist who lives in Philadelphia. With the unemployment rate hovering just under 10 percent and with 15 million people looking for work, advocates say it’s premature to withdraw assistance. “We’re recovering, but we haven’t recovered fully,” said Casey. “Now is not the time to pull up the ladder on people who are hanging on, in some cases to the last rung.” Some conservative Democrats, however, say they don’t understand why the government should subsidize workers who lose jobs with employer coverage and not others who are equally deserving – for example self-employed people priced out of the private market. “You’re paying 65 percent of (one) family’s health care costs, but the neighbor next door, there’s no help for,” said Rep. Dennis Cardoza, D-Calif. “So we’re picking and choosing. There’s an inequality there between our constituents.” Not to mention that Congress has treated the program as emergency spending, adding its cost to the deficit. In Marietta, Ohio, boiler operator Neil Davis is facing the loss of his job as the coal-burning power plant he works at prepares to shut down for good. Davis, 33, has marketable skills but he’s unsure how quickly he’ll be able to find comparable work. His wife is a stay-at-home mom raising two elementary-age children. “Being able to have coverage at an affordable rate, we wouldn’t be afraid to take the kids to the doctor if they get sick,” said Davis. “The economy might be getting better some place, but I don’t know where at.”

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