summer

The Summer Gas Squeeze

by AP on May 28, 2011

Huffington Post…

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

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The Summer Gas Squeeze

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Pain at the Pump: ‘Been There, Done That’

by on May 12, 2011

Costar…

U.S. gas prices have again climbed above $4-plus/gallon this spring, as they did for the first time ever in the summer of 2008 when the increase was accompanied by an outcry from shopping malls to distribution center operators. Perhaps because the commercial real estate industry has been through this before, the business outlook has been less ruffled. Or maybe it is because it just been through the worst recession in a lifetime and it is used…

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Pain at the Pump: ‘Been There, Done That’

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The Latest State Where Gas Now Costs More Than $4 Per Gallon

April 17, 2011

WASHINGTON — Add New York to the growing list of states where gas prices are topping $4 per gallon. On Sunday, the Empire State became the sixth state to top $4 for the average price of a gallon of gas, joining Alaska, California, Connecticut, Hawaii and Illinois, according to AAA’s Daily Fuel Gauge. The average price of gas also rose to more than $4 per gallon in Washington, D.C., on Saturday. The next states to join the list could be Michigan, which has gas for $3.95 per gallon on average, and Indiana, where the average price is $3.94. Nevada, Washington and Wisconsin are close behind. Hawaii has the highest price in the U.S. at $4.48 per gallon. Wyoming has the lowest, at $3.54. The national average for gas has increased for 26 straight days, and is now at $3.83 per gallon. That’s up 29 cents from a month ago. Retail surveys suggest motorists are reacting to higher prices now by buying less fuel. Still, the government expects pump prices to keep climbing this summer as vacationers take to the highways. For American drivers, the $4 mark harkens back to the summer of 2008, when oil rose to $147 per barrel and gas prices topped out at $4.11 per gallon before the economy went into a tailspin. The rapid increase at the pump follows a parallel rise in oil. Since Labor Day, oil has risen 48 percent and U.S. gas prices have gone up 42 percent. The increases gained momentum in mid-February when a popular rebellion in Libya turned violent and shut down the country’s exports. Crude has jumped 30 percent since then, with gas prices gaining 22 percent.

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Daniel Dicker: Why Gasoline Costs Are Too Damn High

February 21, 2011

The U.S. is being fooled to believe that the gas prices we see on TV and in newspapers aren’t actually so bad. But they are. Relatively, they are much worse now than they were in the past, and are likely to get even worse as spring and summer approach. We watch the TV and look in the newspapers, see that crude oil is selling for $87 dollars a barrel and think: “yeah, those are high prices, but I remember when oil was over $100 dollars, even $120 and $140 dollars a barrel — this doesn’t seem so bad yet.” But you’re being fooled. You’re being fooled because the price that the newspapers and television are referring to is the price of West Texas Intermediate crude oil, traded at the New York Mercantile Exchange (where I traded for 25 years). This financial benchmark has been used to set the price for virtually all of global oil for the past 25 years — even though there are hundreds of other specific grades of crude oil in the world, extracted from ground, water and stone, and delivered in hundreds of local markets across the globe. But the market for this one local grade of sweet crude, delivered at Cushing in Oklahoma has dominated the financial world of global oil for so long, it has also come to set the physical prices for real oil virtually everywhere else — until a few weeks ago. West Texas Intermediate (WTI) has disconnected with crude markets everywhere else and no longer represents the “real” prices of crude, or in other words, the real prices that are being charged at the pump to you and me. Take a look at some other physical benchmarks and their recent prices: Dubai and Oman sour crude is trading at $99 a barrel, Mars sour — a U.S. grade from the gulf coast — has traded at $96, Brent Crude from the North Sea is at $104 and Louisiana Light Sweet, a very similar grade to WTI delivered only 700 miles south in Port Arthur has recently traded at $106! What’s fascinating is that WTI has historically been much, much more expensive than ANY one of these other grades. The reasons that WTI no longer “works” — at least temporarily — as a global benchmark is two fold: Physically, Cushing is filled to the brim with supply and because it is small and landlocked, it is difficult to ship incoming crude further south. Financially, the WTI contract has become nothing more than a trading and investing ping-pong ball of asset managers, index investors, ETF’s, energy hedge funds and individual traders, all stuck long in a market that won’t react positively to Middle East unrest and a general commodity price spike — a spike that is overtaking every other grade of crude out there. I outline the mechanisms of all of this in my upcoming book Oil’s Endless Bid , but the bottom line is this — While financial oil may be subject to the whims of big money investors and traders, the gasoline market is far more insulated — and delivered in New York Harbor where no such physical constraints exist as in Cushing. So, gas isn’t being held back by the WTI disconnect — its pricing at the pump is a solid 40 cents a gallon higher than the “advertised” price of crude oil that’s going out to the world would suggest, up to $3.18 a gallon nationally, according to the Lundberg survey. And this is just the beginning. As unrest continues to heat up in the Middle East, and as the physical and financial roadblocks to WTI clear up — as they must — the financial benchmark at the NYMEX is much more likely to again represent where the rest of global oil is currently pricing — well above $100 a barrel and indeed closer to $110. And that means more pain — much more pain — at the pump as the summer approaches.

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Susan Buchanan: New Orleans Tap Water Beats Odds, Meets All Regulatory Standards

February 17, 2011

The Crescent City draws its water from the Mississippi — a river lined with petrochemical plants and storage tanks and full of waste from northern neighbors. Residents worry about spills in the river, and wonder if oil lapping at the coast has affected their faucet water. In a weekend last November, city dwellers endured a boiled-water advisory after a plant problem. And life on some blocks has been disrupted by water main breaks in recent years. Local, state and federal authorities, however, say the city’s tap water meets and, under some criteria, exceeds their standards because of controls on discharges in the river, constant water sampling and cleansing at plants. Last week, the purification superintendent at the Sewerage & Water Board of New Orleans rated the quality of the city’s tap water as “excellent.” The 106-year-old Carrollton plant, outfitted with pumps, pipes and generators to pull water from the river, uses conventional purification processes, filters the water and provides 135 million gallons daily to nearly 300,000 people over hundreds of square miles. The facility’s tile-roofed buildings employ 200 workers, and contain a water-quality laboratory. Vincent Fouchi, Superintendent of Water Purification at the S&WB, said “we have the same plants, the same chemicals and procedures as before Katrina.” Across the river, the Algiers plant supplies the West Bank with 10 million gallons of drinking water each day. “We monitor the two plants daily and monthly to comply with U.S. Environmental Protection Agency and state Dept. of Health & Hospitals water-quality guidelines,” Fouchi said. “We’re in compliance with current regulatory levels. The state’s Dept. of Environmental Quality has done a good job of controlling the flow of industrial waste in the river by strict permitting of plant emissions.” The U.S. Coast Guard has helped enforce those permits. Fouchi said, in his opinion, “the S&WB provides excellent-quality, potable water to our customers.” He continued, saying “DHH tests for agricultural runoff and pesticides in the river.” And while the BP spill was too far away to hurt the city’s water supply, “we remain vigilant for upriver oil spills between Baton Rouge and New Orleans.” The DEQ has an Early Warning Organic Compound Detection System or EWOCDS for spills. The S&WB lab analyzes river water daily and reports any contaminants to the DEQ. Fouchi said river pumping operations are halted “when we choose to stop taking water from the river.” Decisions to stop drawing are based on types and concentrations of contaminants. “We have more than one river pumping station and sometimes a spill may affect one, but not two stations,” he said. In a long-ago study, released in 2003, the Natural Resources Defense Council said the city’s water quality was good, but source protection was poor. Fouchi said “for source-water protection, EWOCDS is our best tool. The Mississippi River is leveed between Baton Rouge and the mouth of the river, so the only sources of possible contamination along this stretch are permitted industrial discharges and marine traffic accidents.” He noted that other large cities on the Mississippi like St. Louis draw their water from the river, though Baton Rouge gets its supply from deep wells. New Orleans, meanwhile, is strapped for cash for upgrading the water system. “Our infrastructure needs are still significant, and greatly outreach our current, capital-improvement funding levels,” Fouchi said. “We’re doing our best to repair infrastructure and equipment, as needed, within our current, budgetary constraints.” The U.S. Army Corps of Engineers is installing a new generator at the Carrollton plant in an estimated $48 million project. Nancy Allen, Army Corps spokeswoman, said a contractor is building a structure to house the generator, which should be in place this September. At the Algiers plant, “we switched from elemental chlorine to sodium hypochlorite about two years ago,” Fouchi said. Sodium hypochlorite is a chemical compound used to disinfect water. “We’re currently constructing a sodium hypochlorite storage and feed facility at Carrollton, where sodium hypochlorite will replace elemental chlorine as our disinfectant.” Those change are intended to eliminate risks from chlorine gas releases. Clyde Carlson, New Orleans-based, district engineer in the Office of Public Health of the La. Dept of Health and Hospitals, said “the city is in compliance with safe-drinking water regulations. Customers can look at the S&WB’s website and read its consumer confidence report released last summer, along with updates on that report.” In terms of water quality, the city’s purification plants meet all state and federal, including EPA, standards. Under EPA requirements, a consumer confidence report must be mailed to customers once a year. The S&WB plans to send out its next report this summer. New Orleans drinking water escaped any affects from the Gulf spill. “We’re 100 miles upstream from the mouth of the Mississippi River, and the BP spill occurred 50 miles out in the Gulf and in no way impacted water quality in New Orleans,” Carlson said. “We’re vigilant about any spills that might occur on the river upstream from us, however.” A network of monitors, involving the DEQ, DHH’s Office of Public Health and the U.S. Coast Guard, alerts stakeholders and water authorities about any detected spills in the river. The last, big river spill in New Orleans occurred in July 2008 and left residents concerned about tap water. “In the 2008 incident, in which a barge overrun by a tanker spilled oil in the river, we saw a quick response from the Coast Guard, DEQ, EPA and Louisiana’s Office of the Oil Spill Coordinator,” Carlson said. “The S&WB Algiers’ plant closely monitored or closed down water intakes from the river in an appropriate response.” A water advisory was issued for Algiers, however. As for leaky water mains and pipes in New Orleans, Carlson said “mains that have exceeded their design life are a challenge for aging infrastructure across the country. However, with enough positive pressure from electrical and steam power in the distribution system, contaminants are unlikely to get into tap water from broken mains.” Last November’s boil-water advisory in New Orleans, Carlson said, “was based on an abundance of caution after a brief power outage at the Carrollton plant affected delivery of water to the distribution system, but didn’t alter treatment.” Carlson continued, saying that joint, water-quality testing is performed by S&WB and the DHH. “Daily, monthly, and yearly reports are sent to us at the Safe Drinking Water Program of the Office of Public Health.” Bacteriological sampling is conducted monthly at the East and West Bank distribution systems, and all EPA protocols for monitoring pollutants are followed. “Sampling is routinely done under lead and copper rules and disinfection byproduct regulations,” he said. The S&WB water lab is state-certified every three years. Carlson said “the Carrollton power plant was flooded by Katrina, but in a staged recovery, potable tap water in areas closest to the plant was back on in about three weeks.” Other city neighborhoods were gradually brought back. “However, it took almost a year for the Lower Ninth Ward to have potable, tap water because of water quality and pressure issues,” he said. Fouchi at S&WB said the Carrollton plant was shut down for several days after Katrina, but it was several months before normal operations resumed because it hard to procure water-treatment chemicals. Meanwhile, the Algiers plant was not flooded by Katrina. As for other water sources, Carlson said Baton Rouge relies on wells because of high-quality ground water in that area. New Orleans has some wells that aren’t for drinking. Audubon Park, for example, contains a well for irrigation purposes. Ground water in the New Orleans area can be highly colored or highly saline, and would require different treatment than river water, Carlson said. “And there are some instances across the country where ground water withdrawals have caused subsidence” or ground sinking, he noted. Jesse Means, geologist with the Drinking Water Protection Program at the La. Dept of Environmental Quality, said “our program focuses on public awareness, and we did surveys across the state from 2000 to 2003 to locate water wells and surface water intakes, including intakes in the Mississippi River, for every public water system.” The DWPP is an outreach program to help communities protect aquifers, rivers and lakes used for drinking water. The surveys have been updated in recent program work. “We’ve identified facilities and activities such as chemical plants, gas stations, and cemeteries near public wells and water intakes that have chemicals associated with them,” Means said. Barge-cleaning operations, anchorages and wharves have been recorded. “We’ve surveyed everything from St. Francisville down to Boothville on both sides of the river, and tried to identify all plants and other activities discharging into the river,” he said. A third of Louisiana’s residents get their water from surface water–lakes, rivers and bayous–while two-thirds drink water that comes from wells and is pumped out of aquifers. Means said “the DEQ looks at drinking water use and what the quality of the river water needs to be, and has a strict, discharge-permitting system. Plants are allowed to discharge a specified amount of treated waste water into the Mississippi River under their permits.” He continued “if plants treat their water and follow what’s authorized in their permits, they are not unduly polluting the water supply. The DEQ has routinely worked to locate unpermitted discharges for years in the New Orleans area and elsewhere.” The U.S. Coast Guard permits and inspects sewage-treatment systems for vessels in navigable waterways. Means said “the DWPP tries to get as many people and businesses involved in pollution prevention as possible. We’ve set up volunteer committees–made up of citizens, officials, water-system operators, business owners and anyone that’s interested in participating–to visit businesses near water-supply intakes and wells, and we try to educate them on best management practices to prevent pollution.” Meanwhile, in an issue that has resurfaced, Carlson said “OPH is aware of the recent, EPA draft guidance on perchlorate, and will continue to work with EPA on related rules and regulations in the future.” In early February, the EPA said it will regulate perchlorate, a component of rocket fuel, along with sixteen other volatile organic compounds that can cause cancer. Carlson also said “the Office of Public Health does not advocate point-of-use treatment devices for water, particularly when water meets regulations. However, if a resident chooses to use a filter, they should use an NSF-certified device.” NSF International, an independent, public-health group, tests and certifies products. Carlson advised “run tap water until the temperature changes, especially in older buildings in the morning, to flush out plumbing contaminants and metals from old pipes. And always use water from the cold tap for consumption.” Also, make sure prescription drugs are not disposed of in sinks, toilets, drains or through any conduit to the watershed, he said. This article was published in the Feb. 14, 2011 edition of “The Louisiana Weekly.”

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Home Depot To Add More Than 60,000 Seasonal Jobs

February 15, 2011

ATLANTA — Home Depot Inc. will hire more than 60,000 seasonal workers to help with its busy spring season. The world’s biggest home improvement retailer said Tuesday it will fill the positions before its second annual Spring Black Friday promotion. “Spring is our Christmas and traffic is at its highest during this season,” Craig Menear, executive vice president for merchandising, said in a statement. Consumers typically head to home improvement stores in the spring to pick up flowers, vegetables and lawn care products as they prepare their residences for the summer. Home Depot said the workers, who will be hired and trained in February and March, will be in every market. The Atlanta company currently has more than 300,000 employees. Home Depot said it will also add some permanent part-time and full-time jobs this year, but did not specify how many. In December Home Depot boosted its 2010 earnings and revenue outlooks on stronger sales. The chain also said it plans to open 10 new stores in 2011, including seven in Mexico. Home Depot has 2,247 retail stores in all 50 states, the District of Columbia, Puerto Rico, U.S. Virgin Islands, Guam, 10 Canadian provinces, Mexico and China.

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Obama’s Big Budget Cut Proposals Target The Poor

February 10, 2011

WASHINGTON — As Democrats and Republicans wrangle over fiscal austerity and the shape of the 2012 federal budget, the White House is targeting programs in the $4 trillion budget that benefit low-income Americans. It’s a sop to moderates and conservatives, and it’s likely to infuriate voters who put President Barack Obama in the White House. In the past week, the Obama administration has signaled that it will propose significant cuts to community service block grants and an energy assistance program that helps poor people stay warm in the winter and cool in the summer. A White House source familiar with the budget process told HuffPost that the president will propose cutting $2.5 billion from the Low Income Home Energy Assistance Program , or LIHEAP, which received $5.1 billion in federal funds in 2009. That program distributes money to states, which then distribute it to social service agencies to help families heat or cool their homes. The National Energy Assistance Directors’ Association , a group that represents state aid officials in Washington, said Wednesday that the bad economy has forced more low-income households to rely on LIHEAP. About 8.3 million households used it in fiscal 2010, up from 7.7 million and 5.8 million during the previous two years, and the association expects eligible applications to rise to 8.9 million this year. NEADA director Mark Wolfe told HuffPost that the administration’s proposal would cut off 3.5 million households. “It’s just a cruel proposal,” Wolfe said. “What this would do is take some of the most vulnerable families in the country off energy assistance.” HuffPost readers: Used LIHEAP to heat your home? Tell us about it — email arthur@huffingtonpost.com . Wolfe said he assumed the White House had “drawn a circle” around education-aid programs like Pell Grants and Head Start. “My guess is that the administration sees a course of programs they want to protect,” he said. “But why offer this up before the Republicans suggest cuts. Why volunteer us? Why volunteer LIHEAP?” The White House declined to address these concerns on the record, though a source noted that energy prices are lower now than when Congress increased LIHEAP funding for 2009. Although energy prices have indeed declined since then, Bob Greenstein, the director of the Center on Budget and Policy Priorities, a progressive think tank, pointed out that the overall economy hasn’t improved much since then. Price drops don’t offer much relief to people still looking for jobs. “The unemployment rate is higher and there are lot more people that have low incomes today than during fiscal 2008 when this was written,” Greenstein said. “I’m certainly surprised and disappointed at this cut.” And this isn’t the only program for low-income people that the White House has put on the chopping block, at a time when the administration and Congress chose to extend tax cuts for upper income and wealthy Americans. Community service block grants, which fund community organizers in poor neighborhoods, are also facing cuts. During the 2008 campaign, Obama emphasized that his own resume included a stint as a community organizer. White House budget director Jacob Lew said in a New York Times op-ed Sunday that Obama would propose cleaving block-grant allocations to $350 million from $700 million. “These are grassroots groups working in poor communities, dedicated to empowering those living there and helping them with some of life’s basic necessities,” Lew wrote. “These are the kinds of programs that President Obama worked with when he was a community organizer, so this cut is not easy for him.” David Bradley, director of the National Community Action Foundation, that works with Congress and local governments on behalf of programs for low-income people, said he was surprised that the president, a former community organizer, would go after programs that represent such a tiny part of the massive federal budget. “The question is why? Why pick on this program? It makes a statement, particularly when you’re able to say, ‘Here’s a program I really care about,’” Bradley said. “Once the Obama administration throws a poverty program in the water, it starts a feeding frenzy.” Bradley said the the White House has thrown chum into the waters swirling around the budget-cut debate. He said the Obama administration’s move simply emboldened Republicans to propose even deeper cuts to the same programs. In the wake of the White House proposal, Republicans said yesterday that they would seek $405 million in cuts to community service block grants as part of their proposed continuing resolution , a stopgap budget measure that would fund the federal government for the rest of the year. Even before word of the block grant and LIHEAP cuts, the National Law Center on Homelessness and Poverty worried that the White House will abandon a waning homeless prevention program created by the stimulus bill. The White House has also stepped on other programs for poor folks. In August, it pushed Congress to pass a child-nutrition bill — a priority of the First Lady’s — that was paid for in part with cuts to future funding for the Supplemental Nutrition Assistance Program, better known as “food stamps.” At the time, the Food Research and Action Center, a national anti-hunger organization that lobbies on behalf of food stamps and other programs, estimated that a family of four will receive $59 less per month starting in November 2013 as a result of the $2.2-billion cut, which came on the heels of another $11.9-billion cut to food stamps that was folded into a state-aid bill. More than 100 House Democrats protested and promised to block the child nutrition bill because of the cuts, but the White House persuaded them to fall in line. With mounting evidence that the White House is willing to sacrifice low-income assistance as it jockeys for position in budget and election battles, it may be hard this time around to convince congressional Democrats to support the proposed block grant or LIHEAP cuts. The 11 Democratic members of Congress from Massachusetts sent Obama a letter on Monday opposing cuts to the block grants. And one prominent Democrat has already voiced his displeasure with the LIHEAP proposal. “I understand that difficult cuts have to be made,” Sen. John Kerry (D-Mass.) wrote in a letter to the White House on Wednesday. “But in the middle of a brutal, even historic, New England winter, home heating assistance is more critical than ever to the health and welfare of millions of Americans, especially senior citizens. I request that the administration preserve LIHEAP funding at least to the Fiscal Year 2010 funding at $5.1 billion when it submits its FY12 budget proposal to Congress.” In Massachusetts, eligible applications to LIHEAP increased 21.1 percent in 2009, and that represents a population of voters likely to be as disgruntled about the White House’s proposal as Kerry.

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Jeffrey Rubin: Food: What’s Really Behind the Unrest in Egypt

February 9, 2011

It’s more than coincidence the Arab world is convulsing with social unrest just as the United Nations Food and Agricultural Organization’s widely watched price index recently soared past the previous food price peak set in the summer of 2008. After all, didn’t those same prices ignite food riots throughout the world only three summers ago? When 40% of your population lives on less than $2 per day, soaring food prices isn’t about cutting back on luxury spending. This is particularly telling when record prices include basic grains such as wheat, of which Egypt is the world’s largest importer. Suddenly, it becomes a lot more difficult for the roughly 30 million Egyptians living on that $2 per day to stomach their three decade dictator, Hosni Mubarak. Similar popular indigestion, triggered initially around food prices, sent equally beloved Tunisian strongman, Zine El Abidine Ben Ali, packing all the way to exile in Saudi Arabia. And when food riots recently broke out in neighboring Algeria, not only did three-term president Abdelaziz Bouteflika suddenly see fit to lift a 19-year stage of emergency but, more important, he told his government to order a record 800,000 tonnes of wheat. Algeria is not the only country in the region to start bulking up on its food inventories as a hedge against future food protests that could easily morph into popular revolutions. Everyone in the region is doing it, including supposedly stable Saudi Arabia, which recently announced plans to double its wheat inventories. And it is not just Arab nations feeling the pinch. Food riots are sweeping across the developing world, encouraging similar hoarding elsewhere. Bangladesh and Indonesia placed record rice orders; the former doubling its order, while Jakarta quadrupled its rice purchases. And China may soon be joining the fray. Severe drought in the north is having a disastrous impact on the country’s winter wheat harvest. This has left the ground extremely dry for spring planting. If China, normally self-sufficient in wheat, becomes a significant importer this year, world grain prices could go a lot higher. If soaring food prices are the real culprit behind growing civil unrest sweeping through the developing world, governments reaction to the crisis is only bound to make the problem worse. You don’t need a PhD in economics to figure out what happens to prices when every government under the sun starts stockpiling food. What’s most disconcerting about today’s food prices (as it is with oil prices) is not so much their record level but how little time it has taken for basic resource prices to rebound from the post-war’s deepest global recession. At the very beginning of a new cycle, we are already seeing the same record food and energy prices that ended the last cycle. I wonder what that says about the sustainability of growth?

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Airfares On The Rise As Airlines Charge Passengers For Fuel

February 8, 2011

NEW YORK — The rising cost of flying comes with a familiar refrain: The airlines need help paying their fuel bills. For the first time since late 2008, U.S. airlines are adding fuel surcharges to ticket prices. They’ve already raised fares five times since December.to offset a 25 percent increase in the price of jet fuel. For those with spring and summer travel plans, it’s a one-two punch. Right now, the surcharges on U.S. routes are only between $3 and $5 each way. Back in 2008, surcharges started slightly higher, then jumped as high as $60 when oil hit $147 in the summer. Many estimates have oil moving slightly above $100 this year. Even a one-way $15 surcharge adds more than 4 percent to the average domestic ticket price of about $340. And on international flights, fuel surcharges at their peak can more than double the price of a ticket. _ Adding fuel to the fare American Airlines last week added a fuel surcharge of about $5 each way on most U.S. routes. United and Continental applied a charge of $3 each way. Others are expected to follow. JetBlue tacked on $35 to $45 for trips to the Caribbean and Puerto Rico. Besides raising fares system-wide, individual airlines are hiking fares further on popular routes. That helps boost revenue, but airlines aren’t sure it’s enough. Airlines generally expect to pay at least 15 to 25 percent more for fuel this year. Estimates vary because carriers use different financial strategies for rising fuel prices. Oil topped $92 per barrel last week, the highest level since October 2008. _ Where (and why) you’ll find them Fuel surcharges are traditionally an easier way to raise fares. An increase to a base fare isn’t always tolerated by customers. They can switch to a rival or force an airline to lower fares again to keep them. Fees are complicated and can drive passengers away, too. Airlines also believe passengers are more forgiving of price increases for specific reasons. “I think our customer understands fuel surcharges because they see their energy costs rising as well,” JetBlue Dave Barger said in an interview with The Associated Press. _ Now you see them. Surcharges are wrapped into the base fare on U.S. flights – you won’t incur a separate fee at booking. And they must appear in all promotions and advertisements. But on international flights fuel surcharges are often hidden during an initial fare search on online travel sites and the airlines’ own websites. They can exceed the ticket price. Surcharges for international flights reached $350 on a trip to Europe in 2008. They dropped, but never went away like domestic charges did in the recession. Fuel surcharges are labeled with an “F” code on your final booking statement of airfare and taxes. Peak travel day surcharges, which airlines introduced soon after domestic fuel fees disappeared, have a “Q” code. It’s unclear whether travelers will incur both fees this summer. _ More to come? Few airline executives expect costs to drop this year, so travelers should prepare for higher fuel surcharges. Southwest CEO Gary Kelly said fuel will be the airline’s biggest hurdle to staying profitable this year. Fuel is often an airline’s biggest expense next to labor. It accounts for about one-third of an airline’s total costs, on average, according to the International Air Transport Association. Rick Seaney of FareCompare.com predicts airlines will apply fuel surcharges much more slowly this year to avoid the resistance they encountered two and a half years ago. But that’s not to say airlines wouldn’t raise fuel surcharges higher than in 2008. With the economy growing and more people flying, analysts suggest that fares and fees should climb steadily this year. “They’ll keep rising until the point where the consumer says `I’m not buying a ticket anymore,’” Seaney said.

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Bank Of America Pays $410 Million In Overdraft Case

February 6, 2011

Bank of America has agreed to pay $410 million to settle a federal lawsuit alleging the bank charged excessive overdraft fees. The suit is one of several filed against several banks from plaintiffs in 14 states, which were consolidated in a federal court in Florida. Other banks named in related suits include Wells Fargo and Citibank. The nation’s largest bank said in a court filing Friday that it has reached a memorandum of understanding to settle the claims in the suit by paying $410 million. The settlement is subject to court approval. Consumers alleged the bank processed the payments in a way that caused more overdrafts. Customers pay overdraft fees when they spend more money than remains in their accounts. The fees can reach $35 apiece. Before federal law changed this summer, banks frequently charged overdraft fees on numerous transactions in a single day. Anne Pace, a spokeswoman for the Charlotte, N.C., bank, said Saturday that BofA is “pleased to reach a fair resolution” to the case. BofA has already has addressed many related customer concerns, she said. Wells Fargo is appealing a $203 million judgment in a separate California case.

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BP Resuming Pay Of Dividends Seen As ‘A Slap In The Face’ To Oil Spill Victims

February 2, 2011

NEW ORLEANS — BP’s decision to resume paying dividends rankled Gulf Coast residents Tuesday who saw it as another sign the company wants to move on even though many are still suffering from last year’s massive oil spill. Oil stains linger in marshes along Louisiana’s fragile coast and tens of thousands of victims are waiting for final payments from a $20 billion compensation fund, while a large number of people haven’t received any money at all. The 7 cents per ordinary share payable to BP shareholders March 28, or about $1.25 billion overall, isn’t a lot by BP’s standards – it’s half what the company paid investors for the final quarter of 2009 – but Gulf residents frowned on the idea of going back to business as usual. “BP has so much money that we can’t really fathom it, but BP has to take care of its obligations to us,” said Pass Christian, Miss., shrimper Bobby Barnett. Barnett said London-based BP still owes him compensation, which he has filed for, for damages from a shortened season after the spill halted shrimping in some areas for much of the summer. He’s also worried about the long-term effect on Gulf seafood from the dispersants BP used to break up the oil. “This is a slap in the face to the thousands of victims forced to watch BP line its shareholders’ pockets while they struggle to pay their mortgage and put food on the table,” said James P. Roy, a lead attorney for plaintiffs suing BP and other companies over the disaster. U.S. Sen. Mary Landrieu acknowledges that it’s up to BP to decide when and how much it pays in dividends to its shareholders. But, the Louisiana Democrat said, “I intend to hold them accountable for paying every penny they owe to make businesses and families in Louisiana whole again and to repair the damage the spill did to the state’s coast and our seafood industry.” She is pushing for at least 80 percent of the penalties ultimately charged to BP under the Clean Water Act to be returned to the Gulf Coast for long-term economic and environmental recovery. BP announced in June that it would not pay dividends to shareholders for the rest of 2010 as it sought to get a grip on its huge liabilities from the April 20 rig explosion and oil spill that followed. At the same time, BP agreed to commit $20 billion to a fund to compensate victims of the spill. A schedule of payments to the fund called for BP to make an initial contribution of $3 billion last summer and $2 billion in the fall, followed by $1.25 billion per quarter until the full figure is reached. But as of last week – some seven months after the fund was announced – only $3.54 billion of the fund had been spent, according to BP. The administrator of the fund, Washington lawyer Kenneth Feinberg, is preparing to make final payments to individuals and businesses. Any money left over is expected to be returned to BP. The Associated Press reported Monday that the fund has paid a final settlement to just one of the thousands of people and businesses waiting for checks, and that $10 million payout went to a company after the oil giant intervened on its behalf. As of last weekend, roughly 91,000 people and businesses had filed for final settlements. Thousands have received some money to tide them over until a final settlement amount is offered, but only one business listed as paid on the facility’s website has so far received a check. Billy Nungesser, president of oil-soaked Plaquemines Parish, said he’s not opposed to BP giving a return to its shareholders, but he has a problem with the timing considering the company’s unfinished business to restore the Gulf. Such payments only benefit investors – Roy, Landrieu, Barnett and Nungesser said they don’t own any BP stock. “I feel like they think this is something in the past and they want to close the book on it,” Nungesser said.

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How A NY Tax Cut Backfired On The Tea Party

January 27, 2011

MINEOLA, New York (By Edith Honan and Kristina Cooke) – At his January 2010 inauguration, Tea Party-backed Republican Edward Mangano marched up to the podium, pen in hand. Even before being officially declared Nassau County Executive, he signed a repeal of an unpopular home energy tax. The move elicited chants of “Eddie, Eddie, Eddie” from supporters assembled in the auditorium of Mangano’s alma mater, Bethpage High School, 30 miles east of New York City. “This is very cool and quite an honor,” Mangano said as he gave his admirers a thumbs-up. The fiscal consequences, however, were anything but cool. The repeal set Mangano on an immediate collision course with the state-appointed fiscal overseer, the Nassau County Interim Financial Authority, or NIFA. It culminated in NIFA seizing control of the wealthy New York county’s finances on Wednesday. Nassau’s ills exemplify the growing tension across the country as dozens of freshly-elected Tea Party lawmakers, many of whom promised to cut taxes, must find ways to slash record budget gaps as revenues dwindle. “A lot of people who got elected on this type of anti-tax platform are running into the brick wall of fiscal reality,” said Matthew Gardner, executive director of the non-partisan Institute on Taxation and Economic Policy in Washington. Besides being a cautionary tale, the setback in Nassau County is a black eye for the Tea Party, the grassroots movement built around the core principles of constitutionally limited government, free-market ideology and low taxes. Indeed, a close examination reveals that the affluent area’s woes were exacerbated by missteps and miscalculations. Among other things, a Reuters review of dozens of public and private documents showed vague, circular answers to oversight panel queries and basic math errors in budget documents. In a sense, Nassau County’s predicament remains highly unusual. The oversight board created by New York State more than a decade earlier following a financial crisis gave Mangano little margin for error. But in other ways, Nassau County is not unlike many places in the United States today. A June 2010 survey by the National Association of Counties found 65 percent of the 800 counties polled reported budget shortfalls of between $100,000 and $50 million. “It’s a metaphor for what is happening in the Western world,” said Richard Ravitch, who advised New York City during its fiscal crisis in the 1970s. “People don’t want to tax but there is a point below which they don’t want to cut.” TAX REVOLT Mangano’s victory over two-term Democratic incumbent Thomas Suozzi in 2009 was one of the first major upsets that can be chalked up to the Tea Party. His campaign posters avoided the word “Republican” and instead stressed his “tax revolt” message. On that score, his opponent was an easy target. To help close a yawning budget gap, Suozzi had instated the $45 million home energy tax and indicated he would raise property taxes. The home energy tax cost households on average $7.27 each month — a fraction of most tax bills. But in an area already paying some of the highest taxes in the country, it took on symbolic importance. Mangano defeated Suozzi by fewer than 400 votes, stunning the political establishment. With his Long Island accent and a heavy frame, Mangano is often described as genial. He has made much of his blue-collar roots, including his time spent working as a janitor while a high school student. His struggle began almost the minute he repealed the energy tax. “I’m not sure that (Mangano) understood the magnitude of the fiscal problems that he faced and he had promises from the campaign that he had to keep,” said Lawrence Levy, a dean at Hofstra University and a former member of the editorial board at Long Island daily Newsday. Eliminating the energy tax “blew a bigger hole in his budget and added to the problem with really no plan to replace the revenue,” he said Within two working days of Mangano’s inauguration, a letter from NIFA landed on his desk — the opening salvo of what would fast become a testy relationship. In a two-page letter, NIFA’s chairman Ronald Stack requested a revised multi-year plan and asked Mangano how he planned to make up for the lost revenue. He never did provide an answer that satisfied them. On Wednesday, NIFA said the county’s $2.6 billion budget was out of balance by $176 million, meaning it could take control of its finances. Mangano said he would sue NIFA. HEAVEN FOR REPUBLICANS To be sure, Nassau County’s fiscal woes long predate the Tea Party. Known as the “Gold Coast” and dotted with sprawling mansions in America’s Roaring Twenties, the North Shore of Nassau County was the setting for F. Scott Fitzgerald’s “The Great Gatsby.” Following World War Two, the entire county transformed into the quintessential American suburb. Its proximity to New York City, its beaches, good schools and low crime rate led to a rapid population increase. In liberal New York, it was also a rare conservative stronghold. “When a Republican dies and goes to heaven it looks a lot like Nassau County,” former President Ronald Reagan famously said. But by the 1990s, both its economic and population growth had plateaued. At the same time, police salaries had ballooned. By 2000, a Nassau County cop could expect to earn over $100,000, including overtime. In 1999, with bankruptcy a real possibility, the state bailed out Nassau County to the tune of $100 million. NIFA was created the following year to oversee Nassau’s finances and to issue bonds and notes on the county’s behalf. Even a one percent budget gap can prompt a takeover. The county’s financial crisis helped usher in an era of Democratic rule. Suozzi was elected in 2001 and served two terms as county executive before his defeat to Mangano, a 14-year veteran of the Nassau County Legislature. Despite its troubles, the county of 1.4 million people remains one of America’s wealthiest. It has the highest concentration of affluent neighborhoods in the United States, according to Forbes. It also has a median household income of $94,856 almost twice the U.S. median — though it is also one of the country’s most expensive places to live. A shopping strip in Manhasset, known as the Miracle Mile, is a blur of Tiffany’s and Prada and is popular with celebrities including Gwyneth Paltrow and Jennifer Lopez. Although Mangano insists that politics is behind the state’s takeover, the six-member NIFA board is hardly on the same page ideologically, at least according to their voter registration. Three are registered Democrats, one is a Republican, one is a Conservative and one an Independent. The Republican, Thomas Stokes, served as Suozzi’s deputy for finance, while conservative George Marlin publicly backed Mangano during the election campaign. Lately, though, Marlin has become one of Mangano’s most outspoken critics. TALE OF TWO DEFICITS Marlin told a NIFA meeting late last year that Nassau County faced a “tale of two deficits.” “A serious and critical budget deficit that the Mangano administration inherited” and “then there’s the credibility deficit. A lack of candor has been coming from the county. Promises have been made but not kept,” he said. Some problems stemmed from sheer sloppiness. The documents reviewed by Reuters included a number of simple errors. For example, in his review of the county executive’s budget, Comptroller George Maragos, a fellow Republican, incorrectly calculated a gain as a loss in the other revenues column — a $600,000 gain was instead posted as a $500,000 loss. The comptroller’s office said the error was due to a typo. And then there was the chasm between words and actions. Despite his stated mission to slash spending, Mangano did not immediately institute a formal hiring freeze. By far the biggest savings he touted for the 2011 budget were $61 million worth of union concessions. Those never came, and by most accounts were never a serious possibility. The offending home energy tax was part of a three-year deferred-pay deal struck by Suozzi with the unions. Suozzi said the deal would give the county time to get its finances in order as the economy picked up. The thinking was that the home energy tax alongside a promised property tax increase would set up a recurring revenue stream for the county. Among other things, taking on the energy tax hampered Mangano’s ability to negotiate with the unions. “Everybody was supposed to share a little bit of the pain,” said police union President James Carver. “Now the county executive is taking away one of those legs of the three-part plan.” At the end of April, Mangano met with labor leaders at Ruth’s Chris Steak House in Garden City to inform them he would put $61 million in union concessions into his 2011 budget. Union leaders say they remember the dinner as not very substantive, quipping that the main decision of the evening revolved around what to order as a side dish. Carver said Mangano told him the budget item was a mere “place holder” while he pursued a possible Long Island casino project and his revamp of the county’s costly property tax refund system. “He gave me the impression that this was never going to happen,” said Carver, who pointed out that the $61 million reduction would be the equivalent of an 11 percent cut in police salaries. “NO PROPERTY TAX BUDGET” In September, Mangano presented his 2011 budget, which he called a “no property tax budget.” He said it would eliminate 400 county jobs and cut more than $100 million in spending. Both Comptroller George Maragos as well as the county legislature’s Republican majority leader Peter Schmitt deemed the budget was sound. But by NIFA’s calculation, it was off by at least $26 million — the one percent that would spur a control period. “A budget is a plan, it’s a dynamic plan,” the comptroller told Reuters in an interview in his Mineola office. “For NIFA to argue that a one-percent anticipated deficit in a $2.6 billion budget is cause for alarm I think is ludicrous.” But NIFA were not the only one concerned with the 2011 budget. In November, Moody’s Investors Service downgraded the county and put its finances on outlook negative, citing weak liquidity and an over-reliance on nonrecurring revenues. The rating agency singled out the energy tax repeal as problematic. For the next two months, there was constant wrangling between the two sides — with NIFA saying the county had cut taxes without making up the difference and Mangano and Maragos accusing the authority of playing politics. “I thought they were very antagonistic, very assertive … as if they’re in control, they’re running the county,” the comptroller said. Indeed, NIFA sent multiple requests to county officials beginning as early as the summer, asking for back-up for their cost savings as well as a battery of additional contingency plans. When they had questions for the comptroller that August, he was out of the country. Maragos spent nearly six weeks in his native Greece, although he had remote access to email and spoke with his office daily. PERMITTED TO GOVERN As 2010 drew to a close, handling NIFA inquiries had become a full-time job for the county executive and his staff. NIFA called a public meeting at the Long Island Marriott Hotel in Uniondale for December 30. Mangano had not been expected to attend, but in the end he did come — armed with several new contingencies. “There may come a time when I may ask for your help. That time is not now,” Mangano said ahead of the meeting. “We ask that we be permitted to govern.” Following a lengthy closed-door meeting, NIFA decided to hold off declaring a control period, and gave the county three additional weeks to provide further substantiation for the new contingencies. “In an abundance of caution, we’re giving the county one final opportunity to present its case that this budget is balanced,” Stack said, adding this would be its “last chance.” Despite the extra time, a review of all letters sent to NIFA during that period showed few concrete details. When answering questions about labor savings, the county circled back to its extra contingencies, including a land lease deal that had yet to be formally approved. When answering questions about that same land deal, the county looped back to the promised union concessions that have not materialized. Many of the other ideas required some sort of legislative action. In the end, he ran out of time. On Wednesday, NIFA took over. “As is the case elsewhere in New York State and the nation, this is the convergence of anti-tax fervor and a lack of political will to make the expense cuts necessary to balance the budget,” Stokes, the NIFA board member, told Reuters. (Editing by Jim Impoco and Claudia Parsons) Copyright 2010 Thomson Reuters. Click for Restrictions .

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Robert Gates: Congress Dumping ‘Crisis On My Doorstep’

January 27, 2011

OTTAWA, Ontario — Defense Secretary Robert Gates is accusing Congress of dumping a “crisis on my doorstep” by holding the Pentagon to last year’s spending levels and creating a potential $23 billion gap that could weaken a wartime military. “That’s how you hollow out a military,” Gates said Thursday. Gates said it looks increasingly likely that Congress will not act on the Pentagon’s 2011 budget request even as lawmakers argue over Gates’ proposal to slow the rate of increase in defense spending next year and freeze it by 2015. Gates was in Canada for North American defense talks. In an interview as he traveled to the Canadian capital, the Pentagon chief said he understands that his proposal for $78 billion in cuts in future spending has run into opposition among lawmakers. The opposition is bipartisan – from Republicans who oppose any reductions and Democrats along with some Republicans backed by the tea party who say Gates isn’t cutting enough. Rhetoric on all sides ignores “the real world that I live in,” Gates said. He warned of emergency cuts if the Pentagon is forced to live within last year’s means when it had planned for more. Congress has not acted on the $549 billion request for the budget year that began on Oct. 1. Congress last fall passed a stop-gap government spending measure that keeps budgets at the previous year’s levels. For the Pentagon, that means a budget of about $526 billion, officials say, not counting war funding. Gates said the separate request for spending on the wars in Iraq and Afghanistan will fall to about $120 billion for 2012 from about $159 billion this year, reflecting the planned final troop withdrawal from Iraq. Gates said lawmakers appear so eager to fight over the longer-range Pentagon spending proposal that they are ignoring the near-term effects of not passing a new budget for the current year. If the stop-gap approach is not replaced by a new budget, the Pentagon will face a money pinch that “could have an impact on training across the entire force,” and in other areas, Gates said. One example: After years of concern that the fast pace of wars in Iraq and Afghanistan prevented the Army and Marine Corps from doing a full range of training at home, they finally are in position to correct that shortcoming, Gates said. But the training may be unaffordable for the remainder of this year unless Congress replaces the stop-gap budget, known as a continuing resolution, with a new budget by March. “It’s one thing to talk about 2012 and then to express concerns about something that may or may not happen in four or five years,” he said, such as Gates’ proposal to reduce the size of the Army and the Marine Corps starting in 2015. “But I have a crisis on my doorstep. And I want them to deal with the crisis on my doorstep before we start arguing about the levels (of spending) in 2012.” The Pentagon’s proposed spending plan for 2012-16 will be part of the budget President Barack Obama submits to Congress the week of Feb. 14. The debate over defense spending next year and beyond was on full display Wednesday at a House Armed Services Committee hearing, where Republicans posed tough questions about the risks of slashing too deep and shortchanging U.S. forces. Rep. Buck McKeon, R-Calif., the committee’s new chairman, took the lead by declaring, “I will not support any measures that stress our forces and jeopardize the lives of our men and women in uniform.” Steering the 2012 defense budget through congressional criticism that it is either too ambitious or too meek is likely to be one of Gates’ final campaigns before retiring. If he quits this summer, as many believe likely, he will have been one of the longest-serving defense secretaries since the post was created in 1947. He started in December 2006, succeeding Donald H. Rumsfeld, who resigned amid heavy criticism over the Iraq war. In the interview Wednesday, Gates was vague about his retirement plans. “My lips are sealed,” the former CIA chief said when asked when he intends to leave. “I’m going to be around for a number of months,” including during the budget hearings on Capitol Hill in February and March, Gates said. Last year he said he planned to quit sometime in 2011. Gates has fashioned himself into a guardian of the U.S. military’s global pre-eminence, but he also has cautioned that military muscle can be an illusion. “Possessing the ability to annihilate other militaries is no guarantee we can achieve our strategic goals,” he told Army officers in May. In that same vein, he launched his current effort to preserve military strength while accepting that the nation’s grim financial condition means the days of big annual raises for the Pentagon are over. He demanded that the Army, Navy, Air Force and Marine Corps find $100 billion in budget savings over the coming five years, while allowing them to keep most of that savings for other needs. The military services responded with investments in a modernized fleet of Army tanks, more strike and surveillance drone aircraft for the Navy and Air Force, and more missile interceptors for use in an expanded missile defense system in Europe.

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JetBlue Expects Fare, Fee Hikes To Continue

January 27, 2011

NEW YORK — JetBlue is tacking on surcharges on flights to the Caribbean to cover its rising fuel bill, and said airlines should continue to pass these costs on through higher fares. The New York airline said in a conference call after the release of its fourth-quarter earnings that it’s glad to see that airlines are raising fares to cover the price of fuel, their largest expense. JetBlue expects to pay 17 percent more for fuel in the first three months of the year than it did in the fourth-quarter. Fuel jumped 16 percent in the October-to-December period from the year before. The airline raised ticket prices by about 4 percent in the fourth-quarter and recently added a $35 fuel surcharge for flights in or out of Puerto Rico and $45 for Caribbean destinations. JetBlue hopes to get 20 percent more in fees this year. Passengers on average paid $20 apiece in extra fees in the fourth-quarter, mostly for more spacious seats. For all of last year, travelers paid $85 million to sit in seats with “Even More Legroom.” The airline was tripped up by higher costs, mostly for fuel, in the fourth-quarter. That drove net income down 18 percent. A massive winter storm in December walloped its home base of New York and slammed operations in Boston, where it is the biggest domestic airline by passengers. , JetBlue estimated that the storm cost $30 million in lost revenue. The airline canceled around 375 flights on Wednesday and Thursday after another big storm rolled into the Northeast. The New York airline earned $9 million, or 3 cents per share, in the October-to-December period. That compares with a year-ago profit of $11 million, or 4 cents per share. Revenue rose 13 percent to $940 million. Costs rose 15 percent. The results fell short of Wall Street’s expectations. Analysts polled FactSet Research expected a profit of 6 cents per share on revenue of $948.3 million. Traffic improved by about 10 percent from a year ago. Most other major airlines posted a profit in the last three months of the year – which includes the important holiday travel period – as demand improved and they were able to raise ticket prices. Only American Airlines and United-Continental lost money in the last three months of the year. For all of 2010, the airline posted a profit of $97 million, or 31 cents per share, compared with $61 million, or 21 cents per share, in 2009. JetBlue plans to expand the number of available seats it offers, or capacity, by about seven to nine percent this year. That will mostly be through continued expansion in Boston and the Caribbean, where JetBlue has been aggressively adding service while bigger airlines have pulled back. JetBlue increased flights in Boston by 30 percent in 2010 over 2009, and expects to reach 100 daily flights there by this summer. It predicts that about one-quarter of its flights will be in and out of the Caribbean this year. The company has 600 daily flights. It says its efforts to lure more business travelers, especially in Boston, are paying off. The airline made changes last year to make its flights more attractive to corporate customers, who tend to pay more. That included adding an early boarding option for those who paid more for extra legroom seats, adding more convenient flight times and offering refundable fares. In midday trading JetBlue shares rose 2 cents to $6.50.

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AP: Year Ahead Looms As Toughest Yet For State Budgets

January 15, 2011

SACRAMENTO, Calif. — If 2011 is hinting at a national recovery, there is little sign of it in statehouses across the country. States that already have raided their reserve funds, relied on borrowing or accounting gimmicks, and imposed deep cuts on schools, parks and public transit systems no longer can protect key services in the face of another round of multibillion dollar deficits. As governors roll out their budget proposals and legislatures convene this month, they do so amid a sputtering economic recovery and predictions of slow growth for years to come. State and local governments face lackluster revenue projections, worries from Wall Street over looming debt and the end of federal stimulus spending. In the first weeks of 2011, Republican and Democratic governors alike have begun detailing across-the-board pain for education, health care, transportation, public safety and other programs. Some say the year of reckoning for state and local governments is at hand, with calls for structural changes that could radically shift expectations of what services government provides. Many believe the months ahead will be the most challenging in memory, with consequences for millions who depend on government funding. “We need to send a message to the governor: We’re real, and we depend on all these services,” said Sergio Garibay, a 41-year-old Southern California resident who relies on state disability payments and recently protested deep cuts to Medi-Cal programs proposed by California Gov. Jerry Brown. “There are other alternatives to the budget. Why don’t we tax the rich, these corporations?” In releasing his budget proposal, Brown told California lawmakers “the year ahead will demand courage and sacrifice” as the state faces a deficit projected to hit $25.4 billion over the next 18 months. His proposal combines spending cuts to Medi-Cal, in-home services for the elderly and higher education with a five-year extension of income, sales and vehicle taxes. New York Gov. Andrew Cuomo proposed eliminating 20 percent of state agencies by combining duties, such as merging the Insurance Department, Banking Department and the Consumer Protection Board into the Department of Financial Regulation. It’s part of “radical reform” to pull his state out of its fiscal crisis. And Gov. Chris Christie in New Jersey skipped a $3.1 billion payment to the state’s pension system in a push to cut benefits for public workers, while proposing higher employee contributions and a boost in the retirement age from 62 to 65. In Illinois, lawmakers voted for a dramatic 66 percent hike in personal income tax, from 3 percent to 5 percent, in a bid to resolve a $15 billion deficit, which amounts to more than half of the state’s entire general fund. The tax increase will be coupled with strict 2 percent limits on spending growth. “It’s important for their state government not to be a fiscal basket case,” Gov. Pat Quinn in defending the major tax hike. And on and on it goes: _ In oil-rich Texas, where education and social service spending is relatively low and Republican Gov. Rick Perry has railed against government spending, hard times are looming. The shortfall is projected to be between $15 billion and $27 billion over the coming two-year budget cycle. _ In South Carolina, outgoing Gov. Mark Sanford has proposed a spending plan that would end funding for museum and arts programs, slash college funding and give many state employees a 5 percent pay cut. _ In Georgia, deep cuts appear to await the state’s popular HOPE scholarship program that provides public college tuition to students who earn good grades. Rising tuition and enrollment have outpaced the lottery revenues that fund the program and Gov. Nathan Deal has not proposed any additional state money to bail it out. Even as tax revenue in many states shows signs of a rebound, states are expected to collect 6.5 percent less than they did in 2008, according to the National Association of State Budget Officers. And any revenue gains could be more than offset by the expected loss of federal stimulus money. Most of the $814 billion stimulus program was designed to help states provide essential services and give a boost to the economy, but will start to run out this summer. A new round of stimulus funding is unlikely with Republicans controlling one house of Congress. Top GOP lawmakers say they will try to provide states with relief by reducing mandated programs, not by giving them more money. “States came into this recession with relatively large rainy day funds. Now that states have done the accounting gimmicks and the relatively easier stuff, each year gets harder and harder because those one-time things are gone,” said Nicholas Johnson, director of the state fiscal project at the Center for Budget and Policy Priorities, a think tank in Washington, D.C. Despite lower tax revenue since the recession began, the level of service expected from state and local governments remains, often creating a disconnect between public perception and the reality of the fiscal crisis confronting elected officials. Public schools face rising enrollments, more people are seeking government health care because they have lost jobs or their employers have dropped coverage, and millions of those thrown out of work are receiving unemployment checks. One possible solution is revising tax structures, even with an anti-tax mood persisting across much of the nation. In Georgia, some lawmakers are considering a 4 percent state sales tax on groceries and boosting the tax on cigarettes as part of an overhaul of the state’s outdated tax code. The increases would be paired with reductions in the personal and corporate income taxes. But any proposal for tax increases will run into opposition from Republicans, who were swept into office in large numbers last fall on a message of reducing the size and reach of government. Republicans picked up 690 state legislative seats Nov. 2 – the largest shift since 1966, according to data compiled by the national legislative group. The GOP now controls both chambers of the state legislature as well as the governorship in 21 states. “When you’ve got an unemployment rate at 10 percent, I don’t think that’s a good time for us to tell Georgians that we need more of their money,” Georgia House Speaker David Ralston said. “I’m going to resist that again this year.” As states struggle to balance their books, Wall Street is watching rising debt burdens, although analysts so far have not sounded many alarms. Federal law does not allow states to file for bankruptcy protection, but states can default on their debt if their financial condition worsens considerably. That move is extremely rare. Arkansas was the last state to default on its debt payments, a move it took during the Great Depression. Moody’s predicts that no state government will default on its debt in 2011. Moody’s Managing Director, Naomi Richman, said states generally borrow for long-term infrastructure projects. They don’t usually borrow to pay debt and fund operating budgets. Those that have, including California, Illinois and Arizona, already have been penalized with low credit ratings, which increases their borrowing costs. It’s possible, however, that more cash-strapped cities and counties could seek bailouts from states, as Harrisburg sought help from the commonwealth of Pennsylvania. “I think you’re more likely to see it cascade up, rather than down,” said Steve Malanga, a senior fellow at the Manhattan Institute, during a discussion about state budgets at George Mason University. Kail Padgitt, an economist with the nonpartisan, nonprofit Tax Foundation, said the states with the greatest concerns about their fiscal health are those with costly public employee pensions that are underfunded. Many public pension systems use overly optimistic rates of return and do not provide a true, long-term cost to taxpayers. Padgitt cited a recent study by the Pew Center on the States that found states face a $1 trillion funding shortfall in public-sector retirement benefits, but said that likely underestimate the problem. “The long-term outlook is quite bad,” Padgitt said unless states begin to make pension reforms. Matt Hanson, 50, a civil engineer who has worked for California’s transportation department for 22 years, said he understands that public pension systems could use adjustments but he believes pensions are fundamentally sound. For example, he said he’s open to contributing more to cover retiree health care costs, which have been rising. “If there’s some shared pain that has to be felt than I want it to be constructive,” Hanson said. “There’s a difference between going out for a run and feeling pain right after – at least you’ll be in better shape in the long run, rather than hitting your hand with a hammer. Pain for pain’s sake doesn’t make a lot of sense.” ____ McCaffrey reported from Atlanta. Associated Press writer Robert Jablon in Los Angeles contributed to this report.

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Rich Nations Not Adding Enough Jobs, World Bank Says

January 13, 2011

WASHINGTON (By Pedro Nicolaci da Costa) – Economic growth in the world’s wealthier nations is still too slow to create enough jobs for the tens of millions who lost their during the worst global recession since World War Two, the World Bank said on Wednesday. In a report detailing its outlook for 2011, the multilateral lender forecast the global economy would expand 3.3 percent this year, softer than the 3.9 percent expansion seen during 2010. Growth in the developing world will sharply outstrip growth in mature economies. The World Bank forecast growth in emerging economies of 6 percent in 2011, weaker than last year’s 7 percent rate. Rich countries, in contrast, will grow only 2.4 percent, down from 2.8 percent for 2010. “The recovery in many high-income countries has not been strong enough to make major inroads into high unemployment in spare capacity,” the report said. The United States, the world’s largest economy, is a case in point. The economy exited its worst recession in generations in the summer of 2009. But at 2.6 percent on latest count, growth has been too soft to put a meaningful dent in a stubbornly high jobless rate — now at 9.4 percent. The World Bank predicts the U.S. economy will grow 2.8 percent in 2011, largely in line with a median forecast of 2.7 percent in a Reuters poll of private sector economists. In Europe, recovery has been hampered by persistent worries about highly-indebted countries like Greece and Portugal, which have kept borrowing costs high and led to severe market disruptions. Euro zone growth is expected to slow to 1.4 percent this year from 1.7 percent in 2010, the World Bank said. Indeed, the report cited the continent’s ongoing debt debacle as a key risk to the global recovery. Given a backdrop of uncertainty, monetary authorities on both sides of the Atlantic have adopted a policy of extremely low interest rates, which the World Bank blamed for rising currency exchange rates in parts of the developing world. “Capital inflows into some middle-income countries have placed undue and potentially damaging upward pressure on currencies,” the World Bank said. The U.S. Federal Reserve, in particular, has come under intense criticism from officials in emerging economies for its policy of purchasing government bonds to keep long-term rates down. The U.S. central bank argues it must focus on the domestic economy, saying other countries have their own ways of dealing with rising capital inflows. A range of countries have adopted measures such as tariffs and capital controls in order to stem the influx, which some fear could reverse quickly if conditions shift. (Reporting by Pedro Nicolaci da Costa; Editing by Leslie Adler) Copyright 2010 Thomson Reuters. Click for Restrictions .

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Budget Woes Threaten Vital Services In New York City

January 7, 2011

NEW YORK — The children at Strong Place day care in Brooklyn can recognize a Van Gogh. They can discuss the effects of acid rain. Some of these preschool-aged kids can even read. But in July, if New York City sticks to its current plan, this learning will end. Strong Place is one of 16 city-funded day care centers slated for closure under mayor Michael Bloomberg’s plan to plug a budget hole of more than $3 billion. That Strong Place provides a crucial service for low-income residents of the community, with a four-decade-long record of educating young children, doesn’t matter. It, and others like it, must go. “When parents hear about this, they start to cry,” said Age Pjetergjoka, the bookkeeper at Strong Place. “We take care of kids that really need help.” In the wake of the worst financial crisis since the Depression, cities across the nation are struggling to compensate for wounded tax revenue, which in many cases isn’t enough to fund even the most basic of services. New York City’s budget is in relatively strong shape, thanks in part to rounds of cuts Bloomberg has been implementing since before the crisis struck. But even here, as deficits remain, the city must continue the bitter process of trimming services wherever it can, squeezing savings from groups that shelter the homeless, investigate domestic abuse and provide families with day care. In November, Bloomberg proposed his latest round of cuts, which included carving more than $61 million from children’s services over the next two years. This week, the city council reached an agreement with the mayor to restore a portion of these cuts. But the 16 day care centers, which were targeted under an earlier plan, remain on the chopping block. “If this closes, that’s it,” said R. Ramos, 27, a mother whose child is enrolled at Strong Place, and who declined to give her full first name because she works for the city. “I can’t take another childcare leave of absence.” To the energetic teachers and loyal parents of Strong Place, the cuts seem haphazard, and supremely unfair. The Administration for Children’s Services, one of the city agencies that determine where the mayor’s cuts will fall, targets programs, not providers. This means the cuts land across the board, shuttering a range of providers, seemingly regardless of their proven success. As part of a guiding principle that risks sounding contradictory, ACS says its priority is to ensure the well-being of the city’s most vulnerable residents, not the well-being of the groups that serve them. “Our top priority is always to minimize disruption to children,” said ACS spokesperson Elysia Murphy, in a statement. “We have been working with families since the summer to identify alternative child care programs to transfer the children.” But parents at Strong Place say other options won’t exist. Their situation is unusually dire, partially because what they currently have is unusually valuable. Of the 16 day care centers slated for closure in the city, 11 are in Brooklyn, and five are in or around Strong Place’s community board district. The reason for this seeming unevenness isn’t clear. The staff at Strong Place say ACS sees their location, around the corner from the upscale streets of the Cobble Hill neighborhood, as gentrified, and able to sustain cutbacks. For some residents, that may be. But others depend on public day care in order to stay afloat. The 12.6-acre housing project across the street from Strong Place, and the storefronts that line Hoyt Street, belie any notion that upper middle-class comfort is uniform. In a budget proposal last year, the city estimated that 1,150 children were enrolled in the 16 day care centers that are set to be closed. The savings, principally from cutting rent payments, would reach about $16 million each year. “I don’t know how all these children are going to be absorbed,” said Norma Martin, assistant executive director of Brooklyn Community Services, a non-sectarian agency. “Parents might quit their jobs or drop out of school.” Despite the city’s promise to help parents find other day care providers, parents say that simply isn’t possible. At Strong Place, parents of the 54 children currently enrolled often pay just $20 a month. In many neighborhoods, where few public day care centers exist, finding alternatives means enduring a long commute. Private day care, another option, is prohibitively expensive: The cost, which can reach more than $20,000 a year, could equal a family’s income. “My wife would stay at home,” said Julius Alfonzo, 38, a Strong Place parent who works as a bus operator. Otherwise, he added, “it wouldn’t make sense. One of the incomes would be paying for childcare.” Not all parents are as lucky as Alfonzo. Many are single. Some live in shelters. A spokesperson for mayor Bloomberg, Marc LaVorgna, acknowledged the sometimes devastating consequences of city budget cuts. “You can’t quantify in dollar value the value of some of the services to people,” he said. “They are very difficult decisions to make, but the city is best served when its financial house remains in order.” Even though it’s considered a day care center, Strong Place operates more like a rigorous preschool. On Thursday, Lorraine Pennisi, the center’s effusive director, who has been a “proud auntie” to Strong Place children for 22 years, beamed as a group of toddlers sang “Keep Christmas With You,” accompanying the words with sign language. On the wall behind her hung drawings from an “art exchange,” between the Strong Place children and students in Port Elizabeth, South Africa. Pennisi is worried, but she tries not to show it. “It’s a very heavy burden on me,” she said, “to keep people hopeful.”

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David Isenberg: Outsourcing War and Peace: Part 1

January 7, 2011

It’s a new year so it’s time for a new book on private military contractors. Out later this month is Outsourcing War and Peace: Preserving Public Values in a World of Privatized Foreign Affairs by Laura A. Dickinson. She is a law professor at Arizona State University. I’m in the process of writing a review and don’t want to give anything away but there is a lot of useful information here. So with the permission of her publisher, Yale University Press, I am going to post three excerpts from the book. Here is the first part. Privatization of Defense Department Operations It was not until the presidency of Bill Clinton that privatization began to penetrate deeply into the corridors of the Pentagon and other foreign policy agencies. Through the reinventing government program of Vice President Al Gore, the Clinton administration accelerated the privatization pace across all governmental sectors. But what is significant for our purposes is that in this period the foreign policy sector was also part of the privatization trend. At the DOD, Secretary William Cohen was a key figure. Caught between escalating price tags for weapons systems and political pressure to cut costs in the post-Cold War era without weakening the military’s capabilities, Secretary Cohen turned to the private sector for advice. During the summer of 1997 he assembled a committee that included leading executives from private industry to offer their wisdom about the road ahead. Cohen then proceeded to pursue a reform path that aimed to modernize defense by embracing the rhetoric, practices, and methodologies of American businesses.39 This embrace is perhaps most apparent in his Defense Reform Initiative, which he launched in the fall of 1997 as an effort to “aggressively apply to the Department those business practices that American industry has successfully used to become leaner and more flexible in order to remain competitive.” The four pillars of the initiative included the following practices: “(1) reengineer by adopting the best private sector business practices in defense support activities; (2) consolidate organizations to remove redundancy and move program management out of corporate headquarters and back to the field; (3) compete many more functions now being performed in-house, which will improve quality, cut costs, and make the Department more responsive; and (4) eliminate excess infrastructure.” To further these goals, Secretary Cohen proposed reductions of 33 percent in the number of employees in the Office of the Secretary of Defense, 29 percent in the Joint Staff, 10 percent in military headquarters, 21 percent in defense agencies, and 36 percent in departmental field activities. He also sought to make at least thirty thousand DOD positions subject to competition with the private sector each year for five years, outsourcing those that the private sector could perform better–dwarfing any previous outsourcing efforts. Thus, he sought to implement the troika of practices that had become the buzzwords of American industry in the 1980s and 1990s: downsize, compete, and outsource. While Secretary Cohen cut many civilian employees, Pentagon officials downsized troops and closed military bases, replacing uniformed soldiers with contractors for certain support roles. In the words of one senior DOD official, “The peace dividend requirement forced us to downsize. We had to reduce Army divisions from 18 to 10. But we didn’t cut all types of troops proportionally. We didn’t want to take the risk on the combat side. We took the risk on the support side. In 1991 we had 56 combat brigades. We cut the number down to 46. But if we had taken I down proportionally, we would have taken it down to 36.” Thus, the Pentagon increasingly came to rely on contractors to supply food, build bases, deliver latrines, and perform other support roles. Yet, at the same time, DOD cut its acquisitions staff by 38 percent. As a senior DOD official later noted, “Where we screwed up was not to cut the guys who buy the tanks and the big equipment; instead, we cut the guys who do nuts, bolts, supplies and so on–these were the guys who we were going to need as we turned more and more to service contractors. Thus, at the very moment that the military was turning increasingly to contractors to provide support services to troops, the Pentagon, under pressure from Congress, cut back severely on the acquisitions workforce that would become increasingly necessary to manage those contractors. Yet such cuts were politically much easier to make because, as Steven Schooner has argued, there is no natural political constituency for the acquisitions workforce.

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Identity Theft Victim Can’t Convince Freddie Mac He Owns His Home

January 7, 2011

The Identity Theft Resource Center says Ty Powell is a victim of identity theft. Freddie Mac says he hasn’t paid his mortgage in two years. The local paper says he’s dead. Powell says, “I don’t know what to say.” He’s afraid to leave his Casa Grande, Ariz. house for an extended period of time because the mortgage servicer, Chase, might send someone to break in and try to change the locks — something Powell said already happened twice last year after the bank foreclosed on him. The foreclosure was completed last July, and Powell, 30, could be evicted at any time. He said he doesn’t sleep much. “I spent Christmas alone,” he said. Powell said he bought the house from a builder in January 2007, paying $217,000 in savings and cash he’d earned playing professional basketball in Brazil after graduating from Yale in 2002. But as far as Freddie Mac knows, it owns a delinquent $376,703 mortgage taken out in November 2006. Powell said he was in Brazil at the time and had nothing to do with that mortgage. Jay Foley, founder of the nonprofit Identity Theft Resource Center, said the builder apparently used Powell’s personal information, which Powell sent months in advance from Brazil, to take out a fraudulent mortgage in his name. The builder went as far as to make some payments on the mortgage and even attempt a loan workout in 2008. “The builder took out a mortgage on the house in Ty’s name. Then he turned around and maintained the mortgage until Ty came back and bought that house,” Foley said. “This builder sounds like a pretty slick dude and I would love to see him making little rocks out of big ones someplace.” Powell said he found an eviction notice on his door in March. He hired a pricey lawyer. “The argument was that I was not properly served,” he said, “which was not the right argument.” An Arizona judge ruled in favor of Freddie Mac in September. Foley reached the same conclusion as Powell. “His attorney is arguing the wrong point,” he said. “Instead of arguing the loan was fraudulent, the attorney’s arguing it’s the nature of the service because Ty wasn’t served.” Now Powell owes tens of thousands in legal fees, both to his own lawyer and to Freddie Mac’s. Foley isn’t the only one advocating for Powell. In October, his congresswoman, Rep. Ann Kirkpatrick (D-Ariz.), wrote a letter to Freddie Mac stating that the “home mortgage loan was secured without his consent along with various credit cards, and student loans.” (Kirkpatrick was defeated in November by Republican Paul Gosar, whose office should now have Powell’s case file.) Freddie Mac just doesn’t buy it. The loan is in default, the mortgage giant says, so it’s their house now. “We first learned of Mr. Powell’s claim after the foreclosure was completed last July,” a Freddie Mac spokesman told HuffPost. “He filed suit in March 2010 — eight months later — and our request for summary judgment was granted by the court on Sept. 14, 2010. “We believe the foreclosure was legitimate because the loan secured by the property was in default. Despite a mortgage workout in 2008, no mortgage payment had been received since January 2009. We have also referred the matter to our fraud investigations unit.” The Casa Grande Dispatch reported this summer that Powell “died on July 12, 2010, at Casa Grande Regional Medical Center of heart problems.” Managing Editor Donovan Kramer Jr. told HuffPost there’s no record of the email sent to the paper alleging Powell’s passing, or much else. “This was a very brief one and apparently there was no corroborating information,” he said. Powell figures the death notice is a threat from the fraudster. Foley said it’s more likely an effort by the perp to confuse Freddie Mac. Either way, there’s plenty of information corroborating the claim that Powell is a victim of identity theft. The Identity Theft Resource Center provided HuffPost with a stack of letters from banks and local municipalities absolving Powell of other, smaller frauds committed in his name, like phony accounts and drivers’ licenses Chase, the servicer of the allegedly-bogus mortgage, declined to comment because of “ongoing litigation” it refused to describe. Powell said he didn’t know anything about that. “I’ve exhausted all of my resources to try to remedy this,” he said. Convincing Freddie Mac he doesn’t have a mortgage, he said, is like convincing “birthers” that Obama has a legitimate birth certificate. “Obama has the luxury of dismissing these claims as from people on the fringe,” he added. “I don’t have the luxury of dismissing this ridiculousness.”

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Fund Investors Slowly Returning To Stocks

December 31, 2010

BOSTON — It appears investors are beginning to get comfortable with risk again. Not only are they pulling money out of bond mutual funds at the fastest pace in two years, but they’re slowly starting to embrace stocks again. The shift in sentiment comes as positive economic news and robust corporate earnings lift stocks, which have risen 20 percent since the start of September. Prices of bonds, typically less risky than stocks, are heading in the opposite direction. A broad measure of the bond market, the Barclays Capital U.S. Aggregate Bond index, is down nearly 3 percent since early November. This reflects fears about rising interest rates, which effectively lower bond returns. “You’ve almost got a one-two punch, with stocks up, and the bond market taking a pretty big hit,” says Ron Saba, director of stock research with Horizon Investments, a Charlotte, N.C.-based investment adviser for $3 billion in assets. “So now you start to see psychology take over. Investors say, ‘I want to invest where I’m making money.’” For the last few months, there’s been a disconnect between the market’s gains and investor behavior. Investors have been withdrawing more money from U.S. stock mutual funds than they’ve been adding. There hasn’t been a positive weekly net flow of cash since late April, according to the Investment Company Institute. That has finally changed. The fund industry organization reported Wednesday that investors added a net $335 million into U.S. stock funds during the week ended Dec. 21. Although that’s a small amount – stock funds hold more than $5 trillion in assets – the switch to positive flow comes after the pace of U.S. stock fund withdrawals has recently slowed. Meanwhile, more than $20 billion has been pulled out of bond funds since mid-November, with the weekly outflow in mid-December marking the biggest in more than two years. “At the end of the year, a lot of investors have been looking at what stocks have been doing and asking, ‘What am I sitting in bonds for?’” says Cleve Rueckert, a strategist with Birinyi Associates, a stock research and money management firm in Westport, Conn. The Standard & Poor’s 500 stock index is up 15 percent this year including dividends, more than twice the return of the comparable bond index. The advantage for stocks was even bigger in 2009, when markets began recovering from a financial crisis that soured many investors. That has led to a massive shift into the relative safe haven of bonds. Investors have added a net $640 billion to bond funds since January 2009, according to ICI data. When investors have sought the higher potential returns of stocks, their search has taken them overseas. U.S. stock funds have consistently seen money flow out, while funds buying stocks of foreign companies have taken money in. But positive sentiment is coming home, especially with many recognizable U.S. stocks faring well. Year-to-date, Apple Inc. is up more than 50 percent. Shares of NetFlix Inc. have more than tripled in value, and Priceline.com has nearly doubled. Investing pros also are also turning more positive. At least three surveys of money managers this month show growing confidence. Some of the frequently cited reasons: _ Stocks remain cheap by the most widely used measures. The price-to-earnings ratio for Standard & Poor’s 500 index stocks was 15.75 on Thursday, based on earnings from the trailing 12 months, according to Rueckert. Over the past two decades, the average has been around 23. _ Volatility has eased. The rapid swings in the the stock market have turned off many investors. A year or two ago, daily movements in the Dow of more than a full percentage point were the norm. But that’s tapered off, and the Chicago Board of Options Exchange’s Volatility Index is running at its lowest level in eight months. The index, known as Wall Street’s fear gauge, is now roughly a third of where it stood during the financial crisis in 2008. _ Most economic indicators are positive. The deal between Congress and President Obama to extend Bush era tax cuts is expected to give the economy a short-term boost. Despite continuing housing market troubles, most data suggest the economic recovery is regaining momentum after stalling over the summer. For example, the government reported Thursday that the number of people applying for unemployment benefits fell to its lowest point in nearly two and a half years. Those are the key reasons why Harry Rowen, CEO of Starmont Asset Management, has gradually been increasing the stock component of the more than $100 million his San Francisco-based firm manages for wealthy individual investors. Now that total is about half in stocks, half in bonds. Rowen expects to increase the stock component to 60 to 70 percent in coming months, anticipating stocks will continue rising after posting what could be the market’s best December showing in 20 years. But Rowen is moving slowly and cautiously. “My clients are still very skittish – most of them have a good deal of money already, and they like to preserve it,” he says. “So our moves back into stocks” he says, “are coming in small steps.” ______ Questions? E-mail investorinsight(at)ap.org.

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BP Survives? Oil Spill Won’t Impact ‘Ability To Do Business’

December 29, 2010

NEW YORK — As the Gulf oil spill gushed out of control, BP’s financial liabilities seemed big enough to sink the company. No more. Cleanup, government fines, lawsuits, legal fees and damage claims will likely exceed the $40 billion that BP has publicly estimated, according to an Associated Press analysis. But they’ll be far below the highest estimates made over the summer by legal experts and prominent Wall Street banks, such as Goldman Sachs, which said costs could near $200 billion. BP will survive the worst oil spill in U.S. history for several key reasons: it has little debt; its global businesses are forecast to generate $26 billion next year in cash flow from operations; the environmental impact of the spill isn’t as bad as feared; and the government seems unlikely to ban BP from Gulf drilling. To bolster its finances, BP has cut its dividend, issued debt and sold more than $21 billion in assets. “It could have been a lot worse,” says Tyler Priest, a University of Houston petroleum historian who serves on President Obama’s oil spill investigation committee. “BP is going to come back from this.” Many influential investors appear to agree. According to Thomson Reuters, 23 firms with $1 billion or more invested in the stock market, including BlackRock Investment Management, Managed Account Advisors and Rydex Security Global Investors, more than doubled their holdings of BP stock from July through September. At $44.11, BP’s stock price has risen 63 percent from its low of $27.02 on June 25. It’s still down 27 percent from its close of $60.48 on April 20, the day of the spill. The well was capped on July 15. The AP analysis shows the company is likely to face $38 billion to $60 billion in spill-related costs. A settlement with the federal government could reduce that amount, while a successful class-action lawsuit could add billions more. The analysis includes: _The $10.7 billion that BP already has paid to plug its well, clean up the spilled oil and pay damage claims and other costs. _A $20 billion fund that BP set up in August for individuals and private businesses that were affected by the spill. The fund, known as the Gulf Coast Claims Facility, pays for environmental damage, personal injury, cleanup and lost earnings. The fund so far has paid $2.7 billion to address nearly 168,000 claims. Nearly half a million individuals and businesses have filed claims, and those that settle with the fund give up their right to sue the company. If any of the $20 billion is left over, it goes back to BP. _Fines: The Justice Department is suing BP for violating the Clean Water Act. Fines are based on how much oil was spilled. The government’s estimate of 4.9 million barrels means BP faces between $5.4 billion and $21.1 billion in fines. The upper limit applies if investigators conclude BP acted with gross negligence. The government has a history of settling with companies for as little as 50 cents on the dollar in order to avoid lengthy disputes, says Eric Schaeffer, former head of the Environmental Protection Agency’s enforcement division. _Legal fees: BP has hired lawyers, engineers and geologists to defend the company. These experts could cost as much as $2 billion, according to Mitratech Inc., a consulting firm that handles legal and trial logistics for Fortune 500 companies. _Lawsuits: The toughest costs to estimate are future settlements and judgments from the hundreds of lawsuits filed against BP, including any class actions. Shrimpers, oystermen, charter-boat operators, restaurant workers and real-estate developers are suing BP for lost business. Oil rig workers and cleanup crews are making personal injury claims. And Gulf states and local governments are expected to sue for lost tax revenue and environmental damages. Alabama is seeking an initial $148 million from BP. Analysts at Citigroup say settlements, judgments and punitive damages from these suits will total as much as $6 billion. Legal experts caution that the unpredictability of juries makes it difficult to estimate the cost of losing a class-action lawsuit. A successful class-action could easily double the Citigroup estimate for total legal liabilities, says Alexandra Lahav, a University of Connecticut professor who studies such lawsuits. BP may be able to spread the spill’s costs around. Minority partners Anadarko Petroleum Corp. and MOEX 2007 LLC own 35 percent of the operation, and rig owner Transocean Ltd. also may be asked to pay. “Companies have the incentive to settle with BP to put the matter behind them,” FBR analyst Robert MacKenzie says. He expects BP to get as much as $2 billion from Transocean and as much as $4 billion from Anadarko. “We’ve set aside what we think is the right amount to pay for the relevant costs” from the spill, BP spokeswoman Sheila Williams says. Since the spill, BP has moved aggressively to shore up its finances. The company suspended its quarterly dividend of 84 cents a share, which cost it $10.5 billion last year. It also raised $21 billion in asset sales that include: $7 billion for its stake in Pan American Energy; $7 billion for oil fields in the U.S., Canada and Egypt; $1.9 billion for its Colombian exploration business; and $1.8 billion for assets in Vietnam and Venezuela. BP also raised $3.5 billion in an Oct. 1. bond sale. From April through June, when BP’s stock was tanking, Fred Fromm, who manages a natural resources fund for Franklin Templeton Investments, scooped up 170,000 shares. Their value climbed by more than $2 million in the third quarter. A few weeks after the Deepwater Horizon rig exploded and sank, scientists worried the oil slick would reach the Gulf’s Loop Current, which sweeps around Florida and up the East Coast. Beaches would be damaged along the way. But BP got lucky. Gulf winds kept shifting, which kept the oil concentrated in the waters south of Louisiana, said David Hollander, a University of South Florida chemical oceanographer. And hurricanes mostly avoided the region. Scientists disagree about how much oil remains in the Gulf, but already the streaky sheens of oil on the surface are mostly gone. The more oil that remains, the greater the potential for environmental lawsuits. Whatever remains, “it won’t impact their long-term ability to do business,” says Citigroup oil analyst Mark Fletcher. Exxon dealt with lawsuits for decades after its Valdez supertanker ran aground and spilled 11 million gallons of crude into Alaska’s Prince William Sound in 1989. The spill cost Exxon $4.5 billion – nearly half of which went to clean up the oil. The rest was spent on payments to residents and businesses, punitive damages and settlements with the government. Exxon never lost its perch among industry leaders, and BP won’t either, says Citigroup’s Fletcher. BP remains among the top oil drillers in a world that runs on petroleum, and that may be the best way to judge the company’s lasting power. “Did (Valdez) stop anyone from buying Exxon gasoline? No. Exxon’s results are better than anyone’s on a multiyear basis,” Fletcher said.

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Jeffrey Rubin: Will Car Sales Ever Rebound to Meet US Ethanol Targets?

December 28, 2010

Just as the fiscal crisis sweeping through the major oil-consuming nations of the world is cutting funding for green energy, one of the most expensive yet least efficient of green fuels, corn-based ethanol, has been given another year of generous taxpayer support in the US. The promotion of corn-based ethanol has been America’s principal policy response to its growing dependence on ever more costly foreign oil. Fuelled by a federal tax credit of 45 cents per gallon and a crippling 54 cent per gallon tariff against competing Brazilian sugar-based ethanol , American ethanol production has grown exponentially over the course of the last decade to around 12 billion gallons per year in 2010. And it’s targeted to grow to as much as 36 billion gallons by 2022. Food inflation, particularly with respect to corn prices, has moved in step. Thanks in large measure to ethanol demand, US corn prices are up some 40 per cent this year. Food inflation aside, Congress had lots of other good reasons not to extend further subsidies. The net energy content from ethanol, after allowing for all the hydrocarbon inputs (ranging from fertilizers to diesel fuel for the tractors to coal for the processing plants), is marginal at best. And its carbon footprint isn’t materially better than burning fossil fuels, given how much of the latter is embodied in its very production. Despite a last-ditch attempt by Senator Dianne Feinstein and others to end the subsidies, the Senate decided to fork out more pork barrel funds to corn farmers and, by extension, to firms like Monsanto and Archer Daniels Midland for another year. But don’t count on American ethanol production’s ever coming even close to reaching that lofty target of 36 billion gallons per year. If the return of fiscal sanity to Washington doesn’t undercut its life-sustaining subsidies, an aborted recovery in motor vehicle sales will soon put the kibosh on future production growth. Car manufacturers and ethanol producers both hope that an economic recovery will return vehicle sales to their pre-recession levels. Unfortunately, the recovery they are counting on so heavily is a double-edged sword. An economic rebound will very quickly push pump prices beyond most drivers’ reach. They’re already hovering around $3 per gallon, and with triple-digit oil prices around the corner, we’re sure to see prices of $4 per gallon or higher by next spring. The last time we saw those prices, in the summer of 2008, scooters were outselling SUVs by a margin of three to one, and no one was keen to scoop up car-leasing firms and make acquisitions like Toronto-Dominion Bank’s recent $6.3 billion purchase of Chrysler Financial. Four-dollar gas crunched the North American vehicle market back in 2008, and it will likely do the same in 2011. And when it does, American farmers can go back to growing corn for food and, in the process, save taxpayers some $7 billion a year in ill-conceived ethanol subsidies.

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Bailed Out Banks Teeter Towards Collapse

December 27, 2010

Nearly 100 banks previously rescued by the federal government are again poised to fail, despite billions of dollars of support from the American Treasury. The number of banks on the brink of collapse rose from 86 to 98 during the summer months, according to analysis of federal data from the Wall Street Journal . The banks in question have received $4.2 billion dollars in aid through the Troubled Asset Relief Program ( TARP ). Most of the troubled institutions are relatively small. The latest sign of distress in the financial system suggests the bailout may have simply been a stopgap solution for a sector still contending with the aftershocks of the greatest banking crisis in 80 years. The continued weakness of some banks now threatens to impede a tentative economic recovery, say experts. With many banks still troubled, lending remains tight, depriving businesses of capital to expand and hire. With expansion and hiring rare, the economy remains weak, depriving the banks of healthy customers–in short, a feedback loop of trouble. The Wall Street Journal defined “troubled banks” as those with less than 6 percent of their primary assets both reliable and liquid. Through TARP, the government has purchased hundreds of billions of troubled assets from banks in danger. Though the program was purportedly meant to benefit healthy institutions with a good chance of survival, these latest failures suggest that many banks were in tenuous shape to begin with. Seven TARP recipients have already failed, at a loss of $2.7 billion. But some analysts pointed to the fact that most of the failing institutions are relatively small in dismissing concerns. “If Citibank and Bank of America were going under, that would be a problem,” said Mark Blyth, a political economy professor at Brown and a fellow of the Watson Institute for International Studies . “The bailout was meant to deal with a global systemic crisis. It was not to make sure that some bank in Utah with dodgy commercial real estate would be okay.” Blyth expects some smaller banks to continue to fall, due in large part to the lack of growth in the economy. “People aren’t borrowing,” he said. “The reason they’re not borrowing is because they’re up to their eyeballs in debt.”

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Rescued Banks Teeter Towards Collapse

December 27, 2010

Nearly 100 banks previously rescued by the federal government are again poised to fail, despite billions of dollars of support from the American Treasury. The number of banks on the brink of collapse rose from 86 to 98 during the summer months, according to analysis of federal data from the Wall Street Journal . The banks in question have received $4.2 billion dollars in aid through the Troubled Asset Relief Program ( TARP ). Most of the troubled institutions are relatively small. The latest sign of distress in the financial system suggests the bailout may have simply been a stopgap solution for a sector still contending with the aftershocks of the greatest banking crisis in 80 years. The continued weakness of some banks now threatens to impede a tentative economic recovery, say experts. With many banks still troubled, lending remains tight, depriving businesses of capital to expand and hire. With expansion and hiring rare, the economy remains weak, depriving the banks of healthy customers–in short, a feedback loop of trouble. The Wall Street Journal defined “troubled banks” as those with less than 6 percent of their primary assets both reliable and liquid. Through TARP, the government has purchased hundreds of billions of troubled assets from banks in danger. Though the program was purportedly meant to benefit healthy institutions with a good chance of survival, these latest failures suggest that many banks were in tenuous shape to begin with. Seven TARP recipients have already failed, at a loss of $2.7 billion. But some analysts pointed to the fact that most of the failing institutions are relatively small in dismissing concerns. “If Citibank and Bank of America were going under, that would be a problem,” said Mark Blyth, a political economy professor at Brown and a fellow of the Watson Institute for International Studies . “The bailout was meant to deal with a global systemic crisis. It was not to make sure that some bank in Utah with dodgy commercial real estate would be okay.” Blyth expects some smaller banks to continue to fall, due in large part to the lack of growth in the economy. “People aren’t borrowing,” he said. “The reason they’re not borrowing is because they’re up to their eyeballs in debt.”

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New GOP Wave Pushes Business Lobbyist’s Wish List

December 24, 2010

JEFFERSON CITY, Mo. — Having won big in the fall elections, Republicans preparing to take over statehouses around the country are proposing to cut corporate taxes, weaken union clout and rewrite laws on discrimination, whistle-blowers and injured workers to the benefit of employers. In short, they intend to push through a business lobbyist’s wish list. And they plan to press ahead even though some of their ideas could, at least in the short term, cost their states desperately needed tax revenue. “It’s going to be a good year for businesses,” said Missouri Sen. Brad Lager, the commerce committee chairman in a state where Republicans won historic legislative majorities. When a new wave of politicians takes office in January, Republicans will hold a majority of governorships and their greatest number of state legislative seats since 1928 – giving them the muscle to enact the pro-business agenda they promised to voters concerned about high unemployment and an economy that has yet to make its big rebound following the Great Recession. But those pro-business policies are in some cases theories – not yet clearly proven to create jobs. And if they do work, they could take some time to produce the kind of growth that results in higher tax revenue for cash-strapped states. In the meantime, each new business tax break enacted could add to what the National Conference of State Legislatures forecasts to be an $83 billion shortfall for the upcoming budget year in about two-thirds of the states. Advocates for education and social services fear that will only deepen the short-term spending cuts coming their way. “We question if that pool of proposals are really business-friendly or not,” said Amy Blouin, executive director of the Missouri Budget Project, a nonprofit group that analyzes how fiscal policies affect low- and middle-income families. “We’re at the point where the result would actually be reductions in education, and businesses tend to care at least as much about the quality of education and communities and services as they do about the tax structure.” One of the first places to test the new pro-business push will be Wisconsin, where Republican Gov.-elect Scott Walker has promised to call the new GOP-led Legislature into an emergency session on his first day in office Jan. 3. Walker wants to lower taxes on businesses with fewer than 50 employees, impose new business-friendly limits on liability lawsuits and transform the state Commerce Department into a public-private partnership to lure companies to the state. “I think it’s basically put-up-or-shut-up time,” Walker said after his November election. “We have a mandate from the voters of the state, and it’s one we don’t take lightly.” In Michigan, voters elected the former chief operating officer of computer manufacturer Gateway Inc. to turn around a state that has consistently had one of the highest unemployment rates in the nation. Republican Gov.-elect Rick Snyder immediately chose the former president of the Michigan Economic Development Corp. to lead his transition team. “The business people we represent across the state are very excited about this change of leadership,” said Rich Studley, president and CEO of the Michigan Chamber of Commerce. Snyder wants to eliminate the Michigan Business Tax, which generates about $2.2 billion annually, and replace it with a lower corporate income tax projected to produce about $700 million for the state. Advocates for social services fear that could nearly double Michigan’s projected budget shortfall to more than $3 billion in the 2012 fiscal year. “Without any additional revenues, it’s hard to imagine filling that gap and not having just a devastating effect on social services and human services,” said Karen Holcomb-Merrill, the state fiscal policy director for the Michigan League for Human Services. In Iowa, Republican Gov.-elect Terry Branstad has said his plan to cut commercial property tax rates could cost the state up to $500 million over four years. The theory behind cutting corporate tax rates is that businesses will be more likely to locate or expand in a state if they can keep more of their profits. But the Congressional Budget Office has cast doubt on how much corporate tax cuts actually help stimulate the economy. A January 2008 report by the office said “increasing the after-tax income of businesses typically does not create an incentive for them to spend more on labor or to produce more,” because decisions on whether to increase production depends on their ability to sell the product. Such cuts haven’t helped yet in California, where outgoing GOP Gov. Arnold Schwarzenegger forced Democrats two years ago to accept corporate tax cuts that cost the state an estimated $2.5 billion a year in revenue. So far, there is little evidence the cuts created jobs – unemployment has remained a steady 12 percent since the summer of 2009 – or boosted revenue: The state’s lawmakers will again wrestle with a huge budget gap in 2011. The pro-business efforts extend beyond policies that will affect a state’s budget. In Oklahoma, where Republicans seized the governor’s office and increased their legislative majorities, incoming leaders such as Gov.-elect Mary Fallin want to lower workers’ compensation costs for businesses and overhaul the civil justice system to reduce liability insurance costs for doctors and businesses. In Missouri, GOP legislative leaders – who must work with a Democratic governor – want to rewrite laws governing lawsuits by alleged whistle-blowers and victims of discrimination and workplace injuries. They contend the current laws are unfair to businesses. And Missouri Sen. Rob Mayer – the likely next Senate leader – wants a “right to work” law that would prohibit union membership and fees from being a condition of employment. ___ Associated Press writers Scott Bauer in Madison, Wis., Kathy Barks Hoffman in Lansing, Mich., and Sean Murphy in Oklahoma City contributed to this report.

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Chip Conley: 2011: The Year of Curiosity

December 20, 2010

‘Tis the time of the year to reflect and project. I’m going to take my cue from the most famous management theorist of all time, Peter Drucker , who lived to the ripe old age of 95. This leadership guru incorporated two practices into his professional and personal life that I’ve decided to adopt in the new year. First off, Drucker made it a practice of spending two weeks every year reviewing his work, a habit he picked up from his Editor-in-Chief when he was working for a newspaper in Europe. He would set aside this time to “review my work during the preceding year, beginning with the things I did well but could or should have done better, down to the things I did poorly and the things I should have done but did not do.” Simple idea, yet few of us practice this kind of self-reflection. I’m off to the beach for the next few days and, while I won’t spend two weeks on this, I will spend a few days doing an inventory of what I learned this year and how I can apply it in 2011. Peter Drucker’s other practice — to adopt a new subject, completely unrelated to his work life, to study and master over the course of three years — is an unadulterated form of curiosity. When I spent some time with Mihaly Csikszentmihalyi , the author of the landmark book Flow this summer, he told me that the most important trait for 21st Century innovation isn’t creativity, but instead it’s curiosity. Curiosity — that blessed alchemy of wonder and awe — is a quality that we all had as a child and yet, with time, most of us found ourselves on a narrower and narrower path. For more than 60 years, Peter Drucker studied one subject at a time from Japanese art to Civil War history with the intent of mastering the subject. Curiosity may have killed the cat, but it helped Mr. Drucker keep a facile mind and a youthful spirit into his mid-90′s. So, starting in 2011, I am going to take one subject per year and devour it — both mentally and experientially. This first year I’m going to tackle the sublime and geological magic of natural hot springs. Why and how were these created? Why do some smell so different than others? What are the health benefits or risks associated with using them? And what’s the history of public bathing? And, as I will do in the future with subjects like Renaissance art or hang gliding, I plan to explore these subjects by literally diving in. So, in 2011, I will visit a different natural hot spring every month of the year. Iceland and Japan, here I come!! Some of you may think this is silly. How can this be related to business leadership? One of the most sage pieces of advice I ever heard went something like this: “Great managers have great answers. Great leaders have great questions.” At the heart of great leadership is a curious mind, heart, and spirit. Today, business serendipity and profound innovation will come from seeing the metaphors and natural laws in one part of life and applying them elsewhere with a vision that less curious minds would never have imagined. See you in the spring.

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Google Startup Lab Propels Budding Tech Firms

December 16, 2010

SAN FRANCISCO (By Alexei Oreskovic) – A small team has toiled away since early October in a quiet corner of Google Inc’s sprawling campus in Mountain View, CA on a project related to the discovery of human antibodies. The group is not part of Google, and has nothing to do with Google’s flagship Internet search business. But Google has provided the team — part of the secretive New Hampshire-based biotech company Adimab — with a workspace fitted with top-notch amenities, including high-speed Internet access, conference rooms, even a ping-pong table. Adimab and four other companies are among the first tenants of the new Startup Lab managed by Google’s venture capital arm. The lab represents the latest expansion of Google Ventures, the search engine’s $100-million-a-year fund which launched in March 2009, providing Google with an opportunity to chase the big financial payoffs that can come with venture investing while helping it build ties to the fast-paced world of start-ups. The on-campus lab is designed to let young companies funded by Google Ventures draw from the deep well of resources within the world’s No. 1 Internet search company. Google staffers offer tips on anything from product design to recruiting, while also providing the startups with an instant Silicon Valley presence, said Bill Maris, managing partner of Google Ventures, in an interview at Google’s headquarters earlier this month. And with growing competition to fund the youngest, early-stage start-up companies, Google Ventures wants to set itself apart from other venture firms and angel investors. “We plan to be very active in 2011 in the seed space,” said Maris, referring to the funding of early-stage companies. “Startup Lab is an expression of that interest.” The 15,000-square foot facility can accommodate 100 to 120 people, and is composed of equipment that Maris and Google Ventures Partner David Krane pulled together over the summer. The pair found a vacant building owned by Google and furnished it with desks inherited from Google’s acquisition of mobile ad firm AdMob. The lab’s 1-gigabyte broadband network is separate from Google’s corporate network so it can provide a layer of separation and privacy for the labs’ tenants. In addition to the five startups that use the lab, Google entrepreneur-in-residence Craig Walker, the former group product manager of Google Voice, has also set up shop with a small team as he develops a new company. “We wanted to have a place where someone like Craig, or other talented entrepreneurs… maybe they don’t even have a company yet; they just want a place to work,” said Maris. At this point, Google Ventures does not plan to bring on further EIRs into the Startup Lab. GOLDEN TICKET The lab’s opening comes as Google’s domination of the Web faces challenges from smaller rivals, like social networking companies Facebook and Twitter. Over the past year, several of Google’s top engineers and executives have defected to Facebook. One such defector, Google Maps co-creator Lars Rasmussen, said in a newspaper interview that it can be “very challenging” to work at a company the size of Google. The Startup Lab underscores how Google, which has more than 23,000 employees worldwide, is seeking to wield its size as an asset to help it forge ties with entrepreneurs and startups. “The Google calling card in Silicon Valley, it’s the equivalent of a golden ticket at Willy Wonka and the Chocolate Factory,” said Tom Hale, the chief product officer of Austin-based HomeAway, which operates vacation rental sites like VRBO.com and is funded by Google Ventures. HomeAway has one engineer working in the Google Ventures Startup Lab two to three weeks a month, and plans to station a small product development group at the site in the coming months. Since moving in to the lab, HomeAway has worked with Google on technical issues involving scaling the architecture of its Web properties. HomeAway is also seeking guidance from Google on how to manage a program that allows engineers to devote a portion of their work time to personal projects, similar to a well known Google policy that lets employees devote 20 percent of their time on other pursuits. Google Ventures, which has grown from two partners in March 2009 to roughly 20 staffers today, has a small team of experts whose job is to help portfolio companies design their products. Google Ventures is also about to bring on its first full-time recruiter to help startups hire engineers. The Startup Lab is different from other programs that combine mentoring and early-stage funding, like Y Combinator, he said. The plan, he said, is not to bring in a new batch of entrepreneurs every year and give them a set curriculum, but to provide an easy way for startups to take advantage of Google’s resources. Nor is Google Ventures turned off by the competition to fund early-stage companies, which has led some venture investors, like Marc Andreessen to declare that seed investing has become less attractive than it was a few years ago. “Everyone kind of talks about this seed bubble and whatnot, but it doesn’t enter our calculus when we’re making our investment decision,” said Maris. “A price isn’t high or low, it’s either fair or not. So maybe for a seed round or series A, the price seems high, but maybe it’s deserved.” (Editing by Kenneth Li and Robert MacMillan) Copyright 2010 Thomson Reuters. Click for Restrictions .

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Susan G. Komen Foundation Elbows Out Charities Over Use Of The Word ‘Cure’

December 7, 2010

In addition to raising millions of dollars a year for breast cancer research, fundraising giant Susan G. Komen for the Cure has a lesser-known mission that eats up donor funds: patrolling the waters for other charities and events around the country that use any variation of “for the cure” in their names. So far, Komen has identified and filed legal trademark oppositions against more than a hundred of these Mom and Pop charities, including Kites for a Cure, Par for The Cure, Surfing for a Cure and Cupcakes for a Cure–and many of the organizations are too small and underfunded to hold their ground. “It happened to my family,” said Roxanne Donovan, whose sister runs Kites for a Cure, a family kite-flying event that raises money for lung cancer research. “They came after us ferociously with a big law firm. They said they own ‘cure’ in a name and we had to stop using it, even though we were raising money for an entirely different cause.” Donovan’s sister, Mary Ann Tighe, said the Komen foundation sent her a letter asking her to stop using the phrase “for a cure” in their title and to never use the color pink in conjunction with their fundraising. What bothered her most about the whole ordeal, she said, was that Komen forced her to spend money and time on legal fees and proceedings instead of raising funds for cancer. “We were certainly taken aback by it,” she told HuffPost. “We have partners running these kite events around the country. What if one of them uses, say, magenta? Is that pink? I mean, where are we going with this? We just want to raise money for cancer. What we don’t want is to have our energy misplaced by having our charity partners trying to police the good work that we’re doing.” Sue Prom, who started a small dog sledding fundraiser for breast cancer called “Mush for the Cure” in Grand Marais, Minn., said she was shocked to hear from Komen’s lawyers this summer asking that she change the name of her event or face legal proceedings. “I had to call the trademark helpline, because I had no idea what I was doing,” said Prom, who runs the annual sled race with her husband and friend. “We pay for the expenses out of our pockets, and we’ve never personally made a dime from it. We have t-shirts, sweatshirts, domain names, posters, stationery, all with ‘Mush for the Cure’ on it. What do we do with all the materials now? How are we gonna defend ourselves? We’re not like Komen.” Prom said she’s been running the event for six years, and the most she has raised for the National Breast Cancer Foundation is $25,000. Before the NBCF could accept the money, they warned her to file for a trademark to protect her event legally against the Komen Foundation. But now that Komen has opposed Mush’s trademark application with the U.S. Patent and Trademark Office, Prom is looking for a pro bono lawyer to help her figure out what to do next. “I think it’s a shame,” she said. “It’s not okay. People don’t give their money to the Komen Foundation and they don’t do their races and events so that Komen can squash any other fundraising efforts by individuals. That’s not what it’s about.” Komen’s general counsel, Jonathan Blum, told HuffPost that the fundraising powerhouse tries to be reasonable when dealing with small charities and nonprofits, but that it has a legal duty to protect its more than 200 registered trademarks. “It’s never our goal to shut down a nonprofit,” he said, “and we try very hard to be reasonable, but it’s still our obligation to make sure that our trademarks are used appropriately so there’s no confusion in the marketplace over where people’s money is going.” Blum told HuffPost that legal fees comprise a “very small part” of Komen’s budget, but according to Komen’s financial statements, such costs add up to almost a million dollars a year in donor funds. “I think it’s important that charities protect their brand, but on the other hand, I don’t think the donors’ intent in giving their money was to fund a turf war,” said Sandra Minuitti, a spokesperson for Charity Navigator. “It’s very important that Komen treads carefully and is very transparent about how they’re spending money on these legal battles.” Michael Mercanti, an intellectual property lawyer, said he is surprised by the large number of oppositions Komen has filed against other charities–a number he would expect from a company like Toys”R”Us or McDonalds, but not a charitable fundraising organization. “They seem to be very aggressive in policing their mark, or what they’re claiming to be their mark,” he told HuffPost. “I guess there are a lot of ways to captain a ship, but it seems like there are ways they could protect and police their trademarks and also allow other charities to coexist.” Mercanti said filing hundreds of oppositions is not only damaging to other charities, but could also be counterproductive for Komen’s brand. “They could actually be seen as being a bully,” he said. “They’re going to alienate some donors who don’t appreciate them stepping on smaller, worthwhile charities.” With the help of a team of pro bono layers, Kites for a Cure was able to reach a settlement with Komen: They agreed to only use the phrase “for a Cure” in conjunction with the words “lung cancer” to make the distinction clear. But Tighe said they reached a settlement only after many, many months of a free legal team working long hours each day. “We were very fortunate because we had strong support from knowledgeable pro bono counsel, but it did seem like a misdirection of a lot of people’s energy,” she told HuffPost. “I don’t know what smaller organizations do without free representation.” Sue Prom said Tighe has already put her in touch with her pro bono legal team, and she is prepared to fight for the name of her sledding event in court. The ordeal has changed her opinion of Komen. “I used to give money to Komen all the time, but now I’m just kind of wary of them,” she said. “I’m not buying Yoplait yogurt or anything that has the word ‘Komen’ on it. They seem to have forgotten what charity is about.”

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Tests Show Toxic Metals In Children’s Products Exceed Federal Limits By 1000 Times

November 22, 2010

LOS ANGELES — Drinking glasses depicting comic book and movie characters such as Superman, Wonder Woman and the Tin Man from “The Wizard of Oz” exceed federal limits for lead in children’s products by up to 1,000 times, according to laboratory testing commissioned by The Associated Press. The decorative enamel on the superhero and Oz sets – made in China and purchased at a Warner Brothers Studios store in Burbank – contained between 16 percent and 30.2 percent lead. The federal limit on children’s products is 0.03 percent. The same glasses also contained relatively high levels of the even-more-dangerous cadmium, though there are no federal limits on that toxic metal in design surfaces. In separate testing to recreate regular handling, other glasses shed small but notable amounts of lead or cadmium from their decorations. Federal regulators have worried that toxic metals rubbing onto children’s hands can get into their mouths. Among the brands on those glasses: Coca-Cola, Walt Disney, Burger King and McDonald’s. Coca-Cola, which had been given AP’s test results last week, announced Sunday evening that after retesting it was voluntarily recalling 88,000 glasses. The AP testing was part of the news organization’s ongoing investigation into dangerous metals in children’s products and was conducted in response to a recall by McDonald’s of 12 million glasses this summer because cadmium escaped from designs depicting four characters in the latest “Shrek” movie. The New Jersey manufacturer of those glasses said in June that the products were made according to standard industry practices, which includes the routine use of cadmium to create red and similar colors. To assess potential problems with glass collectibles beyond the “Shrek” set, AP bought and analyzed new glasses off the shelf, and old ones from online auctions, thrift shops and a flea market. The buys were random. The fact it was so easy to find glasses that appeal to kids and appear to violate the federal lead law suggests that contamination in glassware is wider than one McDonald’s promotion. The irony of the latest findings is that AP’s original investigation in January revealed that some Chinese manufacturers were substituting cadmium for banned lead in children’s jewelry; that finding eventually led to the McDonald’s-Shrek recall; now, because of the new testing primarily for cadmium in other glassware, lead is back in the spotlight as well. AP’s testing, conducted by ToyTestingLab of Rhode Island, found that the enamel used to color the Tin Man had the highest lead levels, at 1,006 times the federal limit for children’s products. Every Oz and superhero glass tested exceeded the government limit: The Lion by 827 times and Dorothy by 770 times; Wonder Woman by 533 times, Superman by 617 times, Batman by 750 times and the Green Lantern by 677 times. Federal regulators will decide whether the superhero and Oz glasses are “children’s products” and thus subject to strict lead limits; if U.S. Consumer Product Safety Commission staffers conclude the glasses to fall outside that definition, the lead levels would be legal. Judging by the agency’s own analysis, obtained by the AP under the Freedom of Information Act, the Oz and superhero glasses appeal to kids. “Licensed characters based on action superhero themes or friendship themes are very popular” with children ages 6 to 8, CPSC staff wrote when explaining why the “Shrek” glasses, which featured the cartoon ogre and his friends, would end up in children’s hands. Warner Brothers said, “It is generally understood that the primary consumer for these products is an adult, usually a collector.” However, on Warner Brothers’ website, the superhero glasses are sold alongside kids’ T-shirts with similar images and a school lunch box. An online retailer, , describes the 10-ounce glasses as “a perfect way to serve cold drinks to your children or guests.” http://www.retroplanet.com The importer, Utah-based Vandor LLC, said it “markets its products to adult collectors.” The company said less than 10,000 of each set had been sold and that the products were made under contract in China. The company said that superhero and “Oz” glasses both passed testing done for Vandor by a CPSC-accredited lab, including the same lead content test that ToyTestingLab did for AP – a test only required of children’s products. Spokeswoman Meryl Rader did not answer when asked why a test specific to children’s products would be performed on glasses the company said were not intended for kids. “The results were well within the legal limits” of 0.03 percent lead, Rader wrote in an e-mail. The company would not share those results. Informed in general terms of AP’s results, CPSC spokesman Scott Wolfson said that the agency would pursue action against any high-lead glasses determined to be children’s products. The agency has authority to enforce lead levels for glasses going back decades, he said. AP’s testing showed Vandor’s Chinese manufacturer also relied on cadmium. That toxic metal comprised up to 2.5 percent of the decorative surface of the Oz and superhero glasses, nearly double the levels found in the recalled “Shrek” glasses. But the CPSC only limits how much cadmium escapes from the designs, not how much cadmium the designs contain. Even that regulation is new: The CPSC used the “Shrek” glasses to establish a standard for how much cadmium coming out of children’s glassware creates a health hazard. Five of the glasses that AP tested, including one ordered from the online Coca-Cola store, shed at least as much cadmium as the CPSC found on the “Shrek” glasses. While those five could have been deemed a health hazard under the CPSC guidelines used for the recall, recent revisions tripled the allowable amount of cadmium and the agency may no longer consider them a problem. The agency has said its upward revision means the “Shrek” glasses did not need to be recalled. The all-red Coke glass shed three times more cadmium than the Puss in Boots “Shrek” glass that worried federal regulators the most last summer. Coke Zero and Diet Coke glasses did not exhibit the same problem. In announcing that it was voluntarily recalling 22,000, four-glass sets “for quality reasons,” the Coca-Cola Co. said the glass designed to look like a red can of Coca-Cola “did not meet our quality expectations. While recent tests indicated some cadmium in the decoration on the outside of the glass, the low levels detected do not pose a safety hazard or health threat.” The company said consumers who purchased the glasses from Coke’s online store will receive an automatic credit; customers who bought the glasses in retail stores will be instructed on what to do starting Nov. 30. The glasses, which Coke said were “designed for the general adult population,” were manufactured in the United States by Arc International, the same company that made the recalled “Shrek” glasses. In all, AP scrutinized 13 new glasses and 22 old ones, including glasses sold during McDonald’s promotion for a 2007 “Shrek” movie. The used glasses date from the late 1960s to 2007, mostly from promotions at major fast-food restaurants. Thousands of such collectibles are available at online auction sites; countless others are kept in American kitchen cabinets, and used regularly by children and adults. First, AP screened them using a state-of-the-art Olympus Innov-X gun that shoots X-rays into a glass and delivers an estimate of how much lead, cadmium or various other elements are present. The glasses were then sent to ToyTestingLab, which is accepted by the CPSC as an accredited laboratory for a range of procedures. The glasses were tested according to the procedure that the safety commission used in the “Shrek” recall. The decorated surface of each glass was stroked 30 times with water-soaked wipes, with each stroke representing a hand touch. The wipes were then analyzed for how many micrograms of lead, cadmium or other elements they collected. Finally, for seven of the superhero and Oz glasses the lab extracted samples of the decorations. That colored enamel was analyzed for its total lead content. “I was extremely surprised at the levels,” said Paul Perrotti, ToyTestingLab’s director, of the total content test. He said his lab has seen glasses that fail to meet government standards, “But not 30 percent lead.” Despite what Perrotti described as “grossly high” levels, the wipe testing picked up very little lead coming out from these seven glasses. His staff had to use a diamond-tipped grinder to remove the colors, suggesting the enamel was strongly bonded to the glass. Perrotti and glass engineers interviewed by AP said the surface of the glasses AP tested could break down with repeated use, scouring and trips to the dishwasher, making the metals more accessible. Following a cascade of problems with products manufactured in China, Congress in 2008 passed strict new limits that effectively ban lead in any children’s product. The underlying materials in these products – including the baked-in enamel – cannot be more 0.03 percent lead. Lead has long been known to reduce IQ in kids; recent research suggests cadmium also can damage young brains. Cadmium also is a carcinogen that can harm kidneys and bones, especially if it accumulates over time. Cadmium, however, also happens to be an indispensable pigment for an important part of the color palette – without it there is no “fire engine red” (think Superman’s cape and Dorothy’s slippers). Lead on the other hand is not essential. A lot of a toxic metal in a glass does not necessarily mean a health hazard. Most of the 35 lab-tested glasses were safe under normal conditions – their decorations shed very low or no detectable amounts of lead or cadmium. Among those that did release higher levels in the wipe test, none gave off nearly enough to make someone immediately sick, according to AP’s analysis of the results. Instead, the concern is low levels of exposure over weeks or months, whether kids also are eating a sandwich or licking their fingers. In addition to the seven contaminated Oz and superhero glasses, 10 others raised concern over longer-term contact – two for both lead and cadmium, five for lead only and three for cadmium only. According to widely used computer modeling, the contamination that came off three of the glasses could measurably increase a child’s blood lead level. If half of what gets onto a child’s hand enters their mouth, as the CPSC calculates, seven of the glasses would require fewer than 20 hand touches for kids age 6 and under to exceed U.S. Food and Drug Administration guidelines for the maximum amount of lead they should ingest in a day. Most of the 10 additional glasses were released before 2000, including a Disney “Goofy” glass distributed by McDonald’s that shed lead and cadmium, and three “Return of the Jedi” glasses from 1983 released by Burger King. One of the “Jedi” glasses hit the FDA lead level for 6-year-olds after just eight touches. Both fast food chains said in statements that their glasses met applicable safety standards at the time they were manufactured. Disney, which ran several promotions with McDonald’s for glassware AP tested, had no comment. Using computer modeling, nationally recognized toxicologist Dr. Paul Mushak, who has advised government agencies including the CPSC and now operates a consulting practice in North Carolina, concluded that if half of what came off the glasses was ingested, it could raise a 5- to 6-year-old’s blood lead level by 11 percent on the high end and 4 percent on average. The blood level changes didn’t alarm Mushak, but he expressed concern because lead from the glasses would be absorbed into the bones, only to be released much later in life, for example in menopausal women. Mushak suggested that the safety commission’s wipe test could underestimate real-world exposure, because it uses water on the wipes, a very mild approach. AP’s testing showed that when glasses were subjected to a wipe wetted with artificial sweat, the amounts of lead or cadmium that came off were up to four times higher than water wipes. Members of the association representing the U.S. glassware industry say the glasses are safe and strongly protest that the wipe test does not accurately reflect how much lead or cadmium escapes in the real world. Myra Warne, executive director of the Society of Glass and Ceramic Decorated Products, said she is frustrated that the CPSC used it, rather than a more commonly used method developed by the FDA. “As we are aware, government agencies don’t always (or perhaps often) share their insight and knowledge with one another which is likely why CPSC and others are fixated on improper test protocol for our products,” she wrote in an e-mail. ___ The AP National Investigative Team can be reached at investigate(at)ap.org

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Unemployment Extension Defeated In House

November 18, 2010

WASHINGTON — The House of Representatives on Thursday voted down a measure that would have reauthorized extended unemployment insurance for another three months, leaving no clear path forward to prevent the benefits from lapsing as scheduled on Nov. 30. Without a reauthorization, the Labor Department estimates that two million long-term unemployed will prematurely stop receiving benefits before the end of the year. “I think it’s a sad moment,” said Rep. Alan Grayson (D-Fla.) after the vote. “It appalls me that the Republicans keep pitching and pitching and pitching the tax cuts for the rich and won’t join in a bill to help people keep their homes and not have to live in their cars.” The bill was brought to the floor under a “suspension of the rules,” meaning it required approval from two-thirds of the House. It failed 258 to 154, with mostly Democratic support. Twenty-one Republicans voted in favor and 11 Democrats voted nay. Even if it had passed the House, it’s unclear how it would get through the Senate, where Democrats will need at least three Republicans to switch sides. No GOP moderates have signaled a willingness to support an unemployment reauthorization that isn’t “paid for” with spending cuts — something Democrats have refused to do all year. In most recessions, the cost of federally-funded jobless aid is usually paid for with deficit spending. It’s likely there will be another effort in Congress to reauthorize the benefits before the Christmas break, though lawmakers will be off next week for Thanksgiving. “My understanding is the Senate is trying figure out what vehicle they can add it to and how they can include and we’ll see, but I don’t think we should be going home over the holidays when people are losing their unemployment benefits, and especially when the struggle seems to be how you can give more money to rich people,” Rep. George Miller (D-Calif.), chairman of the House Education and Labor committee, told HuffPost. Democrats may attempt to attach a reauthorization of the extended benefits to a broader bill, such as a measure reauthorizing some of the Bush-era tax cuts set to expire at the end of the year. Advocates for the unemployed want a bill that preserves existing benefits for the entirety of 2011. White House spokesman Robert Gibbs on Thursday said Congress ought to reauthorize the benefits before its Christmas break. “When we discuss how to get our economy moving again, there isn’t an economist in the country who won’t tell you that ensuring [that] those who lost their jobs have the ability to pay their rent, support their families, isn’t in and of itself a great boost to the economy,” he said. I do not think that we want to leave here having fought for tax cuts for millionaires and against… unemployment insurance for those who lost their jobs.” Federally-funded extended benefits, which give the unemployed up to 73 weeks of benefits once they exhaust 26 weeks of state benefits, have needed several reauthorizations in the past year, and Congress has let them lapse three times. The shorter lapses didn’t cause too much of an interruption in benefits, but over the summer, as Senate Republicans filibustered a reauthorization for 50 days, 2.5 million people stopped receiving checks for several weeks. “Sadly, Congress is once again heading out of town just as the federal unemployment insurance programs are slated to expire, this time right as the holiday season begins,” said Christine Owens, director of the National Employment Law Project, in a statement. “It is critical that a full-year renewal of the program moves to the top of the agenda when Congress returns on November 29th, to minimize the hardship and disruption to families and the economy that will result from the November 30th cut-off.” Sam Stein contributed reporting.

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Jeffrey Wasserstrom: Covering China for Marketplace: A Quick Q & A With Rob Schmitz

November 16, 2010

Over the summer, there was a changing of the guard in the Shanghai office of Marketplace , a radio program that has consistently carried smart reports about China. Scott Tong moved from the PRC back to the US (where he continues to work for the show) and former Peace Corps volunteer Rob Schmitz took his place. I had the pleasure of meeting them both in Shanghai in July and ran a post with the former in early August, in which he reflected on his time covering the China beat. Now, as a sequel to that post, comes a quick q and a with Schmitz, who recently did a great feature on Inner Mongolia (listen to it here, and check out the striking photos that he took to accompany the report here ), which among other things is a fascinating addition to the growing number of intriguing pieces, in varied media, on how life in the PRC is being transformed by the increasing importance of cars as forms of transportation and status symbols: JW: What story has been the most fun to cover for Marketplace since you arrived in Shanghai? RS: I just finished a series of stories on the rapid economic transformation of the Ordos basin in Inner Mongolia. All the big dreams, hope, and optimism that make life in today’s urban China so full of electricity seemed to shine even brighter in this tiny region. The area is making a mint off its status as one of the most prominent coal and natural gas producers of China. Nearly everyone I met there was either looking for investors or looking to invest. Both groups were overcome with a type of gold fever that made them fun to be around. One guy intercepted me on the airplane to Ordos and talked me into scheduling an interview with the CEO of his logistics company. When I showed up the next morning, I was ushered to the corner office. The CEO shook my hand without letting go. At the point where it started to become uncomfortable, a photographer appeared out of nowhere and began to snap photos. The CEO then released my hand and announced that he was too busy for an interview. They had gotten what they needed: a photograph of their leader with a foreigner for promotional material to attract more investors. But I fought for a consolation prize. After the paparazzi shoot, I asked my new acquaintance for a tour of the automobile industrial park his company was constructing. He was happy to do so, and the result ended up in the first piece of the series. Two days later, I met my Mongolian fixer. I found him through a mutual acquaintance, and we had spent the week prior emailing each other about the details of my upcoming trip and some of the rural areas where we could find ethnic Mongolian herders to talk to. I expected him to be middle-aged, possibly a former herder. Not even close. Baigaal was 24 years old, had a shaved head, and upon meeting me, had one question: “Do you like Eminem?” Baigaal was an aspiring rapper. He brought two of his college friends along on our day-trip through the grasslands. There we were: three ethnic Mongolians, my Chinese assistant, and me, crammed into a tiny Suzuki Swift, listening to a mix CD Baigaal had put together of Mongolian hip-hop music. All of the sudden the car goes silent. Two electronic gongs pound through the speakers. It’s ‘Beat It’ by Michael Jackson. Within a minute, we’re all humming along–Mongolians, a Chinese, and an American–as the grasslands of Inner Mongolia flash by outside our Japanese car… there’s nothing like Michael Jackson to make the world a little smaller. JW: What do you consider the biggest challenge to reporting from China just now? RS: On the surface, China is a journalist’s playground: It’s changing at an historic pace, it’s home to the largest human migration the world has ever known, and its fate has become intertwined with the world’s fate. The trick is to make sense of all this. China forces you to become a better reporter–you’re constantly having to check your facts, because what you thought were facts oftentimes weren’t facts to start with. It’s difficult to find the reality behind economic numbers from Beijing, and it requires persistent follow-up with a variety of economists, academics, social scientists, and, most importantly, laobaixing. Once you’ve got what you think is a reasonable amount of material to tell a story, then the challenge becomes trying to fit the nuance and complexities of China into a four-minute feature. The amount of material left on the cutting room floor could fill books. JW: What has surprised you most about how China has–or hasn’t–changed since you were there last? RS: After living in Sichuan as a Peace Corps Volunteer in the mid-90s, I’ve returned to China every two years or so as a journalist, and, like many who live here, I’ve learned to reset my expectations each day when I wake up. Anything can and will happen here, and the rapid pace of change makes surprises an everyday part of life. I just came back from a weekend trip in Hangzhou. My wife, son, and my mother, who’s visiting from the states, walked a few blocks from our home to the subway, where it took 20 minutes to arrive to Shanghai’s new Hongqiao train station. From there, we boarded a sleek, comfortable bullet train that whisked us to Hangzhou in 38 minutes. A trip that used to take 3-4 hours was now reduced to under an hour. As the countryside went by at around 220 mph, my two year-old sat in my lap with his forehead planted on the window, screaming in excitement at how fast we were going. I felt the same way. JW: During your first stay in China you were based in Sichuan and now you are living in Shanghai. Any thoughts you want to share, besides the obvious ones of infrastructure and access to international goods and the like, about how the two living experiences are similar and different? RS: My China experience has changed alongside my evolving career path and in tandem with the economic transformation of the country. In the 1990s, I was a volunteer teacher in the city of Zigong. My Peace Corps site mates and I were the first foreigners to live in the city since 1949. I lived on a hundred US dollars a month and it was my job to help people. Today, I’m a journalist in China’s largest city, I’m one of at least 150,000 foreigners in Shanghai, and it’s my job to pester people with questions. I make more money than I did during my Peace Corps days, but I miss the relationships I shared with my Chinese students and colleagues when I was a teacher. As a journalist, it’s more difficult to cultivate these types of meaningful relationships because you’re always rushing to meet the next deadline. But it’s not impossible. I’m working hard to establish a handful of sources from all walks of life who I can check-in with from time to time. It’s not a daily routine like I had when I was a teacher, but it’s regular enough to serve as a suitable substitute. On the flip side, being a journalist gives me the freedom to explore and analyze parts of Chinese society I was always curious about but didn’t have access to as a teacher. It gives me the opportunity to tell the stories of the Chinese people to an audience thirsty for more knowledge about this fascinating land. It’s a fantastic job. China inspired me to become a journalist in the first place, and I’m thrilled to have this opportunity. JW: Now that the Expo is over, any predictions on how it will be viewed in China a year from now, whether it will be thought of as a success, a failure, a bit of both? RS: I think it depends on whom you talk to. For the Chinese, I think Expo was a rousing success. Tens of millions of people attended the event. Many of them were from smaller cities throughout China and were making their first trip outside their province to ‘see the world’ in Shanghai. It’s easy to criticize the flaws of the event, and many foreign journalists did. But I think dwelling too much on the negative aspects misses the point that this World’s Fair really wasn’t designed for the international community. It was made for China, and the Chinese clearly benefitted from it, no matter how long the lines became and how tacky some of the pavilions were. For the more sophisticated worldly visitor, yes, parts of the Expo were a huge disappointment. To many, the mix of corporate and Chinese propaganda throughout much of the fair was an accurate reflection of a disturbing new world order. But for me, a former teacher in rural Sichuan whose Chinese friends were constantly dreaming of seeing the world and learning about different cultures and ideas, Expo gave them a chance to do that, and I think that’s great. * This piece also appeared today, under a different title, at “The China Beat” blog/electronic magazine.

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Ken Blackwell: Getting Our Fiscal House in Order

November 15, 2010

On November 2, the American people sent a resounding message to Washington D.C. that the era of reckless spending must stop. We all know a Balanced Budget Amendment is vital to stopping out of control spending. That’s why Senator-elect Mike Lee (R – Utah) and I launched Balanced Budget Amendment Now . Actually passing conservative measures such as this, though, will require making sure conservatives are in a position to lead. The good news is there are signs that Speaker-elect John Boehner and Majority Leader-elect Eric Cantor have gotten the message. For example, an unprecedented movement is afoot to appoint bona fide deficit hawks to the appropriations committee who will reign-in the out of control spending and slash our dangerous unsustainable deficits. (Part of the reason this opportunity exists is that so many appropriators have recently lost election, thus making it a less enticing committee for liberal Republicans to seek). As Politics Daily’s Matt Lewis recently noted, “Once thought of as a powerful committee for members wanting to ‘bring home the bacon,’ in today’s political environment sitting on an appropriations panel seems to be an albatross .” That may be true for “appropriators,” but what if real fiscal conservatives were to join the committee, thus changing the way the committee was run? Fiscal conservatives like Reps. Jeff Flake (R-Ariz.) and Tom Graves (R-G.A.) are gaining momentum within the Republican caucus as exactly the type of principled leaders needed to bring fiscal sanity to the appropriations committee. (The Club For Growth, where I sit on the board of directors, has endorsed both in their campaigns). Rep. Flake, of course, is well known to fiscal conservatives, but Rep. Graves is a rising star who is not yet widely known. Having won four races in less than one hundred days (including a special election and two run-offs) to fill the seat for Georgia’s ninth congressional district this summer, Rep. Graves wasted little time in becoming an outspoken opponent of earmarks. Prior to being elected to Congress, Graves was a leader in the Georgia General Assembly to cut $3.1 billion from Georgia’s budget, and authored legislation to implement zero-based budgeting to bring transparency and accountability to the state budgeting process In just his first month in Congress, Graves authored legislation to defund the Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act of 2010. Republicans have an opportunity to change the way Washington works by putting proven conservative leaders in a position to lead by example. To help keep our Fiscal House in order, Reps Graves and Flake should be placed on the appropriations committee.

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Robert Lenzner: Celebrating QE2,Republican Victory,Bush Tax Cuts

November 5, 2010

Celebrating QE2, Republican Victory And The Bush Tax Cuts The results of the midterm elections are a fiscally necessary surprise gift for investors. Robert Lenzner All those investors who liquidated stocks for bonds must be licking their wounds after the great reflation of assets was inaugurated this week. The Bernanke Bump, the well-orchestrated promotion of Quantitative Easing along with the debasing of the dollar have been driving commodities, emerging markets and precious metals into a frenzy. The Bush tax cuts will survive. QE2 wasn’t a surprise at all. But the better than expected results for Republicans in Congress prefigured an Obama compunction to compromise with his opponents. A very fiscally necessary surprise gift for investors. The tax on the sale of stocks, bonds and other assets–what we call the capital gains tax–will remain at the at the historically low rate of 15%, as proposed by the George W. Bush administration in 2003, when the tax cuts were passed in order to improve the lot of investors after bear market of 2000-2002. In fact, the lower tax led to a greater number of transactions and far large tax revenues for Uncle Sam. For 2011 at least, and maybe longer, the capital gains tax will remain at 15%–not double or triple that, as the Obama administration was threatening. So refocus your animal spirits on high-yield bonds (through the iShares High Yield Corporate Bond Fund ( HYG – news – people ), stocks that have a record of increasing their cash dividend for the past 25 years (the SPDR S&P Dividend ETF ( SDY – news – people )), and REITs that pay out a high percentage of their income in dividends. Gold lovers must have woken up Thursday to celebrate QE2, a printing of more dollars with the purpose of driving the price of assets into the wild blue yonder. As a joyous occasion, Gold is still relatively inexpensive in comparison with the Dow Jones industrial average. If gold continues to run up, major gold miners like Randgold Resources ( GOLD – news – people ) could move up at a multiple of two to three times the price of bullion. According to U.S. Global Investors ( GROW – news – people ), a mutual fund group in San Antonio, Texas, another, smaller gold holding that hasn’t run up as much is Medoro Resources, a Colombian gold producer (MRS), according to Frank Holmes, U.S. Global’s CEO. Related Stories In the metals area, copper producer Freeport-McMoRan Copper & Gold ( FCX – news – people ) has run up mightily since the summer, from $60 to $105, and is still selling at only 12 times earnings. A classic example of a stock you must hold for the big move: Its copper reserves are being funneled off to China ever more quickly and at rising prices. Here’s the November Irony to remember: QE2 seems a reward from Ben Bernanke to investors, speculators, gold and silver fanatics and the holders of currencies that rise as the dollar falls (Australia, Singapore, Korea, Brazil).

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Jeff Sweat: Why Your Social Media Campaign Is Not the Next Old Spice Guy

October 27, 2010

Just watching Grover say “I’m on a horse. Cow.” in the pitch-perfect “Smell Like a Monster,” took me back to this summer’s Old Spice Guy social media campaign, and all the advice that followed to help marketers crack the Old Spice secret formula. No doubt there are people using that advice right now to recreate that famous monocle smile. But it takes more than a checklist to create a viral hit. Reverse-engineering the Old Spice Guy is just going to make a lot of things that smell like the Old Spice Guy — but aren’t. The advertising world obsesses about what makes things go viral, so when a true viral hit like Old Spice Guy happens, everyone’s going to try to deconstruct it. So from this campaign we got lessons for brands, lessons for public speakers, and just plain lessons . Luckily for us at Yahoo!, we have scientists to do the obsessing for us. A Yahoo! Labs research team analyzed millions of Tweets to find out what makes something a success. This study only looked at Twitter, but most of its findings translate to other channels, too. Their conclusion? The tweets that were retweeted endlessly looked an awful lot like those that weren’t. And 99.9% of tweets went absolutely nowhere. The only two factors that predicted success were the number of followers, and whether or not the person tweeted it had had a viral hit before. Nothing else — whether it was funny or not, subject matter, timeliness, media format — matters. Well, scratch that. It’s tough to imagine something going viral if it’s not clever. Old Spice Guy wouldn’t have been a hit if he just sat around telling people how to smell like a man. You have to have all the basics of “virality” down. But as Yahoo! research scientist Duncan Watts says, “That’s not a recipe for success — it’s a recipe for probability for success.” If no one actually decides to pass your content along, it’s not viral. It’s just a really nice portfolio piece. Three rules for viral success What? Didn’t I basically just say the rules don’t matter? Well, Watts does offer up some rules. They just don’t work the way you’d think they work. You can’t make viral happen: The first thing you need to do, Watts says, is accept the fact that you can’t control whether or not something goes viral. If that sounds like the Serenity Prayer from a 12-step program, you’re not too far off. Consider this a 3-step program for social media 12-steppers. You can create a great campaign, but you can’t make it a hit. This, by the way, is a great point to make to your boss. Get the recipe right: You have to create the kind of content that people want to pass along, so it needs to combine things like humor, interactivity and buttons that let you share. Usually, it can’t talk about the brand head on. (Which is a rule Old Spice Guy seems to have broken. Or did he? Discuss!) One of the things that Old Spice Guy did right is tap into the networks with large followings. Since that’s one of the few factors that Watts’ team found does work, doing that for your content should help it spread. The bigger your soapbox, the more likely people will be able to hear you. Try lots of stuff: You don’t know which of your ideas is going to take off, so you have to try a lot of them. Remember Elf Yourself, the viral hit from OfficeMax? It’s easy to look back at it now and see why it’s a hit. Because… everyone loves tiny little feet, right? But as AdWeek’s Brian Morrissey said in a recent presentation, that wasn’t the case when it was built. OfficeMax and its advertising agency partners made 24 different sites, many of them duds. Morrissey emailed Daniel Stein of EVB, one of the agencies that created it, who said that he was surprised that something like “Reindeer Arm Wrestling” wasn’t the one that made it big. “What it shows is that brands need a portfolio approach when looking to embed in digital culture,” Morrissey said. “There will be duds, without a doubt, and it’s time brands get OK with that.” By making a lot of good campaigns, OfficeMax increased the odds that one of them would break through. “You want to create a strategy where you don’t have to be right,” Watts says. He compares this to card-counting in Vegas. When you’re counting cards, you’re not trying to win every hand. You’re just trying to increase the odds of winning more hands. I should be clear — I think you should listen to lessons from the Old Spice Guy. Not because they’re going to give you a hit, but because they’re good things for your brand. And possibly because the man has one helluva silverfish hand catch . For more from Jeff, visit the Yahoo! Advertising Blog or follow @YahooAdBuzz .

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Foreclosures Pushing Home Prices Down Even Further

October 26, 2010

WASHINGTON — Home prices are falling further, suggesting a bottom hasn’t been reached in many metro areas. Millions of foreclosures are expected to pour onto the market in the coming years. That’s likely to force prices down and hurt even cities that had begun to rebound. Investigations into banks’ foreclosure paperwork could further deter buyers and weigh down prices. The past few months have been the worst time in a decade for the housing market. Few people have bought homes, and among the small pool of buyers, many have purchased foreclosures and other distressed properties. The impact was apparent Tuesday when Standard & Poor’s/Case-Shiller released its latest index for home prices in 20 major U.S metro areas. The average price for all markets fell 0.2 percent in August and 15 cities posted declines. But the foreclosure problem is far from over. A “shadow inventory” of homes on the verge of foreclosure is bound to force prices lower well into next year. About 2 million loans are in foreclosure, and another 2.4 million borrowers have missed at least 90 days of mortgage payments, according to LPS Applied Analytics. “It’s like a never-ending supply” of homes, said Daniel Alpert, managing partner at the New York investment bank Westwood Capital. He expects prices to fall another 10 percent over the next year – and not improve much after that. Most troubled homeowners are concentrated in cities that have already been battered by the housing bust. One in 15 homeowners in Las Vegas received a foreclosure notice in the first half of the year, according to foreclosure listing service RealtyTrac Inc. In the Fort Myers, Fla. metro area, the ratio was one in 20; in the Phoenix metro area it was one in 23. “If you’re going down the hill, you tend to keep going down the hill,” said Mark Fleming, chief economist at real estate data firm CoreLogic. In Las Vegas, prices have fallen 57 percent from the peak four years ago. They are now at the lowest point since spring 2000. In August, they ticked up slightly – 0.1 percent – according to the Case-Shiller report. Investors buying properties to sell or lease have helped to stabilize the nation’s worst housing market. Demand is also coming from retirees, said Paul Bell, a real estate agent with Prudential Americana Group in Las Vegas, who noted that 45 percent of the city’s buyers are paying cash That’s “helping to contribute to a floor” in the city’s home prices, Bell said. Some markets are doing relatively well. Chicago, Washington and New York have been showing consistent price increases since spring, though the pace of those increases faded over the summer. In the nation’s capital, the large number of federal employees and government contract workers have kept the economy strong. New York has seen fewer foreclosures than other cities. California may offer the most complex housing picture. Even though the state’s major cities have started to show weakness, prices are well above the bottom of spring 2009. The San Francisco area’s home prices have surged more than 21 percent since then. Prices in San Diego have risen nearly 14 percent and had increased for 15 consecutive months before falling in August. In Los Angeles they have increased by more than 10 percent in that period. Home prices would have to rise by more than 50 percent in each of the markets to return to their peaks during the housing boom. It’s still unclear how the allegations of lenders using flawed documents to foreclosure on homes will affect housing markets. Bank of America and Ally Financial Inc.’s GMAC Mortgage have started processing foreclosures again, after calling a temporary halt while they reviewed mortgage documents. Some buyers are worried that the sale of a foreclosure could be contested – or even canceled – if the previous owner claims the foreclosure was invalid. In an October survey taken by the National Association of Realtors, about 23 percent of real estate agents said they have a client who is no longer interested in purchasing a foreclosed property due to the foreclosure-document mess.

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

October 26, 2010

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

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Case-Shiller Index: Home Prices Fall In August As Market Shows Signs Of Trouble

October 26, 2010

WASHINGTON (AP, BY ALAN ZIBEL) — Home prices are weakening around the country, even in metro areas that were showing strength earlier in the year. The Standard & Poor’s/Case-Shiller 20-city home price index released Tuesday fell 0.2 percent in August from July. Fifteen of the cities showed monthly price declines. Prices are expected to drop further in the coming months. The biggest drop came in Phoenix. Prices there fell 1.3 percent from a month earlier. And prices in three California cities that had been rebounding — San Francisco, San Diego and Los Angeles — fell by less than 1 percent in August from July. Detroit, Chicago, Washington, New York and Las Vegas were the only cities to show monthly price increases. The 20-city index has risen 6.7 percent from its April 2009 bottom. But it remains nearly 28 percent below its July 2006 peak. A higher proportion of foreclosed homes likely pushed down California markets, said David Blitzer, the S&P index’s chairman. During the summer, foreclosures were moving swiftly. That was before allegations surfaced of mortgage lenders using flawed documents to foreclose on homes. Lenders responded by freezing foreclosures in many states. Even with the declines, the San Francisco area’s home prices have surged more than 21 percent from spring 2009, when they hit bottom. Prices in San Diego have risen nearly 14 percent and in Los Angeles they have increased by more than 10 percent in that same period. Home prices would have to rise by more than 50 percent in each of the markets to return to their peaks during the housing boom. Those California cities “had come back very fast and very strongly,” Blitzer said. “Prices come down when you get a lot more foreclosures.” Problems with flawed foreclosure paperwork could weaken home prices. That would happen if buyers fear purchasing foreclosed homes because the sale could be contested — or even canceled — if the previous owner claims the foreclosure was invalid. In an October survey taken by the National Association of Realtors, about 23 percent of real estate agents said they have a client who is no longer interested in purchasing a foreclosed property due to the foreclosure-document mess. In the short run, however, the documents problem could prop up sale prices if fewer foreclosed homes are put up for sale. Home prices rose in many markets from April through July. But those increases were mostly fueled by government tax credits, which have expired. Now that the peak buying season is over, a record number of foreclosures, job concerns and weak demand from buyers are pushing prices down. Most experts expect roughly 5 million homes to be sold through the entire year. That would be in line with last year’s totals and just above sales for 2008, the worst since 1997.

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Marshall Auerback: G20 Currency Accord Collapses Under the Weight of its Own Contradictions

October 25, 2010

Cross-posted from New Deal 2.0 . Treasury Secretary Tim Geithner appeared fixated on US trade at last weekend’s G20 Summit in South Korea . While it is misguided to focus solely on current account imbalances, there is a certain kind of perverse logic behind his thinking. Given that the US government is likely to cut back on spending in the near future, which won’t do anything good for our consumption here at home, one can understand the Treasury Secretary’s preoccupation with trade imbalances. In an economy that is far below full employment, higher exports could generate sufficient demand so that, as much as you might be exporting an increasing amount of your domestic output to increase the per capita consumption of foreigners, there is also an accompanying increase in US consumption because of the multiplier effects of more employment. Remember that per capita outputs, and per capita consumption, do not only rise because of imports, but also because we have more people employed. After all, while the Chinese are exporting ever more, they are also slowly increasing their own per capita consumption, especially as more and more of the disguised unemployed in the Chinese countryside become employed in the export sector. But is the optimal policy truly to target current account imbalances? No. The right policy response is to work toward a full employment policy by vastly expanding fiscal policy. The US government is fully capable of doing this on its own without any global cooperation. It is true that many of us have been saying for years that exports are a cost and imports a benefit, so therefore the US should maximize net imports. We have got absolutely no traction with this argument because it is a contingent statement, true only at full employment. So while we have suggested fiscal policies designed to get us to full employment, until the rate of unemployment is reduced substantially it is much harder to make the case that maximizing net imports is a good strategy in an economy that is far below its production possibility curve (i.e., far below full employment). A sensibly constructed fiscal policy that incorporates a Job Guarantee program would be a great start. But let’s be honest: It ain’t gonna happen anytime soon, especially given the likely configuration of the future Congress after the midterm elections. Failing a big fiscal response, then, there clearly is a big problem ahead for the US. The latest data from the US western ports indicate that the American economy has gone from a very rapid pace of expansion in exports on a sequential and year on year basis to small declines in exports on a year on year basis and more severe declines on a sequential basis. And a veritable tsunami of Chinese imports is now hitting our shores, the product of China’s own substantial build-up of its export capacity last year (which is where their government deployed the majority of its fiscal resources). Sign up for weekly ND20 highlights, mind-blowing stats, event alerts, and reading/film/music recs. Why is US trade deteriorating? In part because the rest of the global economy might be slowing. But the more significant cause is China’s over-investment in industrial tradables and the consequent pressures for greater Chinese exports and a greater degree of Chinese import substitution. More restrictive fiscal policy, added to deteriorating trade accounts, likely equals higher unemployment. It seems almost inevitable that this will engender more than mere threats from the American government next year. Tariff increases appear to be in the cards. The upshot is that Beijing is going to be hit with the collateral damage via a trade war. Their economy’s dependence on export growth represents a clear and present danger. So the Chinese are doing themselves no favors by maintaining the pegged rate regime, which they should abandon as soon as possible — largely for their sakes, not ours. Consider the following: According to the Hurun report on China’s wealthiest individuals, 95% of those on the rich list earned their money by focusing on domestic consumption; just 5% are export moguls. Clearly this domestic consumption sector wants to grow from the bottom up, but Chinese government policy currently prevents it from doing so. That said, you can see why Beijing doesn’t take kindly to the “helpful suggestions” from the US, which are riddled with contradictions. On the one hand, Congress and the Treasury are accusing China of currency manipulation designed to increase its net exports. Meanwhile, the Federal Reserve, via ” QE2 “, is trying to force a run out of the dollar to appreciate the currencies of our trading partners so that the US can export its way out of its Great Recession. Similarly, Beijing has been raising its rates on concerns that the Chinese economy is overheating. But our Treasury Secretary is urging them to increase their already booming domestic demand so that they can buy more US output. At the same time, Geithner wants countries with trade deficits like the US to boost saving and cut spending. Fine, except that it seems odd to add to an already booming economy in China while the US is slumping and Geithner talks about the desirability for us to rein in long term deficits and therefore reduce demand. At a basic level, the incoherence in the American proposals is symptomatic of a broader policy making problem when one operates from a flawed paradigm. Policy makers like Tim Geithner have long been clueless on domestic federal budgets. This time around, however, his focus on current account imbalances might be logical, but only as the stupid outgrowth of a misguided understanding of public reserve accounting. In many respects it is nothing but a sideshow, one which conceals the fact that most of the policies of the Obama Administration are only making matters worse (such as turning a blind eye to fraud as part of financial “reform”). The irony, of course, is that when China does begin to enact policies that allow its population to fully consume the fruits of its own economic output, then we’ll be paying a lot more for basic stuff. Remember how great it felt to be paying $5.00 per gallon for gas during the oil price spike in the summer of 2008? That’s going to be child’s play compared to what’s ahead. But we aren’t taking advantage of the gift that China is giving us. And things will only get worse, because we remain prisoners of a 19th century gold standard mentality.

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Alan Krueger, Top Treasury Economist, Returning To Princeton

October 18, 2010

Alan Krueger, a top economics official at the Department of Treasury, will leave his post next month to return to academia, becoming the latest in a string of departures from the Obama administration’s economic team. A spokesman for the Treasury confirmed that Krueger, assistant secretary for economic policy, would return to Princeton University, where he previously served as a professor of economics. The Wall Street Journal first reported the news late Friday. Krueger has served as the top adviser to Treasury Secretary Timothy Geithner since the administration took power last year. News of Krueger’s departure comes after several other high-profile announcements of Obama economic advisers resigning amid concerns over the sluggish pace of the recovery. With unemployment remaining stuck at painfully high levels, Democrats are bracing for heavy losses in the upcoming congressional elections. Peter Orszag, Obama’s budget director, and Christina Romer, head of the president’s Council of Economic Advisers, resigned earlier this summer. And last month Lawrence Summers, the president’s top economist, announced he would return to Harvard University at the end of this year. Secretary Geithner is the only member of Obama’s top-tier economic advisers to remain with the administration. Krueger’s published work focuses on the economics of education, unemployment, social insurance and other policy decisions. He previously served as the Department of Labor’s chief economist during the Clinton administration.

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John Salama, Army Corps Worker, Charged In Iraq Contract Bribes

October 13, 2010

NEWARK, N.J. — An employee of the U.S. Army Corps of Engineers took hundreds of thousands of dollars in bribes from a construction company seeking contracts for projects in Iraq worth millions of dollars, according to a criminal complaint filed Wednesday. John Alfy Salama Markus, also known as John Salama, made an initial court appearance Wednesday afternoon, where U.S. Magistrate Mark Falk ordered him released on $500,000 bond secured by property. He did not enter a plea. Markus faces charges of conspiracy to defraud the United States and money laundering. The money laundering count carries a 20-year maximum prison sentence. Also charged in the alleged scheme was Ahmed Nouri, also known as Ahmed Bahjat, vice president of a construction and engineering company seeking work in Iraq. Nouri was still at large Wednesday. Markus’ attorney, Stacy Biancamano, said he was a soldier in Iraq before working for the Army Corps of Engineers and had earned a Purple Heart and Bronze Star. According to the criminal complaint, Markus, an Egyptian-born U.S. citizen who lived in central New Jersey, monitored contracts as a project engineer for the Army Corps of Engineers in Iraq in 2007 and 2008. It was unclear from the complaint whether Markus was a civilian or military employee, and Biancamano did not immediately return a phone call seeking further comment Wednesday. The complaint alleges Markus took bribes from Nouri in exchange for providing confidential information to Nouri’s company, Iraqi Consultants & Construction Bureau, about bidding negotiations on certain projects. Markus also allegedly steered Army Corps of Engineers projects to Nouri, including a $6.25 million project to enhance security at the Bayji Oil Refinery in central Iraq for which Markus allegedly received at least $200,000 in bribes. Citing Army Corps of Engineers records, the complaint alleges four more contracts were awarded to ICCB in the summer of 2007 totaling approximately $6.3 million. For those projects, Markus allegedly sought $550,000 in bribes. The U.S. attorney’s office alleges Markus deposited the bribes in bank accounts in the Middle East and in the U.S. and used the money to build a $1.1 million house for himself and his wife in Nazareth, Pa. They had previously lived in Belle Mead, N.J. In a November 2007 e-mail, Markus wrote to Nouri, “I saved a lot of money for you guys and I need at least 400K form ICCB for all the work I done for you I made you a lot of profit,” the complaint alleges.

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Afghan Security Contractors Trashed In Senate Report

October 7, 2010

WASHINGTON — Heavy U.S. reliance on private security in Afghanistan has helped to line the pockets of the Taliban because contractors often don’t vet local recruits and wind up hiring warlords and thugs, Senate investigators said Thursday. The finding, in a report by the Senate Armed Services Committee, follows a separate congressional inquiry in June that concluded that trucking contractors pay tens of millions of dollars a year to local warlords for convoy protection. Sen. Carl Levin, chairman of the Senate panel, said he is worried the U.S. is unknowingly fostering the growth of Taliban-linked militias at a time when Kabul is struggling to recruit its own soldiers and police officers. “Almost all are Afghans. Almost all are armed,” Levin, a Michigan Democrat, said of the army of young men working under U.S. contracts. “We need to shut off the spigot of U.S. dollars flowing into the pockets of warlords and power brokers who act contrary to our interests and contribute to the corruption that weakens the support of the Afghan people for their government,” he added. The Defense Department doesn’t necessarily disagree but warns that firing the estimated 26,000 private security personnel operating in Afghanistan in the near future isn’t practical. This summer, U.S. forces in Afghanistan pledged to increase their oversight of security contractors and set up two task forces to look into allegations of misconduct and to track the money spent, particularly among lower-level subcontractors. The Defense Contract Management Agency has increased the number of auditors and support staff in the region by some 300 percent since 2007. And in September, Gen. David Petraeus, the top war commander in Afghanistan, directed his staff to consider the impact that contract spending has on military operations. But military officials and Republicans on the Senate Armed Services Committee warn that ending the practice of hiring local guards could worsen the security situation in Afghanistan. They say providing young Afghan men with employment can prevent them from joining the ranks of Taliban fighters. And bringing in foreign workers to do jobs Afghans can do is likely to foster resentment, they say. Also, contract security forces fill an immediate need at a time when U.S. forces are focused on operations, commanders say. “As the security environment in Afghanistan improves, our need for (private security contractors) will diminish,” Petraeus told the Senate panel in July. “But in the meantime, we will use legal, licensed and controlled (companies) to accomplish appropriate missions.” Levin says he isn’t suggesting that the U.S. stop using private security contractors altogether. But, he adds, the U.S. must reduce the number of local security guards and improve the vetting process of new hires if there’s any hope of reversing a trend that he says damages the U.S. mission in Afghanistan. His report represents the broadest look at Defense Department security contracts so far, with a review of 125 of these agreements between 2007 and 2009. The review concludes there were “systemic failures” in the management of the contracts, including “widespread” failures “to adequately vet, train and supervise armed security personnel.” The panel’s report highlights two cases in which security contracting firms ArmorGroup and EOD Technology relied on personnel linked to the Taliban. Last week, EOD Technology was one of eight security firms hired by the State Department under a $10 billion contract to provide protection for diplomats. A statement released by EOD Technology said the Lenoir City, Tenn.-based company had been encouraged to hire local Afghans and that it provided the names of its employees to the military for screening. The company said the military has never made it aware of any problems with its handling of the contract. In the case of ArmorGroup, the Senate panel says the company repeatedly relied on warlords to find local guards, including the uncle of a known Taliban commander. The uncle, nicknamed “Mr. White” by ArmorGroup after a character in the violent movie “Reservoir Dogs,” was eventually killed after a U.S. raid that uncovered a cache of weapons, including anti-tank land mines. ArmorGroup, based in McLean, Va., lost a separate contract this year protecting the U.S. Embassy in Kabul after allegations surfaced that guards engaged in lewd behavior and sexual misconduct at their living quarters. Susan Pitcher, a spokeswoman for Wackenhut Services, ArmorGroup’s parent company, said the company only engaged workers from local villages upon the “recommendation and encouragement” of U.S. special operations troops. Pitcher said that ArmorGroup stayed in “close contact” with the military personnel “to ensure that the company was constantly acting in harmony with, and in support of, U.S. military interests and desires.” The allegation that contractors rely on warlords for local hiring is not new. Last June, a Democratic House investigation led by Massachusetts Rep. John Tierney concluded that trucking companies had “little choice” but to pay local warlords “in what amounts to a vast protection racket.” Army criminal investigators are examining the allegations, specifically looking at whether companies hired under a $2 billion Pentagon contract to transport food, water, fuel and ammunition to troops were paying up to $4 million a week to insurgent groups. In August, Afghan President Hamid Karzai announced that private security contractors would have to cease operations by the end of the year. The workers, he said, would have to either join the government security forces or stop work because they were undermining Afghanistan’s police and army and contributing to corruption. U.S. officials responded that they shared the goal but wanted to move slow enough that military efforts weren’t impacted. Levin says he blames lost money to the Taliban on a lack of government oversight until this year. He previously has blamed the Bush administration for not devoting enough resources to the war in general. Led by Arizona Sen. John McCain, committee Republicans endorsed the investigative findings in a voice vote last month. But in a statement included in the report, they said Levin’s investigation “falls short of providing a more robust discussion of how slim our options were at the time.”

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Zach Carter: Robbing The Middle Class: Republican ‘Pledge’ Lets Wall Street Off The Hook

October 5, 2010

I didn’t expect to see serious economic policy discussions in the ” Republican Pledge To America ,” but even by Washington, D.C. standards, this document is staggeringly disingenuous. Not once in the entire 48-page screed do Republicans mention the words “Wall Street,” “subprime,” or “foreclosure.” It’s a deliberate effort to obscure the fact that today’s economic mess is the direct result of financial malpractice on Wall Street–and that Republican economic policies would encourage more of it. As my CAF colleague Richad Eskow has noted, this Pact to Rob The Middle Class has plenty of other problems–but fundamentally, it’s supposed to be a discussion about government spending and the federal budget deficit. For anyone to even pretend to discuss those issues without mentioning the past decade’s Wall Street excess is simply laughable. The increases in government spending under President Barack Obama have been an attempt to counter economic damage wreaked by Wall Street under President George W. Bush. They haven’t been enough, but they’ve helped–just ask economist Mark Zandi, former adviser to Sen. John McCain’s presidential campaign (.pdf file). But after watching a deregulated Wall Street pump out trillions of dollars worth of ridiculous predatory mortgages and then amplify their bets tenfold in the unregulated derivatives market , Republicans now promise to hold up any new government regulation that “costs” the economy more than $100 million. This is pure insanity. Any serious Wall Street regulation will cost every megabank far more than $100 million over the 10-year span devoted to budget projections– that’s the whole point of serious financial regulation . Republicans are defending the basic housing bubble accounting scam: book huge, illusory short-term profits with reckless lending and gambling– when those bets blow up, stick taxpayers with the bill. You can measure the short-term costs to bank profitability, but you can’t measure the costs of future financial collapse. Plenty of free-market activists thought decades of deregulation had worked until markets cratered in 2008. At that point, we lost eight million jobs, and the amount of government debt held by the private sector increased by 40 percent of GDP . Without Obama’s stimulus package, the cost in jobs would have been far higher. This rabid deregulatory agenda applies to every rule yet to be written under the Wall Street reform legislation that Congress approved this summer. Since the basic strategy of that bill was to kick all major decisions to regulatory agencies, the Republicans are sending a clear signal to their Wall Street friends: Republicans will work with bank lobbyists to dismantle the entire Wall Street reform bill. They even pledge to freeze federal hiring to prevent regulators from putting more cops on the beat fighting Wall Street fraud . As for further, stronger reforms? Nothing. A promise to “permanently” end bailouts. These promises are always empty. They mean nothing without serious regulations to rein in financial excess. The United States bailed out banks and their creditors prior to 2008 (under Republican regimes), and will do so again the next time megabanks get into trouble. Without strong regulations, smaller banks, or both, the bailout cycle is inevitable. But Republicans have not only pledged to set Wall Street loose, they’ve vowed not to clean-up the economic mess that megabanks create. That’s what their much-ballyhooed cap on federal spending means. When Wall Street sets the economy on fire, we’ll let it burn–if that means home, your job, or your retirement, then so be it. Both political parties court Wall Street campaign cash, and Republicans have been extremely successful at securing that funding. Take a look at the 90 most flagrant Wall Street Cronies in Congress –everyone who voted for the bank bailout in 2008, but opposed reforming Big Finance in 2010 (full table at the end of the post). The list doesn’t include every Wall Street servant on Capitol Hill, only the most obvious offenders. T his Coalition of Wall Street Cronies includes 81 Republicans, and just about every member of the Republican leadership who showed up to roll out the “Pledge To America.” In the House, it includes Minority Leader John Boehner, R-Ohio, and Minority Whip Eric Cantor, R-Va., while the Senate brings in Minority Leader Mitch McConnell, R-Ky., Minority Whip Jon Kyl, R-Az., Republican Conference Chairman Lamar Alexander, R-Tenn., Republican Policy Committee Chairman John Thune, R-S.D., and National Republican Senatorial Committee Chairman John Cornyn, R-Texas. The full list of Financial Miscreants is at the end of this post. What does “The Pledge” actually say about the financial crisis? Repeatedly disproven drivel : “Fannie Mae and Freddie Mac . . . triggered the financial meltdown by giving too many high risk loans to people who couldn’t afford them.” That’s not what happened . Private-sector banks issued subprime loans. Private-sector investors bought up these garbage mortgages in the form of mortgage-backed securities and collateralized debt obligations (CDOs). They lobbied hard to keep consumer protections at bay and to lift leverage limits that prevented them from betting too much on the housing market. After a few years of crazy, irrational profits in the private sector, Fannie and Freddie caught on to the scam, lobbied the Bush administration to adjust their regulations, and began buying up mortgage-backed securities in order to compete with Wall Street. This behavior was disgusting, but it did not cause the subprime crisis, the housing bubble or the Wall Street crash. All of those were created and catalyzed by Wall Street. Fannie and Freddie’s basic function–buying up mortgages and securities–made them totally divorced from any losses at big banks. They didn’t push the crisis onto the banks, they belatedly chose to take part in the crisis created by banks. Even today, only about 14 percent of seriously delinquent mortgages at Fannie and Freddie are subprime. None of this turns Fannie and Freddie executives into good guys–they were reckless scumbags who cost taxpayers billions. But if you’re going to demand major structural reform of Fannie and Freddie (and you should), then you should demand much further-reaching reform of the Wall Street casino that actually wrecked the economy. Best of all, Republicans pledge to “fight efforts to use a national crisis for political gain.” If the Republican “Pledge” isn’t a cynical exploitation of a national jobs crisis for political gain, I don’t know what could possibly qualify as cynical exploitation. Conservatives created the crisis with deregulatory economic policies, and now want to use the crisis not to fix things, but to deregulate further . I’ve been very critical of both President Obama and Congressional Democrats for being overly timid about financial reform and refusing to take the prospect of another near-term crash seriously. This is not a partisan defense of Democrats– to be sure, some of them are still behaving very badly . This is a defense of financial sanity, something that the Republican Party has just pledged to erase. Wall Street’s Cronies are listed below. Senator 2010 Wall Street Cash Career Wall Street Cash Sen. Lamar Alexander (R-TN) $1,600,000 $4,900,000 Sen. Robert Bennett (R-UT) $1,500,000 $2,600,000 Sen. Kit Bond (R-MO) $333,600 $3,300,000 Sen. Richard Burr (R-NC) $1,500,000 $3,300,000 Sen. Saxby Chambliss (R-GA) $2,500,000 $3,500,000 Sen. Tom Coburn (R-OK) $451,700 $1,200,000 Sen. Bob Corker (R-TN) $3,100,000 $3,300,000 Sen. John Cornyn (R-TX) $3,200,000 $4,700,000 Sen. John Ensign (R-NV) $1,300,000 $2,600,000 Sen. Lindsey Graham (R-SC) $1,100,000 $2,000,000 Sen. Judd Gregg (R-NH) $233,200 $1,100,000 Sen. Orrin Hatch (R-UT) $1,400,000 $2,600,000 Sen. Kay Bailey Hutchison (R-TX) $1,400,000 $4,700,000 Sen. Johnny Isakson (R-GA) $1,500,000 $4,200,000 Sen. John Kyl (R-AZ) $2,800,000 $3,800,000 Sen. Dick Lugar (R-IN) $412,200 $2,500,000 Sen. John McCain (R-AZ) $947,600 $34,000,000 Sen. Mitch McConnell (R-KY) $4,300,000 $5,300,000 Sen. Lisa Murkowski (R-AK) $268,200 $909,700 Sen. John Thune (R-SD) $1,600,000 $3,900,000 Sen. George Voinovich (R-OH) $435,200 $2,800,000 21 Republicans 0 Democrats Senate Total $31,881,700 97,209,700 House Member 2010 Wall Street Cash Career Wall Street Cash Rep. Rodney Alexander, R-La. $106,500 $422,300 Rep. Spencer Bachus, R-Ala. $611,600 $4,400,000 Rep. Gresham Barrett, R-S.C. $20,400 $806,700 Rep. Marion Berry, D-Ark. $24,900 $663,700 Rep. Judy Biggert, R-Ill. $395,000 $1,900,000 Rep. Roy Blunt, R-Mo. $1,200,000 $3,800,000 Rep. John Boehner, R-Ohio $1,300,000 $3,700,000 Rep. Jo Bonner, R-Ala. $90,400 $702,200 Rep. Mary Bono Mack, R-Calif. $190,000 $733,400 Rep. John Boozman, R-Ark. $257,700 $491,000 Rep. Dan Boren, D-Okla. $123,100 $722,200 Rep. Rick Boucher, D-Va. $92,700 $1,400,000 Rep. Charles Boustany Jr, R-La. $226,300 $934,600 Rep. Kevin Brady, R-Texas $157,000 $840,500 Rep. Henry Brown, R-S.C. $35,700 $494,000 Rep. Vernon Buchanan, R-Fla. $336,800 $1,400,000 Rep. Ken Calvert, R-Calif. $180,300 $940,300 Rep. Dave Camp, R-Mich. $588,000 $1,700,000 Rep. John Campbell, R-Calif. $413,400 $1,200,000 Rep. Eric Cantor, R-Va. $2,100,000 $4,400,000 Rep. Mike Castle, R-Del. $749,100 $3,200,000 Rep. Howard Coble, R-N.C. $23,400 $502,500 Rep. Tom Cole, R-Okla. $110,000 $686,000 Rep. Mike Conaway, R-Texas $161,500 $711,800 Rep. Ander Crenshaw, R-Fla. $86,100 $717,000 Rep. Henry Cuellar, D-Texas $90,600 $606,900 Rep. Charlie Dent, R-Pa. $177,900 $881,000 Rep. Chet Edwards, D-Texas $324,200 $1,900,000 Rep.Vernon Ehlers, R-Mich. $8,500 $292,200 Rep. Jo Ann Emerson, R-Mo. $143,900 $904,400 Rep. Mary Fallin, R-Okla ($1,000) $340,700 Rep. Rodney Frelinghuysen, R-N.J. $86,200 $840,300 Rep. Jim Gerlach, R-Pa. $251,600 $1,800,000 Rep. Kay Granger, R-Texas $140,000 $1,100,000 Rep. Wally Herger, R-Calif. $171,500 $1,100,000 Rep. Peter Hoekstra, R-Mich. ($1,000) $300,600 Rep. Bob Inglis, R-S.C. 0 $572,800 Rep. Peter King, R-N.Y. $173,900 $1,600,000 Rep. Mark Kirk, R-Ill. $1,900,000 $4,200,000 Rep. John Kline, R-Minn $170,900 $989,100 Rep. Jerry Lewis, R-Calif. $31,800 $748,000 Rep. Daniel E. Lungren, R-Calif. $147,700 $622,500 Rep. Howard McKeon, R-Calif. $132,100 $1,100,000 Rep. Gary Miller, R-Calif. $144,500 $902,000 Rep. Harry Mitchell, D-Ariz. $130,900 $558,000 Rep. Sue Myrick, R-S.C. $93,600 $1,200,000 Rep. Soloman Ortiz, D-Texas $40,200 $381,700 Rep. George Radanovich, R-Calif. $24,900 $462,000 Rep. Mike Rogers, R-Ala. $128,200 $1,000,000 Rep. Hal Rogers, R-Ky. $50,200 $468,000 Rep. Ileana Ros-Lehtinen, R-Fla. $127,000 $986,000 Rep. Paul Ryan, R-Wis. $531,500 $1,900,000 Rep. Jean Schmidt, R-Ohio $121,900 $519,700 Rep. John Shadegg, R-Ariz. $39,700 $1,200,000 Rep. Bill Shuster, R-Pa. $30,700 $403,600 Rep. Mike Simpson, R-Ind. $20,500 $266,900 Rep. Ike Skelton, D-Mo. $112,500 $524,200 Rep. Lamar Smith, R-Texas $258,900 $1,300,000 Rep. Mark Souder, R-Ind. $40,500 $405,800 Rep. Zack Space, D-Ohio $169,300 $476,300 Rep. John Sullivan, R-Okla. $79,200 $494,800 Rep. Lee Terry, R-Neb. $202,600 $1,400,000 Rep. Mac Thornberry, R-Texas $42,500 $603,400 Rep. Patrick Tiberi, R-Ohio $555,500 $2,800,000 Rep. Fred Upton, R-Mich. $81,700 $929,400 Rep. Greg Walden, R-Ore. $180,700 $732,400 Rep. Zach Wamp, R-Tenn. 0 $715,700 Rep. Joe Wilson, R-S.C. $155,500 $580,200 Rep. Frank Wolf, R-Va. $90,400 $1,100,000 60 Republicans $15,873,400 $72,443,800 9 Democrats $1,108,400 $7,233,000 House Total $16,981,800 $79,676,800

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News Corp Gave $1 Million To Chamber Of Commerce Just This Summer: Report

October 1, 2010

News Corp., the parent company of Fox News, contributed $1 million this summer to the U.S. Chamber of Commerce, the business lobby that has been running an aggressive campaign in support of the Republican effort to retake Congress, a source close to the company told POLITICO. It was the second $1 million contribution the company has made this election cycle to a GOP-aligned group. In late June it gave that amount to the Republican Governors Association. The parent companies of other media companies such as Disney (which owns ABC) and General Electric (which owns NBC) have also made political contributions, but typically in far smaller chunks, and split between Democrats and Republicans.

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David Isenberg: The State Department Takes Charge: Be Afraid, Be Very Afraid

September 24, 2010

Yesterday the House Committee on Oversight and Government Reform held an important and under covered hearing entitled “” Transition in Iraq: Is the State Department Prepared to Take the Lead? ” The question is simply whether the State Department is up to the job as duties formerly performed by the U.S. military are transferred to the State Department. As Committee Chairman Edolphus Towns asked in his opening statement . The State Department will take over many functions that are inherently military and for which State has little or no expertise. This raises important, practical questions. Who will provide security for State Department employees? Who will recover personnel who are wounded or killed? Who will provide convoy security? Who will provide counter-fire in rocket, artillery, and mortar attacks? Who will recover damaged vehicles and downed aircraft? Who will provide explosives disposal? Indeed, Iraq has not stopped being a dangerous place. IED are still going off. Firefights still happen. Just this past Sunday six car bombings in Baghdad and a suicide bombing in Fallujah killed 37 people and wounded more than 100 others. Is there reason to be concerned ? Yes, according to the witnesses. Consider what Michael Thibault, Co-Chairman and Grant Green, Commissioner, of the Commission on Wartime Contracting in Iraq and Afghanistan, said in their statement: Commissioner Green’s concern for the Defense-to-State transition in Iraq was validated by our June 21, 2010, Capitol Hill hearing, “Private Security Contractors in Iraq: Where are we going?” Among the troubling testimony we heard that day were these data points: (1) The Department of State estimated that, without U.S. military support, it would need to raise its private-security contractor force in Iraq from 2,700 to between 6,000 and 7,000 people; (2) Under Secretary of State Patrick Kennedy had written to the Department of Defense on April 7, 2010, to request a substantial amount of military equipment, plus continued access to the Army’s LOGCAP logistics contract and continued food-and-fuel supply through the Defense Logistics Agency; and (3) DoD’s Joint Staff had not yet forwarded that request with a recommendation to the Office of the Secretary of Defense. These facts troubled us for several reasons. First, even if State could obtain the funds for more than doubling its private-security force, it is not clear that it has the trained personnel to manage and oversee contract performance of a kind that has already shown the potential for creating tragic incidents and frayed relations with host countries. Second, Ambassador Kennedy’s request highlighted the enormous reliance that State was obliged to place on the U.S. military in a wartime setting–14 critical security-related functions, logistical support, food and fuel, and about 1,000 other detailed tasks. Third, any DoD delay in processing State’s request could prolong uncertainties, promote reliance on contractors for work previously performed by the U.S. military and DoD, and potentially create unacceptable safety risks to American government and contractor personnel as military capabilities disappear in the drawdown process. As we reviewed the results of our hearing and the supplemental information that flowed in afterwards, our concerns rose. On July 12, 2010, the Commission released a unanimous, bipartisan Special Report #3, “Better planning for Defense-to-State transition in Iraq needed to avoid mistakes and waste.” We submitted the report to Congress, distributed it widely to interested parties within and outside of government, discussed its findings with print and broadcast media, and posted it on the Commission’s Internet site, www.wartimecontracting.gov. We have included a copy of the report with this statement, and we respectfully request that it be made part of the record of today’s hearing. Unfortunately, the advent of autumn has not eased the concerns we reported in the summer. We appreciate that the transition issues in Iraq are vast, complicated, and not amenable to quick and easy fixes. We are aware of and assured that working groups have been busy here and in theater discussing these issues. Lieutenant General Kathleen Gainey, the Director for Logistics, J4 of the Joint Staff, tells us that a decision package has been forwarded to the Office of the Secretary of Defense through the Under Secretary for Policy. Nonetheless, it is now nearly six months since Ambassador Kennedy’s formal request for assistance to the Department of Defense. When we checked earlier this week, no decision had yet been communicated. Specifically, State Department leadership informed us two days ago that their request for DoD support remained outstanding and that they have been compelled to pursue two separate contracting strategies simultaneously–one that assumes the requested DoD support, while the other develops a separate and greatly expanded contractor workforce to replace functions previously performed by DoD. The need to develop two separate plans is simply the result of the Department of Defense’s reluctance to articulate where and how they can best support the Defense-to-State transition in Iraq. What are the implications for private military and security contractors? This transition limbo has other deep implications. It raises the serious risk that State will be required to undertake a very large, hurried, expensive, and unprecedented exercise in contracting unless some change is negotiated in the Security Agreement or unless the Government of Iraq demonstrates serious capability and intent to provide the normal array of host-nation security and commercial services. Further, even if State meets the resource and funding challenge of greatly enlarging its security contractor forces, it still risks the policy and political consequences of having private companies performing potentially inherently governmental functions that have been previously performed by the U.S. military. Another significant implication is that the great, lingering uncertainty about the Defense-to-State transition indicates a failure to take a “whole-of-government approach” to contingency operations. Activities in Iraq and Afghanistan involve hundreds of thousands of U.S. military and federal civilian employees from Defense, State, the Agency for International Development, Treasury, Justice, Agriculture, and other departments; American, host-country, and third-country contractors; and a variety of non-governmental and international organizations. But as we and other organizations have observed, a lack of transparency, visibility, and basic data–not to mention the lack of a lead coordinating agency for contingency operations–has caused or contributed to duplication, gaps, and cross-purposes, and has permitted unnecessary incidents of waste, fraud, and abuse. Perhaps the other witness had a more optimistic view? Alas, only in our dreams. Here is an excerpt from the testimony of Stuart W. Bowen, Jr., Inspector General, Office of the Special Inspector General for Iraq Reconstruction My office’s previous reporting on State’s management practices in large Iraq programs raises concerns about whether State will be able to effectively manage both the very significant life support and security tasks (many of which have been provided by the Department of Defense (Defense)) and the diverse ongoing assistance programs, without risking the loss of taxpayer dollars to waste. I do not have in mind simply the potential losses that could arise from weak program, contract, or grant management, which SIGIR audits previously uncovered. It may prove wasteful to keep civilian employees in Iraq and fund assistance programs simply because, if security conditions prevent civilian travel, then oversight of assistance programs could become impossible. We recognize that State is relatively new to large-scale program, contract, and grant management. The projects it has undertaken in Iraq – and the projects it will inherit from other agencies, as they leave – are many times greater than those it has traditionally managed. It takes time to nurture an organizational culture that respects the need for planning and to develop a workforce with appropriate skills. State needs to promptly address this issue. It does seem clear that a relatively modest adjustment of State’s budget priorities could make an enormous difference in the quality of State’s project, contract, and grant administration. That is, spend more on oversight. … As discussed by the Commission [on Wartime Contracting} in its report, the U.S. Embassy in Iraq has been relying on the Defense Logistics Civil Augmentation Program (LOGCAP) contract to provide its employees necessary life support. The contract is a U.S. Department of the Army (Army) program that preplans for the use of private resources in support of worldwide contingency operations. In the event that U.S. forces deploy, contractor support is available to commanders on a cost-plus-award-fee basis. As SIGIR reported in October 2007, LOGCAP is a contingency contract and thus is considered “a contract of last resort” for customers (because of the potential additional costs arising from its noncompetitive aspects). We noted that contingency contracts are primarily designed for areas where emerging requirements are the norm, rapid response is required, and/or conditions are such that normal sustainment contracts are not competitively available. We noted that, once conditions stabilize and a reasonable determination can be made as to the quantity and type of contract work that will be required to support a mission, customers should transition from contingency contracts to a more normal, cost-effective contract. We recommended that, when security conditions in Iraq allow, the Department should consider transitioning from the Army’s LOGCAP contract for life support of the U.S. Embassy-Iraq mission to a State-managed life support contract. Such a change would allow for more competitive contracting in the longer term and may be desirable from the standpoint of cost effectiveness. We believe that when security conditions permit, State should take the step we recommended. However, at this time, for the reasons that the Commission recommends, State and Defense should continue to employ the LOGCAP contract to support State in Iraq; if Congressional action is needed to facilitate this eventuality, it should be taken. We have not analyzed the question of how State would acquire the range of security services the Commission believes may be necessary for Iraq, but our review of other aspects of State’s business practices raises concerns about capacity. In broad terms, State’s contract administration and enforcement efforts need strengthening. State should plan to expand its efforts by employing the most qualified contracting professionals in government for help on these acquisition projects, at least in the near term. We may be waiting a long time before security conditions allow what Mr. Bowen recommends. At my request I asked Robert Young Pelton, author of Licensed To Kill , one of the better books on security contracting in Iraq, his thoughts. He emailed me back that: The chatter behind the scenes is that Baghdad is not the place you want to be posted to next year. Triple Canopy is allegedly 30 percent undermanned and DynCorp according to scuttlebutt has yet to get anything in the air. The current push to double hired guns also comes after Blackwater was dropped and others were asked to fill the gap. The turmoil in protection services began not because Blackwater gunned down 17 Iraqis, but because the State Dept was frozen by the Iraqi government. Condi thought it would be cute to flush BW down the drain but was wise enough to keep them in place under different names. But Hillary nuked them ten days after the inauguration. The irony in all this is that HIllary Clinton who once sponsored legislation to ban PMC’s and specifically Blackwater finds herself at the head of the largest mercenary army in America’s history. We have yet to actually see if the U.S. government can operate in Baghdad without Erik Prince and Blackwater. Triple Canopy tried and failed before, resulting in a massive influx of BW in April of 2005 until 2009. We know from Leon Panetta the CIA can’t operate without Blackwater, I doubt the State Department is going to magically double their protection overnight without some serious teething problems. Now that Erik has packed up and taken his toys with him. My advice to HIllary….don’t go to Baghdad.

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Gulf Coast Tourism Hopes For Boost As Feds Allow Fishing Of Red Snapper, Normally Off Limits In Fall

September 22, 2010

ORANGE BEACH, Ala. — The Gulf Coast’s tourism industry is betting on red snapper to survive the winter. In an unusual move, the federal government is allowing fall fishing of the popular schooling snapper, a favorite for anglers who missed nearly an entire summer of saltwater fishing because of the BP oil spill. Enthusiasts typically flock to the Gulf to catch red snapper during the summer, and the fish is off limits later in the year. But the National Oceanic and Atmospheric Administration announced Tuesday it was allowing snapper fishing over eight three-day weekends beginning Oct. 1. In coastal areas hardest-hit by the oil, the special season is more about tourism dollars than seafood. Tackle shops, restaurants, hotels and stores that suffered steep declines in revenue because of the Gulf of Mexico gusher are hoping for a big boost headed into what is historically the slowest season of the year. “It’s not going to save the summer, but it’s certainly going to help put cash in the drawers and get people through the winter,” said Mike Foster, a spokesman for the Alabama Gulf Coast Convention and Visitors Bureau. Danny Pitalo’s small tackle shop in Biloxi, Miss., depends heavily on coastal visitors for business, and he said the fall snapper season could help keep him going. “It will be a big help for us,” said Pitalo, whose shop is still operating out of a trailer because of damage from Hurricane Katrina five years ago. “Our tackle business is gone, our tournaments are gone. The charter season is pretty much gone.” Red snapper seasons in the Gulf are based on weight quotas. This year’s limit was about 6.9 million pounds, with commercial boats allowed to catch 51 percent and recreational boats allowed to harvest the rest. The regular season opened June 1, and plenty of snapper were caught off the coasts of Florida and Texas before it ended in late July. But fishery experts estimate only one-third of the quota set aside for recreational anglers was harvested since so much of the Gulf was closed because of the oil spill. Peter Hood, a federal fishery biologist, said estimates show about two-thirds of the recreational limit is still waiting to be caught. That means an estimated 2.2 million pounds of red snapper are available this fall in areas with pent-up demand like Alabama, Mississippi and Louisiana. Repeated testing hasn’t shown any spill-related contamination in fish taken from areas that have been reopened for angling, Hood said, and experts don’t expect any problems with red snapper. Johnny Greene, a charter captain based at Orange Beach Marina on the Alabama coast, said some boat operators aren’t interested in the fall snapper season because they made so much money off a BP program that paid crews thousands of dollars each week to scout for oil in Gulf waters. “(And) some people are so far behind they say there’s nothing that can help them,” he said. “Personally, I think it’s a really good thing.” Tourist revenues were down as much as 50 percent on the Alabama coast because of the oil spill, and that contributed to a 10 percent decline in tourism statewide, said Lee Sentell, director of the Alabama Tourism Department. The state spent about $300,000 on promotions for the beach before Labor Day, and it has a TV commercial geared toward fishing that will likely air this fall in conjunction with the red snapper season, he said. Sen. Mary Landrieu, D-La., said the red snapper season was a commonsense step toward bringing business back to charter captains. Anglers are allowed to catch a maximum of two red snapper a day with a minimum length of 16 inches on Fridays, Saturday and Sundays until Nov. 22, when the season closes.

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Richard Shelby, GOP Leader, Wants To Overhaul Consumer Agency

September 20, 2010

WASHINGTON (Reuters) — Republicans will reopen the broad Wall Street reform law and overhaul the newly created consumer protection bureau if they regain control of Congress after the November elections, a leading lawmaker said on Monday. Richard Shelby, the top Republican on the powerful Senate Banking Committee, said lawmakers must revisit the legislation enacted this summer, which is the broadest overhaul of financial rules since the Great Depression.

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The Recession Is OVER, Says Economic Panel

September 20, 2010

(AP, JEANNINE AVERSA): It’s official: The longest recession the country has endured since World War II ended in June 2009, according to a group that dates the beginning and end of recessions. The National Bureau of Economic Research, a panel of academic economists based in Cambridge, Mass., says the recession lasted 18 months. It started in December 2007 and ended in June 2009. That was the longest of any recession since World War II. Previously the longest postwar downturns were those in 1973-1975 and in 1981-1982. Both of those lasted 16 months. The decision makes official what many economists have believed for some time, that the recession ended in the summer of 2009. The economy started growing again in the July-to-September quarter of 2009, after a record four straight quarters of declines. Thus, the April-to-June quarter of 2009, marked the last quarter when the economy was shrinking. At that time, it contracted just 0.7 percent, after suffering through much deeper declines. That factored into the NBER’s decision to pinpoint the end of the recession in June. Any future downturn in the economy would now mark the start of a new recession, not the continuation of the December 2007 recession, NBER said. That’s important because if the economy starts shrinking again, it could mark the onset of a “double-dip” recession. For many economists, the last time that happened was in 1981-82. The NBER normally takes its time in declaring a recession has started or ended. For instance, the NBER announced in December 2008 that the recession had actually started one year earlier, in December 2007. Similarly, it declared in July 2003 that the 2001 recession was over. It actually ended 20 months earlier, in November 2001. Its determination is of interest to economic historians – and political leaders. Recessions that occur on their watch pose political risks. In President George W. Bush’s eight years in office, the United States fell into two recessions. The first started in March 2001 and ended that November. The second one started in December 2007. NBER’s decision means little to ordinary Americans now muddling through a sluggish economic recovery and a weak jobs market. Unemployment is 9.6 percent and has been stuck at high levels since the recession ended. READ the NBER’s full release: sept2010

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Donors: Tax The Rich To Pay For Pakistan Flood Recovery

September 17, 2010

KARACHI, Pakistan — Pakistan’s plea for billions of dollars to recover from this summer’s floods has sparked pressure on the country to reform its dysfunctional tax system, which collects very little money, even from the rich. The country’s biggest donor, the United States, has issued one of the strongest warnings, saying the world will only be able to fund a quarter of the tens of billions of dollars it will take to rebuild – and it will be difficult to get American taxpayers to help if Pakistanis aren’t footing their share of the bill. But many economists fear the threats are hollow and the U.S. and others will once again bail out Pakistan without insisting on necessary economic reforms because the nuclear-armed country is so important in the war against al-Qaida and the Taliban. “Pakistan can say, ‘If you don’t help us, the economy crumbles, the Taliban takes over and there goes your war on terror,’” said Akbar Zaidi, an economist who recently published a report on Pakistan’s tax system for the Carnegie Endowment for International Peace. “They don’t want to alienate the government, so they will let them off the hook.” Despite years of international pressure, Pakistan has one of the lowest effective tax rates in the world, equal to about 9 percent of the value of the country’s economy, according to the Carnegie report. In contrast, the U.S. equivalent is more than three times as high at about 28 percent. One of the reasons Pakistan’s rate is so low is because many people avoid paying taxes. Fewer than 2 percent of the country’s 175 million citizens pay any income tax, according to the report. Also, some sectors of the economy like agriculture – a major money maker for the elite – are totally exempt from tax, and the rich have pushed to keep it that way. “A small elite comprised of the military, land owners, and the rising urban upper and middle classes, is loath to give up any of its wealth (some of which is illegally accumulated),” said the report. Ishrat Hussain, former head of the Pakistan central bank, estimated that better enforcement of current tax policies and the elimination of key exemptions should produce an effective tax rate of 15 percent – generating nearly $10 billion in additional revenue per year. That money would go a long way toward repairing devastation from the floods, which affected more than 18 million people and damaged and destroyed over 1.8 million homes. It would also provide the money necessary to begin fixing Pakistan’s crumbling school system and health infrastructure. “This is a time we have to tell people that we have to all pitch in and mobilize our own resources,” said Hussain. “Why should the international community come to your rescue if you are not doing your part of the bargain?” He said donors should keep up the pressure on Pakistan, but advised against directly linking reconstruction money to tax reform, predicting the move could backfire in a country where animosity toward the West, and the U.S. in particular, is extremely high. “It wouldn’t be a very smart move because people here would consider this as an intrusion on their sovereignty, and the debate would then be muddied,” said Hussain. The U.S. and other countries have donated around $1 billion for emergency relief, and international financial institutions have provided about $2.5 billion in emergency loans. Donors are scheduled to meet in New York this weekend to discuss raising additional aid. Washington has promised more money for reconstruction, but the U.S. special envoy to Pakistan, Richard Holbrooke, warned during a visit to the country this week that the international community could only fund about 25 percent of the bill. He said the U.S. would not condition reconstruction money on tax reform, but cautioned that American generosity has its limits. “I don’t want to withhold money they need, but I think we have to be clear that the Congress is going to be reluctant to give money if the money is filling in a gap because people are not paying taxes,” he said. Earlier this month, the International Monetary Fund held back more than $1 billion of funding because Pakistan had not met a number of economic criteria, including reforming its tax system. The money is part of a multibillion loan Pakistan took out in 2008 to stabilize its economy. It’s unclear if the IMF’s tough stance will last. The organization has provided funding to Pakistan in the past when it didn’t meet its loan criteria – a move that some Pakistani economists believe was driven by international pressure because of Pakistan’s strategic importance. Pakistan had promised the IMF it would introduce a new tax scheme in July – moving from a general sales tax to a value added tax – but ended up delaying it until the beginning of October because of disagreements between the central government and the provinces, especially Sindh province. Kaiser Bengali, a senior adviser to the Sindh chief minister who is responsible for negotiating the tax deal with Islamabad, said it seems unlikely that the government will be able to reconcile its differences with the province by the revised deadline. “I wouldn’t do things simply because the donors are asking me to do it,” said Bengali. If Pakistan does not reform its tax system and the donors fail to bail the country out, it is unclear how the nation would come up with the money necessary for reconstruction. The government has proposed a one-time tax on urban property and agricultural land not affected by the floods, but it is uncertain whether it will be implemented and how much money it would produce. Hussain, the former central bank chief, said that even if the one-time tax was implemented, he was worried the elite would simply use their influence to avoid paying anything as they have done in the past. “The system has given power to the thieves to monitor themselves,” he said. ___ Associated Press Writers Ashraf Khan in Karachi and Asif Shahzad in Islamabad contributed to this report.

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Elizabeth Warren To Lead Search For New Consumer Chief, Could ‘Pull A Dick Cheney’

September 16, 2010

In addition to being charged with forming the newly-created agency dedicated to protecting consumers from abusive financial products, Elizabeth Warren will lead the administration’s effort to find the first director of the nascent unit, the Huffington Post has learned. President Barack Obama will name Warren, a famed consumer advocate and passionate defender of the middle class, as one of his top advisers on Friday, creating a role inside the White House for the Harvard Law professor and bailout watchdog to lead the effort in forming the Bureau of Consumer Financial Protection. Warren, though, will not be named as his nominee for the Senate-confirmed, five-year post to lead the new entity — at least not yet. She will, however, lead the search to find the right person. Consumer advocates and several dozen members of Congress say she’s it. “Who knows? Maybe she’ll pull a Dick Cheney,” said one source familiar with the matter. Former Vice President Cheney was tapped by then-Gov. George W. Bush to lead his search for a running mate during the 2000 presidential campaign. Cheney settled on himself. The possibility of Obama picking Warren surged in recent days after Obama heaped praise on her last Friday and called her a “dear friend.” However, a day after word leaked Wednesday that Warren would be selected for this different role, news outlets including CBS News, citing the White House, reported that not only was it unlikely Warren would get the nod — she allegedly didn’t want the position in the first place. House Financial Services Chairman Barney Frank (D-Mass.) also said that Warren didn’t want the five-year role . Warren backers hold out hope that she remains on the short list of nominees for the permanent job, but CBS News reports that, “It is highly unlikely that Warren … will eventually be nominated to be director of the bureau.” According to CBS, Warren “is no longer on the list” for the long-term position. The reports could serve to undermine Warren before she even steps into the job. However, if it appears that she’ll ultimately deem herself the most qualified candidate for the permanent position — and her backers in Congress, the White House, and advocacy organizations that have the White House’s ear agree — Obama could very well end up choosing the middle class advocate. Support for Warren reached a fever pitch over the summer, as backers presented her as critical to both the success of the new agency and the financial reform effort as a whole. With a budget approaching $500 million and a staff expected to number in the hundreds, the agency represents the consolidation of a multitude of units inside government charged with protecting borrowers. It’s been touted as the capstone of the Obama administration’s effort to reform the nation’s broken financial system. Getting the right person in the job for the historic agency is key, experts and administration officials say. And Warren has long been touted as the natural choice for the position, given her advocacy on behalf of borrowers, her noted research into consumer debt and financial products, and the fact that she conceived the agency in a 2007 journal article. But Warren is seen as a polarizing figure. Her aggressive advocacy on behalf of working-class families has made her an enemy of lenders who favor less regulation and more opportunities for fee-based income, like excessive overdraft levies and credit card surcharges. Mortgages with exploding interest rates and well-hidden fees were particularly profitable for lenders during the boom, and Warren has fought against such practices. In her new role, Warren will be charged with getting the nascent agency on its feet and setting the tone for years to come. The White House isn’t expected to name a nominee for the directorship for months, sources say. ************************* Shahien Nasiripour is the business reporter for the Huffington Post. You can send him an e-mail ; bookmark his page ; subscribe to his RSS feed ; follow him on Twitter ; friend him on Facebook ; become a fan ; and/or get e-mail alerts when he reports the latest news. He can be reached at 646-274-2455.

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Elizabeth Warren To Lead Search For New Consumer Chief, Could ‘Pull A Dick Cheney’

September 16, 2010

In addition to being charged with forming the newly-created agency dedicated to protecting consumers from abusive financial products, Elizabeth Warren will lead the administration’s effort to find the first director of the nascent unit, the Huffington Post has learned. President Barack Obama will name Warren, a famed consumer advocate and passionate defender of the middle class, as one of his top advisers on Friday, creating a role inside the White House for the Harvard Law professor and bailout watchdog to lead the effort in forming the Bureau of Consumer Financial Protection. Warren, though, will not be named as his nominee for the Senate-confirmed, five-year post to lead the new entity — at least not yet. She will, however, lead the search to find the right person. Consumer advocates and several dozen members of Congress say she’s it. “Who knows? Maybe she’ll pull a Dick Cheney,” said one source familiar with the matter. Former Vice President Cheney was tapped by then-Gov. George W. Bush to lead his search for a running mate during the 2000 presidential campaign. Cheney settled on himself. The possibility of Obama picking Warren surged in recent days after Obama heaped praise on her last Friday and called her a “dear friend.” However, a day after word leaked Wednesday that Warren would be selected for this different role, news outlets including CBS News, citing the White House, reported that not only was it unlikely Warren would get the nod — she allegedly didn’t want the position in the first place. House Financial Services Chairman Barney Frank (D-Mass.) also said that Warren didn’t want the five-year role . Warren backers hold out hope that she remains on the short list of nominees for the permanent job, but CBS News reports that, “It is highly unlikely that Warren … will eventually be nominated to be director of the bureau.” According to CBS, Warren “is no longer on the list” for the long-term position. The reports could serve to undermine Warren before she even steps into the job. However, if it appears that she’ll ultimately deem herself the most qualified candidate for the permanent position — and her backers in Congress, the White House, and advocacy organizations that have the White House’s ear agree — Obama could very well end up choosing the middle class advocate. Support for Warren reached a fever pitch over the summer, as backers presented her as critical to both the success of the new agency and the financial reform effort as a whole. With a budget approaching $500 million and a staff expected to number in the hundreds, the agency represents the consolidation of a multitude of units inside government charged with protecting borrowers. It’s been touted as the capstone of the Obama administration’s effort to reform the nation’s broken financial system. Getting the right person in the job for the historic agency is key, experts and administration officials say. And Warren has long been touted as the natural choice for the position, given her advocacy on behalf of borrowers, her noted research into consumer debt and financial products, and the fact that she conceived the agency in a 2007 journal article. But Warren is seen as a polarizing figure. Her aggressive advocacy on behalf of working-class families has made her an enemy of lenders who favor less regulation and more opportunities for fee-based income, like excessive overdraft levies and credit card surcharges. Mortgages with exploding interest rates and well-hidden fees were particularly profitable for lenders during the boom, and Warren has fought against such practices. In her new role, Warren will be charged with getting the nascent agency on its feet and setting the tone for years to come. The White House isn’t expected to name a nominee for the directorship for months, sources say. ************************* Shahien Nasiripour is the business reporter for the Huffington Post. You can send him an e-mail ; bookmark his page ; subscribe to his RSS feed ; follow him on Twitter ; friend him on Facebook ; become a fan ; and/or get e-mail alerts when he reports the latest news. He can be reached at 646-274-2455.

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