Even in an era of budget cuts, these government programs won’t die

I think scholarships are a reasonable use of government funds. Young people deserve good educations. But the farm subsidies are another story.

Even in an era of budget cuts, these government programs won’t die
THE WASHINGTON POST
By David A. Fahrenthold
April 20, 2011

The programs sound innocuous enough: One spends federal money to store cotton bales. Another offers scholars a chance to study Asian-American relations. Two others pay to market U.S. oranges in Asia and clean up abandoned coal mines.

But in Washington’s wonkier circles, these are the federal budget’s equivalent of Jason Voorhees, the hockey-masked movie villain who could take an ax in the skull and come back for the sequel.

They are the Line Items That Won’t Die.

In recent years, leaders in both parties — including, in some cases, presidents from both parties — have singled out these four programs, worth a total of about $337 million, to either be eliminated or lose millions in funding. But they have survived, again and again, thanks to powerful lobbies or high-placed patrons in Congress. Even this year, after Congress cut $38 billion from the budget, they live on.

Now, in the lull before the next budget battle, watchdog groups say these often-criticized programs show the difficulty of the task ahead.

“This is why Ronald Reagan said that a government program is the closest thing to eternal life that we’ve ever seen on Earth,” said Brian Riedl of the conservative Heritage Foundation. “If lawmakers can’t cut programs that cost a few million, how are they going to cut deficits that are going to be in the trillions?”

Among the survivors this year was the East-West Center, a Hono­lulu nonprofit that has long been one of the budget’s great immortals.

The center runs exchange programs for U.S. and Asian journalists and young professionals, conducts research and offers scholarships to study at the University of Hawaii. For 2010, President Obama’s budget proposed reducing its federal funding from $21 million to $12 million, arguing that this would encourage the center to seek other sources for money.

That went nowhere.

The center has a powerful ally in Congress: Sen. Daniel K. Inouye (D-Hawaii), the chairman of the Senate Appropriations Committee. Instead of shrinking by millions, the center’s subsidy went up by $2 million...

Buy American, overseas

At the Agriculture Department, the budget deal spared another untouchable: the Market Access Program.

The program costs about $200 million a year and pays to promote U.S. agricultural products in foreign markets. That could mean holding something as simple as a taste test in the aisles of Asian supermarkets, pitting California pistachios against Iranian ones.

In past years, this was one of the rare things that united Obama and the ultra-conservative Republican Study Committee.

The program’s “economic impact is unclear,” Obama’s 2011 budget said. It recommended a 20 percent cut.

“Taxpayers should not be forced to pick up the tab for this kind of corporate welfare,” said the GOP committee, whose members include 175 of 241 House Republicans. It recommended eliminating the whole thing.

But the program has powerful supporters: the U.S. farm lobby.

“It’s the government’s responsibility to help us counter the heavy subsidization enjoyed by our competitors,” said Michael Wootton, a senior vice president at Sunkist Growers and chairman of a coalition that has lobbied to keep the Market Access Program.

Sunkist, a nonprofit group of citrus growers that took in $1 billion in gross sales in fiscal 2010, got $4 million from the government through the program. Wootton said that advertising helps offset the benefits that foreign growers get from government subsidies and tariffs. “With that brand, and that identity, we’re able to effectively overcome the price differential” with cheaper foreign-produced products, Wootton said.

This year, Rep. Scott Garrett (R-N.J.) proposed a budget amendment that would have cut off the money for the program’s staff.

It never came up for a vote.

Quietly surviving

Other often-criticized programs have also survived without much debate. One of them, intended to clean up abandoned coal mines, sends millions every year to states that are finished cleaning up their highest-priority sites.

The Republican Study Committee has called for cutting this program. So did the bipartisan debt commission. So did Obama, starting in 2009.

“We cut $115 million from a program that pays states to clean up mines that have already been cleaned up,” Obama said the next year, as he laid out the reductions he planned in his budget.

It didn’t happen then. And it didn’t happen this year. The program, which state governments say they still need, was not altered by Congress.

Also unchanged: a program that pays cotton and peanut farmers to store their bales and bushels in warehouses. The idea is to let farmers keep their crop off the market while prices are low. The federal government will still budget $2 million a year, despite criticism from Obama and before him George W. Bush.

Not all of the budget’s immortals escaped serious cuts this year.

Congress eliminated $42 million for the Robert C. Byrd Honors Scholarship Program, named for the longtime senator from West Virginia. It cut $10 million from the National Drug Intelligence Center, a facility in Johnstown, Pa., promoted by House titan John P. Murtha (D-Pa.). And it took more than half the federal funds from the Denali Commission, an agency created by long-serving senator Ted Stevens (R-Alaska).

All three programs share one trait. Their champions in Congress — Byrd, Murtha and Stevens — all recently died.

Advisor to ex-NY comptroller gets prison sentence

Advisor to ex-NY comptroller gets prison sentence
Feb 17, 2011
Reuters

Henry "Hank" Morris, the chief political advisor to New York state's former comptroller, has been sentenced to one-and-a-third to four years in prison for "orchestrating" a pension kickback scheme, New York Attorney General Eric Schneiderman said on Thursday.

This is the maximum sentence under the law, Schneiderman said of the wide-ranging corruption probe into how Morris exploited his ties to Democratic Comptroller Alan Hevesi to reap millions of dollars in fees paid by firms seeking to invest the state's $132.8 billion pension fund.

"Today's sentencing decision by the Court sends a strong message to New Yorkers that those who abuse positions of power to line their own pockets will be held accountable by this office, Schneiderman, who inherited the probe when he took up his current post in January, said in a statement.

Last November, Morris plead guilty to a felony, forfeited $19 million of the fees he was paid by investment firms and money managers, and was permanently banned from New York's securities industry. This is the first sentencing decision resulting from the investigation.

Andrew Cuomo, a Democrat who was the attorney general before he became governor in January, led the probe and netted eight guilty pleas...

Workers toppled a dictator in Egypt, but might be silenced in Wisconsin

Workers toppled a dictator in Egypt, but might be silenced in Wisconsin
By Harold Meyerson
Washington Post
February 16, 2011

In Egypt, workers are having a revolutionary February. In the United States, by contrast, February is shaping up as the cruelest month workers have known in decades.

...But even as workers were helping topple the regime in Cairo, one state government in particular was moving to topple workers' organizations here in the United States. Last Friday, Scott Walker, Wisconsin's new Republican governor, proposed taking away most collective bargaining rights of public employees. Under his legislation, which has moved so swiftly through the newly Republican state legislature that it might come to a vote Thursday, the unions representing teachers, sanitation workers, doctors and nurses at public hospitals, and a host of other public employees, would lose the right to bargain over health coverage, pensions and other benefits. (To make his proposal more politically palatable, the governor exempted from his hit list the unions representing firefighters and police.) The only thing all other public-sector workers could bargain over would be their base wages, and given the fiscal restraints plaguing the states, that's hardly anything to bargain over at all.
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You might think that Walker came to this extreme measure after negotiations with public-sector unions had reached an impasse. In fact, he hasn't held such discussions. "I don't have anything to negotiate," Walker told the Milwaukee Journal Sentinel last week. To underscore just how accompli he considered his fait, he vowed to call in the National Guard if protesting workers walked off the job or disrupted state services...

Fresh conviction in Abramoff scandal: aide traded favors for World Series trip

Fresh conviction in Abramoff scandal: aide traded favors for World Series trip
Christian Science Monitor
By Warren Richey
February 10, 2011

A former congressional staff member was convicted on Thursday of charges that he accepted an all-expenses paid trip to the 2003 World Series in exchange for inserting amendments favorable to a company into the Federal Highway Bill.

Fraser Verrusio was found guilty of all three counts in his indictment following a 10-day trial in federal court in Washington, D.C.

The case is a spinoff from the investigation of former lobbyist Jack Abramoff. Mr. Verrusio’s conviction brings to 20 the number of lobbyists and public officials who have pleaded guilty or been convicted in the Abramoff scandal.

In addition to conspiring to accept an illegal gratuity and accepting that gratuity, Mr. Verrusio was convicted of failing to report the gifts on his financial disclosure statement...

72 super PACs spent $83.7 million on election, financial disclosure reports show

Industry giving to GOP House leadership
Washington Post
Jan. 21, 2011
The new House committee chairmen have in many cases received campaign donations from the industries their panels oversee.



72 super PACs spent $83.7 million on election, financial disclosure reports show
By T.W. Farnam
Washington Post
December 3, 2010

The newly created independent political groups known as super PACs, which raised and spent millions of dollars on last month's elections, drew much of their funding from private-equity partners and others in the financial industry, according to new financial disclosure reports.

The 72 super PACs, all formed this year, together spent $83.7 million on the election. The figures provide the best indication yet of the impact of recent Supreme Court decisions that opened the door for wealthy individuals and corporations to give unlimited contributions.

The financial disclosure reports also underscore the extent to which the flow of corporate money will be tied to political goals. Private-equity partners and hedge fund managers, for example, have a substantial stake in several issues before Congress, primarily the taxes they pay on their earnings.
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"Super PACs provide a means for the super wealthy to have even more influence and an even greater voice in the political process," said Meredith McGehee, a lobbyist for the Campaign Legal Center, which advocates for tighter regulation of money in politics.

American Crossroads, a conservative super PAC that outspent its peers, pulled in six- and seven-figure donations from the financial industry. That included $500,000 from Anne Dias-Griffin, founder of the Aragon Global Management hedge fund, and her husband, Kenneth Griffin, founder of the Citadel Investment Group hedge fund.

Crossroads, which was founded with the support of Bush administration adviser Karl Rove, raised $70 million, much of it used to support 10 Republican Senate candidates and 30 Republican House candidates...



Corporate contributions have surged for new Republican leaders in House
By Dan Eggen and T.W. Farnam
Washington Post
January 22, 2011

The new Republican leaders in the House have received millions of dollars in contributions from banks, health insurers and other major business interests, which are pressing for broad reversals of Democratic policies that affect corporations, according to disclosure records and interviews.

72 super PACs spent $83.7 million on election, financial disclosure reports show
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New Republican lawmakers are hiring lobbyists, despite campaign rhetoric
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Incoming GOP freshmen rapidly embracing big-money fundraisers
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Campaign cash: Who's spending where in 2010


Much of that money flowed to the GOP chairmen overseeing banking, energy and other key committees - leaders who will play a central role in setting the House agenda over the next two years.

The impetus behind such largess is simple: Many companies and industry groups hope House Speaker John A. Boehner (Ohio) and other Republicans will succeed in rolling back Democratic policies they find objectionable, including environmental and Wall Street regulations.

GOP lawmakers took their first step in that direction Wednesday by voting to repeal President Obama's health-care overhaul law. Major health-care firms and their employees gave Republican leaders at least $5 million over the past two years, including well over $2 million to Boehner and Majority Leader Eric Cantor (Va.), according to a Washington Post analysis of contribution data...



Petty Bickering Trumps Jobs Need as Republicans Vote to Repeal Health Care Reform
by Mike Hall
Jan 19, 2011

What do Republicans do with their first big chance as the U.S. House majority? Address the economy, create jobs? Nope. They vote to repeal health care reform. AFL-CIO President Richard Trumka says the action “signals that they won’t let go of old grudges to do the work of the people.”

The nation is in its 20th straight month with unemployment above 9 percent. The electorate in November told lawmakers to “focus less on petty partisan bickering and more on jobs, jobs, jobs,” says AFL-CIO President Richard Trumka.

But in their first significant action since taking majority control of the U.S. House, Republicans chose bickering instead of jobs and threw a huge hunk of red meat to their right-wing backers today by voting (245-189) to repeal the Affordable Care Act.

The action came, although repeal has no chance of succeeding—the Senate will not take the measure up and President Obama has said he would not sign it...

Will New Hampshire Supreme Court defend the 1st amendment or the mortgage company?

New Hampshire Court Tramples on Constitution, Reporter's Privilege, Section 230, What Have You
April 8th, 2009
by Sam Bayard


A reader recently tipped us off to a troubling ruling from a trial court in New Hampshire:

The Mortgage Specialists, Inc. v. Implode-Explode Heavy Industries, Inc., No. 08-E-0572 (N.H. Super. Ct. Mar. 11, 2009).

In the decision, Justice McHugh of the Superior Court for Rockingham County ordered the publishers of the popular mortgage industry watchdog site, The Mortgage Lender Implode-O-Meter ("ML-Implode"), to turn over the identity of an anonymous source who provided ML-Implode with a copy of a financial document prepared by The Mortgage Specialists, Inc. for submission to the New Hampshire Banking Department. The court also ordered ML-Implode to reveal the identity of an anonymous commenter who allegedly posted defamatory statements about the company and enjoined the website from re-posting the financial document or the allegedly defamatory comments.

Background

ML-Implode, founded by computer scientist and mathematician Aaron Krowne in 2007, tracks the financial health of mortgage lending companies. Krowne and ML-Implode were way ahead of the curve in recognizing the then-impending-now-catastrophic crisis in the housing market and mortgage industry. As Louise Story of the New York Times wrote in an article about the website last summer, these days "[t]he misery in the housing market is registering on the Implode-O-Meter." Without question, the website provides original reporting on one of the most critical issues facing the country today:

With the economy struggling, more financial companies, even well-known ones, are finding themselves on [ML-Implode's] fated list. When parts of Bear Stearns’s residential mortgage unit were sold to private equity investors, for instance, the Implode-O-Meter recorded the sale. And E*Trade Financial could not remove the link on its site to its mortgage division or change the recording on its mortgage division’s 1-800 number without the site chiming in.

The tips usually come anonymously from employees at the troubled mortgage companies. Critics of the site say some of the tips have been more gossip than reality. But the Implode-O-Meter often posts the phone recordings and company e-mail to back up the bad news coming out of places like Merrill Lynch, which in March fired nearly everyone at First Franklin Financial, a business it purchased in 2006. (Source)

The Mortgage Specialists, Inc. ("MSI") is one of the companies on ML-Implode's "Ailing/Watch List." In August 2008, ML-Implode reported that the New Hampshire and Massachusetts Banking Departments had issued temporary cease-and-desist orders against MSI in July. As part of this article, ML-Implode posted a copy of something MSI calls the "2007 Loan Chart," a document showing the number and monetary value of the company's 2007 loan transactions. ML-Implode says that the chart was "sent in by an informant and placed online by the Implode-O-Meter staff."

Additionally, in October 2008 a ML-Implode user going by the handle "Brianbattersby" posted comments on one of the site's forums, allegedly stating that the president of MSI "was caught for FRAUD in 2002 FOR SIGNING BORROWERS NAMES and bought his way out." Days later, "Brianbattersby" posted another negative comment about the company.

Counsel for MSI then contacted ML-Implode requesting that ML-Implode take down the 2007 Loan Chart and forum comments, and that it identify its anonymous source for the Loan Chart and the identity of the commenter. ML-Implode agreed to temporarily remove the Loan Chart and the forum comments, but refused to reveal its source or unmask "Brianbattersby." MSI then filed a petition for injunctive relief in New Hampshire state court, seeking to compel ML-Implode to permanently remove the materials and to disclose the identifying information it previously requested...




Citizen Media Law Project and Cyberlaw Clinic Urge New Hampshire Supreme Court to Defend First Amendment Rights of Mortgage Website
Cambridge, MA
June 23, 2009

The Citizen Media Law Project (CMLP), assisted by Harvard Law School’s Cyberlaw Clinic, urged the New Hampshire Supreme Court to defend the First Amendment rights of a website that covers mortgage industry news.

The CMLP, in conjunction with the Reporters Committee for Freedom of the Press (RCFP) and with the assistance of local counsel Paul Apple of Drummond Woodsum & MacMahon in Portsmouth, NH, submitted an amicus curiae brief in the case of The Mortgage Specialists, Inc. v. Implode-Explode Heavy Industries, Inc. The case involves Implode-Explode Heavy Industries, Inc., which runs a mortgage industry website that posted a New Hampshire Banking Department document...That document described certain business practices of the Mortgage Specialists, Inc., a lending company under investigation in New Hampshire and Massachusetts.

After the mortgage company discovered the disclosure, it sued the website, demanding that the document be removed and that the anonymous source be identified.

The Rockingham County Superior Court granted these requests, and the case is presently on appeal.

In their brief, the amici focused on a series of cases in which courts permitted the publication of confidential or controversial documents – from the U.S. Supreme Court in the famed Pentagon Papers case through recent cases involving recorded cell phone conversations and videos of police searches posted online...

The amici urged the New Hampshire Supreme Court to carefully consider the harm the Superior Court’s ruling would have on freedom of the press, noting in their brief that the publication of this document “is not unlawful in New Hampshire, and, even if it were, would nevertheless be fully protected speech under the First Amendment.”...

The CMLP was represented on the brief by the Cyberlaw Clinic. The CMLP and the Cyberlaw Clinic are both based at Harvard University’s Berkman Center for Internet & Society, an organization dedicated to studying the development of cyberspace...


About the Citizen Media Law Project

The Citizen Media Law Project, which is jointly affiliated with the Berkman Center for Internet & Society at Harvard University and the Center for Citizen Media, provides legal assistance, training, research, and other resources for individuals and organizations involved in online and citizen media. The CMLP endeavors to serve as a catalyst for creative thinking about the intersection of law and journalism on the Internet. Through the project’s website, www.citmedialaw.org, the active engagement of lawyers and scholars, and occasional sponsored conferences, project staff are working to build a community of lawyers, academics, and others who are interested in facilitating citizen participation in online media and protecting the legal rights of those engaged in speech on the Internet.

Gillian Tett studied J. P. Morgan and predicted financial meltdown

Gillian Tett is an assistant editor of the Financial Times.

'Fool's Gold': The Banking World's Responsibility (listen to radio interview)
Fresh Air from WHYY
May 14, 2009

Journalist Gillian Tett warned about the problems in the financial industry long before many of her colleagues. In her new book, Fool's Gold, Tett examines the global economic meltdown and the role J.P. Morgan played in creating and marketing risky and complex financial products.

A reporter with Financial Times since 1993, Tett was named British Business Journalist of the Year in 2008, and Journalist of the Year in March by the British Press Awards.

http://www.npr.org/templates/story/story.php?storyId=104130944


Excerpt: 'Fool's Gold'

Fools Gold



Fool's Gold: How the Bold Dream of a Small Tribe at J.P. Morgan Was Corrupted by Wall Street Greed and Unleashed a Catastrophe
By Gillian Tett
Hardcover, 304 pages
Free Press
List Price: $26.66




On half a mile of immaculate private beach, along Florida's fabled Gold Coast, sits the sugar-pink Boca Raton Hotel..

On one summer's weekend back in June 1994, a quite different clientele descended: several dozen young bankers from the offices of J.P. Morgan in New York, London, and Tokyo. They were there for an off-site meeting, called to discuss how the bank could grow its derivatives business in the next year... "It was in Boca where we started talking seriously about credit derivatives," recalls Peter Hancock, the British-born leader of the group...

They worked for the "swaps" department—a particular corner of the derivatives universe—which was one of the hottest, fastest-growing areas of finance. In the early 1980s, J.P. Morgan, along with several other venerable banks, had jumped into the newfangled derivatives field, and activity in the arcane business had exploded. By 1994, the total notional value of derivatives contracts on J.P. -Morgan's books was estimated to be $1.7 trillion, and derivatives activity was generating half of the -bank's trading revenue. In 1992-one year when J.P. Morgan broke out the number for public consumption-the total was $512 million.

More startling than those numbers was the fact that most members of the banking and wider investing world had absolutely no idea how derivatives were producing such phenomenal sums, let alone what so-called swaps groups actually did. Those who worked in the area tended to revel in its air of mystery.

By the time of the Boca meeting, most of the J.P. Morgan group were still under thirty years old; some had just left college...On Friday afternoon, they greeted each other with wild merriment and headed for the bars. Many had flown down from New York; a few had come from Tokyo; and a large contingent had flown over from London. Within minutes, drinking games got under way...Bill Winters, a jovial American who, at just thirty-one, was the second most senior official of them.

...The derivatives group was one of the most unruly but also most tightly knit teams. "We had real fun-there was a great spirit in the group back then," Winters would later recall with a wistful grin. When he and the rest of that little band looked back on those wild times, many said they were the happiest days of their lives.

[They had a good time ruining lives and melting down economies.]

One reason for that was the man running the team, Peter Hancock. At the age of thirty-five, he was only slightly older than many of the group, but he was their intellectual godfather. A large man, with thinning hair and clumsy, hairy hands, he exuded the genial air of a family doctor or university professor. Unlike many of those who came to dominate the complex finance world, Hancock sported no advanced degree in mathematics or science. Like most of the J.P. Morgan staff, he had joined the bank straight from getting his undergraduate degree... he especially loved developing elaborate theories about how to push money around the world in a more efficient manner...

The J.P. Morgan derivatives team was engaged in the banking equivalent of space travel. Computing power and high-order mathematics were taking finance far from its traditional bounds, and this small group of brilliant minds was charting the outer reaches of cyberfinance. Like scientists cracking the DNA code or splitting the atom, the J.P. Morgan swaps team believed their experiments in what bankers refer to as "innovation" — meaning the invention of bold new ways of generating returns — were solving the most foundational riddles of their discipline...

That stemmed in part from Hancock's intense focus on the science of people management. He was almost as fascinated by how to manage people for optimal performance as by financial flows.

The moment he was appointed head of the derivatives group, Hancock had started experimenting with his staff. One of his first missions was to overhaul how his sales team and the traders interacted. Against all tradition, he decided to give the sales force the authority to quote prices for complex deals, instead of relying on the traders...He then started inventing new systems of remuneration designed to discourage taking excessive risks or hugging brilliant projects too close to the vest. He wanted to encourage collaboration and longer-term thinking, rather than self-interested pursuit of short-term gains...

In later years, Hancock pushed his experimentation to unusual extremes. He hired a social anthropologist to study the corporate dynamics at the bank. He conducted firm-wide polls to ascertain which employees interacted most effectively with those from other departments, and he then used that data as a benchmark for assessing employee compensation, plotting it on complex, color-coded computer models. He was convinced that departments needed to interact closely with each other, so that they could swap ideas and monitor each other's risks. Silos, or fragmented departments, he believed, were lethal. At one stage he half-jokingly floated the idea of tracking employee emails, to measure the level of cross-departmental interaction in a scientific manner. The suggestion was blocked. "The human resources department thought I was barking mad!" he later recalled. "But if you want to create the conditions for innovation, people have to feel free to share ideas. You cannot have that if everyone is always fighting!"

One of Hancock's boldest experiments focused on the core group within the swaps team known as Investor Derivatives Marketing. The bankers attached to this team sat around a long desk under low ceilings on the third floor of the J.P. Morgan headquarters, and the group was somewhat anomalous in its responsibilities. Though some marketing of products to clients was done, the group acted more like an incubator for ideas that had no other obvious departmental home and handled a ragbag of products, including structured finance schemes linked to the insurance world and tax-minimizing products.

A few months before the meeting in Boca Raton, Hancock had approached Bill Demchak, an ambitious young banker with a good reputation around the bank, to run the IDM group. Determined to drive innovation, Hancock told him, "You will have to make at least half your revenues each year from a product which did not exist before!" By Wall Street standards, that was a truly peculiar mandate...

Demchak happily accepted the daunting mandate...

Demchak's razor-sharp mind dissected problems at lightning speed. A particular talent was lateral thought, pulling in ideas from other areas of banking...

Hancock installed another ambitious and driven banker in the London office of the team. Bill Winters, who had taken the breaking of his nose with such good cheer, also came from a relatively modest background by comparison to the Ivy League pedigrees of so many of the banking elite. He had studied at Colgate University in New York State, and joined the bank in the mid-1980s. He was blessed with good looks — female colleagues thought Winters looked a little like the actor George Clooney — but he preferred to stay out of the limelight...

Hancock first noticed Winters in the late 1980s, when he was working in the area of commodities derivatives.

"We sent him down to Mexico and somehow — I still don't know how — he persuaded the government to hedge half of its oil production and interest-rate exposure with us," Hancock recalled...Hancock appointed him to run the European side of the derivatives team with the expectation that the "two Bills," as their colleagues dubbed them, would work well together in tossing innovative ideas back and forth across the Atlantic.

Central to the swaps -team's quest now was to take the newfangled breed of financial products called derivatives into new terrain.

From FOOL'S GOLD by Gillian Tett. Copyright (c) 2009 by Gillian Tett. Reprinted by permission of Free Press, a Division of Simon & Schuster, Inc, NY.