« December 11, 2005 - December 17, 2005 | Main | December 25, 2005 - December 31, 2005 »
Christopher Brown-Humes reports in the Financial Times:
A big increase in share offerings from Russia and the Middle East will underpin a 5 per cent rise in global equity issuance next year, according to Morgan Stanley."There will be massive growth in emerging markets and Asia, while we expect activity in Europe and the US to be lower than in 2005," Emmanuel Guéroult, head of European equity coverage at the US investment bank, told the Financial Times. . .
A sharp increase in the number of Middle Eastern share offerings is expected next year. The Kuwait Finance House and Saudi Arabia's National Commercial Bank are both expected to be privatised, with share offerings exceeding $1bn. Initial public offerings are expected from the Saudi Arabian Mining Company, Qatar's Gulf Commercial Bank and Emirates Telecom. . . .
Morgan Stanley is forecasting that Russian equity offerings will be $10bn-$15bn next year, compared with about $6bn in 2005. The largest single offering will be the estimated $7.5bn-$10bn IPO of Rosneft, the Russian oil producer. VTB, the foreign trade bank, has said it hopes to sell shares worth up to $2bn. A spate of smaller issues are also in the offing.
"Recent offerings show Russia is moving beyond sales of oil, energy and telecoms companies. There is also much greater interest in Russian companies from domestic institutions and retail investors," said Mr Guéroult. The country's RTS share index has risen 79 per cent this year.
Posted by dan at 03:09 PM
Great article by Mark Maremont on the front page of today's Wall Street Journal on the obscene practice of shareholders compensating CEOs for taxes owed on their already obscene compensation:
Like most Americans, rank-and-file employees of Home Depot Inc. must reach into their own pockets to pay taxes.But not Robert Nardelli, the home-improvement retailer's chief executive. Under his employment contract, Home Depot picks up a big chunk of his federal and state income taxes. Specifically, the company is obliged to reimburse its CEO for taxes due on a slew of perks, including a high-end luxury car, his family's travel on Home Depot jets and forgiveness of a $10 million loan. Last year, these payments amounted to at least $3.3 million, topping Mr. Nardelli's $2 million base salary.
Amid soaring CEO compensation, a number of companies are paying extra sums to cover executives' personal tax bills. Many companies are paying taxes due on core elements of executive pay, such as stock grants, signing bonuses and severance packages. Others are reimbursing taxes on corporate perquisites, which are treated as income by the Internal Revenue Service. They run the gamut from personal travel aboard corporate jets to country-club memberships and shopping excursions.
"This smacks of Leona Helmsley-like treatment, that only little people pay taxes," says Patrick McGurn, an executive vice president of Institutional Shareholder Services Inc., an influential adviser to big investors that often critiques companies' corporate-governance practices. For these top executives, he says, companies "are removing taxes from the list of inevitable life experiences, leaving only death."
Details of the little-known payments, called "tax gross-ups," are often buried in impenetrable footnotes or obscure filings. In its 2005 proxy statement, Home Depot didn't disclose many of the perks it must give Mr. Nardelli, or that the company is required to reimburse him for taxes related to those perks. The company provided specifics of these benefits and the gross-ups in his employment agreement, which was attached to a 2001 regulatory filing. (Read Home Depot's filing.)
A spokesman for Atlanta-based Home Depot wouldn't discuss the details of Mr. Nardelli's compensation. In a written statement, the spokesman says: "Consistent with the company's philosophy of attracting and retaining the highest performing leadership available, gross-up payments are sometimes utilized as a part of compensation to achieve a net after-tax effect." He also says the company "fully complies" with disclosure rules.
According to a study done by compensation-research firm Equilar Inc., 52% of companies disclosed they paid gross-ups to one or more top executives last year, up from 38% in 2000. The study, which was done this month for The Wall Street Journal, examined the U.S.'s 100 largest companies by revenue and counted those for which public filings could be found in both periods.
Great piece.
Posted by dan at 01:49 PM
Jeff Bewkes, the just-promoted heir apparent at Time Warner, gets a nice big wet kiss from Martin Peers in the Wall Street Journal.
He's got great credentials and a great reputation:
"Mr. Bewkes, who has a master's degree in business administration from Stanford University, is regarded as a rare creature in the entertainment industry: someone who has both financial acumen and comfort with the creative side of the business.In an interview yesterday, Mr. Parsons, 57, said Mr. Bewkes was the most appropriate person to take his job when he eventually steps down. Now that Mr. Logan is retiring, Mr. Parsons said, Mr. Bewkes is "probably the most talented executive ... in the media and entertainment space and if he were ultimately to become my successor, I couldn't be happier.
He did a great job with HBO:
After stints as an executive at a California vineyard and Citibank, Mr. Bewkes joined HBO in 1979. He became chief financial officer in the mid-1980s, president in 1991 and CEO four years after that. Over the next seven years, HBO's profits quadrupled to nearly $800 million as the pay-cable channel broadened its programming mix to include not only Hollywood movies but new TV series made by HBO. Shows like "The Sopranos" and "Sex and the City," along with clever marketing, helped the channel create a hip, sophisticated brand that became the envy of the television world. These programs also generate huge revenues from DVD and rerun sales.
He's an all-around dude:
Married with two children, the tall and lanky Mr. Bewkes is an avid skier and sailor; on summer weekends, he likes to windsurf on Long Island Sound, near a weekend home he has in Connecticut.
And he's a skilled corporate bureaucrat:
In the competitive world of corporate politics, Mr. Bewkes has shown himself a canny player. He is also known for his impatience with corporate bureaucracy. And he brings a tough-minded approach to management: He played a crucial, markedly unsentimental role in Time Warner's sale of Warner Music Group last year -- a wrenching decision as the music group had long been a much-beloved core business, home of artists from Frank Sinatra to The Eagles.
Um, rewrite please? Time Warner sold Warner Music Group to Edgar Bronfman, Jr., and a group of private equity partners for $2.6 billion in cash in the fall of 2003.
In October, the company paid out $350 million in cash to its equity investors. And last May, it went public, giving the new owners a further opportunity to cash in.
As Carl Icahn puts it:
We believe that the sale of the Warner Music Group ("Warner Music")last year to a consortium of private equity buyers for $2.6 billion demonstrated both a lack of business judgment by the Board and Mr. Parsons and an inability to operate businesses efficiently. First, we believe the Company received a trough valuation and could not have chosen a worse time to sell this business given the state of the music industry at the time.In the ultimate embarrassment to Time Warner, Warner Music's current post-IPO enterprise value of over $4.7 billion, is an 81% increase over the sale price (before even taking into account that the buyer group had already recouped the equity portion of their investment through pre-IPO dividends).
Second, the fact that Warner Music had greater value to a group of financial investors than to the world's largest media company is difficult to conceive, yet the private equity group was able to find $250 million in cost savings in just one year of ownership, more than the trailing twelve month EBITDA of the business when Time Warner owned the company.
Rather than unloading this valuable asset, we believe that the Board should have challenged management regarding potential cost savings and forced management to turn this asset around. We believe Time Warner clearly would have created far more value and lessened the debt burden on the Company had it focused more on the operations of Warner Music than on unloading it for what proved to be a cut-rate price.
Perhaps the in-your-face executive should have been a bit more sentimental about Warner Music.
Posted by dan at 01:08 PM
There's an inverse relationship between the amount of publicity a hedge fund manager seeks and his returns.
Exhibit A. Bret Grabow, a callow 20-something hedge fund manager, was the subject of a Wall Street Journal page one article in 2004, in which he described his high-flying, jet-setting lifestyle.
Turns out the guy wasn't just cheesy. He was sleazy. Gregory Zuckerman reports:
The Securities and Exchange Commission accused hedge-fund trader Bret Grebow and manager Robert Massimi of operating a "Ponzi scheme" that bilked investors without actually trading on their behalf.In a complaint filed in federal court in the Southern District of New York, the SEC charged Mr. Grebow, 29 years old, and Mr. Massimi, 45, with securities fraud, alleging they "misappropriated more than $5.2 million" from about 80 investors in their HMC International LLC fund.
A judge granted the SEC's request to freeze the fund's remaining assets, whose value couldn't immediately be determined.
The SEC alleged that the Montvale, N.J., hedge fund used money from new investors to pay investors who were leaving the fund and also sent out false monthly statements as Mr. Grebow, who worked out of a Florida office, "was systematically looting the fund's trading account." The fund told investors it was trading daily, but it hadn't made any trades for some time, according to the complaint.
Mr. Grebow's attorney declined to comment. An attorney for Mr. Massimi, who is based in the New York area, said, "Mr. Massimi denies any wrongdoing and is himself a victim of the fraud perpetrated by Mr. Grebow."
"In the world of unregulated hedge funds, it can be hard to separate fact from fiction," said Mark Schonfeld, director of the SEC's Northeast regional office. "In this case, it was all a fiction. The defendants led a lavish lifestyle at their investors' expense."
Mr. Grebow was featured in a page-one article in The Wall Street Journal last year about financial professionals living the high life again. In that article, Mr. Grebow said he was so confident in stocks he was comfortable spending $160,000 on a Lamborghini and flying friends on privately chartered jets stocked with his favorite treats, including Cookie Crisp cereal and Jack Daniel's.
Posted by dan at 01:03 PM
The Pension Benefit Guaranty Corp. says 9.4% of pensions were frozen in 2003. And there's more to come.
Posted by dan at 12:59 PM
The Wall Street Journal reports that the workers at newspaper chain Knight-Ridder may be interested in owning the means of production:
"A union representing newpspaer workers said it is trying to pull together a 'worker-friendly' buyout of as many as nine newspapers owned by Knight Ridder Inc. . . .The Newspaper Guild-Communications Workers of America said it will seek financial backing from private-equity firms and explore joint bids with other partners."
If reporters think private equity owners will be less demanding about things like profit margins and costs than public stockholders, they could be in for a rude awakening.
Posted by dan at 12:44 PM
I'll be on Brian Lehrer's excellent show on WNYC at 10:00 a.m. this morning, discussing pensions, the transit strike, etc.
Posted by dan at 09:15 AM
My latest in Slate, on journalist/media mogul Steven Brill's registered traveller venture.
Posted by dan at 08:12 AM
Yesterday, on the reality-insulated Wall Street Journal editorial page, Stephen Moore argued that things have never been better for Americans -- rich, poor, and middle class.
Today, in the reality-infused news pages of the Wall Street Journal, Ruth Simon says: not so much.
Soaring house prices and higher mortgage rates have put homeownership out of reach for more people than at any time in more than a decade.Housing affordability in October sank to its lowest levels since 1991, according to the National Association of Realtors' Affordability Index, a widely followed measure of the average household's ability to buy a home at current interest rates. In some areas, including New York City, Los Angeles, San Diego, San Francisco and Miami, housing affordability has dropped to levels not seen since the early to mid-1980s, according to mortgage giant Fannie Mae.
Affordability has long been a problem for low-income home buyers. But as home prices have marched steadily higher in recent years, many buyers with healthier incomes also are being squeezed. Declining affordability mainly affects whether first-time home buyers will enter the market, but in some markets people who already own a home are finding it tough to trade up.
There are signs that the growing costs of homeownership are also beginning to take a toll on the housing market. "There's a systematic erosion of affordability," says David Seiders, chief economist of the National Association of Home Builders. That decline is "the main reason … the market is starting to cool." Mortgage applications fell to an 11-month low last week, the Mortgage Bankers Association reported yesterday, as applications to purchase homes declined . . .
Housing affordability fell nearly 9% in the third-quarter from the same period a year earlier, according to an analysis prepared for The Wall Street Journal by Moody's Economy.com, a unit of Moody's Corp., which adjusted the NAR Affordability Index for seasonal variations. Affordability dropped by more than 20% in nearly two-dozen markets, including Phoenix and Tucson, Ariz., Spokane, Wash., and Orlando and Lakeland, Fla., according to the study. "You have to go back 25 years to find a decline that is as significant on a percentage basis," says Mark Zandi, chief economist of Moody's Economy.com.
In Tucson, where affordability has fallen 23% over the past year, buyers in all price ranges are feeling the pinch, says Kevin Freadhoff, an agent with Long Realty Co. Mr. Freadhoff says he's currently working with eight couples who would like to buy their first home but have been priced out of the market and a dozen others who already own a home, but are having trouble trading up.
In Seattle, declining affordability is forcing many home buyers to accept longer commutes, says Jane Powers, a broker with Ewing & Clark Inc. It's also fueling price increases in outlying areas such as Bremerton, where affordability has fallen nearly 22% in the past year. And in Bergen County, N.J., where most starter homes are priced above $400,000, "prices have gone up to a point where it's pushing the first-time home buyer out of the market," says Margaret Foudy, manager of the Weichert Realtors office in Tenafly. That creates a "domino effect" as people who already own a home find it tougher to move up, says Ms. Foudy. . . .
In 57 of 379 metro areas nationwide, homes were so expensive in the third quarter that a family earning the median income couldn't afford the median-priced home based on traditional lending standards, according to Moody's Economy.com. Sixteen markets have joined the ranks of unaffordable areas over the past year, according to the analysis.
Posted by dan at 07:35 AM
Interesting article by James Areddy in yesterday's Wall Street Journal. China wants to move up the value chain from a consumer of commodities to a trader and price-setter of commodities.
SHANGHAI – China, the world's fastest-growing major economy, is hoping to turn its voracious appetite for raw materials to its advantage by using its heft as a consumer to get better prices.The long-range strategy, still in its infancy, calls for China to transform its young futures markets into global price setters for products ranging from oil to metals to cotton. In the shorter term, China hopes to overhaul its procurement system, better coordinating the many separate purchases it now makes in global markets, in part to avoid unwittingly bidding against itself.
China's heavy dependence on imported raw materials gives it a strong incentive to hold down prices. The country imports almost 30% of its oil, 45% of its iron ore and 44% of its requirement for 10 nonferrous metals, according to Zhu Zhixin, vice chairman of China's planning ministry and an outspoken advocate of overhauling the country's purchasing. But China's approach to the challenge shows that as it integrates itself into the global economy, it isn't willing to surrender entirely to market forces.
Futures markets allow buyers and sellers to limit their price risks by agreeing to exchange a commodity at a specified time in the future at an agreed-upon price. Chinese officials, however, view them largely as venues to control prices. "If we want to increase our competitiveness, then we must develop futures [markets] to grasp our right in setting prices for bulk commodities," Zhou Zhenqing, a member of the financial and economic committee of the National People's Congress, said earlier this month. . . .
Posted by dan at 07:26 AM
I don't usually make a practice of plugging my advertisers, but I'll make an exception in this case. The Enron documentary is now on sale in DVD form. I saw it, and it's quite good. It doesn't capture the complexity and intricacy of the fraud the way the book does, but it's funny, clever, and illuminating.
Posted by dan at 07:25 AM
It's official. Treasury Secretary has slipped the surly bonds of reality and is orbiting in the loonysphere. From Alison Fitzgerald of Bloomberg:
Dec. 21 (Bloomberg) -- President Bill Clinton left office in 2001 with a federal budget surplus of $127 billion. President George Bush ran a deficit of $319 billion in 2005. So who deserves more credit for fighting red ink?No question, says Treasury Secretary John Snow: It's his boss, Bush. Sipping a latte at a Starbucks coffee shop with reporters in Washington two days ago, he said that ``the president's legacy will be one of having significantly reduced the deficit in his time,'' and said Clinton's budget was a ``mirage'' and ``wasn't a real surplus.''
Snow said the Clinton surplus was inflated by a stock-price bubble and that Bush will be remembered for cutting the gap from a record $412 billion in the 2004 fiscal year.
Posted by dan at 07:22 AM
Nobel Laureate Edward Prescott has an op-ed in today's Wall Street Journal about tax rates. It's a coherent argument for greater simplicity and permanence in the tax code. But there's also a fair amount of junk in there, too.
A great deal of the piece deals with the temporary 15 percent taxes on capital gains and dividends. A capital gains tax of higher than 15 percent, in Prescott's view, would be horrible for the economy. And if the capital gains tax were to rise from 15 percent to 20 percent it would tamp down risk-taking, etc., etc. Prescott overlooks a basic fact about taxation on investment: a huge chunk of capital gains are already taxed at a rate much higher than 15 percent, and significantly higher than 20 percent. Short-term capital gains -- gains on assets held for less than a year -- are taxed as ordinary income. Depending on your income level, you could be paying 28 percent, or 33 percent, or 35 percent on capital gains.
In other words, in the last couple of years, a huge differential has opened in the taxation between short-term gains and long-term capital gains. If investors were wealth-seeking machines that were highly influenced by differential taxation rates -- as Prescott argues -- then you would think that the opening of this differential would have a huge impact on investing and trading behavior. People would avoid taking short-term capital gains at all costs, and seek only to take long-term capital gains. Of course, precisely the opposite has happened in the two years since the tax regime on capital gains changed. Trading volume on the exchanges has increased. Hundreds of billions of dollars have been funneled into hedge funds, virtually all of which are engaged in a frenzied, intense effort to reap short-term capital gains.
Prescott also slips into the intellectual dishonesty so common to this page, writing:
And this isn't about giving tax breaks to the rich. The Wall Street Journal recently published a piece by former Secretary of Commerce Don Evans, who noted that "nearly 60% of those paying capital gains taxes earn less than $50,000 a year, and 85% of capital gains taxpayers earn less than $100,000." In addition, he wrote that lower tax rates on savings and investment benefited 24 million families to the tune of about $950 on their 2004 taxes."
That's a nice way of playing with numbers. It may well be that 85 percent of the households that pay a capital gains tax of some sort earn less than $100,000. But that doesn't mean the benefits of capital gains tax cuts don't flow disproportionately to the ultra-rich. The real question to ask is: what percentage of capital gains taxes paid are paid by those earning less than $100,000. The answer: a heck of a lot less than 85 percent. In fact, it's a safe bet that people making more than $100,000 probably pay 90 percent or more of the capital gains taxes, because they get 90 percent or more of the nation's capital gains.
Yes, plenty of people own stock. More than half of the population, according to the Investment Company Institute. But most have comparatively small portfolios -- the median is about $65,000.
Next, he's on to the deficits.
But shouldn't we worry about federal deficits? Isn't it true that we need to raise the capital gains and dividends rate to capture more revenue and thus help close the widening deficit maw? The plain fact is that last fiscal year the debt-to-GDP ratio (broadly defined) went up only 0.2%. If the forecasted deficits over the next five years are correct, it will begin declining. Tax revenues will rise as economic activity continues to grow -- indeed, this has been the case in 2005. Besides, to raise tax rates and thereby dampen economic activity seems a perverse way to improve our economic situation, including our level of tax receipts -- 15% of something is better than 20% of nothing.
Now we're into serious doublespeak. We don't have to worry about extending tax cuts due to expire, Prescott argues, because if the current forecasts on deficits for the next five years are correct, the deficits will begin declining. Of course, the reason the current forecasts call for deficits to start declining in the out years is precisely because they presume the temporary tax cuts will disappear. Then there's the politico-economist's favorite friend: the false choice -- "15% of something is better than 20% of nothing."
He can't really be arguing that boosting the capital gains tax from 15 percent to 20 percent will forestall the creation of a single capital gain? Can he? Is he not aware that every day, investors gladly take capital gains and willingly pay far more than 20 percent on those gains?
Sigh.
Posted by dan at 10:12 AM
Delphi is taking a somewhat softer line toward the unions. Meanwhile, a potential acquirer that knows a thing or two about really cheap labor may be waiting in the wings. John Stoll, Simona Covel and Norihiko Shirouzu report in the Wall Street Journal. (Discussion question: how is it that a nine paragraph story has three bylines?)
"Delphi Corp. withdrew a cost-cutting contract proposal that had drawn harsh criticism from the auto-parts maker's unionized workers, easing somewhat the threat of a strike and signaling an increasingly influential role of top customer General Motors Corp.The Troy, Mich., company, which is under Chapter 11 bankruptcy-court protection, has sought to cut costs, citing competitors' lower labor costs. The terms Delphi offered last month, which would have reduced by about two-thirds the $65 an hour in wages and benefits Delphi's blue-collar employees make, drew outrage from the United Auto Workers and other labor groups. That fueled fears of a strike that might hurt both Delphi and GM.
Delphi also delayed filing a motion in U.S. Bankruptcy Court that would request throwing out the existing contract. The UAW greeted the moves with measured optimism, with UAW President Ron Gettelfinger calling the withdrawal of the contract proposal "certainly a step in the right direction." . . .
Separately, Chinese auto-parts supplier Wanxiang Group said it is interested in acquiring some of Delphi's assets in the U.S., although Wanxiang's U.S. operations chief said it was "way too early" to say whether the company would be able to gain parts of Delphi eventually.
"We have a keen interest" in taking over some of Delphi's U.S. assets, said the Wanxiang official, Pin Ni. But, he added, "We don't have a clear picture of what kind of assets might become available; we don't have any meaningful information to make a judgment at the moment."
Trade magazine Automotive News, quoting Wanxiang's chairman, Lu Guanqiu, reported yesterday that the company is in talks with Delphi about acquiring some of Delphi's U.S. assets. Mr. Ni said Wanxiang isn't in any dialogue with Delphi. Delphi spokesman Lindsey Williams declined to comment.
Posted by dan at 10:09 AM
It's been a good year for bankers, despite the steadily rising interest rates. As the Federal Deposit Insurance Corp. notes, there have been no bank failures in 2005. When was the last time a calendar year passed with no bank failures? A long time. The FDIC's website lets you browse back to 1991, and there's been at least one failure per year in each of those years.
Meanwhile, as Michael Schroeder reports in the Wall Street Journal, the federal government has agreed to boost the amount of deposits it will insure.
"After years of lobbying, bankers won an increase in federal deposit insurance for retirement accounts as well as regular savings accounts.But smaller banks were disappointed because they had sought more deposit protection.
The legislation will raise federal deposit insurance levels on retirement accounts to $250,000 from $100,000 and will gradually increase insurance ceilings on regular savings accounts from the current level of $100,000. The measure passed the House early yesterday morning and the Senate on Saturday. It is expected to be sent to President Bush for his signature soon. . . ."
It's possible that we've reached a new plateau of permanent prosperity, credit control and competence in the banking world. On the other hand, it's also possible that a prolonged period of ultra-low interest rates may have pushed lenders and, now, legislators, into an excess of confidence.
Posted by dan at 09:28 AM
My latest in Slate, on journalists' wages in New York.
Posted by dan at 08:02 AM
Who knew the world's hot new theocrat had such taste in music? The Associated Press reports:
"TEHRAN, Iran - Hard-line President Mahmoud Ahmadinejad has banned Western music from Iran's radio and TV stations, reviving one of the harshest cultural decrees from the early days of 1979 Islamic Revolution.Songs such as George Michael's "Careless Whisper," Eric Clapton's "Rush" and the Eagles' "Hotel California" have regularly accompanied Iranian broadcasts, as do tunes by saxophonist Kenny G.
But the official IRAN Persian daily reported Monday that Ahmadinejad, as head of Iran's Supreme Cultural Revolutionary Council, ordered the enactment of an October ruling by the council to ban Western music."
Uh-oh. So far, the Europeans have taken the news that Iran is developing news with aplomb. But now they're starting to ban cheesy western pop of the type that the Euros love. If Iran bans David Hasselhoff, I don't think the Germans will take it sitting down.
Posted by dan at 03:01 PM
Russell Gold has a chilling report in the Wall Street Journal on how the U.S. may be losing out in the global race for supplies of natural gas.
"Even with natural-gas prices surign to new heights and heating bills soaring across the U.S., much of the nation's import capacity remains idle.The nation has four onshore terminals for receiving and processing imported gas, and they are importint only about half th evolume they can handle. The reason: U.S. buyers are being aggressively outbid by Europeans and Asians for the limited number of cargoes available.
The suply crunch means imports wont cool the U.S. market and natural-gas prices would stay high -- and sensitive to weather changes - for years to come, even as the U.S. builds more terminals to handle overseas gas." . . . .
The theory was that if the U.S> the world's largest natural gas consumer, opened for imports, there would be tankers lining up to discharge their cargo. There was "a self-indulgent, myopic belief that if the U.S> builds a terminal, everyone wants to supply us. And that is what has been wrong," says James Jensen, an industry consultant in Weston, Mass."
Well worth reading.
Posted by dan at 09:10 AM
Bush friend and former Commerce Secretary Don Evans is reportedly considering an offer to become chairman of Rosnet, the oil company owned by the Russian government. The FT reports:
"Eyebrows would go up all over town," said a former National Security Council official involved with energy issues. "The fact that he would be cashing in his political connections is not the problem, but doing it in a foreign country and a country like Russia. People would quesiton whether he is just a figurehead and being used."
I guess when it comes to influence peddling, we're not quite in a global economy.
Posted by dan at 08:58 AM
The Republicans may like to think of themselves as the party of the wealthy. But in the Great Plains states, where the GOP has run up big margins in recent presidential campaigns, GOP is the party of the poor.
The Economist notes ($ required):
"No place so demonstrates the shaky economic state of rural AMerica as the northern Rockies and western Great Plains. Virtually all of the 20 poorest counties in aMerica, in terms of wages, are on the eastern flank of the Rockies or on the western Great Plains. Not one of the ten poorest counties in this region issued a housing permit in 2002. . .The area does include several pockets of wretched Native American poverty, but in most areas the poor are as white as a prairie snowstorm. . .
How does the region survive? For all the brouhaha about independence, it leans heavily on the federal government. In 2003, the governmetn spent an average of $10,2000 per person in Judith Basin [Montana]. North Dakota conties averaged $9,000. . . "
Posted by dan at 08:50 AM
Bethany McLean writes in Fortune about Sallie Mae's unseemly transformation.
"Many people think that Sallie Mae, like Fannie Mae and Freddie Mac, is sponsored by the U.S. government. And until recently it was. But at the end of 2004, Sallie became an independent, publicly traded company, completing a process begun in 1996. It is now radically different than it was even five years ago—an aggressive, highly profitable lender and a stock market superstar. Since 1995 its stock has returned over 1,900%, trouncing the S&P 500's 228% gain. Today Sallie's stock sells for 22 times earnings and almost ten times tangible book value, "an almost unheard-of valuation for a financial institution," as a Criterion Research report noted. . . .To produce those sorts of numbers, a company usually has to be obsessed with the bottom line, and Sallie is certainly that (a big chunk of its executives' bonuses is based on Sallie's profits). As good as that may be for shareholders, a growing number of critics contend that those profits are coming at the expense of Sallie's other constituents: students and taxpayers. "Sallie advocates policies we believe are frequently contrary to the interest of students," says Luke Swarthout, a higher-education advisor to the U.S. Public Interest Research Groups. He charges that Sallie used its political clout to shape new legislation that will increase the cost of student loans. Ira Rheingold, executive director of the National Association of Consumer Advocates, decries Sallie's growing presence in the ugly business of collecting on defaulted debt. Pennsylvania state representative Doug Reichley alleges that Sallie is engaging in "predatory lending." Indeed, Sallie uses high interest rates and fees to charge students as much as 28% annual interest on loans."
Posted by dan at 08:46 AM
My most recent in Slate, on Christmas tree sales.
Posted by dan at 05:50 PM