Archive for the ‘Business’ Category

No-gebauer: No Cap and No Cattle

Today our Republican Congressman Randy No-gebauer (Neugebauer) took a rare turn at the microphone to oppose the current proposed emissions trading (aka cap and trade) bill. I could have guessed his position without watching him speak, but at least he reminded us that he exists, even though it was to bleat “no” yet one more time.

Reducing mankind’s harmful effect on the environment is not going to be easy, but it must be done. The science is quite clear on this matter, and anyone can observe industry’s many negative consequences, whether it’s mountaintop removal coal mining, man-made earthquakes from overzealous oil drilling, or a sky full of black smoke that’s melting our glaciers and warming our planet.

I believe that cap and trade is a good way to proceed with limiting harmful emissions and nudging industry in the direction of renewable energy. (The smart ones like T. Boone Pickens are already headed that direction anyway.) However, we should proceed carefully.

Since 2005, the EU (particularly the UK) has led the way in emissions trading as a way to reduce carbon emissions. It hasn’t been a perfect start by any means, and US lawmakers should study the successes and failures of the EU approach before passing a carbon cap and trade bill for our nation.

In particular, I think the EU made three crucial mistakes that we would be wise to avoid:

1) Instead of auctioning off all of the credits at the outset, the EU hooked up well-connected companies with free carbon emission credits, which were promptly sold to competitors at a huge profit. We can’t afford to play favorites and jeopardize a new and necessary system like that.

2) There were no penalties/tariffs against energy imported into the EU from other countries with no emissions control laws, or on companies who use carbon-emitting raw materials generated in other countries. We won’t tolerate lead paint on toys made in China; we likewise should not tolerate rampant pollution from Chinese — or any other nation’s — industry.

3) The EU allowed too much of the cost (which will be high initially but decrease over time) of emissions trading to be passed on to the consumer. I believe an equitable solution to this problem can be found. Energy companies clearly should not be allowed to make record profits by gouging consumers in the name of increasing costs from cap and trade (this is what happened in the EU), but neither should we put energy companies out of business. Of course, the former scenario is much more likely than the latter, and we should guard against it.

Ultimately, the whole world will have to take emissions regulation seriously, whether through cap and trade or through some other system. The survival of humanity depends on it. In the meantime, first-world nations have a moral obligation to lead the way by cleaning up their own act. And we should go forward with confidence, remembering our successes with closing the hole in the ozone layer and with reducing the problem of acid rain (through a cap and trade system on sulfur dioxide emissions, in fact).

Once we have removed the carbon splinter from our own eye, we can help our neighbors do the same.

Name That Subsidiary

A friend of mine in DC sent word about a neat new website where you can learn about the subsidiaries of multinational corporations. The site features international search, detailed listing of each corporation and its subsidiaries, and an embedded google map to show where they are incorporated.

From their about page:

CrocTail provides an interface for browsing information about several hundred thousand U.S. publicly traded corporations and their foreign subsidiaries. Information from company filings with the U.S. Securities and Exchange Commission (SEC) has been parsed and annotated by CorpWatch to provide a way for users to research and add issues related to corporate subsidiaries. CrocTail also serves as a demonstration of the features and data available through the CorpWatch API.

The website also gives summaries of news stories about subsidiaries behaving badly when the information is available. For example, Coca Cola India Ltd appears to have dangerous levels of pesticides in their products, and they have been cited for dumping hazardous waste into the Ganges River.

This is a people-powered project, so jump on in there if you want to get involved. Work to be done includes uncovering hidden layers of ownership that escape SEC filings as well as associating news of corporations behaving badly with the right subsidiary / parent company.

Credit Cardholders Bill of Rights

Thank goodness, in the next week or so we will finally see a Credit Cardholders Bill of Rights signed into law.

I have been waiting a long time to see legislation like this, and it’s finally cleared both the House and Senate. President Obama should sign it into law as soon as the differences are reconciled.

I’m particularly happy that the credit cardholders bill of rights includes strong protections for minors and for college students:

For college students that don’t have a co-signer, the max amount of credit extended will be limited to the greater of 20% of the student’s annual gross income or $500 dollars. The aggregate amount of credit extended from all of their credit cards will be limited to 30% of the student’s annual gross income (for the recently completed calendar year).
Creditors are prohibited from opening a credit card account for any college student who does not have any verifiable annual gross income or already maintains a credit card account with that creditor, or any of its affiliates.

For consumers under 21 years old, the signature of a parent or another responsible adult who will take responsibility for the debt is required, or proof must be found that the under-21 consumer can repay the credit.
Creditors are prohibited from providing credit to consumers under age 18. (unless they are emancipated under state law, or the consumer’s parent or legal guardian is designated as the primary account holder).

These are sensible protections that will help to keep young adults from getting buried under a mountain of debt long before they have learned the skills to dig their way out.

I also think that credit card companies should not be allowed to solicit on public university campuses, but it will probably be a while before we see a law like that.

Predictably, bankers are already squealing about the forthcoming law. From the American Bankers Association:

Credit cards are a strong economic driver and are relied upon by consumers and small businesses to make payments and to bridge short-term financial gaps. The goal in the legislation should be to obtain the right balance: providing protections, while maintaining the important role of credit cards in providing loans to consumers and small businesses. Unfortunately, we believe the bill does not achieve that balance and will therefore cause an unnecessary decrease in credit availability.

Most importantly, this bill fundamentally changes the entire business model of credit cards by restricting the ability to price credit for risk. What has been a short-term revolving unsecured loan will now become a medium-term unsecured loan, which is significantly more risky. It is a fundamental rule of lending that an increase in risk means that less credit will be available and that the credit that is available will often have a higher interest rate. While the recent Federal Reserve rule also contained restrictions on pricing card credit for risk, this bill goes much further in this and other areas. We are concerned that the Senate bill will have a dramatic impact on the ability of consumers, students, and small businesses to obtain and use credit cards.

Translation: credit cards have been pushed by eager lenders into ridiculous realms of risk, and that’s good somehow?

The only people who will miss the credit card usury we have seen will be the lenders currently doing the screwing.

Blackwater Enters Stealth Mode

Via the design blog Brand New, the notorious mercenary company Blackwater is changing their image:

Xe (pronounced “zee”) is the new Blackwater. And, all of the Blackwater subsidiaries are getting the makeover treatment too:

The Blackwater name has being expunged from all of its business units: Blackwater Airships (which offers surveillance services for intelligence gathering) has become Guardian Flight Systems. Blackwater Target Systems (the unit that develops and builds targets) is now being called GSD Manufacturing, and Blackwater Lodge and Training Center has been named the U.S. Training Center.

There are appropriate roles for private industry to work with government, but, as we learned from the Nisoor Square shooting in 2007, providing military personnel is not one of them.

This Blackwater rebranding suggests that they are trying to distance themselves from the cowboy foreign policy of GW Bush as well as from their own mistakes. Changing the name of a mistake… well, it’s still a mistake. Perhaps also they are trying to fade into the background of our national awareness so that they can re-emerge later without objection. It’s our duty to keep an eye on these accountable-to-no-one private armies and keep them away from our military and our military interests.

Private mercenary companies simply shouldn’t be allowed to exist. Blackwater in particular is approaching the scary point of being “too big to fail” (they even have their own air force, for crying out loud), which, if wall street is any sort of harbinger, is a sure recipe for catastrophe. I don’t want to live in an age of corporate war, where businesses have greater powers to make war than nations. We’re a long way from that terrible place, but the Blackwaters of the world — or whatever they want to call themselves — exist to drag us there.

60 Minutes: Wall Street Shadow Market

This week’s episode of 60 Minutes takes a look at the sources of our current financial crisis:

Everyone (especially Republicans) continues to try to pin the blame on bad mortgages (especially from Fannie and Freddie). The 60 Minutes piece shows that the real problem is the totally unregulated 50 to 60 trillion dollar market of credit default swaps and other such exotic investment banking tricks.

We’ve let Wall Street crooks sell safe-looking bad debt to institutions around the world to the tune of 4 times our national debt in less than a decade.

This is what happens when We the People let our guard down, even for a second, in the age of globalization.

(Thanks, Panhandle Truth Squad for posting this earlier today.)

United States: Behind on Broadband

The right-wing mantra of “deregulate, deregulate, deregulate” is costing America one of our most important technological and cultural advantages: ubiquitous, affordable broadband internet access.

Ars Technica has an article about how we are being left behind:

Despite the repeated claims of the current administration that our “broadband policy” is working, the US actually has no broadband policy and no aggressive and inspiring goals (think “moon shot”).

Simply put: Japan, France, Sweden, Canada, and most of Asia are out-interneting us. The main reason that they have surpassed us is because their governments view fiber optics as core infrastructure issues worthy of government investment.

Meanwhile, our government is too busy selling out the public trust to the biggest corporations it can find, all in the name of “deregulation” and “smaller government.”

My view is that regulation does not stifle competition; instead, it prevents people from hurting other people. A good business can survive in nearly any regulatory climate. In general, we only hurt ourselves when we remove regulations from industry.

Furthermore, we have seen that the politicians who ran on “small government” don’t really believe in small government. What they believe in is a very large government that benefits only them and their friends, while the majority of citizens suffer from a lack of services and public resources. (Picture Hurricane Katrina alongside record profits for military contractors and oil companies and you’ve got a snapshot of the Bush legacy.)

“Small government” plus “deregulation” equals the perfect atmosphere for corruption.

Winning the fight against this type of corruption is how we will catch up with broadband access. (Support of Net Neutrality is an enormous part of this struggle, and it ranks pretty high on my list of reasons for supporting Obama.)

If we keep the internet open — both the physical medium and the data — then we can catch up and once again become the world’s internet access leader.

War on Greed Animated Short

The wunderkinds over at Brave New Films have produced a delightful animated short film about the tax loopholes used by the 21st Century robber barons out there:

Spread this video around!

Mortgage Crisis: Etymology, Cartoon, and “Just Say No”

The etymology of the word mortgage is a fascinating one:

The great jurist Sir Edward Coke, who lived from 1552 to 1634, has explained why the term mortgage comes from the Old French words mort, “dead,” and gage, “pledge.” It seemed to him that it had to do with the doubtfulness of whether or not the mortgagor will pay the debt. If the mortgagor does not, then the land pledged to the mortgagee as security for the debt “is taken from him for ever, and so dead to him upon condition, &c. And if he doth pay the money, then the pledge is dead as to the [mortgagee].”

Our contemporary adjustable rate / subprime mortgage crisis is a little bit more complicated than a simple matter of a debt that may or may not be repaid and a house that may or may not be seized. That’s why I was delighted to find this stick figure cartoon explanation called “The Subprime Primer.” It’s hilarious, educational, and worth the five minutes it takes to read.

Lastly, what happens when someone who is foreclosed on decides that they aren’t giving up without a fight?

Joe Lents hasn’t made a payment on his $1.5 million mortgage since 2002.

That’s when Washington Mutual Inc. first tried to foreclose on his home in Boca Raton. The Seattle-based lender failed to prove that it owned Lents’ mortgage note and dropped attempts to take his house. Subsequent efforts to foreclose have stalled because no one has produced the paperwork.

“If you’re going to take my house away from me, you better own the note,” said Lents, 63, the former chief executive officer of a now-defunct voice recognition software company.

Judges in at least five states have stopped foreclosure proceedings because the banks that pool mortgages into securities and the companies that collect monthly payments haven’t been able to prove they own the mortgages.

These ripoff securities were in such a hurry to rip people off that they may not have done the appropriate paperwork to transfer ownership of the mortgages they are selling to investors! The amount of deceit and dumbassedness at every stage of our modern mortgage crisis is simply staggering.

The lesson that I am learning from the mortgage crisis is this: in a culture where regulation is frowned upon, crooks will thrive.

Did Blackwater Evade Taxes?

The House committee on Oversight and Government Reform raises the issue of how Blackwater pays its employees. Currently, Blackwater is the only contractor in Iraq that pays its armed guards as private contractors, not as employees (with income tax and social security withholding).

There’s nothing wrong with this arrangement by itself, but one of the guards working for Blackwater seemed to think it was unfair. He questioned his status as an independent contractor, and the IRS agreed with him. Now the speculation is whether the ruling applies to all of Blackwater’s contractors in Iraq and Afgahnistan as well:

Since the hearing, I have learned that the IRS determined in March — six months prior to your testimony — that your classification of a security guard working in Afghanistan as an independent contractor was “without merit.” The IRS advised that “[y]ou are responsible for satisfying the employment tax reporting, filing, and payment obligations that result from this determination.” By its terms, the IRS ruling applied only to the individual security guard who protested his classification, but the IRS warned that its ruling “may be applicable to any other individuals engaged by the firm.” The logic of the ruling would appear to apply to your entire workforce in Iraq and Afghanistan.

There is also evidence that Blackwater has tried to conceal the IRS ruling and the evasion of taxes from Congress and law enforcement officials. The IRS determination was issued in response to an inquiry by an individual security guard who questioned his classification as an independent contractor. In June, Blackwater required this employee to sign a nondisclosure agreement before it agreed to pay the back pay and other compensation that he was owed. The terms of this agreement explicitly prohibited the guard from disclosing any information about Blackwater to “any politician” or “public official.” The agreement further provided: “THE UTMOST PROTECTION AND NONDISCLOSURE OF CONFIDENTIAL INFORMATION IS OF CRITICAL IMPORTANCE AND IS THE ESSENCE OF THIS AGREEMENT.”

That last bit about nondisclosure is pretty scary, eh? Good thing that the Committee accepts anonymous whistleblower tips.

It’s a fact that our society’s workforce is moving to a more independent, less hierarchical form. Contractors and subcontractors are more and more common while pensioned, insured, “job-secure” employees are fewer and far between. The jury is still out on whether this will benefit society as a whole — I can see sound arguments on both sides of that issue. But again, the question of the day is: do we want our military to be contracted and subcontracted and sub-sub-contracted out? Where does the buck stop when, say, a bunch of subcontracted mercenaries open fire on a crowd of civilizans?

Truman had the correct answer to that question. Too bad our current President likes to be the decider and the buck-passer at the same time. Too bad everyone in his administration is part of the same culture of irresponsibility. Too bad that private military contractors can drop the buck anywhere they like… at least, until we get some laws passed that bring some legal accountability somewhere in this process.

Naomi Klein: The Shock Doctrine

The Shock Doctrine has been buzzing around the net all week, but a clip of Naomi Klein interviewed by Bill Maher up on rawstory really condenses the main point nicely: politicians are using shocks to our national psyche (e.g. 9/11, Katrina, Iraq) to advance a corporatist agenda, and it’s working.

I believe we have to watch out for this kind of shock corporatism at the State level as well as at the national level. CHIP not working well? Privatize! Schools not “performing?” Privatize! Prisons getting out of hand? Privatize!

And watch out for the new lie that privatized government is good because it’s a “free market system.” Whether or not you believe that a free market system is the best way to accomplish the goals of society, corporations and government working together very rarely do so in a free market manner. The Halliburtons of the world will always have the hook-up with those in power.

Corporatism is a form of fascism, and that’s exactly what’s shock-and-awe-ing America today.

See also: and the video by Alfonso Cuaron below.

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