Mortgage rates continue to benefit from the Federal Reserve's bond buying and are near all-time lows. The Federal Housing Administration is guaranteeing billions in new mortgages that it probably shouldn't.

The Realtors' Housing Affordability Index - which accounts for rates, family income and prices - is near all-time highs. After all, home prices in many markets are down 40 percent or more from their peaks a few years ago. The homebuyer tax credit - which basically amounts to 5 percent or 10 percent discount on a starter house - looks puny by comparison.

The inventory of unsold homes has plunged to a level that would take buyers 8.5 months to exhaust - down from nearly 12 months when gloom prevailed. In normal times there is a 6-month supply of homes for sale. As the supply gets smaller, prices should stabilize no matter what Congress does.

Posted by Jay Hancock at 8:36 AM | Permalink | Comments (14)
Categories: The Great Recession
        

I will question his view of Towson University. To say that Towson and its sister schools "were supposed to educate the kids who didn't get into the University of Maryland, College Park" is ridiculous. We are not here to serve College Park. We are here to serve the citizens of Maryland, and we do that very well. It is also not valid to compare Towson University to Goucher College. Goucher is a small, private school with a student body that is a fraction of Towson's student body.

I plead guilty to unfairly maligning Towson. It is harder easier to get into than College Park. But of course it's far more than that. I've heard from people who got into College Park and chose Towson instead. I should have worded it differently. The point of the Goucher comparison is that Towson is so hard to get into these days that it has a higher rejection rate than the selective Goucher. Caret doesn't refute the rest of the column, which makes a pretty good case that Maryland is rationing higher education, to the cost of the state.

UPDATE: We'll be talking about this with C4 on WBAL today at 2:30.  

Posted by Jay Hancock at 10:44 AM | Permalink | Comments (15)
Categories: Education
        

Some of you may have guessed what kind of twisted economist would ask that question. It's Steven Levitt (with Stephen Dubner), in the sequel to Freakonomics -- SuperFreakonomics. The subtitle is: "Global Cooling, Patriotic Prostitutes, and why Suicide Bombers Should Buy Life Insurance."

Hope there's a reference to Rick James. This is from the publisher's press release:

"SuperFreakonomics challenges the way we think all over again, exploring the hidden side of everything with such questions as:

* How is a street prostitute like a department-store Santa?
* Why are doctors so bad at washing their hands?
* How much good do car seats do?
* What's the best way to catch a terrorist?
* Did TV cause a rise in crime?
* What do hurricanes, heart attacks, and highway deaths have in common?
* Are people hard-wired for altruism or selfishness?
* Can eating kangaroo save the planet?
* Which adds more value: a pimp or a Realtor?"

Posted by Jay Hancock at 8:09 AM | Permalink | Comments (2)
        

The mystery of the paralyzed police cars remains. Yes, I realize this undercuts my speculation that a world awash in ethanol is prompting people to spike the gas supply with excess corn likker.

Contradicting statements by Baltimore officials, the supplier says gasoline blamed for crippling much of the city's police fleet last week did not contain excess amounts of ethanol. Norfolk, Va.-based IsoBunkers conducted its own tests and found the gas was 10 percent ethanol -- just what it was supposed to be, company President Charlie Joanedis told me on the phone.

"They obviously had a problem with a certain number of their vehicles, but we still don't know what caused the problem," Joanedis said. "We took a sample out of the tank at the filling station and sent it to a petroleum inspection company. Everything they tested was on spec."

A week ago more than 200 police cars had problems after being filled with IsoBunkers gas. As much as a third of Baltimore's fleet was briefly out of action. City officials tested the fuel and blamed ethanol, which is added by law to reduce pollution and is also the subject of a huge federal subsidy directed toward corn farmers and refiners.

IsoBunkers got the gas from a Baltimore marine terminal, where the ethanol was added as it went into the truck, Joanedis said. From there the truck went straight to the city service station, he said.

"We want to find the answer," he said, just like the city. "We didn't make the gas. If our supplier gave us bad gas I want to know about it and I want to go back to them for recourse."

Joanedis wondered why only police cars and not other city vehicles seemed to be affected. One theory, which he admitted was speculative: Perhaps the Chevies were unusually sensitive to normal seasonal changes in the gas formula that take place at the end of September.

Given IsoBunkers' results, the city will continue its inquiry, said Khalil Zaied, director of general services.

"We're not done yet," Zaied said. "If the outcome of their work came up agreeing with ours, we would probably stop investigating."

UPDATE: This is a response from Matt Hartwig at the Renewable Fuels Association. He responded to my original post last week. I meant to include it with this post & forgot. Matt sez:

This issue of improper blending by some petroleum marketers is serious and our industry does not support selling ethanol blends in excess of 10% unless they are properly labeled for use in flex fuel vehicles designed to use higher level ethanol blends. However, you seem to blame the fuel itself for finding its way into gasoline in higher than recommended levels rather than the people doing the blending.

When used properly, ethanol has proven a very effective fuel additive, and in the case of E85, a gasoline replacement. In fact, the entire Indy Car Series uses pure ethanol to fuel its race cars, as do some drivers in Brazil.

While we certainly have concerns about your mischaracterization of the environmental and energy securities values of ethanol, this is an issue on which we both can agree: ethanol, like all fuel additives, should be used within the bounds of the law.

Matt Hartwig

Director of Public Affairs

Renewable Fuels Association

Posted by Jay Hancock at 6:00 AM | Permalink | Comments (16)
Categories: Energy
        

From Bloomberg:

Twitter Inc., the social-networking site used by everyone from Oprah Winfrey to British royalty, received a “significant” round of venture capital financing from firms including T. Rowe Price Group Inc.

Other investors include Insight Venture Partners, Institutional Venture Partners, Spark Capital and Benchmark Capital, Twitter said today on its blog. Twitter’s previous round of funding was $35 million in February, bringing its total at the time to more than $50 million. The company has yet to report any significant revenue.

Posted by Jay Hancock at 3:53 PM | Permalink | Comments (0)
Categories: Technology & Innovation
        

Today's column argues that O'Malley should end the three-year tuition freeze so state universities can have the resources to admit more students. The freeze is making schools less accessible, not more. Places such as Morgan State (tuition of $4,280), Salisbury U. ($4,814) and Towson U. ($5,180) are becoming quasi-elite schools, rejecting thousands of kids because the freeze has limited their wherewithal. Is it time to raise the price?

Even as interest in these schools soared, the tuition freeze and tight state budgets forced them to put a lid on admissions.

This year, Towson admitted almost 1,000 fewer freshmen and enrolled 400 fewer than it did last year. That's even though applications hit 15,623 this year, up from 11,750 in 2005.

"We actually pulled back from accepting additional applications," said Brian P. Hazlett, the university's director of admissions. "We didn't want to accept applications from students we didn't have the ability to enroll."

UPDATE: Pulled from comments:

My son was caught in the squeeze. He was not accepted at Towson and is now attending college in New York at about 5x the cost. Would've been nice to have a choice...

And please don't say Community college was a choice - it was, but - they are totally overwhelmed all over the country with some places getting 120% of last years registrations and holding midnight classes. Besides very few cc's offer much in his field.

We are very lucky to be able to afford the other option.

UPDATE II: An emailer asks a good question:

Why not raise taxes to keep tuition low and at the same time allow greater numbers of students to attend college. It will cost money, but in the current global economy it would, in the end, be a wise investment.

My answer:

Maryland taxpayers already contribute about $1 billion a year to the university system on top of what tuition brings in. And two years ago O’Malley pushed through one of the biggest tax increases in Md. history, so he’s kind of maxed out. The real question is: Why can’t we make education more efficient?

Posted by Jay Hancock at 8:07 AM | Permalink | Comments (16)
Categories: Education
        

No, I'm not talking about Ticketmaster's attempted merger with concert promoter LiveNation. They've got something new up their sleeves.

As tickets for Springsteen's 1st Mariner Arena show go on sale this morning Friday, we all remember when Maryland Springsteen fans got shut out buying tickets at the Boss's show at the Verizon center. Like fans in New Jersey, they got rejection messages from Ticketmaster's Web site and suddenly saw themselves directed to Ticketmaster's scalping site, TicketsNow, where they were invited to buy tickets at huge markups. Ticketmaster denied wrongdoing up and down but reached a settlement in New Jersey and tried to mollify fans.

Ticketmaster boss Irv Azoff has said the company is trying to sell TicketsNow, which makes sense when you look at what the company has up its sleeve. It's rolling out a "paperless" ticket system -- like airline e-tickets -- in which you gain admission not with a piece of paper but by showing the credit card you used to buy the ticket.

It's more than just a way to save trees. As this Associated Press story points out, with no ticket, there is nothing for brokers and scalpers to resell. Instead, Ticketmaster controls the reselling on the Web. That gives artists, entertainment venues and Ticketmaster itself virtual control over the secondary ticket market -- even more so than with TicketsNow. The arrangement reached with Penn State for football games looks like it will spread. Students, who get cheap tickets through the school and used to reap bonanzas reselling them, are now limited in price and quantity to reselling on Ticketmaster's system.

If the system spreads, it'll mean fewer scalped tickets available for those willing to pay top dollar. But the scalped tickets that are available will be cheaper, thanks to price controls reached with the artist or team. Quasi-monopoly's Ticketmaster's power will grow. And, says the AP story, its fees on resold tickets are likely to be even HIGHER than the ransom it extracts from regular buyers.

Posted by Jay Hancock at 8:59 AM | Permalink | Comments (9)
        

The requirement that contractors pay "prevailing" wages to weatherization employees is holding up hundreds of millions in stimulus spending, a new government report suggests. The stimulus act provided states with $5 billion for weatherization over three years. Almost half the money has been disbursed, but more than half the states that the Government Accountability Office contacted hadn't started weatherizing houses as of the end of August.

A big reason: red tape resulting from the 1931 Davis-Bacon Act, which requires the payment of the locally prevailing wage on federal contracts. Republicans unsuccessfully opposed Davis-Bacon being folded into the stimulus. Because Davis-Bacon hadn't previously applied to weatherization work, people in the Labor Department had to figure out prevailing wages county by county in every county across the country. (They finished on Sept. 3.)

Contractors didn't want to start weatherization jobs if it meant they might have to retroactively adjust workers' pay. The prevailing-pay requirement will increase wages for people who probably need it, but it's also delaying the stimulus and possibly producing fewer jobs than would have been created otherwise. And it may be reducing energy savings that could be had if insulation, caulk, weatherstrips etc. were in place to the greatest extent possible before it gets cold.

Here's what the conservative Heritage Foundation said about David-Bacon in February:

Congress has included a little-known provision in the economic stimulus legislation that wastes tax dollars and costs jobs. All $188 billion worth of construction projects funded in the American Recovery and Reinvestment Act (H.R. 1) must pay Davis-Bacon prevailing wage rates. This requirement will inflate construction costs by $17 billion and depress the economy.

Sez the GAO:

While DOE has provided each of the states in our review with half of their total allocations, 8 of the 14 states for which we collected information had not started weatherizing homes using Recovery Act funds as of August 31, 2009. However, many of the 14 states had used Recovery Act funds for startup activities such as hiring and training staff, procuring equipment and vehicles, and performing energy audits of eligible homes. Other states told us that they would begin weatherizing homes shortly.

Specifically, state weatherization officials expressed concerns about wage rates and administrative requirements under the Recovery Act’s Davis-Bacon provision. Regarding wage rates, officials in about half of the states we reviewed decided to wait to begin weatherizing homes until Labor had determined county-by-county prevailing wage rates for their state. These officials explained that they wanted to avoid having to pay back wages to weatherization workers who started working before the prevailing wage rates were known.

Posted by Jay Hancock at 9:49 PM | Permalink | Comments (4)
Categories: The Great Recession
        

I was wondering if this was going to happen. Thanks to the government's wasteful, environmentally damaging, taxpayer-draining ethanol program, there are more ethanol refineries than the country wants or needs. So there's a lot of the stuff washing around. Fuel with mostly ethanol seems to sell for about 20 cents a gallon less at retail than regular gas. (The stuff also produces less energy per gallon.) So of course there are huge incentives for somebody to illegally spike gas supplies with too much corn likker. It's not supposed to exceed 10 percent.

But apparently it did for the Baltimore police department. As Justin Fenton reports, nearly a third of the department's patrol cars called in sick this week after filling up at a city pump. At first officials thought the culprit was diesel. But it was too much ethanol. The supplier is conducting tests, and it'll be interesting to see what it says.

A couple years ago I grilled Maryland's weights and measures folks about safeguards to prevent too much ethanol from getting into the state's retail gas supply. They satisfied me that there was a pretty good system to prevent ethanol spiking by unethical refiners or jobbers, so I never wrote about it. But I can't believe the Baltimore police are the only victims of excess ethanol. The financial incentives for suppliers to cheat seem to be too high. The ethanol lobby wants Congress to allow legal mixes of up to 15 percent ethanol. I'll check to see what the concentration was in the city's supply.

UPDATE: The spokeswoman for the boat-maker lobby says they're worried about what ethanol is doing to marine engines:

Hi Jay,

Thank you for your blog post on the ethanol misfueling issue. Your question of how many cars is ethanol crippling is one we’ve been exploring with boats, specifically. Since ethanol causes your boat engine to run much hotter, we anticipate that mid-level ethanol blends could cause serious problems with drivability, phase separation and corrosion in fuel tanks, fuel leaks and emissions problems. Boaters on the Maryland shore and throughout the US have already reported many of these problems with E10.

Our main concern is that EPA hasn’t done any tests on marine engines and ethanol to date. If anything above E10 is introduced in the marketplace, it will likely be a nightmare for boaters.

In any case, thanks again for brining some awareness to the ethanol issue.

Christine Pomorski

Posted by Jay Hancock at 9:45 AM | Permalink | Comments (10)
        

Yesterday Hanah Cho and I asked 1st Mariner boss Ed Hale (her story here, my column here) and other company officials whether the slight revival in the housing market and the first-time homebuyer tax credit were helping the bank unload its inventory of foreclosed houses. The answer is not very much.

Much of the housing bubble was in McMansions -- expensive homes sold to people who probably never should have gotten near any mortgage, let alone one for a million-dollar house. These are what 1st Mariner owns. It's safe to say that they are not the ones first-time buyers are snapping up. The bank owns 29 houses, many in Virginia but also in Chicago, Michigan and Florida. They range in price from $700,000 to $2 million -- and that's after the bank has already written them down by a ton. Six are on the runway to be sold in the next few weeks, Hale said. Others will take months and months to get rid of, and meanwhile 1st Mariner has to pay for somebody to cut the grass etc. It's a lot more work-intensive to handle foreclosed residential real estate than the hotels Hale was dealing with in the 1990s with the Bank of Baltimore.

The housing improvement -- you can't call it a turnaround -- is helping 1st Mariner in other ways. The bank is doing a land office business in mortgage refinancing -- for responsible clients this time, officials say! And the lessening in home-price declines lowers the chances that new customers will default. But there is no boom in the kind of 3,500-square-foot, brick-and-plastic veneer stuff that 1st Mariner owns, and there won't be for a long time.

Posted by Jay Hancock at 8:40 AM | Permalink | Comments (12)
Categories: The Great Recession
        

Good piece by the Sun's Tim Smith Monday on how the Baltimore Symphony Orchestra is keeping afloat through tough times, unlike some other area arts organizations. The group is solvent, active and excelling. And here's how they did it: For the recession everybody gave up something significant to cut the BSO's annual expenses by almost $4 million, or 13 percent.

Musicians took furloughs and pay cuts that came to a 12.5 percent reduction in compensation. Administrative folks took pay cuts of up to 15 percent. But none of this would have worked if music director Marin Alsop hadn't also sacrificed. She had already donated $100,000 to start the BSO's OrchKids educational program, Smith reports. Recently she kicked in another $50,000 as part of a program in which the community would contribute funds proportional with concessions made by the orchestra.

True, she can afford it. For the fiscal year that ended a year ago, BSO paid her more than $700,000 in salary, benefits and artist fees, records filed by the BSO with the IRS show. But donations of $150,000 still represent a substantial dent in her net compensation and substantial resources redirected to the orchestra and the organization. And Alsop, truth to tell, was underpaid. The Philadelphia Orchestra needs a new music director, and I can't imagine they didn't highly consider Alsop before she re-upped with the BSO this year. The Philadelphia Orchestra's previous maestro, Christoph Eschenbach, was pulling down almost $1.6 million a year, IRS filings show.

Doubt Alsop will make that much in her new contract, although she probably got a raise. By sticking with Baltimore and an orchestra she helped build and by giving back substantial dough in tough times, she showed that it really is the art and not the money that matters in the last analysis. That kind of example from the top is a lesson corporate CEOs could profit from. And the whole scenario of shared sacrifice ought to make donors and patrons confident that their money is being spent wisely.

Posted by Jay Hancock at 6:00 AM | Permalink | Comments (3)
        

Baucus gives an interview to the NYT and says he'll increase subsidies for low-income families. Times says the changes could add $28 billion to the cost over a decade, or $2.8 billion a year. That doesn't sound like enough to make much of a difference. But if the figure can move once, it can move again. In a bill that also requires people to have health coverage, increasing subsidies for people who can't afford it is the right thing to do. Boosting the assistance for lower-income folks by a material amount will raise the cost of a bill whose chief selling point had been its affordability.

Reality intrudes again. If you're going to cover everybody, it will cost a lot of money. Revenue has to be found to pay for this. It's worth doing. But do it with eyes open.

Mr. Baucus said the changes showed that he had heard the criticism of his bill from colleagues, who asserted that many people would be required to buy insurance who could not afford it — even with federal subsidies to help defray the cost of premiums.

“Affordability — that, I think, is the primary concern,” Mr. Baucus said. “We want to make sure that if Americans have to buy insurance, it’s affordable.”

Posted by Jay Hancock at 9:24 PM | Permalink | Comments (3)
Categories: Health Care
        

Federal regulators are turning up the heat on First Mariner Bank, which got blasted by the housing collapse and has been unable to rebuild its balance sheet to the extent wanted by regulators despite months of trying. Last week the bank got a cease and desist order from the FDIC and Maryland regulators, which it reported today to the SEC. It's not time to assume a federal takeover of First Mariner. The bank has a couple options that could end up raising the money it needs. Nevertheless, the feds don't seem to have seen any progress and are giving the bank and boss Ed Hale some deadlines.

It has 30 days to present a plan showing it can raise its Tier 1 leverage capital ratio from the 6 percent range to 6.5 percent by April and 7.5 percent by July. (First Mariner says it has already presented such a plan.) Early next year it also has to submit a plan on cutting costs and otherwise improving the bottom line on the income statement.

The key components of the order:

Within 30 days of the end of the calendar year 2009, the Bank shall formulate and submit to the Regional Director of the New York Regional Office of the FDIC (“Regional Director”) and the Commissioner for review and comment a written profit plan and a realistic, comprehensive budget for all categories of income and expense for calendar year 2010. The plan required by this paragraph shall contain formal goals and strategies, be consistent with sound banking practices, reduce discretionary expenses, improve the Bank’s overall earnings and net interest income, and shall contain a description of the operating assumptions that form the basis for major projected income and expense components.

Within 30 days after the effective date of this ORDER, the Bank shall submit a written capital plan to the Regional Director and the Commissioner. The capital plan shall require the Bank, after establishing an Allowance for Loan and Lease Losses, to achieve and maintain, on or before June 30, 2010, its Tier 1 Leverage Capital ratio equal to or greater than 7.50 percent of the Bank’s Average Total Assets and its Total Risk-Based Capital ratio equal to or greater than 11 percent of the Bank’s Total Risk Weighted Assets.

Beginning on March 31, 2010, the Bank shall maintain its Tier 1 Leverage Capital ratio at a level equal to or greater than 6.5 percent and its Total Risk-Based Capital ratio at a level equal to or greater than 10 percent.

Posted by Jay Hancock at 7:05 PM | Permalink | Comments (6)
Categories: Finance
        

Researchers at the University of Maryland found that -- surprise! -- most Twitter content from Congress was self-promoting stuff linked to press releases or media appearances. What sort of vain, self-promoting kind of person would use the Internet to talk about a media appearance? (Hint: I'll be on WBAL at 2 this afternoon to talk about Constellation Energy and Electricite de France.)

Actually, vacuous Twitter content is what we want to see from our public servants, if we're going to see anything. It can easily be produced by lackeys and interns, saving the congresswoman or senator or governor or whoever for important stuff. Thus, Maryland Comptroller Peter Franchot's tweet, in reponse to the Congress/Twitter story:

i'm all about constituent interaction, could teach those congressmen

may not be the greatest thing. Do we need the chief executive of the state's revenue authority frequently tweeting and twerping in person? Maybe when we can fit the Maryland tax form on Twitter, but not until.

Likewise, Missouri Sen. Claire McCaskill was named best tweeter by the UM folks because it's obvious she creates her own content, like this:

Yes @tigeranniemac that was me at Target in the soap aisle. You shoulda said hi. Was with my daughter Lily. We're very friendly."

No. Please Sen. McCaskill. This is not good use of your time. You're on the Committee on Armed Services and the Committee on Homeland Security and Governmental Affairs. Please go learn about terrorists and Afghanistan. Leave the tweets to the PR people.

Posted by Jay Hancock at 11:11 AM | Permalink | Comments (1)
Categories: Politics
        

The doleful James Grant, a Baltimore Sun alumnus and careful student of financial history, believes that the severity of the crash a year ago portends a similarly energetic recovery. I'm skeptical. But here's Grant, in the Wall Street Journal.

By rallying, equities and corporate bonds not only anticipate recovery, but they also help to bring it to fruition. By opening their arms wide to such previously unfinanceable businesses as AMR Corp., parent of American Airlines, and Delta Air Lines Inc., the newly confident credit markets are implementing their own stimulus program. "Reflexivity" is the three-dollar word coined by the speculator George Soros to describe the dual effect of market oscillations. Not only does the rise and fall of the averages reflect economic reality, but it also changes it. One year ago, the Wall Street liquidation stopped world commerce in its tracks. Today's bull markets are helping to revive it.

I promised to be bullish , and I am (for once)—bullish on the prospects for unscripted strength in business activity.

Posted by Jay Hancock at 9:57 AM | Permalink | Comments (0)
Categories: The Great Recession
        

My colleague Eileen Ambrose and experts from the Johns Hopkins Bloomberg School of Public Health will be livechatting on health care reform at noon on Monday. Post advance questions and check out the chat here.

Posted by Jay Hancock at 4:59 PM | Permalink | Comments (0)
Categories: Health Care
        

Maryland unemployment stayed at 7.2 percent for the fourth month in a row, according to a new report from the Labor Department. Another report shows that we shed 12,000 jobs from July to August, but that number is based on a limited sample and is subject to big revisions. The overall picture is that the economy didn't get any better and didn't get any worse for the month. Maryland is doing much better than most states. The national unemployment rate for August was 9.7 percent.

Here is the historical table of Maryland's unemployment rate, shown on the far right.

Here is the historical table of month-on-month job growth or loss, in thousands.

Posted by Jay Hancock at 11:16 AM | Permalink | Comments (2)
Categories: The Great Recession
        

The Wall Street Journal reports that the Federal Reserve is proposing to regulate bankers' pay, giving itself the option to intervene if compensation schemes give key employees the incentive to bet the franchise on cockamamie ventures.

The Fed's plan would, for the first time, inject government regulators deep into compensation decisions traditionally reserved for the banks' corporate boards and executives.

Under the proposal, the Fed could reject any compensation policies it believes encourage bank employees -- from chief executives, to traders, to loan officers -- to take too much risk. Bureaucrats wouldn't set the pay of individuals, but would review and, if necessary, amend each bank's salary and bonus policies to make sure they don't create harmful incentives.

Anybody who appreciates the many benefits of capitalism and free enterprise ought to be creeped out by what's going on. On the other hand, Wall Street virtually asked for this to happen. Don't blame the Fed. Blame the big New York bankers, who betrayed their shareholders and betrayed their system.

Posted by Jay Hancock at 10:20 AM | Permalink | Comments (1)
Categories: Executive Pay
        

Businesses pander to politicians all the time, but usually behind the scenes. They donate campaign funds. They -- nudge nudge wink wink -- promise pols and staff jobs when they leave government. And so forth. Rarely do they back one side or another with public pronouncements. I remember how surprised I was to see an "O'Malley" sign on the lawn of the First Mariner Bank branch near where I live in the last gubernatorial election.

Even more rarely do they use partisanship as a marketing strategy. Whey hack off half your potential customers if you can avoid it? Some company called CREDO Mobile seems to trying it out. In my Inbox this morning, sent out by the Democratic machine:

Dear Jay,
Real healthcare reform is within reach this fall, but we're fighting tooth-and-nail against insurance lobbyists, Republicans, BlueDogs, FOX News, and Obamahaters marching in Washington. To win, we need the support of every ally we can find.
CREDO Mobile has been a great ally in this fight. Won't you consider making them your phone company?
Bob Fertik

And:

Is Your Phone Company Fighting for Real Healthcare Reform?

Unless you're with CREDO Mobile, the answer is probably "no." We're a different kind of company - one that's driven not by the bottom line, but by a belief. A belief that we can make the world a better place, including achieving the goal of health care for all Americans.

Memo to cell phone customers and everybody else: If you want health care reform, don't worry about CREDO. Call your congressman and senator.

Posted by Jay Hancock at 10:02 AM | Permalink | Comments (1)
Categories: Marketing
        

Ben Bernanke and lots of other folks claim the economy can check out of the emergency room. These guys are actually in a position to know.

Posted by Jay Hancock at 2:55 PM | Permalink | Comments (0)
Categories: The Great Recession
        

The new, projected numbers from the Board of Revenue Esimates are shocking. After all the cuts the state has already made (~$4 billion), it looks like it will have $2 billion too little to balance the books next fiscal year, writes Laura Smitherman. That's on top of another $230 million in cuts that will probably be needed this year. People knew there would be new hole. They didn't know it would look this big.

It's true the economy is hurting and Maryland has a long-term structural budget imbalance. But I find it hard to believe that next year's gap will be as big as $2 billion. The economy seems to be recovering. My guess is that the Board of Revenue estimates is being too pessimistic. After having repeatedly revised tax-collection projections downward, they probably don't want to do it again. That big, scary number will also increase political pressure to get slots up and going, and that could fill a decent part of the void by itself.

Posted by Jay Hancock at 12:05 PM | Permalink | Comments (13)
Categories: Politics
        

Why is Gov. Martin O'Malley's Energy Administration trying to suppress testimony requested by his own Public Service Commission on the benefits of letting a French company help build a nuclear plant in Maryland? If you didn't already think politics and not policy were driving the PSC's review of the deal, here is the latest evidence.

The PSC staff hired London Economics International to analyze the agreement by Electricite de France to invest $4.5 billion in Constellation Energy Group's nuclear business. (Constellation owns Baltimore Gas & Electric.) Specifically, LEI's Julia Frayer was asked to determine 1) whether Constellation would be hurt by credit-ratings downgrades if regulators block the deal; 2) whether a new nuclear unit at Calvert Cliffs giving Maryland needed electricity depends on EDF's investment; and 3) whether BGE customers would benefit from lower prices. In response Frayer said things such as:

The likelihood of a ratings downgrade to both CEG [Constellation] and BGE [Baltimore Gas & Electric] is less if the transaction is completed than if it is not.

And:

It appears essentially certain that [Constellation and EDF] will pursue the development of [Calvert Cliffs 3] if the... transaction is approved.

And:

In 2016, demand-weighted annual average energy prices [for Maryland electricity customers after Calvert Cliffs 3 opens] drop by 12% [compared with what they would be without the new Calvert Cliffs unit]... I have estimated the savings over the eight year analysis period to average $141 million per year. This represents an approximately seven percent reduction in wholesale energy costs relative to the cost without CC3.

Great! Say yes and let them start building. More electricity supply equals lower electricity prices. But the Maryland Energy Administration is trying to get Frayer's findings wiped out.

"The State of Maryland and the Maryland Energy Administration hereby move for the exclusion of the testimony of Julia Frayer and Michael M. Schnitzer," says the motion. (Schnitzer is Constellation's expert.) Then it goes on to trash the measurement of benefits in dollar terms as "pseudo-science." And it pretty much tries to discredit the entire report.

What's the point of having a professional PSC staff and experts if you're going to ignore what they say?

Posted by Jay Hancock at 9:44 PM | Permalink | Comments (24)
Categories: BGE/electricity
        

Great anecdote from Time's Karen Tumulty, who's at the Fortune Most Powerful Women summit, which features Warren Buffett. Turns out Buffett could have saved Lehman Brothers a year ago -- and maybe the global economy -- if only he had known how to check the messages on his cell phone.

And around 6 p.m. on that Saturday night, as Buffett was rushing out to a social engagement in Edmonton, Alberta, he got a call from Bob Diamond, the head of Barclays Capital. Diamond was trying to buy Lehman Brothers and rescue it from oblivion, but he was having trouble with British authorities. So he had come up with another plan, one in which Buffett would provide insurance that might make it all work. It was all too complicated for Buffett to take in in a quick phone call, so he asked Diamond to fax him the details. Buffett got back to his hotel room around midnight and was surprised to find ... nothing. Lehman went under, and within days, the world was in a full-blown financial crisis.

Fast forward 10 months. Buffett, who admits he never has really learned the basics of his cell phone, asked his daughter Susan about a little indicator he had noticed on the screen: "Can you figure out what's on there?" It turned out to be the message from Diamond that he had been waiting for that night. (NOTE: Which raises another question: Why didn't Diamond use the fax, like Buffett asked him to?)

Posted by Jay Hancock at 1:37 PM | Permalink | Comments (3)
Categories: The Great Recession
        

From the NYT:

Inside the box, opened in 2003, he found an incredibly rare coin, wrapped in a delicate paper sleeve. It was a gold $20 piece with Lady Liberty on one side, a bald eagle flying across the other and, at Liberty’s left, the four digits that made it so valuable: 1933.

The famous “double eagles” from that year were never officially released by the government. Only a few had ever made their way out of federal vaults, and only one had ever been sold publicly, in 2002. The price: $7.6 million.

And there were nine more of them in the safe-deposit box.

The family turned the coins over to the government for authentication, but Washington held onto them, claiming they never should have been held by the public. Now the family is trying to get a judge's order to release them.

Here is my review from The Sun from five years ago of David Tripp's "Illegal Tender: Gold, Greed and the Mystery of the Lost 1933 Double Eagle." Tripp knew there were other, unaccounted-for 1933 coins, but he couldn't find where they were. Now we know. The review, from the Sept. 5, 2004 edition of The Sun:

On March 6, 1933, President Franklin D. Roosevelt took the United States off the gold standard, banned new gold coins and condemned to the melting pot nearly a half-million $20 gold pieces struck with a 1933 date but not issued.

A few escaped. David Tripp tracks the fugitives across six decades and several continents, through a king's palace and a Secret Service sting operation and into bright day at a Sotheby's auction two years ago.

It is an evocative trip. Per-haps no other metallurgical product emits the symbolic and informational wattage of coins. The little hunks cater to greed, aestheticism, patriotism and probably a few other vices. What we know about Hellenic South Asia and some other ancient cultures is based almost solely on numismatic evidence.

Coins betray 20th-century American secrets, as well. No one could imagine the events of 1933 happening today.

To combat a worsening Depression and plunging prices, Roosevelt and Congress not only stopped minting gold but called on the country to surrender privately held gold in exchange for government paper. The idea was to stabilize the money supply by reversing overseas gold flight.

In a way that will horrify the libertarian and thrill the communitarian, Americans obeyed, trading tons of lustrous yellow metal for Roosevelt's IOUs, for the good of the nation. Eventually it became illegal for people to own almost any kind of gold.

Thus Tripp's escapee $20 "double eagles" are either freedom fighters or desperados, depending on your preference. In either case, they are rare and valuable and, fortunately for Tripp's yarn, have a habit of delivering bad luck to dubious people.

The breakout came from the Philadelphia Mint. Although it was increasingly clear after Roosevelt's election that gold issues would cease, the mint worked on bureaucratic auto-pilot, stamping gold discs with "1933" as soon as the calendar so ordered.

There had been unauthorized links before between mint employees and the numismatic netherworld, and this was the apparent getaway gate. More than a dozen 1933 double eagles reached dealers and collectors before the rest of the hoard was rendered into bricks in 1937 and shipped to Fort Knox.

Exactly how many is uncertain. Tripp's tale focuses on one coin that surfaced in 1996 and was later sold by Sotheby's for $6.6 million after federal authorities tried but failed to confiscate it. One of story's intriguing aspects is Tripp's establishment that there is almost certainly at least one other 1933 double eagle on the lam, and possibly more.

Almost all has been untold until now. A first-time author and consultant for Sotheby's during the 2002 auction, Tripp buried himself in primary research and came up with fascinating material from government archives and interviews with numismatic old-timers.

Documents from the 1940s, for example, show Secret Service gumshoes trailing the double eagles from Philadel-phia's jewelers' row to the doors of tycoon-collectors such as oilman James W. Flanagan, a retired colonel living in Toronto, New York City and Palm Beach. Tripp fingers the original thief, a mint supervisor with a habit of fondling the coins.

The writing can be clunky. Tripp's foreshadowing is heavier than a vault of bullion, and he is addicted to baroque metaphors. The character list is sometimes longer than it needs to be.

But he paces the narrative well, and the underlying story of the most expensive coin ever sold is good enough for the pages to fly past anyway.

Posted by Jay Hancock at 11:46 AM | Permalink | Comments (2)
Categories: Currencies
        

The Baucus bill -- ie., the America's Healthy Future Act of 2009 -- is out. This is probably the closest of anything yet offered to what the final, passed legislation that Obama signs will look like. It certainly seems like it has the best chance of all the bills.

As expected it contains no 'public option' plan -- a new government 'Medicare' to compete with private insurers for the under-65 crowd. Instead there are provisions for nonprofit co-ops, whose look and effects are very uncertain. Of course no abortion funding. There is a "Personal Responsibility Requirement" mandating that everybody have coverage by 2013 or pay a fine, which could be up to $3,800 annually, depending on your income. You would have to report whether or not you have health coverage on your tax returns.

The bill would create an Innovation Center within the Centers for Medicare and Medicaid Services, based in Woodlawn, whose mission would be to improve patient care and control cost increases. Among its tasks: "Align nationally recognized, evidence-based guidelines of cancer care with Medicare payment initiatives."

It would improve reimbursement for primary-care docs -- a critical, underappreciated piece. And on malpractice tort reform -- there is nothing except "a Sense of the Senate that health care reform presents an opportunity to address issues related to medical malpractice and medical liability insurance." Here's a copy of the bill, thanks to the WSJ.

Posted by Jay Hancock at 10:52 AM | Permalink | Comments (1)
Categories: Health Care
        

More on Florida Public Service Commission members and their BFFs, the executives at Florida Power & Light whom they're supposed to be regulating. We knew one PSC staffer went to a Kentucky Derby Day party at the home of an FPL exec. We knew that three PSC staffers gave confidential Blackberry messaging codes to an FPL executive, enabling a medium that may have let them communicate without leaving a record. We know that FPL is looking for a huge rate increase, part of which with it would buy an executive jet. Now we have this, from the Miami Herald:

In an emotional appeal, a utility regulator apologized Tuesday for casting a ``cloud'' over the Public Service Commission, but insisted she broke no rules in dining with an executive of Florida Power & Light as it sought a $1.3 billion rate increase.

Commissioner Katrina McMurrian sounded choked up after Commissioner Nathan Skop suggested she had engaged in ``completely unacceptable'' behavior by having a meal with FPL Treasurer Paul I. Cutler in New York before a March 10 utility conference.

FPL Group, FPL's parent, almost merged with BGE parent Constellation Energy three years ago.

Posted by Jay Hancock at 9:59 AM | Permalink | Comments (0)
Categories: BGE/electricity
        

This is an outrage.

UTICA, New York - When it comes to picking their favorite lad from Liverpool, Americans say Paul (27%) is their favorite Beatle, with John taking a distant second at 16%, and far fewer choosing George Harrison (10%) or Ringo Starr (9%) a new Zogby Interactive poll shows.

Posted by Jay Hancock at 6:25 PM | Permalink | Comments (4)
Categories: Stupid PR pitches
        

Washington threatens to make reforming the financial system more complicated than it needs to be. The Treasury Department's white paper for reform is 89 pages long. The bills are a lot longer. True, there is much to tackle -- derivatives, executive pay, consolidation of regulators. But pols ought to start by focusing on two key factors -- capital ratios and transparency. If they do, much good will follow without needless small print.

Many causes went into last year's meltdown, but what made it deadly and cascading were numerous examples of excess leverage -- far too much borrowed money and far too little solid capital in the vaults. Banks are typically capitalized at a 10 to 1 ratio. Lehman Brothers was something north of 30 to 1. At 30-to-1 ratios it takes only a 4 percent loss on your invested position to wipe out the firm. The solution is simple. Don't allow 30 to 1. And really really don't allow 30 to 1 when the maturity on the debt can be measured in months or weeks, not years.

Second, regulators need to have quick and clear views of what giant financial firms are doing. This means greater disclosure by hedge funds and other private equity, to the extent that they are using significant borrowed money to invest. I would use debt -- leverage -- as a trigger for private-equity regulation both because debt often signals risk and because this approach would leave venture capital alone.

Venture capital is the investment that breeds innovation and creates economic engines such as Google or Microsoft. Venture capital employs little debt. Venture capital must not be punished with new red tape and expenses for the sins of AIG and Lehman. Under Treasury's white paper, it looks like it would be.

Posted by Jay Hancock at 7:00 AM | Permalink | Comments (1)
Categories: Finance
        

Great story by Laura Vozzella on Baltimore's thriving hack industry. Hacks routinely carry residents of Baltimore's poorer neighborhoods to faraway supermarkets, where the clients can buy a wide variety of foods at decent prices. The piece is a good case study on the demerits and benefits of regulation.

If you carry passengers in your car for a fee, Baltimore, like most cities, requires you to have a taxi license. Hacks don't. They're operating illegally. But they're providing an obviously popular and important service -- ferrying people to otherwise inaccessible grocery stores at fares that are probably much lower than what licensed cabs would charge.

Should the city crack down on hacks? Vozzella notes that they can be dangerous and even deadly. Several hack customers have been raped. Two hack drivers were shot and killed in April. Hacks are seemingly more hazardous than regulated taxies.

But if you put hacks out of business, you'll deprive many people of greater food and transportation choice. Shoppers would have to pay the higher fares of licensed cabs, which might be out of reach for many. Without transportation they would have to rely on neighborhood offerings, which are often less healthy and more expensive. And of course hacks provide one of the few ways in some neighborhoods to earn a living without peddling drugs.

Note that, in the practical absence of regulation and enforcement, private parties have come together to address the risks of Baltimore hacking in a way that would warm a libertarian's heart. As Vozzella notes, supermarkets run background checks on hacks and issue them IDs for customers to check. Hacks try to run a smooth show and keep bad actors out of the business. Supermarkets won't issue an ID unless a hack "captain" vouches for a new driver. Customers stick with the hacks they know and trust.

It seems like self-regulation may be working -- until it doesn't. How should Baltimore respond? Should it crack down? Enforcement would divert public safety resources the city badly needs elsewhere. Should it continue ignoring hacks? That might put new hack customers in danger. Should it issue special hack licenses that are more restrictive than cab licenses? That would require new rules, regs, administrators, enforcers etc.

Posted by Jay Hancock at 6:18 AM | Permalink | Comments (21)
Categories: Regulation
        

Barry Ritholtz notes that the Dow Jones Industrial Average was at about about the same level on 9/11 in 2001 and 2009. On 9/10 2001, it closed at 9,605.51. The markets never opened on the day of the attacks, so technically that was the price on 9/11/01, also. On 9/11 2009 the Dow closed at 9,605.41. Fate? The hand of the financial gods? An omen? No, just coincidence. And a sign of a whole lot of financial turmoil and ulcers in between. (Click on the link above to Ritholtz for a chart that makes this painfully clear.) If the Dow is 9,605 on 9/11 2019, then we can talk about bad cosmic vibes.

This has been circulating Wall Street trading desks: On both 9/11/01 and 9/11/09, the Dow industrials were at 9605. (it was the close of the 9/10 in 2001, since markets never opened on 9/11 2001).

Posted by Jay Hancock at 11:58 AM | Permalink | Comments (1)
        

Gus Sentementes writes about telemedicine -- having docs diagnose patients remotely via the Internet and video feeds. It's already happening in Baltimore and, as he notes, is about to go mainstream. About time. Along with education, health care has largely avoided the computer-aided productivity revolution that coursed through the American economy starting in the 1980s and 1990s.

We have computerized inventory controls and supply pipelines at Wal-Mart, but doctors still keep patient records and dispense prescriptions by hand. We have videoconferencing for roof-shingle salesmen and builders but not physicians and patients. We perform the same test thrice on the same patient for the same illness. Hospitals have joined the inventory-control and just-in-time delivery bandwagon. But even hospitals are way behind on getting patient records computerized. Largely because of privacy concerns, hospitals' sophisticated computer systems are great at tracking meds and supplies right up until they reach the customer (patient) -- and then they lose all track.

This has gone largely undiscussed in the debate over health-care reform. Productivity gains -- more results per procedure, per doc, per hospital day -- are one pain-free way to combat runaway health costs. The ultimate productivity gain of course would be clinical -- if we could wave a wand and cure cancer, for example. Barring that, we can still reduce the administrative overhead for the clinical arts we have already mastered. Telemedicine is part of that. Computerized records are a huge part of that. By themselves they won't stop the health-cost monster. But they're part of the solution.

Posted by Jay Hancock at 6:30 AM | Permalink | Comments (9)
Categories: Health Care
        

Outstanding job by the New York Times' Charles Duhigg in investigating thousands of violations of the Clean Water Act and the illnesses they are causing across the country. Corporations are fouling drinking water with impunity, regulators and politicians are clueless and people are getting sick.

Yes, we need to belabor this oft-made point once again: Without newspapers, this sort of information just doesn't come out. Without newspapers, there is little public pressure to fix things. Without newspapers, the problem gets worse. True, victims can resort to the justice system, as they did in West Virginia. But too often the courts award compensation for damages without making sure new damages won't take place. And they are slow, slow slow.

Love this response from West Virginia state officials, whose own files contain unbelievable cases of industrial pollution that they have done nothing about.

“Many of the issues you are examining are several years old, and many have been addressed,” West Virginia officials wrote in a statement. The state’s pollution program “has had its share of issues,” regulators wrote. However, “it is important to note that if the close scrutiny given to our state had been given to others, it is likely that similar issues would have been found.”

They'll soon change their tune, thanks to the New York Times. Thank you, Mr. Duhigg.

Posted by Jay Hancock at 5:29 PM | Permalink | Comments (3)
        

Talked to WBAL's Bill Vanko this morning about Jamie Smith Hopkins' story today on the slight pop in housing sales for metro Baltimore. Also discussed the growing liabilities that the baby boomers are preparing to leave Generation Y.

Posted by Jay Hancock at 11:02 AM | Permalink | Comments (0)
        

The invincible generation seem bulletproof from a medical standpoint, as today's Sun reports. But they're hardly invincible financially. We need comprehensive health coverage. The plan offered by Obama and other Democrats should be passed in some form. A health-insurance "mandate" requiring everybody to be covered has to be part of such a plan. But if everybody is required to have health insurance as they now have to have car insurance, the result will be this: The burden imposed by older Americans on younger Americans will immediately become heavier, and that's only the latest of what today's young adults and their successors will have to put up with.

Young people have been supporting old people forever, of course. Before the coming of social insurance in the 20th century, new generations were expected to support their aged parents and grandparents. The old people who started collecting Social Security benefits starting in the 1930s were free-riding on the backs of young generations who were financing the program. Young people have been paying for old-folks' health care via Medicare since the 1960s.

A health-insurance mandate would advance the process. Young people would be required to buy policies for thousands of dollars or pay a penalty of hundreds of dollars. But young people don't get sick much. Their money would be spent on the people who do -- folks in their 50s and early 60s. Add to that the Medicare premiums that every working young person pays to finance expensive care for seniors. Add to that the Social Security premiums they're also paying. Add in the enormous deficits that the nation is incurring to pay for Medicare and Social Security and wars -- debts that young people will inherit when they become older taxpayers. Add to that the fact that, when today's young adults get older and need care, the nation won't be able to afford the kind of health benefits available today, and maybe not the same Social Security benefits, either.

Add all that up and you could conclude that young folks are getting a pretty raw deal. But I don't hear any young people complaining. They're tuned out. The invincibles are also the insouciants.

Posted by Jay Hancock at 6:19 AM | Permalink | Comments (13)
Categories: Health Care
        

For the second time this week, we have reports of what looks like inappropriately close contact between electric-company interests and the public servants who are supposed to be regulating them. Mike Duvall, an Orange County, Calif., assemblyman and vice chairman of the legislature's utility committee, resigned after a mic recorded his comments on purported dalliances with two women. California media identified one of the women as a lobbyist for an electric company. According to AP:

Several media outlets reported the woman Duvall refers to in his comments works as a lobbyist for Sempra Energy, a San Diego-based energy services company that operates San Diego Gas & Electric Co. and Southern California Gas Co. Sempra issued an e-mail statement saying it was investigating the claims.

"The employee has denied the speculative media reports. Our investigation will be conducted to ensure not only that our policies on employee conduct are strictly adhered to, but also that our employee is treated fairly," the company said.

I would treat the reports identifying Duvall's putative partner with caution. The guy could have just been making stuff up. But if they're true, we have another example of inappropriate socializing between policymakers and energy companies. See this post on the Florida regulator who partied with a utility executive. No reports that I have seen so far on how Duvall voted on matters affecting Sempra.

If you're interested in all the details (me, I'm just worried about the policy implications!), a loyal friend of the blog has found a video link to Duvall's conversation as well as an unedited tape of the comments.

UPDATE: Duvall says he does not admit he had affairs. From the Pasadena paper:

"I want to make it clear that my decision to resign is in no way an admission that I had an affair or affairs," said Duvall, R-Brea, in a statement on his campaign Web site.

"My offense was engaging in inappropriate story-telling and I regret my language and choice of words," he stated. "The resulting media coverage was proving to be an unneeded distraction to my colleagues and I resigned in the hope that my decision would allow them to return to the business of the state."

Posted by Jay Hancock at 11:32 AM | Permalink | Comments (1)
Categories: BGE/electricity
        

Last night Obama mentioned it that shall not be named by liberal Democrats: malpractice liability reform. Malpractice reform is not "a silver bullet," he said, "but I have talked to enough doctors to know that defensive medicine may be contributing to unnecessary costs." He wants to "move forward on a range of ideas about how to put patient safety first and let doctors focus on practicing medicine." Specifically, he referred to Bush administration proposals for "demonstration projects" in a few states to try to contain costs from bad medicine and expensive liability trials.

Presumably he was referring to proposals offered by the Institute of Medicine at the behest of Tommy Thompson, HHS secretary under Bush, to consider no-fault, nonjudicial compensation systems for patients harmed by medical mistakes.

But Mr. President, there already is a demonstration program on malpractice reform, and it has demonstrated some very impressive results. In New Zealand, court cases involving medical malpractrice are virtually nonexistent. Anybody who believes s/he has been injured by a doctor submits a claim to a no-fault insurance panel. The case is decided by medical experts, not a lay jury.

Cases are resolved in weeks or months, not years. There are no junk lawsuits. There are no huge awards to trial lawyers. Without judges, juries, court clerks, trial lawyers' staffs etc., administrative costs for malpractice awards in New Zealand are less than 10 percent, according to a piece three years ago in Health Affairs. In the U.S. they're over 50 percent. And malpractice insurance premiums for docs are less than $1,000 per year, even for obstetricians and neurosurgeons, said the Health Affairs article.

Critics note that patient safety in New Zealand is no better than in other countries. I would reverse this by saying it's no worse, either. Even without the threat of disastrous lawsuits overhanging their daily practice, New Zealand docs seem to be delivering the same standard of care as in other developed nations.

So there you have it. No need for any further demonstrations stateside. Obama is right that malpractice reform isn't a silver bullet. But that's not a reason not to move forward.

Posted by Jay Hancock at 10:21 AM | Permalink | Comments (18)
Categories: Health Care
        

The Treasury has picked Fort McHenry to represent Maryland in its "America the Beautiful" quarters series. The coin will be minted in 2013. I guess McHenry is obvious because it's historically significant. But it's certainly not the most beautiful site in the state. The Chesapeake and its estuaries have a jillion places that are more attractive. What about Deep Creek Lake? Cumberland? Sharpsburg/Antietam? C&O Canal?

Across the country, most of the sites to be portrayed on quarters between next year and 2021 are National Park Service-administered. For some states the scene is easy. Yosemite for California. Grand Canyon for Arizona. Denali for Alaska, volcanoes for Hawaii and Mount Rushmore for South Dakota. Some states must have been challenging -- Nevada! Instead of the Vegas strip, they picked something called Great Basin National Park. For tiny, nondescript Delaware it's Bombay Hook National Wildlife Refuge.

And guess what they picked for New Jersey? I didn't even know the place was in New Jersey.

Posted by Jay Hancock at 2:05 PM | Permalink | Comments (5)
        

One of the many beauties of the Web. You can find folks with similar challenges and trade stories and tips. From Jamie Smith Hopkins' story today:

In this toughest job market in a generation, misery is looking for company - and it's easier than ever to find it online, where groups are springing up for out-of-work people to connect, commiserate and offer hard-earned advice.

Posted by Jay Hancock at 1:23 PM | Permalink | Comments (0)
Categories: The Great Recession
        

Florida Power & Light could well have become an affiliate of Baltimore Gas & Electric. FPL Group, the Florida utility's parent, agreed to merge with BGE parent Constellation Energy Group a few years ago. The companies scrapped the merger after they got resistance from the Maryalnd Public Service Commission.

New details have emerged about how cosy FPL is with the Florida PSC. A state lobbyist who partied with a top FPL exec on Kentucky Derby Day resigned Tuesday, and two other PSC staffers were placed on leave. The Miami Herald reported that an FPL executive had requested and gotten confidential Blackberry messaging codes from one state commissioner and two state staffers. The codes would have reduced chances that the communications would leave a record, the Herald reported.

Meanwhile FPL is asking for a 30 percent rate increase, part of which would be devoted to buying a $31 million executive jet. Beautiful.

Posted by Jay Hancock at 10:26 AM | Permalink | Comments (1)
Categories: BGE/electricity
        

Despite a small market and terrible national economy, Ravenomics look pretty healthy as the NFL season opens, reports Kevin Van Valkenburg in today's Sun. The team has sold out home games again for the 2009/2010 season. It's 7th from the bottom in market size but near the top in revenue. It has renewed leases on nearly all the luxury suites. It renewed 99 percent of its season tickets.

Part of the story surely is Baltimore's 60 years of pro football tradition, the dedication of the fans and the team's winning record. But the greatest fans in the universe can't compensate for the 16 percent unemployment rate in metro Detroit, where, as Van Valkenburg reports, Lions management anticipates empty seats and a TV blackout. Even a team touted to be division champions can't make up for the 10 percent unemployment of metro San Diego, where the Chargers face the same problem. And in Jacksonville, a tiny market, mediocre team and Florida's housing crash mean 17,000 season ticket holders didn't renew this year, KVV reports. A year ago unemployment was 6.4 percent in Jacksonville. Now it's 10.5 percent. The place has lost 6 percent of its jobs in the last two years.

By contrast the metro Baltimore economy, for all its challenges, is doing OK. Unemployment is 8 percent. The region has lost jobs at only half the rate of Jacksonville and a quarter the rate of Detroit. Combine that with the fact that Baltimore incomes on average are higher than those of many NFL towns, and you have the right environment for a full house and long concession lines. Unlike the Redskins, the Ravens don't sue season-ticket holders who find they can't pay for the seats, as the Washington Post's James Grimaldi recently reported. But it doesn't sound like they would even need to.

Posted by Jay Hancock at 6:00 AM | Permalink | Comments (0)
Categories: Marketing
        

As it often does, The Economist magazine boils things down to their essence. From last week's Lexington column:

We are all going to die. And the demand for interventions that might postpone that day far outstrips the supply. No politician would be caught dead admitting this, of course: most promise that all will receive whatever care is medically necessary. But what does that mean? Should doctors seek to save the largest number of lives, or the largest numbers of years of life? Even in America, resources are finite. No one doubts that $1,000 to save the life of a child is money well spent. But what about $1m to prolong a terminally ill patient's painful life by a week? Also, who should pay?

Love that last part.

Posted by Jay Hancock at 9:30 AM | Permalink | Comments (2)
Categories: Health Care
        

Gawker is not my favorite site (!), but they did a service by FOIing the obsequious email requests made by various news outlets (all the ones reproduced by Gawker are from broadcast -- surprise!) for an interview after Blagojevich got caught on tape making an idiot of himself. This example, from the Today Show, is priceless.

Want to be the first to give Governor and/or First Lady a platform to talk; interview would take place with Meredith Veira[sic] and/or Matt Lauer, who would contact the Governor or representative to go over line of questions; they stress "they are sensitive."

Posted by Jay Hancock at 10:10 AM | Permalink | Comments (2)
Categories: Media
        

Obama is giving a speech next week to urge kids to stay in school. From the NYT:

“The thing that concerned me most about it was it seemed like a direct channel from the president of the United States into the classroom, to my child,” said Brett Curtiss, an engineer from Pearland, Tex., who said he would keep his three children home.

“I don’t want our schools turned over to some socialist movement.”

Posted by Jay Hancock at 7:25 AM | Permalink | Comments (9)
        

Kind of a weird story in the Times today on how older workers are postponing retirement. Has a couple anecdotes and mentions a Pew survey but ignores the startling Labor Department statistics proving the thesis. I wrote about this on Sunday.

The NYT piece holds out the full-boat, state-sponsored retirement schemes from Europe as an attractive alternative to the U.S. model but soft-pedals the ticking fiscal time bombs that these systems represent.

Of course, such a system comes with tradeoffs. To help pay for generous state pensions, Danish workers have one of the highest tax burdens. The population is also aging, meaning that there will be fewer working people to pay for the pensions and care of a graying society.

The Danish system is simply unsustainable. Presenting it as a potential model for the U.S. seems like a non sequiter.

Posted by Jay Hancock at 10:29 AM | Permalink | Comments (1)
Categories: The Great Recession
        

We knew that Electricite de France's plan to invest $4.5 billion in Constellation Energy would produce a new unit at the Calvert Cliffs nuclear generation facility, numerous jobs and a key new supply of electricity for the Maryland economy. What I didn't know until recently is that the deal would produce a huge tax windfall for Maryland just when it could use it the most.

Selling half of its interest in the existing Calvert Cliffs units would instantly generate a $130 million income-tax bill for Constellation, the company says. Legislative fiscal pro Warren Deschenaux confirms this -- he says it's about $100 million.

The portion of the plants being sold to EDF is worth about 1.6 billion. Maryland's corporate income-tax rate is 8.25 percent, and it gets slapped right on the EDF proceeds the minute they land in Constellation's possession. It surprised me that income-tax law applies to a capital transaction like this. But when you're a corporation apparently that's the way it works.

For a state that just filled a $700 million budget hole with furloughs, layoffs, huge program cuts and reductions in aid to localities, $130 million could have come in handy and made the cuts less severe. But Gov. O'Malley is having the PSC rake Constellation over the coals in hearings and putting the matter in some doubt. I have gone on the record saying the deal won't get done.

Posted by Jay Hancock at 6:00 AM | Permalink | Comments (3)
Categories: BGE/electricity
        

The inspector general looking into the SEC's baffling failure to investigate Bernard Madoff finds no corruption -- no strings pulled at high levels to call off the dogs, no bribes, no cronies helping cronies. It does find ridiculous, maddening and repeated failures to respond to extremely specific allegations, as far back as 1992. We knew much of this already, of course. But seeing it in print from the IG is still amazing. If the SEC and its nearly $1 billion budget can't respond to tips such as these, what the #&%!!*$ were they doing down there?

The first complaint, brought to the SEC's attention in 1992, related to allegations that an unregistered investment company was offering "100%" safe investments with high and extremely consistent rates of return over significant periods of time to "special" customers. The SEC actually suspected the investment company was operating a Ponzi scheme...

The second complaint was very specific and different versions were provided to the SEC in May 2000, March 2001 and October 2005. The complaint submitted in 2005 was entitled "The World's Largest Hedge Fund is a Fraud" and detailed approximately 30 red flags indicating that Madoffwas operating a Ponzi scheme, a scenario it described as "highly likely."

In May 2003, the SEC received a third complaint from a respected Hedge Fund Manager identifying numerous concerns about Madoffs strategy and purported returns, questioning whether Madoff was actually trading options in the volume he claimed, noting that Madoffs strategy and purported returns were not duplicable by anyone else, and stating Madoffs strategy had no correlation to the overall equity markets in oyer 10 years. According to an SEC manager, the Hedge Fund Manager's complaint laid out issues that were "indicia of a Ponzi scheme."

The fourth complaint was part of a series of internal e-mails of another registrant that the SEC discovered in April 2004. The e-mails described the red flags that a registrant's employees had identified while performing due diligence on their own Madoff investment using publicly-available information. The red flags identified included Madoffs incredible and highly unusual fills for equity trades, his misrepresentation of his options trading and his unusually consistent, non-volatile returns over several years. One of the internal e-mails provided a step-by-step analysis of why Madoff must be misrepresenting his options trading. The e-mail clearly explained that Madoff could not be trading on an options exchange because of insufficient volume and could not be trading options over-the-counter because it was inconceivable that he could find a counterparty for the trading. The SEC examiners who initially discovered the emails viewed them as indicating "some suspicion as to whether Madoff is trading at all."

The fifth complaint was received by the SEC in October 2005 from an anonymous informant and stated, "I know that Madoff [sic] company is very secretive about their operations and they refuse to disclose anything. If my suspicions are true, then they are running a highly sophisticated scheme on a massive scale. And they have been doing it for a long time." The informant also stated, "After a short period of time, I decided to withdraw all my money (over $5 million)."

The sixth complaint was sent to the SEC by a "concerned citizen" in December 2006, advising the SEC to look into Madoff and his firm as follows:

Your attention is directed to a scandal of major proportion which was executed by the investment firm Bernard L. Madoff.... Assets well in excess of$10 Billion owned by the late [investor], an ultra-wealthy long time client of the Madoff firm have been "co-mingled" with funds controlled by the Madoff company with gains thereon retained by Madoff.

In March 2008, the SEC Chairman's office received a second copy of the previous complaint, with additional information from the same source regarding Madoff's involvement with the investor's money, as follows:

It may be of interest to you to that Mr. Bernard Madoff keeps two (2) sets of records. The most interesting of which is on his computer which is always on his person.

Posted by Jay Hancock at 4:26 PM | Permalink | Comments (4)
Categories: Finance
        

We haven't run out of oil yet. Huge, recent offshore discoveries for Brazil have boosted that country's reserves to 12 billion barrels. That was already a blow against 'peak oil' theorists, who say the world is running out of petroleum.

Now, says Reuters:

LONDON (Reuters) - London-based BP Plc (LSE:BP.L - News) said it had made a "giant" oil discovery in the Gulf of Mexico, reaffirming the area's importance to Western oil majors who are increasingly barred from investing in the world's richest oil prospects.

Further appraisal will be required to ascertain the volumes of oil present, BP said, but a spokesman said the find could be bigger than its Kaskida discovery which has over 3 billion barrels of oil in place.

The find is in the Gulf's Keathley Canyon, a couple hundred miles southeast of Houston. Three billion barrels is a lot. Total reserves in the United States are only 21 billion barrels. In Mexico reserves are 12 billion barrels. These new discoveries are not great news for the planet. We need to get off the Texas tea and onto something healthier.

Posted by Jay Hancock at 12:05 PM | Permalink | Comments (21)
        

Today's column is on how Gov. O'Malley and the rest of Annapolis have coped with the fiscal crisis. The verdict is: Not bad. I might have been harder on O'Malley for not doing more to pare the government work force during the worst recession in 70 years, except for this statistic: Maryland ranks very well for the number of state and local government employees per capita.

I suspect there is more to the story. Maryland's taxes are high compared with those of other states, which does not imply efficiency. But if we're not spending the money on state and local government workers, where is it going? Two guesses: Government services performed by private contractors. Or entitlements. But I do not know. Anybody got an idea?

Posted by Jay Hancock at 9:00 AM | Permalink | Comments (2)
Categories: Taxes
        

Maryland has started another tax amnesty program, this one from now until Oct. 30. Tax scofflaws -- who owe Maryland as much as $500 million, according to the comptroller -- can pay their arrears without penalty.

This is Maryland's third tax amnesty since the Federation of Tax Administrators began keeping track in 1982. We had one in 1987 and another in 2001. At some point these things are going to stop paying off. Maybe they already are. The 1987 holiday raised $35 million for Maryland. The 2001 one netted $39 million. This time officials are talking about $5 million or $10 million.

It's a great deal for the tardy taxpayer. Not only are penalties waived. This time so is half the interest, which in Maryland is practically at Tony Soprano levels -- 13 percent!

Taxpayers are rational, and they can see that amnesties are becoming more than the one-time deals that they're advertised as. In most states amnesties crop up when recessions hit and comptrollers are hard up for dough. If you owe back taxes and you see the fiscal situation deteriorating, governors and legislatures are sending you a message: Just wait, folks, because we're so desperate that soon we'll change the rules in your favor.

States offering tax amnesty this year include Alabama, Arizona, Connecticut, Massachusetts, New Jersey, and Virginia, according to The Tax Adviser. At least some policymakers are starting to worry that enough is enough. A New Mexico fiscal analyst quoted by The Tax Adverser recently warned: "frequent amnesty periods may indirectly communicate a message to taxpayers that they do not need to comply with the Tax Administration Act because, potentially, another amnesty period may be approved."

These days "potentially" is becoming "inevitably."

Posted by Jay Hancock at 6:12 AM | Permalink | Comments (2)
Categories: Taxes
        

Here in the newspaper business we're painfully familiar with comments pertaining to the editing process making it into final print. The Boston Globe is still famous for publishing a jokey headline that was intended only as a temporary placeholder on an editorial about Jimmy Carter: "MORE MUSH FROM THE WIMP." When I was an overworked editor at another paper years ago I once published a reporter's story without removing my notes from the copy: "WHAT DOES THIS MEAN?" and "??????" etc.

Never seen it with financial reports, however, until now. One of the accountants at NZ Farming Systems Uruguay apparently gave a helpful bit of advice to a colleague so s/he could make the books balance. In the table reconciling the income and cash statements, somebody wrote on the depreciation line: "fudge this to equal depn in FA note 11S 2391."

Oops.

NZ Farming Uruguay replied to regulators:

While the words in the comment were not well chosen, they were merely a prompt for the author of the Financial Statements to reconfirm the rounding difference expressed in an early draft of the Financial Statements where there was a minor rounding discrepancy.

HT Barry Ritholtz.

Posted by Jay Hancock at 9:12 AM | Permalink | Comments (0)
Categories: Finance
        

Kelly Brewington's story on the newest study on prostate-cancer tests illustrates some of the dilemmas surrounding health-care reform. The study she writes about points up the problems with the "preventing illness will save money" argument. It also demonstrates the problem with arguing that we're consigning people to "death panels" unless we spend as much as it takes to save every single last life, no matter how expensive it becomes. As Kelly reports:

Because many men are diagnosed with cancer that will not cause symptoms and will not kill them, the screening tests save few lives, the authors conclude.

To be more specific, some studies suggest to save one person's life from prostate cancer, the system has to test 1,000 men and treat about 50 of them through surgery, radiation or both. That's very expensive. Sure, we're saving a few lives. But we're also investing a ton of money that could be spent elsewhere in society, and getting relatively little in return.

Even the current protocols, which suggest men start getting tested for prostate-specific antigen after they turn 40, are controversial. It used to be 50. The study, Brewington writes, has "reignited a long-simmering debate in medical circles on the merits of the blood test." Why perform it, the argument goes, when it triggers so much unneeded treatment -- treatment that sometimes causes harm such as impotence or incontinence?

But if you're the one guy out of 1,000 whose life is saved (and somehow we can magically, retrospectively identify you), you're not buying that argument. "Don't sent me to the death panel!" you'll say. But why stop there? Men as young as 35 sometimes develop prostate cancer, and we don't routinely screen people their age. If we did it would add millions in costs to the system, make preventing a few prostate deaths even more expensive and inefficient and drive the cost of health insurance even higher.

So by decreeing age 40 as the cutoff for routine tests, we're rationing prostate-cancer detection now. Is that the right age? The job for society is to figure a way to deploy medical resources against prostate cancer and a thousand other diseases so that both the costs and the benefits are reasonable. But nobody, Democrat or Republican, wants to admit this.

Posted by Jay Hancock at 6:07 AM | Permalink | Comments (8)
Categories: Health Care