An interesting thought experiment would consider the fate of Baltimore-based Allfirst Financial had currency trader John Rusnak not gotten into enormous trouble with the Japanese yen. Rusnak lost hundreds of millions of dollars and forced Allied Irish Bank to sell the place to M&T. It was another loss of a Baltimore-based banking company.

Allied Irish, of course, has had even bigger troubles recently. Ireland has perhaps been harder than anywhere else in the world beside Iceland by the global financial explosion. Today the Financial Times reports that the Irish government is taking a majority stake in AIB.

Had Rusnak behaved himself, AIB probably would have sold off Allfirst last year or this year as a result of the Great Recession. M&T or whoever bought it probably would have gotten an even better price. AIB does, however, continue to own something like a fifth of M&T stock. There are discussions to sell the stake to Spain's Santander bank.

Posted by Jay Hancock at 11:53 AM | Permalink | Comments (0)
Categories: Finance
        

Ross Douthat tackles the question: : What do we accept today that our great-grandchildren may condemn? And he offers some suggestions, in part by referring to a piece by Kwame Anthony Appiah in the Washington Post: abortion, brutal prisons, industrial meat production.

Tyler Cowen turns the question around: What do we condemn that our descendants may accept?

Torture and loss of privacy -- in some of its forms at least -- already seem to be on the rise, at least in terms of their acceptability in the United States.

With rising health care costs and tight budgets in many countries, can we not expect euthanasia to rise in moral popularity? Will the principles for cutting off care force us to transparently embrace some ugly moral principle, or will the ugliness be our lack of transparency and arbitrariness on these matters?

Preemptive warfare feels unpopular, because Iraq and Afghanistan have gone poorly, and because there have no more major successful terrorist attacks on U.S. soil. I predict the idea will make a comeback. Robot and drone warfare may become even more commonplace, as will targeting at a distance and selective cyberwarfare.

I fervently hope that torture, preemptive war and euthanasia don't make a comeback. However here is one condemned practice that nobody mentioned that ought to be accepted: assisted suicide for the terminally ill. I predict that Dr. Jack Kevorkian, now widely viewed as a bizarre crank, will be seen as a hero by the future.

Posted by Jay Hancock at 9:28 AM | Permalink | Comments (1)
        

David Kocieniewski and the NYT resume the conversation started by University of Chicago blogger/professor Todd Henderson about whether a family with a low-mid six-figure income is rich:

“You take a couple in Westchester County, a police officer with a lot of overtime and a principal at a public school,” said Vincent R. Cervone, a certified public accountant in New York City. “They’re grateful to be working. They aren’t in danger of eviction or starving. But the cost of the average house is $500,000 — five times the national average. Taxes are higher than the rest of the country. If they have a couple of children in college, can you call them rich? Not by any common-sense standard.”

The dispute over what income level qualifies as rich is caused, in part, by the tendency of people to gauge their own wealth by comparing themselves to those closest to them. A study released this month by two Princeton University professors found that in most of the country, people feel comfortably middle class if they earn $70,000. But in New York City, the figure was $165,000. The median income in New York City is $55,980, according to the Census Bureau.

Posted by Jay Hancock at 9:58 PM | Permalink | Comments (13)
Categories: Taxes
        

Maryland's Department of Labor, Licensing and Regulation employs professionals, paid with your tax dollars, to survey and analyze the Maryland economy. But the political types working for Gov. Martin O'Malley, also being paid with your tax dollars, don't seem to want to let them do their job. As reported by Annie Linskey, Secretary of Labor, Licensing and Regulation Alexander M. Sanchez got mad when a mildly negative report on Maryland job growth went up on the department's Web site.

"Maryland's Market Stalls During July" was the headline on the jobs report for that month, which was true. Job growth based on payroll counts rose by just 500 in July, following more impressive gains in previous months. Maryland's economy had made "substantial progress" since the beginning of the year, the report said. But with the end of temporary Census jobs, "we can expect in the months ahead to face an uphill struggle in trying to regain the jobs lost during the downturn," it said.

Routine stuff. It's information that Maryland businesses rely on for planning and analyzing their hiring, buying and investment decisions. But it was too hot for Sanchez.

"Is it down?" he emails DLLR spokesman Bernie Kohn, according to documents obtained through a public records request by the campaign of Bob Ehrlich, O'Malley's opponent in the gubernatorial election. "Call mw (sic) as soon as we know who posted outrageous info on the site."

(Disclosure: Kohn is the former business editor and special projects editor at The Sun and was my boss for several years.)

Sanchez apparently thinks telling the truth about Maryland's economy is outrageous. His story is that it was an "internal document" that was posted in error. But the only error was to put a (barely) bad spin on the O'Malley economy. So the document comes off the Web site, and staffers at DLLR and elsewhere in the O'Malley administration waste hours worrying about whether it's really off-line, who put it up etc.

Ehrlich called a news conference to publicize the emails. O'Malley campaign spokesman Rick Abbruzzese called the news conference an "embarrassing political stunt." No, the embarrassing political stunt is a DLLR secretary who seems to be more worried about spinning the data than telling Marylanders what's going on with the economy.

UPDATE: O'Malley's response to this -- "The numbers are what they are and economists will differ on that. Whether those economists are people inside our staff or people in academia or other places" -- is utterly disingenuous. This isn't about economists disagreeing on how to interpret the numbers. This is about political appointees -- non-economists -- freaking out that the DLLR economic commentary would make the governor look bad.

Posted by Jay Hancock at 6:02 AM | Permalink | Comments (14)
Categories: Politics
        

As today's column says, Southwest Airlines' proposed takeover of AirTran has a lot of downside for BWI Marshall airport. The deal, unless the Justice Department requests changes, would give Southwest a 70-percent market share at BWI and a local monopoly on most of its direct flights.

However, here's the possible positive news. BWI's biggest drawback is its lack of international flights. You basically have to drive to Dulles if you want to fly overseas anywhere but London and the Caribbean. Southwest has been talking about getting into international but hasn't done it. If it were to do so, BWI would be the logical place to start. With a million domestic BWI flights, Southwest could easily route flyers overseas and back through its own system through BWI.

AirTran has a few international routes, and on Monday Southwest boss Gary Kelly said Southwest hoped to take advantage of the experience to perhaps expand the combined company's international offerings, once Southwest overhauls its reservation software. Here's Kelly on the conference call:

[AirTran] fits in beautifully with where
we want to go. It brings a different opportunity for us in terms of markets
with a small international presence but we have the desire ourselves of
course to prepare for international expansion one of these days and that will
be a wonderful learning experience for us....

we've made no secret of the fact that we have been
contemplating international and this - I wouldn't say that the acquisition of
AirTran is making that international commitment for us. But I think it's
very safe to share with you today that we're committed to going
international. We'll have to prepare ourselves for that and again that's
really another topic perhaps for another day that, one of the gaining factors
for us of course is our reservation system technology but I would just
confirm with you today as well that we've made the decision to replace our
reservations technology, we've narrowed that down to two players and that
will bring us the necessary capability that we'll need at least on the
commercial side to offer international service. So, a way to start here
obviously is to acquire AirTran, keep their international service in effect
learn from it, build the capability within Southwest over the next several
years so that when we fully integrate them, the target would be for us to be
ready to move that international service into Southwest Airlines several
years down the road.

Posted by Jay Hancock at 7:37 AM | Permalink | Comments (3)
Categories: Airlines
        

I would be quite surprised if U.S. antitrust authorities let the Southwest/Airtran merger go through unaltered. Baltimoreans might have been better off if Southwest had succeeded in its attempt last year to buy Frontier Airlines. That way Southwest and Airtran would continue competing for passengers on many important routes at BWI Marshall. Southwest seems to have grown as much as it can on its own, and now it seeks growth through acquisitions. (It made a few small buys of other airlines over the years but never anything on this scale.)

Airtran and Southwest compete directly on BWI flights to Boston, Fort Lauderdale, Fort Myers, Indianapolis, Jacksonville, Los Angeles, Milwaukee, New Orleans, Orlando, San Antonio Seattle and Tampa. They compete indirectly on other routes. For example, Airtran flies from BWI to Dayton; Southwest goes to Columbus and Cleveland.

BWI broke passenger records this summer in no small part because of the great fares resulting from the competition between these two companies. A combination of the two is probably not good for Baltimore and BWI in any event, but it would be terrible news if it goes through unaltered. In all but a few cases (eg. Boston, L.A.) on the above routes, the merger would give the combined company a BWI monopoly on direct flights to those destinations. Sure, there's Reagan National, but who wants to drive down there?

The merger as envisioned would give Southwest almost 70 percent of the passengers at BWI. If that happens they'll need to take Justice Marshall's name off the airport and rename it for the big airline based in Dallas.

Posted by Jay Hancock at 9:35 AM | Permalink | Comments (33)
Categories: Airlines
        

Sunday's column is about what state and national authorities are doing, if anything, about the risk that, to crank up hospital profits, in an almost total absence of controls, interventional cardiologists are installing coronary-artery stents in unblocked arteries.

Here are other columns from this year on stents:

Heart stents cost billions, may offer little benefit

St. Joseph stent case could be one of many, doctor says

State should press inquiry into needless stents

St. Joseph must pay victims to close stent case

Posted by Jay Hancock at 11:32 AM | Permalink | Comments (2)
Categories: Health Care
        

From a Bloomberg story today:

Electricite de France SA, Europe’s biggest utility, and Constellation Energy Group Inc. are in talks to avoid the collapse of their U.S. nuclear venture, according to two people with knowledge of the discussions.

The companies are negotiating to resolve a dispute over an option Baltimore-based Constellation has to sell non-nuclear plants to EDF for as much as $2 billion, the people said, declining to be identified because the talks are private. The so-called put, due to expire in December, was agreed to in 2008 when Constellation sold half its nuclear business to EDF.

It's basically what I reported and what Constellation said on the record a week ago. From my Sunday column:

There's also leftover business from almost two years ago, when EDF, parent of Electricite de France, bailed Constellation out of a mess by buying almost half its nuclear operation. As part of that rescue, it also gave Constellation an option to sell non-nuclear generation plants to EDF for up to $2 billion.

The option expires Dec. 31. Constellation doesn't need the cash nearly as badly as it did during the financial crisis. But EDF, which has better things to do with its money these days, seems increasingly concerned that Constellation boss Mayo Shattuck will pull the trigger to unload the assets.

Such a move would cause a "breaking point" that "will destroy the credibility of the management" at Constellation, EDF Chairman and CEO Henri Proglio said in a telephone interview Friday...

"We are committed to working with EDF to resolve these issues," [Constellation] said in an e-mailed statement. But, it added, both companies face an "increasingly challenging economic and policy environment." Constellation, it said, must be mindful of "our contractual rights and obligations and the interests of our shareholders."

The Energy Department guarantee is the fulcrum. If Washington backs a new reactor at Calvert Cliffs, Constellation and EDF may have a baby to raise, a reason to stay together and compromise on the put option. If the project dies, Shattuck has little reason not to cram the coal plants down EDF's throat.

It's worth wondering how serious the negotiations are since EDF boss Henri Proglio was in town a week ago and didn't meet with anybody from Constellation.

Posted by Jay Hancock at 11:57 AM | Permalink | Comments (1)
Categories: BGE/electricity
        

More evidence, if you needed it, that Maryland politics are not like national politics. Here's Andy Barth, spokesman for Republican gubernatorial candidate Bob Ehrlich, in today's paper:

Andy Barth, a spokesman for Ehrlich, said the problem with the state and federal job-creation tax credits is "they don't attack our economy's underlying problem: lack of demand."

Lack of aggregate demand is the fundamental Keynesian diagnosis for economic slumps. That is to say, it is the fundamental Democratic diagnosis. Ehrlich's read on the problem, however, fits with one of the main planks of his platform, which is to cut the Maryland sales tax from 6 percent to 5 percent. (Here's my column on why the personal income tax should be cut instead.) Cutting the sales tax will increase consumer spending & spur growth, he says. The real Democrat, meanwhile, Gov. Martin O'Malley, is pushing the traditional Republican, supply-side recession remedy: income-tax cuts -- in this case in the form of tax credits for hiring.

Of course the candidates' economic policies aren't that surprising. Unlike the president, Gov. O'Malley doesn't have the power of deficit spending (thank goodness) to boost demand in traditional Keynesian fashion. Thus the income-tax credit, which isn't being much used by business and even if it were wouldn't make much difference. On the Ehrlich side, Barth also makes the argument, handed down from generation to Republican generation, about Democrats hating business.

Still, it's funny to hear Barth sound, at least initially, like Paul Krugman.

Posted by Jay Hancock at 8:50 AM | Permalink | Comments (4)
Categories: Politics
        

With election opponent Bob Ehrlich talking ceaslessly about small business and jobs, Gov. O'Malley may feel the need to boost his biz cred. Nevertheless, I found the press release below to be unusual. I'm not a politics junkie, and if this happened before maybe I missed it and somebody remind me.

But in my experience CEOs and other business leaders don't generally formally endorse political candidates. They write checks to both sides and keep their mouths shut, for obvious reasons. I remember being surprised four years ago when Ed Hale had O'Malley signs at 1st Mariner Bank branches. (He's on this list.) I'm not necessarily surprised they're endorsing O'Malley. I'm surprised they're endorsing anybody.

Some of the names on the list are unsurprising. And many aren't in "business" at all; they're lawyers or lobbyists. But some names surprised me. Among them:
Paul Allen, Constellation Energy, Senior Vice President, Corporate Affairs (Maybe Constellation, even after all the bashing O'Malley has given them, felt the need to assign a token O'Malley supporter.)
Norman R. Augustine, Lockheed Martin Corp., retired Chairman and CEO
Chet Burrell, CareFirst, CEO
Mark Fetting, Legg Mason, CEO
Edward Kelly, Citigroup, Vice Chairman (the former Mercantile CEO who sold the bank to PNC)
Bill Roberts, Verizon Maryland, President
H. Thomas Watkins, Human Genome Sciences, CEO

BUSINESS LEADERS BACK O'MALLEY-BROWN

Roster of Business Supporters Includes Fortune 500 Executives and Small Business Owners
Baltimore, MD (September 23, 2010) -- Today more than 200 business leaders from every corner of the state announced their support for the O'Malley-Brown ticket, stressing Governor O'Malley's focus on jobs and economic development in challenging times. The roster of supporters cuts across business sectors and ranges from Fortune 500 executives to small business owners.
"We're thrilled with the tremendous support we're receiving from the Maryland business community. Job creators are backing our campaign because they know we are making the tough choices to invest in the future and position our state for future economic success," said Governor Martin O'Malley.
The announcement of business community support builds on a series of television ads emphasizing O'Malley's efforts to boost small businesses and create 21st century manufacturing jobs in Maryland.
Baltimore business leader Mark Fetting had this say about his endorsement of O'Malley: "Governor O'Malley's leadership has helped steer Maryland through very difficult times in a fiscally responsible manner. As a chief executive, I understand the tough decisions he's had to make, and how those decisions have put Maryland in a strong position to grow out of this recession."

The full list is available below:

Ronald P. Adolph, The TAC Companies, LLC, President and CEO
Hussain Ali, All American Mechanical Inc., President
Stephen, J. Allen, Health Facilities Association, CEO
Paul Allen, Constellation Energy, Senior Vice President, Corporate Affairs
Eugene Amobi, Tech International, President

Louis M. Aronson, Saul Ewing LLP, Partner Wajahat Ashai, Allied Trading Inc., President Hasan Askari, HASCON LLC, President Gary Attman, Future Health Care, President Peter Auchincloss, Watermark Corp., President Norman R. Augustine, Lockheed Martin Corp., retired Chairman and CEO Doug Austin, UPD Consulting, President and CEO Ahmed Awad, Medical Diagnostic, President Arif Ayub, All Tune and Lube, Owner Thomas J. Baltimore, Jr., RLJ Development LLC, Co-Founder and President Eric Bargar, Raymond James Financial Services Michael Batza, Heritage Properties, Owner Michael Beatty, H&S Properties Development, President Rick Berndt, Gallagher, Evelius & Jones, Managing Partner Khalid Bhatti, Mimar Architect, Principal Hon. James J. Blanchard, DLA Piper, Partner Sharon R. Bland, The Clear Solution, Principal Cheryl and John Blazer, Blazer Enterprises, Principals Dr. George Bone, IC Care, President Thomas S. Bozzuto, Bozzuto Management Co., CEO Toby Bozzuto, Bozzuto Development Group, President Paul Brathwaite, The Podesta Group, Principal Christopher Brandt, Audacious Inquiry, President Kirsten Brecht, New City Companies, Managing Partner John M. Brophy, Sr., ACS State & Local Solutions, Executive Vice President Chet Burrell, CareFirst, CEO Jennifer Busse, Whiteford, Taylor & Preston, Partner Keith Campbell, Campbell and Company Kelly Cantley David Carroll, Capitol Strategies, Founder and Principal Judith Carroll, Carroll Engineering, President Dickie S. Carter, Urban Service Systems Corp, President Alan C. Cason, McGuire Woods, Managing Partner, Baltimore Office Pat Caulfield, Coakley & Williams Construction, Co-Owner & CEO Winston Chan, Multimax, Inc., President Steven C. Chen, 3e Technologies International, Founder, VP, GM Munawar Choudhery, Ellicott Amoco Services Inc., President Muhammad Sharif Choudhry, Stark Inc, President Atif Choudhry, SA FATRADER LLC, President Gabriel J. Christian, Law Offices of Gabriel J. Christian Pete Collier, Baltimore Grand Prix, COO Molly Corbett, Corbett Nonprofit Consulting, President Mary Ann Cricchio, Da Mimmo Restaurant, Owner Raymond Crosby, Crosby Marketing Communication, President Michael Croxson, Care One Services, President Marwan Daas, Ilias LLC, President Mark Dambly, Pennrose Properties, President Robert Dashiell, Law Offices of Robert Fulton Dashiell Jay Davidson, Baltimore Grand Prix, CEO Joe Deboy, ARA Construction Corporation, President James H. DeGraffenreidt, Jr., Washington Gas Light Company, retired Chairman/CEO Connie DeJuliis, DeJuliis & Associates, President John K. Delaney, CapitalSource, Chief Executive Officer Gurmeet Dhillon, Dhillon Engineering, President Brad Dockser, Real Estate and Investments William Dockser, CRI Inc., Chairman Douglas Doerfler, MaxCyte, Inc., President and CEO Chris Doherty, Columbia Partners Private Capital, Managing Director Chris Donatelli, Donatelli Development, President John Eckenrode, CPSI, President Richard H. Edson, Housing Capital Advisors Inc., Managing Director Jimmy Fagan, James Joyce, Proprietor Michael L. Falcone, Municipal Mortgage and Equity LLC, President/CEO/COO Todd Ferrante, Park Place Jewelers, Owner Mark Fetting, Legg Mason, CEO Stanley Fine, Rosenberg, Martin and Greenberg, Partner Dr. Robert Fischell, Fischell Enterprises, Chairman/CEO Morton Fisher, Ballard Spahr LLP, Senior Counsel James A. Franzoni, SF&C Insurance Associates, Inc., Founding Partner Howard E. Friedman, Lanx Capital, Chairman Karen Garner, Research and Engineering Development Inc., President Jack Garson, Garson Claxton LLC, Partner Robert H. Geis, Jr., Venable LLP, Partner Syed Fazal Ghaznavi, Travel Wings, President Michael Giangrandi, AJ Michaels Co. Inc., Senior Counsel Brian Gibbons, Greenberg Gibbons Commercial Corp, President & CEO Edward C. Gibbs, Jr., Gibbs & Haller, Partner Brendan Gill, Mackenzie Commercial Real Estate Services Morgan Gilligan Wayne Gioioso, Mid-Atlantic Properties, President Bradley Glaser, Vanguard Equities, Principal Alan H. Gottlieb, Lerner Enterprises, COO Andy Graham, Esquire James P. Grant, First Municipal Credit, President and CEO Ajay K. Gupta, GSecurity, President Glenn Gutridge, Ilias LLC, Vice President Ed Hale, 1st Mariner Bank, Chairman and CEO Syed Haque, Hamda Realty LLC, President Anthony Harrington, Albright Stonebridge Group LLC, President and CEO Lisa Harris-Jones, Harris, Jones & Malone, Principal Anwer J. Hasan, EA Engineering, Science, and Technology, Vice President, Business Unit Director Joseph Haskins, Jr., Harbor Bank, CEO Harold Herndon, Compliance Corporation, President Sandra S. Hillman, Hillman PR, President Samuel K. Himmelrich, Jr., Himmelrich Associates, President William Hite, The United Association of Plumbers & Pipefitters, General President Humberto Ho, Ho Brothers Development, Vice President Robert N. Hockaday, Jr., The Spenceola Group, Principal Timothy A. Hodge, Jr., Miles & Stockbridge, Partner Douglas M. Hoffberger, Keystone Realty Company, Inc., Vice President Denis Horgan, James Joyce, General Manager Kanan Hudhud, Frederick Oncology Center, President Yasin Hussain, GNC, owner Reza Jafari, E-Development International, Chairman and CEO Shahid Jamil, Syzco, President Christopher Janian, H&S Properties Development Corp Ajaz Janjua, Super Eagle Travel, President Charles "Buddy" Jenkins, Bay Shore Development, CEO Mark Jensen, Bowie & Jensen, Founding Partner David E. Johnson, Stratford Realty Mgmt. Co. LLC, President Pless Jones, Sr., P&J Contracting, Owner Lisa Junker, Colbert, Matz & Rosenfelt, Vice President Lisa R. Kazor, Savantage Solutions, President Stephen J. Kearney, Kearney O'Doherty Public Affairs, Principal Edward Kelly, Citigroup, Vice Chairman Frank Kelly, Kelly and Associates Insurance Group, CEO Cliff Kendall, Computer Data Systems, former Chairman and CEO Kim Kennedy, K&K International, President Robert C. Kettler, Kettler Company, Founder and CEO Faisal Khan, Faisal Brothers, Inc., President Kashif Khan, KG General Contractors and Maryland Custom Homes, Managing Member Pervaiz Khan, PGK Inc, President Karen Khan, Golden Fuels Inc, President Ayub Khan, Optimal Solution IT LLC, President Michael E. Klein, Metropolitan Management, Managing Partner Daniel Klein, Klein Enterprises Jay Knerr, Kite Loft, Owner Martin G. Knott, Jr., Knott Mechanical, President Owen Knott, Knott Mechanical, COO Satish Korpe, Potomac Engineers, CEO Charles Kumi, Kumi Construction, President Jon M. Laria, Ballard Spahr, Partner Wonro Lee, Good Trading, Inc., CEO Chris Lee, Ports of America Chesapeake, CEO Belkis Leong-Hong, Knowledge Advantage, Inc, President Mukesh Majmudar, Star Hotels, President/CEO Tim Maloney, Joseph, Greenwald, & Laake, Partner Thibault Manekin, Seawall Development, Real Estate Development Aris Mardirossian, Technology Patents, Inc., President Ricardo Martinez, Project Enhancement Corporation, President Tim McCully, Atlantic Federal Mortgage Co., President Ambassador Tom McDonald, Baker Hostetler, Partner Wayne McDowell, McDowell's Complete Chimney Service, Inc., President Mel McLaughlin, McLaughlin Company, President and CEO Gary N. Michael, The Michael Companies, Owner Herb S. Miller, West Developers, Chairman and CEO Chris Millitello, Arrow Bike, Proprietor Raza Mir, Santa Fe International Inc., President Scooter Monroe Nate Mook, Localist.com, CEO Charles J. Morton, Jr., Venable LLP Ram Mukunda, Integrated Global Networks, CEO Rajan Natarajan, PhD, Artisys Corporation, Director of Business Development Sayed Naved, Banyan Technology, President Damian C. O'Doherty, Kearney O'Doherty Public Affairs, Partner Karen Olson, BioMarker Strategies, CEO Eric G. Orlinsky, Saul Ewing LLP Yomi Osoba, Environ Civil, President Edissa Padder, Padder Health Services, LLC, President Feroze Padder, Heart to Heart, LLC, President Jerry Parrott, Human Genome Sciences, Vice President of Corporate Communications R. Scott Pastrick, BKSH & Associates Worldwide, President and CEO Anil Patel, Northstar Management LLC/Best Western Hotel, President Jay Patel, Star Development Group, Vice President David Peck, Sound Vision Systems, President R. Donahue Peebles, Peebles Corporation, Owner Klaus Philipsen, ArchPlan Inc., President Abba David Poliakoff, Gordon Feinblatt, Chairman of Security Practices Linda F. Powers, Toucan Capital Corp., Co-Founder Paul B. Prager, Beowulf Energy, CEO K. Mark Puente, Riverside Consulting, Healthcare Consultant Rick Raley, Coombs Drury & Reeves Insurance Agency, Owner Dave Rather, Mother's Federal Hill Grille, President Deborah Ratner Salzberg, Forest City Washington, Real Estate Mubariz Razvi, FiberElectronics, CEO Bill Roberts, Verizon Maryland, President Wayne L. Rogers, Synergics Energy, Chairman Michael D. Rosenbaum, Catalyst IT Services, CEO David Rutstein, Venable Law Firm, Counsel Majid Sahi, Sahi Petroleum, President Khalid Said, Tanis Hospitality Management, President Jay Salkini, Tecore, President Truman T. Semans, Brown Advisory, Partner & Vice Chairman Dr. Vinod K. Shah, Shah Associates, Founder and Cardiologist JimShea, Venable Law Firm, Managing Partner Gregory Stephen Shockley, Shenanigan's, Owner Raghid Shourbaji, Top Notch Service Inc., President Dana Shourbaji, Little Light House, President Manni Sidhu, Sidhu Associates, President Ambassador Thomas Leland Siebert, Wexler Walker, Senior Counsel Robert E. Smith, Jr., Savantage Solutions, Vice President Jim Smith, Subway, Owner Shaun Smithson, Star Management Group, Senior Vice President Francis Smyth, Century Engineering, President Chris Spann, The Wine Market, Owner Charles F. Sposato, Cecil Federal Bank, Chairman Ken Stadlin, Kenergy Solar, President Macky Stansell, Macky's Bayside, Owner Dana B. Stebbins, The Cornelius Group, Inc. Jay A. Steinmetz, Barcoding.com, President Richard T. Stewart, Montgomery Mechanical Service, President Joe Stone, Joe Stone Insurance, President Mark Sump, Activate, President Craig A. Thompson, Venable LLP Charles G. Tildon, III, United Way of Central Maryland Bill Titelman, Grant & Eisenhofer P.A., Director Maurice Tose, TCS, Chairman and CEO John Trupiano, Smart Logic Solutions, President K. Robert Turner, Canyon-Johnson Urban Fund LP, Managing Partner Patrick W. Turner, Henrietta Development Corp., President Stan Udihiri, REI Drayco, President Hon. Ted G. Venetoulis, Publisher Dr. Ivan C. Walks, Ivan Walks & Associates, Founder H. Thomas Watkins, Human Genome Sciences, CEO Len Weinberg, Vanguard Equities, Principal Dan Whitehurst, Clark Turner Signature Homes Mike Whitson, Tri-County Abstract, President Patrick H. Williams, The Cormac Group, Partner Bethsaida Wong, Powersolv, VP Government & Community Relations Robert Wray, Mp3Car, Founder and President Thurman W. Zollicoffer, Jr., Whiteford Taylor, Partner

Posted by Jay Hancock at 6:17 AM | Permalink | Comments (24)
Categories: Politics
        

Here is the Motion Picture Association rating appended at the end of A.O. Scott's NYT review of Oliver Stone's new film.

“Wall Street: Money Never Sleeps” is rated PG-13. Obscenity and obscene wealth.

Posted by Jay Hancock at 8:45 PM | Permalink | Comments (0)
        

From the NYT story on Avandia:

From now on, drug regulatory authorities are unlikely to approve medicines simply because they help diabetics control blood sugar levels — the standard for more than 80 years. Instead, authorities are likely to insist that companies prove that their medicines improve the quality or length of diabetics’ lives.

The Avandia story also marks a new and unsettling period for pharmaceutical companies because Avandia’s risks became known only after Dr. Nissen analyzed data from myriad trials that GlaxoSmithKline had been forced to post on its Web site as a result of a legal settlement. Such public postings are increasingly the norm, which means that drug makers can no longer easily hide or control scientific information about their medicines.

Posted by Jay Hancock at 4:09 PM | Permalink | Comments (1)
Categories: Health Care
        

The process to approve the PATH transmission line, which will import badly needed electricity into Maryland and other parts of the mid-Atlantic from West Virginia, continues to be fought every step of the way. Last week the Frederick County zoning commission rejected plans to build a substation that will be the end point for the feeder line.

The Gazette has a good account. The station and the PATH line will get built. But every year they're delayed means another year of higher-than-necessary prices for BGE and Pepco customers. Central Maryland makes less electricity than it consumes. That means local generation companies such as Constellation Energy have a grip on the market. And existing transmission lines to import juice from other states are inadequate and subject to high "congestion" charges. The PATH line will help relieve the shortage and lower prices.

If you live in Frederick County, or even if you don't, you might want to let the zoning officials know what you think. One local woman worried that the substation could be attacked by terrorists. By that logic we should decommission the grid and go back to the Bronze Age. All electricity infrastructure is a potential target for terrorists.

Posted by Jay Hancock at 8:46 AM | Permalink | Comments (10)
Categories: BGE/electricity
        

Well, I know part of the answer, in addition to his having a brief phone conversation with me. As reported, the Chairman and CEO of EDF Group, owner of Electricite de France and partner of Constellation Energy in building a new reactor at Calvert Cliffs, was in Maryland on Friday.

But Henri Proglio didn't meet with anybody from Constellation, which I and others find quite strange. He told me he was here to work on "the project." Since I didn't press him for his meeting schedule, a spokeswoman declined to reveal it after I got off the phone with him. However, here is part of the answer: He had breakfast with Gov. Martin O'Malley. This is from O'Malley spokesman Sean Adamec:

I can confirm that he [Proglio] met with the Governor for a few hours over breakfast, and they spoke about the need for loan guarantees from the federal government to get the new Calvert reactor built. The Governor is very committed to the project, not only for the long term energy benefits but for the thousands of jobs it will create in its construction.

EDF and Constellation are waiting on requested construction loan guarantees from the Energy Department for the reactor project. I guess it makes sense that Proglio would seek out a top public official to confab with. He's not just a French industry titan; he's also basically a government minister. EDF is majority owned by the French government. As noted, the relationship between EDF and Constellation seems fragile and the fate of the Calvert Cliffs project uncertain.

Posted by Jay Hancock at 6:02 AM | Permalink | Comments (0)
Categories: BGE/electricity
        

I don't know how I missed this, but in case you did, too, here is Eleanor Holmes Norton doing what is completely legal and what congress members of both parties do every day -- and what is deeply unsavory. What probably distinguishes her from others is that she did it while being recorded and was perhaps a little more candid about the shakedown than many members of congress might have been.

The NYT accepts the voicemail and transcript as accurate, so I will too:

I was, frankly, uh, uh, surprised to see that we don’t have a record, so far as I can tell, of your having given to me despite my uh, long and deep uh, work. In fact, it’s been my major work, uh, on the committee and subcommittee it’s been essentially in your sector.

I am, I’m simply candidly calling to ask for a contribution. As the senior member of the um, committee and a subcommittee chair, we have (chuckles) obligations to raise, uh funds. And, I think it must have been me who hasn’t, frankly, uh, done my homework to ask for a contribution earlier. So I’m trying to make up for it by asking for one now, when we particularly, uh, need, uh contributions, particularly those of us who have the seniority and the chairmanships and are in a position to raise the funds.

Posted by Jay Hancock at 2:52 PM | Permalink | Comments (1)
Categories: Government & Business
        

Environmental litigation can get incredibly complicated, and it's impossible to say how much liability Arcelormittal and Severstal will bear for the pollution at Sparrows Point. They were successive owners of the Sparrows Point steel mill and related properties after longtime owner Bethlehem Steel entered bankruptcy proceedings several years ago.

They didn't cause the pollution. Bethlehem did that. But they've inherited environmental liability as well as exposure to lawsuits, as demonstrated by the 1997 consent order and the lawsuit by the present owners of the Sparrows Point shipyard. The bottom line is that this is another challenge that Sparrows must deal with.

Of all the mill's difficulties, environmental liability is subsidiary to macro factors such as the value of the dollar, slumping demand for steel and excess industry capacity. But it's still a factor, especially amid reports that Severstal is shopping the plant around. Any potential buyer will look long and carefully at the environmental problems before writing a check.

Posted by Jay Hancock at 9:16 AM | Permalink | Comments (0)
Categories: Environment
        

It's one of the anti-taxers' favorite soundbites, and pilloried blogger Prof. Todd Henderson trotted it out the other day in what was otherwise an informative, fairly restrained post.

But more importantly, what is the theory under which collecting this money in taxes and deciding in Washington how to spend it is superior to our decisions?

The guy's a lawyer, not an economist, but he ought to know better. Even militant libertarians admit that the market fails when it comes to providing some public goods and that some taxes and collective spending are necessary to maintain a stable society. The military, for one. Police and fire departments. They won't exist -- or will work very badly -- without a government to tax citizens and pay for them. Roads, parks, poverty etc. A top-notch system of courts to maintain the property rights that are essential to capitalism. After we stipulate to these -- and who wouldn't but an anarchist? -- it's a matter of arguing what levels of taxation and government spending are appropriate.

Hilzoy, aka, Hilary Bok, professor of bioethics & moral & political theory at Johns Hopkins, explains it better than I can. Here are her thoughts, pulled from comments, in response to another commenter:

John20723: "what is the theory under which collecting this money in taxes and deciding in Washington how to spend it is superior to our decisions?"

Here's an answer:

A lot of what the government spends money on is public goods: things we either cannot buy for ourselves (e.g., national defense), that require powers we do not have (e.g., regulating the stock market, having embassies in other countries, enforcing immigration laws), or that are subject to other market failures (i.e., someone could, in principle, have built the interstate highway system for us, and we would all have benefitted, but in practice it works better to do this collectively.)

If the government were deciding for me whether I should get a flat-screen TV or go on vacation, I'd be upset. But when the government spends money on things I cannot purchase alone, like national defense or the FDA, that's not "it deciding how to spend my money"; it's our elected representatives deciding how much of our money we want to spend on public goods, and how much on private goods.

Posted by Jay Hancock at 6:00 AM | Permalink | Comments (19)
Categories: Taxes
        

I put "loses" in quotes because this is a preliminary estimate from a limited sample in a data series that is often subject to huge revisions when the true numbers come in months later. Nevertheless it may generate some political heat, giving a talking point to Bob Ehrlich and suggesting that Maryland's good job-creation performace (which Gov. Martin O'Malley had little to do with in the first place) may be faltering. The main dynamic could have been the disappearance of temp Census jobs.

Below are the month-to-month changes in total Maryland nonfarm employment, adjusted to smooth out seasonal variations.

Posted by Jay Hancock at 10:59 AM | Permalink | Comments (6)
        

From Ed Yardeni's daily email blast. (No link available.)

Yesterday, I reviewed the outstanding performance of the market three months after midterm elections. I also noted that the third years of the presidential cycle tend to be very bullish. The fourth year of presidential terms, along with first and second years, tend to be much less consistently bullish than third years. Yesterday, I asked Joe, “How well does the S&P 500 perform from the midterm elections to the end of the third year of the President’s term?” The results are spectacular. Since 1962, there have been 12 such 14-month periods, and their average increase was 20.9%! Not one of them was down. Indeed, there are only two gains that are not in the double digits: 0.4% during 1986-1987 and 6.2% during 2006-2007.

Posted by Jay Hancock at 10:44 AM | Permalink | Comments (0)
Categories: Finance
        

More disturbing news about nonprofits, which aren't supposed to be overtly political. Nonprofits are are substantially involved in the fall campaign, and Stephanie Strom and Michael Luo of the NYT report that nobody is likely to do anything about it. It's unclear whether the activity is outside the law. What's certain is that the Internal Revenue Service will do little about it.

The rule of thumb, in fact, is that more than 50 percent of a 501(c)(4)’s activities cannot be political. But that has not stopped Crossroads and a raft of other nonprofit advocacy groups like it — mostly on the Republican side, so far — from becoming some of the biggest players in this year’s midterm elections, in part because of the anonymity they afford donors, prompting outcries from campaign finance watchdogs.

The chances, however, that the flotilla of groups will draw much legal scrutiny for their campaign activities seem slim, because the organizations, which have been growing in popularity as conduits for large, unrestricted donations among both Republicans and Democrats since the 2006 election, fall into something of a regulatory netherworld.

Neither the Internal Revenue Service, which has jurisdiction over nonprofits, nor the Federal Election Commission, which regulates the financing of federal races, appears likely to examine them closely, according to campaign finance watchdogs, lawyers who specialize in the field and current and former federal officials.

Posted by Jay Hancock at 8:59 AM | Permalink | Comments (0)
        

Prof. Todd Henderson at the University of Chicago got probably more Web traffic than he anticipated when he wrote about the effect the expiring Bush tax cuts might have on his family. There's a bit of "who knows best how to spend your money, you or the politicians?" tendentiousness. But mostly it's a straightforward description of his family's finances -- $15,000 in property taxes, big mortgage, $500,000 in education debt for Henderson and his doctor wife etc. -- and how they might respond to higher taxes.

Henderson doesn't specify his family's exact income. He says only that's over $250,000 but not by a lot. Tyler Cowen quoted someone else saying it was $455,000, but has since recanted. Henderson:

If our taxes rise significantly, as they seem likely to, we can cut back on some things. The (legal) immigrant from Mexico who owns the lawn service we employ will suffer, as will the (legal) immigrant from Poland who cleans our house a few times a month. We can cancel our cell phones and some cable channels, as well as take our daughter from her art class at the community art center, but these are only a few hundred dollars per month in total. But more importantly, what is the theory under which collecting this money in taxes and deciding in Washington how to spend it is superior to our decisions? Ask the entrepreneurs we employ and the new arrivals they employ in turn whether they prefer to work for us or get a government handout.

There was a very hostile reaction, with Henderson being accused of "sniveling," "mendacity, ignorance, and small-minded cupidity" and other grave sins.

I suspect the Henderson household will find a way to adjust without canceling the cell phones and cable if the Bush tax cuts expire. Nevertheless it seems to be a family without much in the way of net worth, the traditional measure for "rich."

Posted by Jay Hancock at 9:46 AM | Permalink | Comments (38)
Categories: Taxes
        

Marta Mossburg had a good piece on the op-ed page last week on the huge number of "non-profit" institutions in Baltimore and the hundreds of millions in property tax revenue the city loses as a result. She got the latest numbers from the city and found that nearly 30 percent of the city's property, as measured by assessed value, is exempt:

Since 2000, the city has lost 2,000 properties from its tax rolls, according to the Finance Department. At the same time, the number of tax exempt properties has risen by about 4,800.City documents show that $15 billion of Baltimore's total of $53 billion in property is not taxable. That translates to $340.2 million in lost revenue each year at the city's tax rate of 2.268 per $100 of assessed value.

Loyola University's Stephen Walters tells Mossburg that it's a vicious cycle. Baltimore's property tax rates are a large disincentive for tax-paying businesses or individuals contemplating a move to the city. To a large degree only the tax-exempt can afford to relocate there. So exempt property as a portion of the city's tax base may continue to increase.

Posted by Jay Hancock at 8:57 AM | Permalink | Comments (2)
Categories: Taxes
        

The late, Wilford Brimleyesque Ronald Speer was one of the mid-level editors who made The Virginian-Pilot and The Ledger-Star, of Hampton Roads, one of the best regional newspapers in the 1980s. He would tell reporters: Never assume anything. Double check even the seemingly obvious conclusion.

Words I should have recalled when I wrote Sunday's column on the fraught relationship between France's EDF Group and Constellation Energy. The two companies have agreed to build a third nuclear reactor at Calvert Cliffs on the Chesapeake. EDF Chairman and CEO Henri Proglio was in Maryland on Friday, on his way from the World Energy Congress in Montreal.

The relationship between EDF and Constellation is on an edge, and so is the Calvert Cliffs project and the future of U.S. nuclear development. I got to speak to Proglio on the phone for 10 minutes on Friday when he was in town. In the interview he gave the strongest warning yet from EDF to Constellation about exercising a put option that would transfer some of Constellation's U.S. generation plants to EDF, against EDF's desire.

When I asked in the interview what he was doing here, Proglio said he was working on "the project, of course," referring to Calvert Cliffs. I assumed this meant meeting with his Constellation counterpart, CEO Mayo Shattuck, and other Constellation officials about their partnership. I said so in the column. I was wrong, which EDF quickly pointed out after the piece went on line Friday night. The column required an embarrassing correction.

But the fact that Proglio was here and didn't meet with any Constellation folks seems to support the column's thesis that the companies aren't exactly bosom buddies. He's based in Paris. Constellation is here. So top officials can't have many opportunities to consult in person. Yet according to EDF (and Constellation has not disputed this) Proglio was here for the Calvert Cliffs project but had no meetings with project partner Constellation. The odds for Calvert Cliffs 3 seem to be getting longer.

Posted by Jay Hancock at 6:05 AM | Permalink | Comments (0)
Categories: BGE/electricity
        

In a rebuke to the Public Service Commission and a win for the Severstal Sparrows Point steel mill, the Court of Special Appeals on Friday rejected a 2008 surcharge levied on Sparrows and other commercial customers to keep Baltimore Gas & Electric electricity rates affordable for some small businesses.

Thanks to soaring energy prices and a change in the way customers were classified, some businesses were set to see their electric bills shoot up by 40 percent in the summer of 2008. To provide relief, the PSC capped the increase at 15 percent for the affected businesses and spread the difference among all non-residential BGE customers.

Severstal and others sued, arguing that the commission didn’t have the authority to shift costs in such a way. The policy increased electric bills for the mill by about $400,000 that summer, according to the court’s decision. The appeals court reversed a lower court decision upholding the PSC’s move.
The decision sets the stage for a possible PSC appeal to the Court of Appeals, Maryland’s high court, or a move by the commission to raise others’ rates to pay back Severstal and the other plaintiffs. In all about $7 million is at stake.

PSC Chairman Doug Nazarian said the commission was studying the ruling.

You can read the decision here.

Posted by Jay Hancock at 7:07 PM | Permalink | Comments (0)
Categories: BGE/electricity
        

Both Republican gubernatorial nominee Bob Ehrlich and Gov. Martin O'Malley talk about fiscal responsibility. But they need to get down to specifics of how to fix enormous Maryland pension deficits if they want to have any credibility.

Billions of unfunded liabilities for pension for state employees and health care for state retirees amount to one of the biggest fiscal challenges Maryland faces. The challenge has been building for years. Nobody wants to address it until after the election. But voters deserve to know how the candidates would respond.

So I sent this query to both camps and asked for a response by next week:

To:

The Hon. Bob Ehrlich

The Hon. Martin O’Malley

Gentlemen:

You have both indicated the need for Maryland to improve its long-term fiscal stance. Mr. Ehrlich, in his most recent ad, refers to “a mountain of debt.” Mr. O’Malley talks about “fiscal responsibility during difficult times.”

There are two critical issues with regard to increasing fiscal responsibility and ameliorating the mountain of debt and liabilities: Maryland’s obligations for pensions and other post-retirement employment benefits, ie., health insurance. Together the unfunded liabilities for these programs approach $30 billion.

Voters deserve to know your thoughts on how to solve these problems. Do you believe increased state contributions alone can cover unfunded OPEB and pension liabilities? Or do you believe that some reductions in benefits (changing the credit formula, pushing back the retirement age, increasing employee contributions, for example) will be necessary?

Please be as specific as you can. Thank you for your consideration.

Posted by Jay Hancock at 9:25 PM | Permalink | Comments (6)
Categories: Politics
        

From the NYT:

A curious phenomenon has emerged at the intersection of fashion, sports and crime: dozens of men and women who have robbed, beaten, stabbed and shot at their fellow New Yorkers have done so while wearing Yankees caps or clothing...

The Mets, forever in the shadow of their Bronx rivals, are perhaps grateful to be losing this one: only about a dozen people in the same review were found to be wearing Mets gear.

“It’s a shame,” said Chuck Frantz, 57, the president of the 430-member Lehigh Valley Yankee Fan Club in Pennsylvania. “It makes us Yankees fans look like criminals, because of a few unfortunate people who probably don’t know the first thing about the Yankees.”

The Yankees organization declined to comment for this article.

Posted by Jay Hancock at 12:29 PM | Permalink | Comments (0)
        

From Barry Ritholtz, with ways to finance them, too. My favorite:

One Year Payroll Tax Holiday: Want to increase job creation and reduce unemployment? Tax it less. A 12 month employer FICA holiday will encourage job creation. How to pay for it: Raising both the retirement age and the cap on FICA contributions.

You could get a bipartisan group to support this and fixing Social Security all in the same bill. The whole list is here.

UPDATE: Typing fingers outpace brain. By "could" in the above sentence I mean, "might possibly be able, in a mythical perfect world, in which Democrats weren't worried about voter perceptions of whacking Social Security and Republicans were inclined to do anything on a bipartisan basis."

Posted by Jay Hancock at 10:31 AM | Permalink | Comments (1)
Categories: The Great Recession
        

It's easy to exaggerate the economic effects of retail projects. Store developers like to boast about jobs created and projected spending and so forth. But retailing is the tail on the economic dog. Consumer spending pretty much is what it is, and a few more or less stores in a region won't change that. Stacy Mitchell of the Institute for Local Self-Reliance puts it well in her comments on the proposed Walmart and Lowe's project in Baltimore's Remington section.

First, it's important to note that retail development does not expand the amount of economic activity in a given region. The amount of retail spending in the Baltimore area is a function of the size of the population and their incomes. New retail development may shift the location of spending, but it cannot increase the overall amount of spending.

The relevant geography for Baltimore policymakers, however, isn't necessarily the region. Baltimore has not shared equally in the region's prosperity in recent decades. The boom in Howard County, for example, has not helped Baltimore that much. One of City Council's top tasks should be pulling regional development back inside city borders. That's what the 25th Street Station project is supposed to be about.

A new Lowe's and a new Walmart in Remington won't increase regional retail sales or regional employment. They may, however, shift retail sales and employment back inside the city by attracting shoppers who now drive to big box stores in Baltimore County. I'd say that's a reason to OK the project, despite the generous tax breaks being offered.

Opponents including Mitchell may disagree, partly because Walmart's higher productivity may mean fewer jobs per sales dollar than in the stores it displaces. They also note correctly that some of those displaced stores and lost jobs will be in Baltimore. But as I've argued, the net effect on the city should be positive.

I couldn't find Mitchell's letter online, so I have reproduced it in full below.

Dear Baltimore City Council, Thank you for this opportunity to submit testimony regarding the proposed rezoning to accommodate the development of a Wal‐Mart and Lowe's as part of the 25th Street Station. I am a senior researcher with the Institute for Local Self‐Reliance, a nonproKit research and educational organization focused on sustainable and equitable community development. My area of expertise is on the economic impacts of retail development. I have served as advisor to numerous communities around the country, assisting them in evaluating impacts and formulating policy.

The purpose of my testimony is to draw your attention to a number of serious flaws in the
study titled "The Community Economic and Workforce Development Impacts of The 25th
Street Station Mixed Use Development," submitted in support of the proposed rezoning, and
to urge you to obtain a comprehensive and independent economic analysis from a qualiKied
consultant before proceeding with this project.

First, it's important to note that retail development does not expand the amount of
economic activity in a given region. The amount of retail spending in the Baltimore area is
a function of the size of the population and their incomes. New retail development may
shift the location of spending, but it cannot increase the overall amount of spending.
A comprehensive analysis, therefore, must look at the net impacts: spending and job gains
at a new shopping center are invariably offset by spending and job losses elsewhere. This
study does not offer an estimate of net impacts and therefore does not provide the city with
an accurate picture of the employment impacts.

In addition to this fundamental problem, the study has numerous more specific flaws:
It states that the number of jobs created by the operation of the retail portion of the project
will be 703. This Kigure is based on average employment figures for retail operations as
provided by the International Council of Shopping Centers.

However, one of the key
characteristics of the large‐format retailers proposed is that they employ fewer workers
per unit of sales than other retailers competing in the same lines of goods. The average
Wal‐Mart store employs 360 people. The average Lowe's employs 140. A more accurate
estimate therefore is 500 jobs, not 703.

The study indicates that the retail stores in the project will do $57.5 million a year in sales.
It's unclear where this number comes from. The average Wal‐Mart of this size does $70
million a year in sales, while the average Lowe's does $28 million.

If the local market conditions are such that this project does post annual sales that are 41
percent lower than average for these two retailers, then one can expect that the number of
jobs created will likewise be 41 percent lower, or just under 300 jobs.

As noted earlier, this gain of 300 jobs is only half the picture. In order to estimate the net
employment impacts, one needs to analyze the likely sales impacts to existing businesses in
the neighborhood and the resulting job losses as these businesses either downsize or close.
This study does not provide the comprehensive market and economic impact analysis
needed to determine the net employment impact.
Given that the area around the proposed project has an overall retail spending surplus, it is
safe to assume that a significant share of the sales at the proposed development will come
at the expense of existing businesses within the neighborhood. This will produce job losses
in the neighborhood that offset some or all of the job gains.

A nationwide study conducted by economists at the University of California that analyzed
the impact of Wal‐Mart stores developed nationwide found that the job losses caused by a
new Wal‐Mart store exceed the gains by an average of 150 jobs.1 This is because, as stated
earlier, Wal‐Mart employs fewer workers per unit of sales than many of the retailers it
competes with.

(If the estimated sales of $57.6 is really closer to the national average of $98 million, then
the "bite" taken out of existing businesses in the neighborhood will be even greater.)
A recent study that examined the impact of the opening of a Wal‐Mart on the West Side of
Chicago in 2006 confirms that these type of developments often provide little or no net gain
in employment. The study by researchers at Loyola University found that the opening of
the new Wal‐Mart led to the closure of about one‐quarter of the businesses within a fourmile
radius. These closures eliminated the equivalent of 300 full‐time jobs, about as many
Wal‐Mart added to the area.2

In terms of grocery spending leakage, the study of the 25th Street Station project estimates
that 75% of the area's grocery needs are being met by retailers within a one‐mile radius. It
estimates a leakage of $16 million. But it greatly overestimates the amount of square

footage needed to meet this demand. It suggests the area can support 47,000 SF of new
grocery retail. But the average supermarket does $592 in sales per SF, meaning this gap can
support only 27,000 SF of grocery retail. Wal‐Mart will create about double that amount of
grocery space, which would likely lead to the vacancy of about 25,000 SF of existing grocery
retail elsewhere in the neighborhood and a similar level of job, tax, and economic losses.

A better solution to the grocery leakage woutl be the development of small supermarkets
that provide better job and wage beneKits to the neighborhood.
Thank you for the opportunity to submit this testimony.
Sincerely,
Stacy Mitchell
smitchell@ilsr.org
612-379-3815 x213
Institute for Local Self-Reliance

1 The Effects of Wal‐Mart on Local Labor Markets ‐ ‐ by David Neumark (University of
California‐Irvine), Junfu Zhang (Clark University), and Stephen Ciccarella (Cornell
University), IZA Paper No. 2545, Jan. 2007
2 The Impact of an Urban Wal‐Mart Store on Area Businesses ‐ by Julie Davis, David
Merriman, Lucia Samayoa, Brian Flanagan, Ron Baiman, and Joe Persky, published by the
Center for Urban Research and Learning Loyola University Chicago, December 2009.

Posted by Jay Hancock at 6:10 AM | Permalink | Comments (17)
        

Here is a terrific idea (free registration required) from Joshua Rauh and Robert Novy-Marx, published in the online journal, The Economists' Voice. The state and local pension crisis is caused by 1) Generous promises of pension and retiree benefits made by states to public employees, 2) The increasing scarcity of resources to pay for those benefits, 3) The refusal/inability of state politicians to reduce the payouts, partly because they know that, 4) In the event of imminent default, the federal government would have to bail states out.

The Rauh/Novy-Marx plan solves all four problems. To finance pension deficits, they argue, the federal government should allow states to sell tax-exempt bonds explicitly for that purpose. (Under current law bonds sold to finance pensions are taxable.) That gives state governments a source of cheap money to meet their obligations.

But states would be allowed to obtain the tax-exempt status for the bonds only if they radically overhauled their retirement systems, ending defined-benefit pensions for new state employees and replacing them with defined contribution plans, similar to the 401(k) plans offered to employees by corporations. That condition gets rid of the potential for a long-term fiscal catastrophe. It gives state politicians political cover to make hard decisions; they can say they had to cut retiree benefits for future employees because Washington made it impossible to refuse.

At the same time, the plan makes states shoulder the pension burdens that they created, getting federal taxpayers off the potential hook.

UPDATE: Here is basically the same idea, from former Los Angeles Mayor Richard Riordan and a co-author, in yesterday's NYT. Thanks to Jim for the pointer.

Posted by Jay Hancock at 6:00 AM | Permalink | Comments (3)
Categories: Slo-mo fiscal train crash
        

I few years ago I wrote a vicious anti-penny tirade. But I am a weak, sentimental pennyphile compared with vlogbrother John Green, who delivers this deadly critique. Stephen Dubner calls it the best anti-penny rant ever.

Posted by Jay Hancock at 5:39 PM | Permalink | Comments (11)
        

Mary Beth Pfeiffer at the Poughkeepsie Journal does some old-fashioned journalism:

The Medicaid reimbursement rate for state institutions is $4,556 per person per day, the Poughkeepsie Journal has reported, three to four times higher than the cost of care. These overpayments fund a wide variety of other services for New Yorkers with autism, Down syndrome and other lifelong brain disorders, from workshops to family support. The Journal's reports have spurred reviews by state and federal overseers.

And Tyler Cowen is impressed.

Posted by Jay Hancock at 9:14 AM | Permalink | Comments (0)
        

Hancock blog, March 18, 2010:

So I asked Jay Brodie, chief executive of the Baltimore Development Corp., if the Remington Walmart and Lowe's or its developer may be getting tax abatement, payment "in lieu of" tax or other one-off breaks. Brodie's reply: The project "is in the Enterprise Zone and so is entitled to those credits. No other incentives have been asked for or offered."

Baltimore Sun, Sept. 14, 2010:

The developers of a Remington shopping center, which is slated to include a Walmart and Lowe's home improvement store, could be eligible for substantial tax breaks because of a resolution hastily approved by the Baltimore City Council last year.

The 25th Street Station project, planned for the site Anderson Automotive has occupied for half a century, is located in one of the city's two designated "focus areas," where businesses receive extensive property tax breaks and credits for hiring employees to stimulate growth in struggling communities...

The resolution, which was introduced at the request of the Baltimore Development Corp., the city's quasi-public economic development arm, also established four enterprise zones, where lesser tax breaks are intended to stimulate economic growth.

The "focus-area" tax breaks would appear to be over and above the Enterprise Zone tax breaks. Why can't Baltimore get even a discount retailer store without layering on the giveaways?

Posted by Jay Hancock at 8:59 AM | Permalink | Comments (13)
Categories: Corporate welfare
        

To partly paraphrase the former New England Journal of Medicine editor quoted in this NYT piece, these results are shocking and totally unsurprising. Doctors getting paid millions by companies that make knee and hip replacements and other medical devices are doing "research," publishing it in medical journals and then failing to disclose the payments as a conflict of interest.

The study, done by the Archives of Internal Medicine, wasn't a perfect exemplar of transparency, either. Observing a quaint, clubby protocol of academia, it failed to disclose the identities of the doctors raking it in.

Twenty-five out of 32 highly paid consultants to medical device companies in 2007, or their publishers, failed to reveal the financial connections in journal articles the following year, according to a study released on Monday.

The study was based on disclosures by five medical device companies, mostly forced by government investigations. The companies paid about $250 million to consultants in 2007, including royalties, the study says. Zimmer paid $87 million; DePuy Orthopaedics, $63 million; Stryker, $45 million; Biomet, $27 million; and Smith & Nephew, $24 million.

Of that total, $114 million went to 41 doctors, the study said, of whom 32 wrote or were co-authors on orthopedic journal articles the next year.

Posted by Jay Hancock at 8:42 AM | Permalink | Comments (0)
Categories: Health Care
        

Given what's happened, it's amazing that the Wall Street lobby is still spouting the sophistry that led to the financial crisis. This is from a Wall Street Journal story on the Basel III accords.

Many bankers were less enthusiastic. "Every dollar of capital is one less dollar working in the economy," the Financial Services Roundtable, a lobbying group of large U.S. financial firms, said in a statement.

No, every dollar of capital is a dollar spent on an insurance policy against another disaster. Excessive leverage is poison. Wall Street is well able to finance a thriving economy while maintaining common equity of 7 percent.

Posted by Jay Hancock at 7:15 PM | Permalink | Comments (0)
        

This is a post about banking capital requirements, but don't turn to the Video Music Awards article just yet. This is interesting. The No. 1 cause of the mortgage disaster was inadequate equity capital requirements. Equity capital is the "down payment" on a house, the shareholder's equity in a business, the proffered cash in a securities transaction. All across the spectrum during the housing bubble economic agents were allowed to do deals with practically nonexistent capital. Houses bought with no money down. Firms like Lehman operating on 30 parts borrowed money for every one part of equity. Etc. When you have little or no equity to start with, even small reversals in the prices of the assets you're buying causes bankruptcy. That, in a nutshell, is the story of the housing blowup.

One of the terrible aspects of the Dodd-Frank financial reform legislation was its failure to do anything to beef up requirements for equity capital. Such a move would have made the system much more stable, simply and cleanly. It also would hurt Wall Street's profits. So it's great to see the international Basel III requirements doing what Washington couldn't bring itself to do. Matt Yglesias has the story.

Posted by Jay Hancock at 8:40 AM | Permalink | Comments (0)
Categories: The Great Recession
        

Great Vanity Fair piece by Michael Lewis on how Greece responded uniquely and disastrously to the global flood of cheap money that dried up in 2007.

Americans wanted to own homes far larger than they could afford, and to allow the strong to exploit the weak. Icelanders wanted to stop fishing and become investment bankers, and to allow their alpha males to reveal a theretofore suppressed megalomania. The Germans wanted to be even more German; the Irish wanted to stop being Irish. All these different societies were touched by the same event, but each responded to it in its own peculiar way. No response was as peculiar as the Greeks’.

Posted by Jay Hancock at 8:28 AM | Permalink | Comments (1)
Categories: The Great Recession
        

Marjorie Censer and Peter Whoriskey have a pessimistic piece in today's Washington Post on what shrinking defense spending will do to the D.C. regional economy, including Maryland and Northern Virginia. (Well, it's pessimistic for the regional economy. It's probably positive for the national deficit, wasted taxpayer money and possibly for world peace.)

Several in the industry said the downturn could be as severe as it was in the early 1990s, when, among other things, the Navy largely pulled out of Crystal City.

"We're seeing the start of another down cycle," said Randy Jayne, managing partner for executive search firm Heidrick & Struggles's aerospace, defense and aviation practice.

Posted by Jay Hancock at 8:15 AM | Permalink | Comments (1)
Categories: Government & Business
        

It's Jeff Salkin & me on Maryland Public Television.

Posted by Jay Hancock at 1:06 PM | Permalink | Comments (1)
Categories: BGE/electricity
        

And here are WBAL's Bill Vanko and me talking about it.

Posted by Jay Hancock at 11:01 AM | Permalink | Comments (0)
Categories: Airlines
        

In October 2001 I wrote a column that began:

MARYLAND regulators are spending millions to educate people about electricity deregulation, but a few key parts of the process haven't been covered in the government brochures."Sorry, Baltimore consumers, we blew it," is what the brochures would say if you put sodium pentothal in the Public Service Commission water coolers. "Our motto is, `You use it. Now choose it,' but in Central Maryland you may not get electricity choice for years.

Nine years later electricity shopping is finally a reality. More BGE households than ever have swtiched to a competitive supplier. What happened meanwhile? How did Maryland let BGE transfer its valuable generators to its parent, which preceded the near doubling of BGE household kilowatt prices? What has happened since then and what should be done now? Thomas Firey, a senior fellow at the Maryland Public Policy Institute, gives a good, sophisticted overview.

His ultimate prescription is closely related to regulators' recent approval for BGE to install smart meters.

Instead of pushing consumers to buy more-expensive energy-efficient appliances or building more generating plants and power lines, the easiest, lowest-cost solution to Maryland’s electricity problems would be to simply shift some of the peak demand to offpeak times when wholesale prices are lower and congestion is less.

When energy experts worry about Maryland’s future supply of electricity and its cost, their concern is about meeting peak demand. If the peaks can be moderated even slightly, that would greatly benefit Maryland consumers.

Moderating peaks is what smart, computerized meters are supposed to do.

In a history of Maryland electricity deregulation I would have mentioned the windfall profits that BGE parent Constellation Energy made from the Calvert Cliffs nuclear plant at the peak of the energy bubble. Wholesale megawatt prices were keyed to very high natural-gas prices, but (the largely depreciated) Calvert Cliffs was cranking out cheap, uranium-based power that Constellation could then sell at the inflated, going rate. Before deregulation, savings from the cheap power would have been passed to customers. But that's a quibble with Firey's account.

Posted by Jay Hancock at 6:00 AM | Permalink | Comments (4)
Categories: BGE/electricity
        

As Hanah Cho reports, an administrative law judge has rejected the Securities and Exchange Commission civil allegations that Ferris Baker Watts lawyer Theodore Urban didn't do his job with respect to rogue broker Stephen Glantz. It's a victory for Urban, who was FBW's general counsel.

Judge Brenda P. Murray's initial decision in the case, 57 pages long, gives the most publicly available background yet to the Glantz affair, which goes back to 2004 and earlier and preceded FBW's sale to RBC Dain Rauscher. Among other details, the opinion portrays Louis J. Akers, who was vice chairman and had previously been CEO, as something of a bully who helped enable Glantz's fraud. Judge Murray:

Akers was a big physical presence, a domineering personality, who was engaging to some and a bully to others. Tr. 416, 602, 970-71, 1602, 2202-03. Akers was aggressive towards everyone, he yelled at people, and he was always determined that his positions prevailed. Tr. 1602, 1648, 2203, 2685-86. Akers’s relationship with Patricia Centeno (Centeno), Chief Compliance Officer and Compliance Director in the period January 1, 2003, until March 30, 2004, was contentious and adversarial. Tr. 2628-29. Centeno testified of multiple incidents in which Akers thwarted her compliance efforts. Tr. 592-93. In an incident that occurred after she left FBW, but which supports her position, Akers described the Compliance Director as a member of Hitler’s Third Reich and a Compliance branch examiner as Frankenstein’s lab assistant, Igor, at a fairly large meeting of branch managers in 2005.

I called Akers, who has settled with the SEC for his part in the Glantz debacle and is out of the securities business.

Akers says he takes "full responsiblity" for not watching Glantz more closely when it was his job to do so. Was Akers a bully? "You can't be in this business and do anything without having some people who really like you and some people who really don't," he said. "If people want to say I was the boogie man, that's fine. But somehow when I was there the firm really prospered."
And, he says, "I'm not as imposing as I was because I lost 57 pounds."

More in the Sunday column.

Posted by Jay Hancock at 2:07 PM | Permalink | Comments (0)
Categories: Finance
        

You're not as thin as you think you are. Esquire's Abram Sauer got out a tape and measured various brands of pants with waistlines of allegedly 34 inches. They weren't even close.

Says Sauer:

However, the temple for waisted male self-esteem is Old Navy, where I easily slid into a size 34 pair of the brand's Dress Pant. Where no other 34s had been hospitable, Old Navy's fit snugly. The final measurement? Five inches larger than the label. You can eat all the slow-churn ice cream and brats you want, and still consider yourself slender in these.

Posted by Jay Hancock at 1:24 PM | Permalink | Comments (2)
Categories: Marketing
        

Scripophiles everywhere are dancing in the aisles. From AP:

AMSTERDAM (AP) - An archive in the Netherlands has uncovered what it says is the oldest known share of stock in a company.

The West Fries Archive says the share in the Dutch East India Company is dated Sept. 9, 1606. That's more than two weeks before what had been the oldest known share in the corporation, which is held by a group of German investors.

According to a statement on the archive's website Thursday, the share was issued to an official named Pieter Harmenz in Enkhuizen, which then rivaled Amsterdam as one of the nation's most important ports.

The share was found by a college student working on his history thesis, the archive said.

It didn't say how it knows the document is authentic. The share goes on display Friday at the West Frisian Museum.

(Copyright 2010 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.)

Posted by Jay Hancock at 1:07 PM | Permalink | Comments (0)
        

There is a contest between two of the government's biggest programs, the Department of Defense and Medicare, to see which can waste the most taxpayer money through billions of dollars in fraud and ripoffs. Conservatives love to complain about abuse of social programs but seldom pipe up about the outrageous waste at the Pentagon. Vice versa for liberals. Criticize waste in social programs and you're liable to be accused of hurting people. Point out the obvious at the Defense Department and you risk being labeled unpatriotic.

In truth both the human welfare and the war-fighting sides of the government are expensively dysfunctional, lining the pockets of fraudsters, which is especially objectionable at this time of resource scarcity. The latest evidence of the Pentagon financial morass comes from Sen. Charles Grassley, whose investigators issued a very troubling report this week that echoes some of the findings in the Washington Post's Top Secret America series.

The short story is that the Pentagon's Audit Office has basically stopped auditing! From the Grassley report:

The Audit Office appears to consistently demonstrate little or no interest in finding fraud and waste. That attitude was clearly reflected in the response given by senior management to this question raised at each interview: “How much fraud was detected by your directorate in FY 2009?” Without exception, the answer was a disinterested: “I don’t know.” That answer will not change until contract audits are “front and center” once again.

The success or failure of an audit turns on the quality of financial data available for audit by competent examiners. Unfortunately, the quality of the financial data presented to OIG auditors by DOD during the period reviewed by the staff should probably be rated as poor to non-existent. Having lost control of the money at the transaction level, DOD’s broken accounting system is incapable of generating accurate financial records. The consequences are predictable. Most of the time, OIG auditors report: “no audit trail” found.

The OIG Audit Office has allowed the “no audit trail” scenario to hinder and, in some cases, to obstruct the completion of credible audits. The situation is so bad that OIG senior managers readily admit that existing audit teams are no longer able to conduct full-scope, end-to-end contract audits. Auditors no longer verify payments at the primary source – the Defense Finance and Accounting Service (DFAS). . “It’s impossible …. We can’t do it,” they say. If the OIG Audit Office is not checking payments and matching them with contracts and deliveries, it will never find much fraud and waste. OIG Audit needs to be on the “money trail” 24/7. That is where most fraud occurs.

Posted by Jay Hancock at 6:30 AM | Permalink | Comments (2)
Categories: Slo-mo fiscal train crash
        

Business professors and a doctoral student at the University of British Columbia find what you may have always suspected. Business isn't just about profits and losses and rational expectations. It's about dominance and testosterone and winning and losing. The paper, Deal or No Deal: Hormones and the Mergers and Acquisitions Game, finds that high-testosterone males behave more aggressively in business deals, perhaps in ways that hurt their interests or those of the principals they represent.

Young male CEOs appear to be combative: they are 4% more likely to be acquisitive and, having initiated an acquisition, they are over 20% more likely to withdraw an offer. Furthermore, a young target male CEO is 2% more likely to force a bidder to resort to a tender offer. We argue that this combative nature is a result of testosterone levels that are higher in young males. Testosterone, a hormone associated with male dominance seeking, has been shown to influence prospects for a cooperative outcome of the ultimatum game. Specifically, high-testosterone responders tend to reject low offers even though this is against their interest. It has been argued that this is consistent with a low offer being seen as dominance seeking.

No, they didn't actually take blood samples and measure the androgens. They used an executive's age as a proxy for testosterone intensity. Younger men typically have higher levels of the stuff. This raises an obvious quesiton: Maybe the behavior measured by the researchers resulted from inexperience, or a perceived need by younger men to seem more aggressive, rather than raging hormones per se.

Nope, for a valid study I want a nurse in the boardroom with with a hypodermic and a sample tube. We can start with Carl Icahn, 74. He probably has the testosterone of an 18 year old.

The paper is by Maurice Levi, Kai Li, Feng Zhang and is to be published this week in the journal Management Science.

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

After weeks of anti-slots-at-the-mall TV ads, David Cordish is out with his first pro-slots spot, reports Nicole Fuller in today's paper. The ad is simple and direct, talking about jobs and revenue with wholesome images of ethnically diverse citizens working and studying.

As anti-slots-at-the-mall leader David Jones points out, the ad doesn't note that there are other potential slots locations in Anne Arundel County. Of course the anti-slots ads, which promote Laurel Park as the alternative, away-from-"families"-and-residences site, don't say that there are problems with that location also and that slots could potentially end up at some third, unspecified county location.

Posted by Jay Hancock at 8:42 AM | Permalink | Comments (5)
Categories: Slots
        

A sharply lower portion of Maryland businesses believed Maryland was pro-business in the second quarter of 2010 than did four years previously, according to a survey from the University of Baltimore. Asked whether the state is "pro-business or business friendly," only 31 percent of the business folks surveyed said "Yes" this year. 36 percent said Maryland is business neutral; 33 percent said the state is anti-business or business unfriendly.

The last time the survey was done, in the third quarter of 2006, confidence in Maryland had reached an all-time high. 74 percent of the firms at that time said Maryland was pro-biz or business friendly; only 9 percent said it was anti-business or business unfriendly.

Naturally Bob Ehrlich seized on this when it came out last month, saying the study, from UB's Jacob France Institute, "underscores that the O'Malley administration has little or no understanding of what it takes to lead a recovery in Maryland." The last time the survey was done, in 2006, marked the end of Ehrlich's tenure as governor.

For sure some businesses are less than happy with O'Malley's policies, especially the tax increases passed in the 2007 special legislative session. But the results probably also reflect the poor economy generally. Even though the survey asks companies to rate Maryland, not the overall economy, surely some responses are influenced by the business cycle.

I waited a few weeks to post this because I had some questions about the survey and the timing. Ehrlich's people jumped on the data so quickly, and it had been so long since the previous survey, that I wondered whether the Ehrlich campaign paid for the new research. The answer is no, say both the Ehrlich folks and Richard Clinch, the UB economist who does the study. The survey was stopped in 2006 because funding had run out, but the France Institute wanted to revive it and self-funded it, says Clinch.

Also, despite the fact that the 2010 survey reports "friendly," "neutral" and "unfriendly" results and the 2006 survey reports only "friendly" and "unfriendly," the question protocol was the same for both surveys, Clinch says.

Posted by Jay Hancock at 6:00 AM | Permalink | Comments (1)
        

Hewlett Packard boss Mark Hurd resigned last month after the board learned that he fudged his expense accounts with regard to time spent with a female former reality-show contestant. Nobody was more critical of the defenestration than Oracle's Larry Ellison, who has now hired Hurd for one of the top three spots at Oracle, dispensing with President Charles Phillips.

We'll see how this one turns out. Hurd was used to being alpha dog at HP, but Ellison is one of the top egos in any industry, anywhere. There is also Safra Catz, who also holds the title of president. She's the former chief financial officer, also a potential heir to Ellison, and can't be especially happy about the hire. Separately the three are incredibly talented. Whether they can work together is very much an open question.

Here's my August column on Mark Hurd's golden parachute, which he was allowed to keep despite his behavior.

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

From the Texas state fair, via the Dallas Morning News:

For three years, Zable has been on a mission to concoct Fried Beer. He remembers staring at a bar menu in a restaurant. Calamari. Nachos. Fried cheese.

Bor-ing.

"Someone needs to figure out a way to fry beer," he thought.

Zable started experimenting. But the beer-and-dough concoction kept exploding once it hit the fryer. He kept getting burned.

So he consulted with a food scientist – still, no luck.

Then, earlier this year, he finally found the recipe for success. Now Zable keeps the process shrouded in secrecy and has applied for a Fried Beer patent and trademark.

Posted by Jay Hancock at 8:40 AM | Permalink | Comments (0)
Categories: Marketing
        

In his paper, "Are Economists Human?," University of Chicago economist Howard Margolis raises questions about the rationality of a profession that considers itself, above all, rational. Economists tended to do poorly on the following questions, which Margolis considers elementary to the discipline. Answers are here.

You won a free ticket to see an Eric Clapton concert (which has no resale value). Bob Dylan is performing on the same night and is your next-best alternative activity. Tickets to see Dylan cost $40. On any given day, you would be willing to pay up to $50 to see Dylan. Assume there are no other costs of seeing either performer. Based on this information, what is the opportunity cost of seeing Eric?

And:

Three poker chips are in a cup. One is marked with a BLUE dot on each side, another with a RED dot on each side, and the third has a BLUE dot on one side and a RED dot on the other. So there is one blue/blue chip, one red/red chip, and one blue/red chip. Without looking, you take out one chip, and lay it on the table. 1. Suppose the up-side turns out to be BLUE? What is the chance that the down-side will also be BLUE? ____ 2. What if the up-side is RED? What is the chance that the down-side will also be RED? ____ 3. Before you see how the chip has fallen, what is the chance that it has the same color dot on both sides? ____ 4. Suppose you answered 1/2 in response to Questions 1 & 2. That would mean that whichever the up color of the chip, the chance is 50/50 that the color on the down side is the same. But if at Question 3 you said that chance is 2/3, aren't you contradicting yourself? Yes ___ No___

Posted by Jay Hancock at 8:15 AM | Permalink | Comments (3)
        

Jamie Smith Hopkins has a short piece on the continued growth of jobs in the nonprofit sector even as the recession plastered employment at for-profit companies. The research was done by the Johns Hopkins Center for Civil Society Studies. I can't get the study to load on the Center's site, but I'm betting that nonprofit job growth was fueled largely by hospitals and other aspects of health care. Health-care employment has been fueled by the aging population and lack of controls on Medicare spending.

Posted by Jay Hancock at 7:54 AM | Permalink | Comments (1)
Categories: Nonprofits
        

Very dismal forecast from Berkeley's Barry Eichengren at Euro Intelligence.com:

While I am mindful of the eminent forecaster Edgar Fiedler’s admonition that he who lives by the crystal ball soon learns to eat ground glass, I would now put the odds of a double dip at 3 to 1. The recent data flow, from home sales and new unemployment claims to exports and manufacturing activity, leave no doubt that U.S. growth will be less than 1 per cent in the second half of the year. That could be stall speed.

Read the whole thing here.

Posted by Jay Hancock at 11:50 AM | Permalink | Comments (0)
        

From AP:

Gulf oil rig explodes off US coast GRAND ISLE, Louisiana (AP) — An offshore oil rig has exploded in the Gulf of Mexico, west of the site of the April blast that caused the massive oil spill. Coast Guard Petty Officer Casey Ranel says the blast was reported by a commercial helicopter company about 9:30 a.m. CDT (1430 GMT) Thursday. Seven helicopters, two airplanes and four boats are en route to the site, about 80 miles (130 kilometers) south of Vermilion Bay along the central Louisiana coast. Ranel says it hasn't been determined whether the structure is a production platform or a drilling rig or whether workers were aboard. Ranel says smoke was reported but it is unclear whether the rig is still burning.

Posted by Jay Hancock at 11:44 AM | Permalink | Comments (2)
Categories: Energy
        

Julie Bykowicz reports that Maryland had a year-end budget balance of $344 million because the economy and tax collection performed not quite as terribly as analysts had projected. People are already talking about how to blow it. Counties and cities want some of their cuts restored. State employees want to be reimbursed for one of their furlough days.

But it's way too early to start spending the money. Maryland's budget situation is still really dicey. Substantial slots money is probably at least a year away. The economy is highly questionable. The decent job growth Maryland had earlier this year, probably partly tied to temporary Census hiring, seems to have stopped. A double dip recession, while not being predicted by most economists, is very much a possibility. In an election year Gov. O'Malley may be tempted to ladle the gravy in a few choice places, but until things are clearer the money should stay in the rainy-day fund.

Posted by Jay Hancock at 8:54 AM | Permalink | Comments (0)
Categories: Taxes
        

This looks like a great analysis from the Institute for Policy Studies -- an attempt to quantify how CEOs are enriching themselves off the misery of employee layoffs. The equation has been around for years: CEOs get paid based on cash flow and profit margins and stock prices, all of which can be improved for the short term by slashing and burning among the cubicles. CEOs reap immediate, enormous bonuses -- long-term damage to the company be damned.

But I've never seen this kind of detailed look. The IPS analysis offers compelling and maddening evidence of this dynamic. The whole study is worth looking at, including scores of the Layoff Leaders. (Congratulations Fred Hassan at Schering-Plough! No. 1, with $50 million in pay, 16,000 layoffs!)

Here are some highlights:

-- CEOs at the 50 major firms that have laid off the most workers since the onset of the economic crisis took home nearly $12 million each on average in 2009, 42 percent more than the average compensation that went to S&P 500 CEOs.

-- These layoffs in no way rate as an inevitable consequence of red corporate ink. Of the 50 top corporate layoff leaders, 72 percent ended last year in the black. Overall, these top 50 layoff firms enjoyed a 44 percent average profit increase in 2009.

-- Of the 50 layoff leading companies, only two reported paying corporate income tax in
2009 at the 35 percent statutory rate.

-- These numbers all reflect a broader trend in Great Recession-era Corporate America: the relentless squeezing of worker jobs, pay, and benefits to boost corporate earnings and maintain corporate executive paychecks at their recent bloated levels.

Posted by Jay Hancock at 6:00 AM | Permalink | Comments (6)
Categories: Executive Pay
        

Sun weather blogger Frank Roylance says a preliminary report from the National Weather Service makes this the hottest Baltimore summer since they began keeping records in 1871. And Thursday should set the record for the number of 90-degree-plus days in the region. And summer still has almost three more weeks to go. NWS:

THE METEOROLOGICAL SUMMER MONTHS...JUNE TO AUGUST...OF 2010 WAS THE WARMEST ON RECORD FOR BALTIMORE MD. THE AVERAGE NWSTEMPERATURE DURING THIS 92 DAY PERIOD WAS 79.3F...BREAKING THE PREVIOUS WARMEST SUMMER ON RECORD OF 79.1F IN 1943.

THE HIGH TEMPERATURE AVERAGED OVER METEOROLOGICAL SUMMER OF 2010 FELL JUST SHY OF 90 DEGREES...89.6F. THE PREVIOUS WARMEST SEASONAL HIGH TEMPERATURE FOR METEOROLOGICAL SUMMER WAS 88.7F IN 1995.

Posted by Jay Hancock at 8:49 PM | Permalink | Comments (0)
Categories: Environment
        

It is possible to argue about whether an artery that is 40 percent blocked by plaque needs a stent. The medical consensus is that it does not, but presuambly clincians can have a debate. What you can't do is stent an insignificantly blocked artery and then tell Medicare it was 80 percent or 90 percent, as McLean is alleged to have done. If the allegations are true, they amount to defrauding Medicare and are one reason health costs are so high.

On or about September 8, 2005, in the District of Maryland, the defendant, JOHN R. MCLEAN, in a matter involving a health care benefit program, did knowingly and willfully make a materially false, fictitious and fraudulent statement and representation, and make and use any materially false writing and document knowing the same to contain any materially false, fictitious, and fraudulent statement and entry, in connection with the delivery of and payment for health care benefits, items and services; that is, defendant MCLEAN caused an entry in the Medical Record of Patient HK to state that the lesion in Patient HK’s LAD was 80 percent, well knowing that the Medical Record contained a materially false, fictitious and fraudulent statement and entry, in that the lesion was substantially less than 80 percent.

On or about November 2, 2005, in the District of Maryland, the defendant, JOHN R. MCLEAN, in a matter involving a health care benefit program, did knowingly and willfully make a materially false, fictitious and fraudulent statement and representation, and make and use any materially false writing and document knowing the same to contain any materially false, fictitious, and fraudulent statement and entry, in connection with the delivery of and payment for health care benefits, items and services; that is, defendant MCLEAN caused an entry in the Medical Record of Patient WF to state that the lesion in Patient WF’s LAD was 80 to 90 percent, well knowing that the Medical Record contained a materially false, fictitious and fraudulent statement and entry, in that the lesion was substantially less than 80 to 90 percent.

On or about December 12, 2005, in the District of Maryland, the defendant, JOHN R. MCLEAN, in a matter involving a health care benefit program, did knowingly and willfully make a materially false, fictitious and fraudulent statement and representation, and make and use any materially false writing and document knowing the same to contain any materially false, fictitious, and fraudulent statement and entry, in connection with the delivery of and payment for health care benefits, items and services; that is, defendant MCLEAN caused an entry in the Medical Record of Patient SD to state that the lesion in Patient SD’s RCA was 80 to 90 percent, well knowing that the Medical Record contained a materially false, fictitious and fraudulent statement and entry, in that the lesion was substantially less than 80 to 90 percent.

On or about March 29, 2006, in the District of Maryland, the defendant, JOHN R. MCLEAN, in a matter involving a health care benefit program, did knowingly and willfully make a materially false, fictitious and fraudulent statement and representation, and make and use any materially false writing and document knowing the same to contain any materially false, fictitious, and fraudulent statement and entry, in connection with the delivery of and payment for health care benefits, items and services; that is, defendant MCLEAN caused an entry in the Medical Record of Patient PS to state that the lesion in Patient PS’s LAD was 80 percent, well knowing that the Medical Record contained a materially false, fictitious and fraudulent statement and entry, in that the lesion was substantially less than 80 percent.

On or about June 19, 2006, in the District of Maryland, the defendant, JOHN R. MCLEAN, in a matter involving a health care benefit program, did knowingly and willfully make a materially false, fictitious and fraudulent statement and representation, and make and use any materially false writing and document knowing the same to contain any materially false, fictitious, and fraudulent statement and entry, in connection with the delivery of and payment for health care benefits, items and services; that is, defendant MCLEAN caused an entry in the Medical Record of Patient HW to state that the lesion in Patient HW’s Ramus was 90 to 95 percent, well knowing that the Medical Record contained a materially false, fictitious and fraudulent statement and entry, in that the lesion was substantially less than 90 to 95 percent.

On or about July 24, 2006, in the District of Maryland, the defendant, JOHN R. MCLEAN, in a matter involving a health care benefit program, did knowingly and willfully make a materially false, fictitious and fraudulent statement and representation, and make and use any materially false writing and document knowing the same to contain any materially false, fictitious, and fraudulent statement and entry, in connection with the delivery of and payment for health benefits, items and services; that is, defendant MCLEAN caused an entry in the Medical Record of Patient AW to state that the lesion in Patient AW’s LAD was 80 to 90 percent, well knowing that the Medical Record contained a materially false, fictitious and fraudulent statement and entry, in that the lesion was substantially less than 80 to 90 percent.

Posted by Jay Hancock at 12:20 PM | Permalink | Comments (1)
Categories: Health Care
        

Well, it's not really secret. But it's under-appreciated. Jamie Smith Hopkins reports the latest figures on federal procurement spending in Maryland and other states. The Census Bureau is getting better at reporting this stuff on a timely basis. Contractors spent $34 billion in Maryland in fiscal 2009, Smith Hopkins reports, a whopping $9 billion more than in the year before. Credit federal stimulus spending, ongoing boondoggles for homeland security and war and other stuff.

Total federal spending and assistance in Maryland (contracting, Social Security, Medicare, block grants, salaries for federal employees, loan guarantees etc.) surpassed $100 billion. Holy cow! The state's whole economy is only around $300 billion.

Gov. O'Malley likes to take credit for recent job growth and Maryland's low unemployment rate relative to other states. In truth he has little or nothing to do with it. (I would be saying the same thing of a Republican governor making the same claims, as s/he surely would.) The question for Maryland, as I keep saying, is what happens when Washington cuts off the deficit-spending spree?

The data are interesting. ($3.4 million for the "Forensic Casework DNA Backlog Reduction Program." Nearly $1 billion for highway construction. $2.8 million for "earmark grants.") Check out the latest Consolidated Federal Funds Report, which breaks down the numbers by state and spending category and even county, if you want to see them.

Posted by Jay Hancock at 8:35 AM | Permalink | Comments (3)
Categories: Government & Business
        

Still getting intelligent feedback on Sunday's article by Andrea Walker and my column on executive pay at metro-Baltimore hospitals. Walker's piece reported that 8 hospital CEOs pulled in more than $1 million in year for which documents were most recently available, and more make just under that. I argued that the pay is too much for highly subsidized, charitable organizations that call themselves nonprofit.

Some readers were surprised and shocked that the pay was so high; others argue that these are complex institutions and that the people who lead them should be handsomely compensated. Thanks everybody for the ideas, a sampling of which are below:

Are you kidding me? I work at one of the hospitals in the article and think the CEO is worth every penny of his salary. When nurses make $100,000 and IT professionals make $150,000 and so on up the food chain, how much do you expect a CEO who runs a small city to make? These are smart, successful business men who keep the expenses down and the OR's humming. You are dreaming if you think they are overpaid. Sometimes I think you write this rubbish just to get readers' juices flowing. You did it this time.

And:

They only made $1.4 million? Seems to be paltry considering the job. Pick on Oprah instead.

And:

What do you think is fair and just compensation for the people who run the world's premiere medical institutions? I was struck more by the fact that the CEO of the U of MD Medical System earns 2.5 times the compensation of the President of the Hopkins Hospital and Health System. The relative sizes of these two numbers is remarkable in itself. And, unlike the CEOs of for-profit corporations, the most important responsibility of the non-profit CEO is fundraising. Would you put these people on commission?

I am not one to argue that excessive pay produces excessively good results. The "turndown" has revealed that notion to be fantasy. But rational policies dictate that there be a relationship between one's responsibilities and one's compensation...professional athletes and other celebrities excluded.

And:

Wonders never cease, CEO's getting a big bulk of the money while the hospitals continue to harass people over unpaid bills, I know one family out here in Harford County that lost every thing they including their home because they couldn't afford a hospital bill of over $30,000, and then having to read that the CEO of that very same hospital pulled in 7 million a year, it sort of make me wonder about the Doctor' Creed that they will do no harm? Hospital destroy people doesn't matter if the person lives or dies, it's seriously connected to Free Market System that continues to Rob and Steal billions from the people and make life happy and sustainable for the rich and miserable and nerve whacking for the poor and middle-class

And:

Thank you, thank you, thank you for exposing this and putting it in the strong and proper prospective.

And:

Thank you very much for shedding light on an area that the average person does not have time to investigate. We are often asked to contribute to St. Joseph's and GBMC's foundations. The huge salaries are truly excessive. Baltimore is not Paris, London, or Rome and while a charming city in some ways, these salaries in some part explain the enormous number of multi-million dollar homes listed each week in the Real Estate Section. I always wonder who lives in these homes? Now I, in part, know! I also have a question about the "need" for hospitals to advertise so much especially on the radio. This must also be very costly. Does one really shop for a hospital? Don't the doctors' admitting privileges, and patient's geographic convenience determine the choice of hospitals in most cases. I hear ads all the time as if one is considering surgery the way one might consider buying or replacing a car. I have asked two doctors and they just shrug and say that is how it is done. Shouldn't one's doctor or specialist keep up on the better medical centers for say women's health, or pediatrics, or hip replacement etc. Why would Arundel Medical Center be trying to attract patients from the entire WBAL listening area when it reaches up into DE and PA? Why would someone from Towson choose to go to AA County for medical care when traffic is so bad in this Baltimore area? It seems like a cost hospitals could reduce and simply promote themselves within the medical specialties of their respective regions. I am sure there are so many other ways medical costs could be cut. Excessive pay for CEO's is one good way to begin. I am sure dedicated CEO's could be found with compensation packages around $300,000 - $500,000 depending on size of institution.

And:

Just to play devil's advocate on attracting CEOs, depending on what hospitals mean by "qualified", they may need millions to pull in what they would consider a quality CEO.

Back to reality. I do not believe for a single second that any donors to non-profit hospitals like JHH are ignorant about the fact that the CEOs make millions. Many of the higher-end donors that donate in the hundreds of thousands to millions of dollars are attracted by things like the high-amenities wing at JHH, and participate in lavish fundraising gatherings. I've been to some, having been married to a JHH employee, and the donors wouldn't have attended had the event been a cheap hoe-down in a horse barn. Any donors' claims of ignorance are a load of road apples.

And:

Your case arguing that executive salaries for non-profit executives is a good one, but it left me with some questions. For example, you did not make the case for paying non-profit executives less than those of profit making corporations when the responsibilities and duties are comparable. Both have fiduciary responsibility: the non-profit executive to the mission of the organization and the for-profit executives to the corporation's bottom line. The Red Cross is not a good example; it has not always fulfilled its mission well.

The State of Maryland is a $12-13 trillion enterprise. It's CEO's salary is $150,000, about that of a GS-15 employee in the Federal Civil Service. Stanley Black and Decker ($3B in sales), a company that you cited, pays its CEO many times this amount. Perhaps his salary would be a bit steep for a roughly median-sized state, and his salary plus bonuses surely exceeds his value to the company. But I am continually struck by how little some folks, with so much responsibility, are paid. Even when you count the Governor's "perks," the total is modest by comparison.

And:

Your misunderstanding or misrepresentation of non-profit status is downright shameful. Non-profit status has NOTHING to do with the salaries of the lowest, middle, or highest positions on the employment ladder at a non-profit. Yes, you covered yourself by pointing out that not-for-profit is a tax designation but the suggestion is that there is something untoward about employee earnings. For folks donating to any charity or not-for-profit enterprise, it is vital that they determine what per centage of donations actually go to the cause for which they are solicited and accepted. You want to talk about people living high on the hog and using only the money of others to do so? Start with the Obamas and then move on to Pelosi, Reid and company!

Posted by Jay Hancock at 6:00 AM | Permalink | Comments (2)
Categories: Nonprofits