So it looks like Frank Stronach isn't going to hold races 140 days next year at Pimlico and Laurel after all. Earlier this month he told me he would. But Monday night Stronach's Maryland Jockey Club submitted a plan to the state with only 47 racing days -- 30 at Pimlico and 17 at Laurel. Not surprisingly the racing commission saw this as tantamount to smothering the industry and rejected the plan. But this isn't the end. Expect some sort of compromise that bumps up the number of days and of course includes the Preakness, Pimlico's big (only) moneymaker.

The most charitable thing that can be said about Stronach is that his intentions are good but that he has trouble fulfilling his vision and that he keeps choosing inappropriate business partners. He bought the tracks by agreeing to give the previous owners, the De Francis family, enormous portions of any potential slots profits. He almost immediately regretted it and tried in vain to renegotiate the deal. Wrangling over reducing the De Francises' slots cut delayed and then sabotaged the Jockey Club's bid for a slots license at Laurel Park, which allowed David Cordish to swipe the prize and put slots at Arundel Mills.

Now Stronach has gone into league with Penn National, the gaming company, which naturally seems to have been more interested in slots profits than in horse racing. As co-owner of the tracks, Penn National wants to cut their losses by reducing races. And the company seems to have substantially overruled Stronach, although the previous plan to shut down Laurel altogether was modified. Even a compromise with the racing commission probably won't give the industry enough meets to test how slots-fattened purses draw crowds and contenders. Just when the thoroughbred community thought things couldn't get any worse, they got worse.

Posted by Jay Hancock at 10:14 AM | Permalink | Comments (10)
Categories: Slots
        

Prompted by Paul West's story in today's paper and Anirban Basu's comments therein, I'm trying to find statistics on federal civilian pay over the last decade. What are the aggregate costs for each year? What are the raises awarded to General Schedule employees each year? What are costs/increases for wages and salaries only and what are they if benefits are included?

No luck so far. Can't find anything at OPM or CBO. The Labor Department's Employment Cost Index doesn't include federal employees. I want to compare raises for the federal sector over the last decade with those in the private sector. Anybody got ideas?

Posted by Jay Hancock at 9:31 AM | Permalink | Comments (7)
Categories: Slo-mo fiscal train crash
        

Salon.com's Andrew Leonard has a great meditation on contradiction and duality in modern China, of which we have seen plenty. His metaphor is the site of the first big meeting of the Chinese communist party in Shanghai, which now is surrounded by a swank, mixed-use development patronized by the grand bourgeoisie that party leader Mao Zedong hated with passion and venom. Leonard:

A few hours ago, I stood at the address 76 Xingye Road, in front of the Shanghai building where the First Congress of the Chinese Communist Party met in July 1920. To my left loomed "Corporate Avenue" -- a complex of office towers erected by a Hong Kong-headquartered real estate developer that for the last 15 years has been relentlessly transforming the neighborhood around this hallowed ground into an entertainment-and-dining mecca now called Xintiandi. One of the poorest neighborhoods in Shanghai, the CFO of the developer's China-based subsidiary told us with pride, was now one of the city's most expensive to live in. 

Yet the Chinese people that Leonard, I and the other journalists talked to on our trip see little if any contradiction. Mao desired improvement for the working class, they say, and his heirs are spectacularly delivering it. Modern China's philosophy seems to be not Marxism but utilitarianism, which says that those actions are most moral which most increase happiness and prosperity for the most people. I doubt Marx would be happy, not least because he thought utilitarianism apostle Jeremy Bentham was a jerk. Nor, I suspect, is China's dynamic of thesis (communism), antithesis (capitalism) and synthesis (the state as market-oriented corporation) the kind of dialectic that Mao had in mind.

But as an argument success usually trumps all others. China has plenty of that.  

Posted by Jay Hancock at 4:38 AM | Permalink | Comments (3)
Categories: China
        

China is the second-biggest economy in the world, it's moving at the speed of light, and we're only here for 10 days. So you look for little stories that freeze the blur. The Chinese nanny industry is one of them.

Mao Zedong believed that women had as much to contribute to the state as men, so he encouraged them to work and began providing day care in the 1950s. This continued for decades. Long Jing, a young Shanghainese women traveling with us, was raised in factory daycare from a very young age.

But state-sponsored day care has declined with the rise of of the private economy. Private corporations are far less likely to accommodate women raising a child. So along with all the other services developing here, the nanny and housekeeper industry is booming. Initially nannies tended to be country girls fresh from the farm. They demanded little in wages even though they were able to earn more as nannies than as field hands.

Perhaps initially families used relatives or acquaintances from their village as nannies. But eventually referral agencies sprang up, connecting the nanny-and-maid labor supply in the villages with demand in the cities. Then parents began to demand more. Rural grooming and housekeeping standards often weren't up to what clients desired. So the agencies began training nanny candidates in housekeeping, child care and so forth. Or maybe clients desired a nanny from a particular place or with a particular accent. Agencies did the legwork.

The arrival of foreigners -- Americans, Japanese, Europeans -- was a new opportunity. Foreigners on business expense acconts were willing to pay more for nannies, especially if they could speak the expat's language. Shortages developed, especially for well-qualified nannies. So China began importing nannies. Filipina nannies are reported to be very common even though they're illegal.

Ambitious nannies have started their own agencies. But like everybody else they have to deal with the Internet. Avoiding the fees agencies exact from both nannies and clients, families and would-be nannies find each other on the local equivalent of Craigslist.

Posted by Jay Hancock at 7:46 PM | Permalink | Comments (1)
Categories: China
        

Some values are universal. Among them are love, patriotism and the occassional willingness to accept bribes for medical care referrals. Two weeks ago St. Joseph Medical Center settled allegations that it paid kickbacks to cardiologists to send patients its way.

Yesterday there was a similar story in China Daily. Doctors at a hospital in Hangzhou, where we're flying tomorrow, are alleged to have taken cash, gift cards and digital cameras in return for prescribing products made the by Hangzhou Tairui Medical Device Co. The story, which seems to be based on an anonymous Internet post, is quite thinly sourced. But China's efforts to crack down on doc kickbacks suggests that the practice is widespread.

And the same ingredients for potential medical bribes exist here as they do in America: Customers who rely on third parties not only to select the product but also to pay for it to; and a medical class whose income often depends as much on prescribing products and procedures as it does on keeping patients healthy.

Posted by Jay Hancock at 4:53 AM | Permalink | Comments (0)
Categories: China, Health Care
        

We're in Nanning, in Guangxi province in western China, near Vietnam. The place is basically the regional capital of a rural backwater -- and it's totally cranking. Cranes everywhere, mile after mile. Thirty-story apartment buildings being erected not one at a time but in batches of half a dozen or so. Yesterday we met with the deputy chief of the provincial economic development authority. That building was constructed in 1995, he told us, "so it's a little bit old." The capital investment in roads, rail and apartments -- this last driven by the perceived need to provide migrant housing and avoid urban shantytowns at all costs -- is breathtaking. (As mind-blowing as this is, Alison Bradley, who's taking us around on behalf of the China - United States Exchange Foundation, says the development here pales to what she's seen elsewhere in China.)

And yet, something is missing. Motorbikes clog the streets so badly that the government banned new registrations a few years ago. But there are few cars. Thousands of retail shops line the streets. But they're only a step up from kiosks and stalls -- one-room emporia of maybe 200 square feet in one- or three-story buildings and open to the street, with garish, five-foot high signs overhead and a counter in front.

We toured a big museum of ethnic minority culture. There are a dozen ethnic groups in Guangxi, each with its own language. The museum had beautiful costumes and fabrics and depictions of traditional housing and gorgeous rural landscapes. We loved the xiuqiu balls, traditional Guangxi symbols of love made of colorful panels of silk. We wanted to get some in the gift shop. But there was no gift shop.

No gift shop, not much of a tourist economy and a very undeveloped consumer economy. Everything is about state-driven capital investment and exports to developed nations and, increasingly, Vietnam, Cambodia and Laos. In the last five years wages have doubled at the truck plant we toured to the equivalent of $3,000 a year. But it's still $3,000 a year. The Chinese dream is for exports to continue rising, for incomes to keep doing the same thing and for families to start spending more of their money on consumer goods. Xiuqiu balls for sale at the museum would be a sign the plan is working.

Posted by Jay Hancock at 7:42 PM | Permalink | Comments (3)
Categories: China
        

Every country is defensive in response to outside critics. Authoritarian countries are often more defensive than most. When you ask about dissidents and democracy here in China, you get pushback among the elites in a nation that values stability above everything else. Officials claim U.S. media exaggerates China as an economic and strategic threat. China would like "more balanced, objective reports on the other side," was a typical comment, made by Xie Feng, chief of the North American section at the Ministry of Foreign Affairs.

But China is pretty candid about two shortcomings: the environment and protection of patents and other intellectual property. Maybe the pollution is so obvious it can't be spun away. Yesterday, as we left Beijing to fly to Nanning, near Vietnam in the west, the haze was so thick you couldn't see more than a few hundred yards. But a thing's obviousness is not necessarily a disqualification for authoritarian regimes to deny it. (cf. Baghdad Bob.)

China's leaders genuinely realize that they need to clean the country up."Bluer skies, more forest, more grassland," is part of what China wants in the next decade, Xie says. Yesterday's China Daily had a grim article about totally unregulated mom-and-pop mines in the north that are surrounded by hundreds of acres of dead fields that result from tailings and other pollution.

Likewise leaders acknowledge their entrepreneurs are pirating intellectual property. "I admit there is much room for improvement in that regard," Xie said.

Words are not actions, but they're a start. China's pollution hurts its people and causes internal dissent. China can't rely forever on copying other people's products to generate the growth it so desires. If the nation places a premium on stability, it may understand that these are two of the most destabilizing threats it faces.

Posted by Jay Hancock at 1:13 AM | Permalink | Comments (2)
Categories: China
        

The Democrats holding onto the House Senate raises the chances of hearing more trash talk aimed at China next year -- for currency manipulation, for impeding the entry of U.S. companies into China (this is more of a Republican complaint but Democrats chime in, too), for poor labor and environmental standards and for apparently inexhaustible supplies of cheap labor. Those sore spots won't be getting much better anytime soon, except for one. China's not as cheap as it used to be -- for labor, or for suppliers exporting to the United States and elsewhere. China isn't raising the value of the renminbi currency as much as Washington would like. That's one way Chinese prices could rise against the dollar.

But in each meeting we attend here in Beijing we hear about rising price inflation within China, some of it at alarming rates. That lowers the purchasing power of the Chinese, and it also makes Chinese goods more expensive for foreigners. The Chinese government is reluctant to admit it has an inflation problem, but even it concedes that prices are going up at an increasing rate. The government says maybe 3 percent for all of 2010, with the CPI hitting a 4 percent annual rate these days.

Nobody believes this. The government spun a huge stimulus package last year. The money supply has gone berserk. State-owned banks are lending like crazy. Chinese who live in Hong Kong, used to dirt-cheap bargains available on the mainland, say it costs them much more travel and consume there. The 20 million Chinese migrant workers who got laid off and went back to their villages in 2009 have returned to work. Minimum wages just went up in the provinces. And workers are demanding and getting big raises from employers. Migrant workers have been getting pay increases of about 10 percent a year since 2003,said Cai Fang, a labor economist at Renmin University. This year they're going up by 30 percent, he said. He claimed productivity is rising faster than wages, which would keep unit prices down, but that's hard to believe.

Really low-wage jobs are shifting from China to places such as Cambodia and Vietnam. And food inflation, always a potential cause of unrest in developing nations, is prompting griping at the markets and unease in the ministries. Patrick Chovanec, a professor at Tsinghua University in Beijing with ties to private equity investors, says food hit an annual inflation rate of 8 percent in September. Inflation is "a tiger in a cage," says Yu Yongding, an economist with the Chinese Academy of Social Sciences and a former member of the monetary policy committee of China's central bank. The cage door is open, he says. Observers are waiting to see if the tiger escapes. "Inflation is the No. 1 problem," he says. "Housewives feel there is very high inflation."

We met with an executive from a state-owned investment fund who thinks Chinese consumer inflation has hit a pace of 15 percent annually, which if sustained could substantially erode the country's cost competitiveness and trade surplus with the United States. The question is: What will the big-picture effect be in the U.S.? Short-term, higher Chinese prices could fuel U.S. inflation. But even if inflation gets a grip in China, Cambodia and Vietnam are willing and increasingly ready to be the new low-cost suppliers.

Posted by Jay Hancock at 8:26 PM | Permalink | Comments (4)
Categories: China
        

Our group of journalists -- me, Slate's June Thomas, economics superblogger Megan McArdle, Salon.com's Andrew Leonard and National Public Radio's Uri Berliner -- had dinner in Beijing Monday night with Ambassador Chen Yonglong. Folks from the Chinese People's Institute of Foreign Affairs, an NGO, were also there.

Amb. Chen's account of his career -- helped by a dumb question by me -- traced the arc of China's progress.

He was trained as an economist during Mao's Cultural Revolution in the 1960s. One assumes that course didn't include Adam Smith and David Ricardo. By some perverse administrative logic he ended up not in the economics ministry but the foreign ministry, where he rose. An early job was that of courier, carrying the diplomatic pouch to and from embassies in more than 100 countries. Later he was China's ambassador to Jordan, then to Israel. He recently joined China's Committee on Climate Change, and he's also a vice president at the People's Institute think tank.

He was referring to his early days at the foreign ministry. "Were you a trade attache?" I asked, thinking that's how economists often start diplomatic careers.

All the Chinese as well as the alert Americans at the table thought that was hilarious. In the 1970s, of course, China had no trade, With anybody. Communist dogma held that autarky -- a self-sustaining economy -- was the way to go. Business dealings with foreign Capitalist Roaders were anathema. Now, two or three generations later, international trade is China's life blood, caffeine and intoxicant.

Posted by Jay Hancock at 2:46 PM | Permalink | Comments (1)
Categories: China
        

A Chinese housing bubble is not like an American housing bubble. The American bubble has popped. The Chinese one hasn't. Yet. Americans bought houses. The Chinese in Beijing and Shanghai buy apartments. Americans bought with no money down. Many Chinese still pay cash with no mortgage. American real estate was lived-in during the bubble and became vacant afterward. Hyperappreciated Chinese real estate, on the other hand, is already vacant. Nobody ever lived there, at least to a large degree.

More than half the apartments in Beijing and Shanghai may be unoccupied, China Daily reported last summer, citing figures from Sina.com. In Hainan it may be as high as 70 percent. The titles are clean. The mortgages are paid on time, when they exist. But nobody's home. And the owners wouldn't think of renting, says Patrick Chovanec, associate professor at Tsinghua University in Beijing. They don't want to mar their precious assets with people walking on the floors and opening and closing the doors.

Apartments seem to play the same role in modern China that gold often does in India -- a place to invest and store your money. Wealth is cascading into Beijing. But you can't invest it in the S&P 500; currency and capital controls prevent investments abroad. You could put it in bank and earn 2 percent, but Chinese inflation is perhaps 6 percent or 8 percent. Who wants to lose money doing that? So the Chinese sock their savings away in a nice flat, and since nobody wants a used apartment they don't allow anyone in the place.

"These aren't for living in," says Prof. Chovanec, who met with our group of U.S.journalists at Tsinghua today. "They're a store of value."

Or apparent value, anyway. Just because there's no huge overhang of borrowed money doesn't mean the bottom might not fall out, Chovanec says. Chinese real estate has never crashed since the government allowed private ownership in the 1990s, so that means it can never happen, right? Trying to quash speculation, Chinese authorities try to identify vacant apartments by checking for unused electric and water meters, reports Beijing Today. But vacant-apartment owners are catching on, running the water and lights for a bit to simulate occupancy.

Posted by Jay Hancock at 8:13 AM | Permalink | Comments (9)
Categories: China
        

The Chinese consumer is part of the subtext to U.S.-Chinese tension, demonstrated at last week's G20 summit. Washington wants China to let the renminbi currency as well as Chinese wages to appreciate. Such developments would make Chinese imports to America less competitive, and they would also give Chinese consumers more income to, well, consume. Thus China's enormous trade surplus would shrink as consumers bought more from abroad as well as from China's own factories. The global flow of funds might be a bit more balanced.

If China's consumer economy is slow in taking off, it's not for lack of trying by the advertisters and marketers. I spent 45 minutes on a stationary bike at our Beijing hotel gym after we arrived this afternoon, with a TV overhead. I surfed. Game shows. Men in military uniforms reading the news. Black & white movies from the 1950s with happy, singing peasants. And ads.Tons of ads for scotch, BMWs, electric shavers, Mercedes Benz, vacuum cleaners, cologne, gin, toasters etc. etc. The sales counter of the Chinese retail sector is open for business, and has been for some time.

What's taking longer to develop (this is a very relative term; China is growing so rapidly that nothing takes long by normal standards) is not just consumer incomes but consumer finance. As the annual McKinsey & Co.. Chinese consumer survey notes, middle-class Chinese are unlikely to have credit cards, let alone debt worth several months of income on them. Chinese still save a third of their incomes. In the United States we're trying to stay at 5 percent after having been around zero for several years. Chinese shop more often than Americans but buy relatively less on each trip, although that is changing, according to McKinsey. They, too, like to window shop. But they seem less likely to take the stuff in the window home on a whim.

Of course overborrowed, overspent American consumers just brought down the global economy, so perhaps one doesn't want the Chinese to mimic them too closely. But there is a long way to go before that happens.

Hancock is being sponsored, along with four other American journalists, by the China-United States Exchange Foundation on a 10-day tour of Chinese factories, ministries, universities and laboratories.

Posted by Jay Hancock at 2:05 PM | Permalink | Comments (0)
Categories: China
        

Here are WBAL's Bill Vanko and me talking on the radio this morning about developments at the Maryland Jockey Club, Laurel Park and Pimlico Race Course that are far more entertaining than anything going on at the tracks or the slots casinos.

Posted by Jay Hancock at 11:10 AM | Permalink | Comments (0)
Categories: Slots
        

If the Tea Partiers and Paul Krugman both hate the deficit reduction plan, it must have something going for it. Good to see the commission take aim at the mortgage-interest deduction, which distorts the housing market, deprives the Treasury of more than $100 billion in annual revenue and hurts the environment. Allowing mortgage-interest deductions gives incentives for people to buy bigger houses than they need, increasing energy use, hurting smart growth and chewing up open space.

The problem with attacking the mortgage deduction now is the same problem that exists with any deficit-reduction action: The economy is terrible. Unemployment is more than 9 percent. It's unlikely to fall very quickly. And any attempts to cut the deficit -- be they tax increases or spending cuts -- will impede a recovery. Reducing the mortgage deduction would impair the process of clearing all these unsold homes off the market. I suspect political momentum to deal with deficits will still exist after the 2012 elections. That might be the more-appropriate time to take action.

Posted by Jay Hancock at 9:21 AM | Permalink | Comments (29)
Categories: Slo-mo fiscal train crash
        

From the testimony of Thomas Cafcas, Good Jobs First, before the Maryland Business Tax Reform Commission on Tuesday:

Statewide, the projected cost of the Enterprise Zone Property Tax Credit in 2009 was $1.79 per Maryland resident. This figure does not include the costs of local property tax abatement programs. A 2005 study found that Maryland has more property tax abatement programs than any other state in the country. With such high costs, are Marylanders getting bang for their buck in existing programs?

Taxpayers do not know. Maryland does not disclose recipients of Enterprise Zone Property Tax Credits, despite the cost of the program doubling between 2006 and 2010. Worse, this program contains no clawbacks to protect taxpayers if companies fail to meet benchmarks. But this disclosure problem doesn’t stop with the Enterprise Zone program. The state does not disclose how much companies were eligible to receive or actually received in Job Creation Tax Credits. The same is true of One Maryland Tax Credits which cost the state $8 million in 2008.

Maryland should take notice of other states. Many states, like Wisconsin and Illinois, have passed blanket laws that require consistent disclosure of tax credit recipients. The Illinois Corporate Transparency Accountability Portal allows taxpayers to search an online database by company or subsidy type. Any subsidy a company receives is posted in the database. Michigan maps the location of MEGA tax credit recipients and discloses all other subsidies made available to that company. StateStat already has this capacity.

Posted by Jay Hancock at 7:27 PM | Permalink | Comments (0)
Categories: Corporate welfare
        

This is a currency/store-of-value, reductio ad absurdum joke by Barry Ritholtz, but you have to know the background. People who think that gold is the only REAL money like to run charts pricing various assets (often stocks) expressed not in dollars but in gold. (More precisely, the dollar/gold conversion price.) Of course this looks goofy/Alice-in-Wonderlandy next to the nominal charts, which is the intended effect.

Ritholtz takes a step further into the 14th dimension by saying, bah, SILVER is the only real money. Next to silver, gold (which keeps setting record highs) is trash. And he has the chart to prove it. The point, of course, is that pricing everything in gold is kind of loony.

Barry concludes:

 Forget QE, the Gold Miners are doing QM  Quantitative Mining. These irresponsible Miners are “printing gold” by scraping it out of the ground as fast as they can. They are debasing it as a store of value, and are no better than central bankers with their fiat currencies and printing presses. 

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

You can see why STDs would be the early market for saliva-, blood- and urine-testing via smartphones and other Web avenues. But there's no reason it needs to stop there. Diabetics could test blood sugar. You could do pregnancy tests, cholesterol etc. Eventually the technology could get more accurate than what are often primitive at-home tests for some of these conditions.

From CNN Tech:

The "eSTI2" project, managed by Tariq Sadiq from St George's University of London, England, recently received a $6.5 million grant to develop small chips that can be used to used to test saliva, urine or blood for sexually transmitted diseases. The chips -- which, yes, you would need to pee on in some cases -- would connect to mobile phones for processing.

It's possible that a smartphone app would be able to tell a person if they'd tested positive or negative for a particular STD in 5 to 15 minutes, Sadiq said.

The small chips would be used once and then thrown away, and they would plug into mobile phones via a standard cable, Sadiq said, although the group hasn't figured out exactly what that would look like.

Posted by Jay Hancock at 8:30 AM | Permalink | Comments (0)
        

What Maryland Stadium Authority executive director Michael Frenz told reporters last night may be true: Cutting the state's take of Orioles' home-plate advertising in half might be the best deal the state could get. The lease says the state gets 25 percent of all ballpark ad revenue. The state, subject to approval by the Board of Public Works, says it'll settle for 12.5 percent from the home-plate ads.

The team argues, ridiculously, that the ads fastened to the wall behind home plate are really TV ads, not ballpark ads. Therefore the Orioles don't have to share (as much) revenue from those video billboards. But the state has its hands tied: Such disputes must be settled by arbitration, not lawsuits. So perhaps the settlement was inevitable. What's disappointing is that, as the Daily Record reports, "the settlement does not cover the potential for the team to replace the physical ads with virtual ones added to game broadcasts by computer, an option that could leave the authority without any ability to collect a share of the revenue and one the team has repeatedly referenced in the dispute."

The potential for virtual home plate ads, of course, was the Orioles' primary leverage in achieving this concession. If the settlement indeed doesn't address this issue, it leaves the team free to apply that threat again, in the future.

Here is a September column on the dispute.

Posted by Jay Hancock at 10:42 AM | Permalink | Comments (3)
Categories: Corporate welfare
        

Tyler Cowen is skeptical but interestedly hopeful that Bernanke's second round of quantitative easing -- buying longer-term paper thus trying to bring down longer-term interest rates -- will do some good. In any case he doesn't think it's the end of the world and the beginning of Weimar-style inflation. And, he claims, as policy responses go, it beats the alternatives of doing nothing, trade war with China, a new WPA etc.

I do take seriously some of the more speculative criticisms, namely that QEII may set off bubbles in some emerging markets, or that it may break the euro (and that the euro would not otherwise break of its own accord). Still, those hypotheses are far from established and it is difficult to believe that say three percent U.S. price inflation should bring international doom. These factors also need to be weighed against the international and political economy costs of continued American economic stagnation.

Posted by Jay Hancock at 8:22 AM | Permalink | Comments (1)
Categories: The Great Recession
        

How did St. Joseph Medical Center get to be one of the highest-volume heart-stent operations in the state? Well, according to federal allegations in a settlement announced today by U.S. Attorney Rod Rosenstein, St. Joseph paid doctors to send patients its way. Or, in the language of the settlement, St. Joseph gave MidAtlantic Cardiovascular Associates "remuneration in excess of fair market value... in exchange for the referral of lucrative cardiac procedures..."

Kickbacks, in other words. "Kickbacks give doctors an incentive to pursue unnecessary treatments...," Rosenstein says in the press release. St. Joseph does not admit liability or wrongdoing in the settlement. But it nevertheless agreed to pay $22 million to settle the claims. Everybody knew this case was out there, but it took years to settle. That's likely because new allegations have emerged that St. Joseph's Dr. Mark Midei (formerly with MidAtlantic) implanted hundreds of unnecessary coronary artery stents.

The whistleblowers in the case were Garth McDonald and other docs at Cardiac Surgery Associates, competitors of MidAtlantic, according to the settlement. Friction between the practices goes way back and was beautifully chronicled by Geeta Anand and Ron Winslow in a 2003 Wall Street Journal piece. Here's how it begins:

TOWSON, Md. -- During the late 1990s, Garth McDonald's group of eight heart surgeons was busy and thriving. They performed about 110 operations a month at St. Joseph Medical Center, and senior partners each earned more than $1 million a year.

By September 2000, the caseload at Cardiac Surgery Associates had fallen by nearly two-thirds to just 40 surgeries a month. In August of this year, it was down to 25.
Behind that drop is a heated dispute between two groups of doctors that used to work closely together but now have been pushed apart by big changes in the economics and science of medicine. Dr. McDonald's surgeons rebuffed an offer to merge with a big group of cardiologists, who treat heart patients and make referrals for surgery.
So the cardiologists hired their own surgeons and referred patients to them instead. Now the fight has erupted into a lawsuit, with Dr. McDonald's group accusing the cardiologists of trying to drive them out of business.

The bitter dispute has upended longstanding relationships in and around this Baltimore suburb.

Posted by Jay Hancock at 6:33 PM | Permalink | Comments (1)
Categories: Health Care
        

From the San Francisco Chronicle:

A Pacific Gas and Electric Co. executive in charge of the utility's SmartMeter program admitted Monday that he used a fake name in an effort to join an Internet discussion group of SmartMeter opponents.

William Devereaux, senior director of the $2.2 billion SmartMeter program, used the name "Ralph" when he sent an e-mail to the moderator of a discussion group for people trying to block deployment of the new, wireless electricity and gas meters. But his real name appeared next to his e-mail address.

In an interview with The Chronicle, Devereaux said that he had been monitoring online groups of SmartMeter foes for a couple of months.

"I joined that (group) anonymously to better understand the concerns and the points of view of those folks so that we could do a better job of getting our facts to our customers," he said. "I did make a mistake, obviously, in trying to join this ... group and trying to use that alias name, which I'm sorry for."

HT Carol

Posted by Jay Hancock at 1:33 PM | Permalink | Comments (2)
Categories: BGE/electricity
        

So I drove down Wisconsin Avenue this morning to pick up an entry visa for China (more on this later) in D.C On the right was a grandiose pile of a building, a ghastly cross between Colonial Williamsburg and Louis XIV's Versailles. My first reaction was: To what colossal ego was this thing erected? My second thought: Why is there nobody here? The place looks empty.

As I drove farther, both questions were answered by a huge sign: FANNIE MAE. Was that a statue of Frank Raines toppled on the (still immaculately groomed) front lawn? (Fannie bought the building in the 1970s, long before Raines arrived, but the architecture matched the hubris that characterized the Raines era and afterward.)

And on the pedestal these words appear:

`My name is Ozymandias, King of Kings:

 Look on my works, ye mighty, and despair!'

Nothing beside remains. Round the decay

Of that colossal wreck, boundless and bare,

 The lone and level sands stretch far away.

Posted by Jay Hancock at 1:14 PM | Permalink | Comments (1)
Categories: The Great Recession
        

Today's column turned into news when Frank Stronach, the Canadian tycoon who controls Laurel Park and Pimlico Race Course, told me he would reverse his organization's move to end live racing at Laurel and race only 40 days a year at Pimlico.

The obvious question is: What the heck? For two weeks Jockey Club President Tom Chuckas has been saying in no uncertain terms that the approval of slots at Arundel Mills on election day would mean the end of racing at Laurel. He said so before voters said "Yes" to Arundel Mills, and he said so afterward. Obviously the threat to downsize Maryland thoroughbred racing turned out to be a bluff.

I wouldn't blame Chuckas for bad faith, however. I suspect Stronach switched agendas on him. He has a history of this kind of thing. The Jockey Club flipflopped on plans for the Pimlico backstretch before finally closing it. Stronach talked at one time about tearing down Pimlico and rebuilding it. That obviously never happened.

As if to prove that Stronach has more money to put into the tracks if he chooses, he spent $2.3 million over the weekend, doubling the auction reserve, to buy a pheenom filly named Awesome Feather. From the Thoroughbred Times:

Frank Stronach, the owner of Adena Springs and chairman of MI Developments Inc., went to $2.3-million to acquire Grey Goose Breeders’ Cup Juvenile Fillies (G1) winner Awesome Feather during the Fasig-Tipton Kentucky selected mixed sale on Sunday in Lexington.

“She’s a nice filly, what more is there to say?” Stronach said. “Her disposition—she is very calm. Her race record speaks for itself.”

Posted by Jay Hancock at 8:00 AM | Permalink | Comments (4)
Categories: Slots
        

One macro benefit (to the U.S.) of quantitative easing (lowering long-term interest rates) is a weaker dollar. The Fed's $600 billion "QE2" campaign is being spent on dollar-denominated assets such as Treasury paper. These new dollars in theory lower their price against other currencies, which makes imports more expensive and exports more competitive. Paul Krugman is all for this:

The case for a more expansionary policy by the Fed is overwhelming. Unemployment is disastrously high, while U.S. inflation data over the past few years almost perfectly match the early stages of Japan’s relentless slide into corrosive deflation.

But he is very much against China's policy of suppressing its yuan by having ITS central bank buy dollars to raise their value in that country's highly controlled international exchange regime.

This time, much of the noise is coming from foreign governments, many of which are complaining vociferously that the Fed’s actions have weakened the dollar. All I can say about this line of criticism is that the hypocrisy is so thick you could cut it with a knife.

After all, you have China, which is engaged in currency manipulation on a scale unprecedented in world history — and hurting the rest of the world by doing so — attacking America for trying to put its own house in order.

How is what the U.S. is doing putting "its house in order" while what China is doing is currency manipulation? Neither policy is close to a classical free market. Yes, the ultimate scale of China's interventions surpasses QE2. And China's arrangement makes its currency policy very unfree indeed. One could argue that a weaker dollar is merely a side effect of a U.S. monetary policy focused on domestic interest rates and demand, while China's currency regime is blatantly mercantilist in intent and effect. Still, there are "manipulations," of one sort or another, and in varying degrees, on both sides.

Posted by Jay Hancock at 9:03 AM | Permalink | Comments (4)
Categories: Currencies
        

The must-read story of the day is Scott Calvert's piece on Baltimore Behavioral Health, a addiction-treatment nonprofit that somehow finds (and bills for) a diagnosis of patient mental illness at almost three times the average rate of all Maryland clinics treating drug abuse.

This is a state program. Almost all BBH's money comes from Medicaid -- $16.7 million for the most-recent fiscal year. Less than $50,000 came from private patient payments, the organization's tax forms show. So why did it take The Baltimore Sun to bring the irregularities to light? There are red flags that should have prompted state authorities to take a look: the high salaries and large raises top executives made in recent years; the (astonishing) lack of audited financial statements; the sharp increase in billings; the domination of the board of directors by insiders making the money.

Not to mention the anomalies in the clinical data. As Calvert reports, about 90 percent of BBH's patients were deemed to be dual-diagnosis -- to have depression or bipolar disorder in addition to drug addiction. But statewide only 31 percent of patients in addiction-treatment centers are also diagnosed with mental illness.

Posted by Jay Hancock at 10:16 AM | Permalink | Comments (3)
Categories: Health Care
        

Probably makes sense for M&T Bank to take over K Bank. M&T gets half a billion dollars in deposits and probably a good deal from the government on a similar amount of loans. M&T also took over Bradford Bank under FDIC supervision.

But M&T doesn't need the K Bank branches. All will be closed, an M&T spokesman told my colleague Lorraine Mirabella. Acquiring banks in these situations count on holding on to most of the deposits, even when they close the branches. Usually that's the way it works. But they know customers have a choice, so they typically work pretty hard to make the transition as pain-free as possible.

K Bank's Owings Mills branch is made redundant by M&T's Painters Mill office. K Bank's Ellicott City customers, if they choose to stay with the bank, will be using M&T's branch just down Route 40, at St. John's Lane. M&T also has several branches in Timonium/Cockeysville that customers of K Bank's York Road branch can use.

Likewise there's an Eldersburg M&T branch just down Liberty Road from the K Bank office that will close. And there are M&T backups in Perry Hall, Randallstown and Bel Air.

Posted by Jay Hancock at 7:53 PM | Permalink | Comments (1)
Categories: Finance
        

K Bank has been teetering on the edge for a long time. We were hearing rumors about an FDIC seizure a year ago. Then again, the FDIC has been quite the busy agency. It beefed up hiring two years ago but still doesn't have nearly enough capacity to close all the zombie banks.

To see why K Bank was on their to-do list, look no further than its capital. This is a financial institution that had $538 million in assets as of Sept 30 but only $7 million in bank equity. Its Tier 1 leverage ratio was 1.02 percent. Tier-1 risk-based capital ratio was 1.53 percent, and total risk-based capital ratio was 2.81 percent. You don't need a finance degree to figure out that these are not ample equity cushions for a bank holding nearly $58 million in overdue mortgages and, hmm, only $6.5 million set aside to cover losses from uncollectible loans.

Cost to the FDIC's insurance fund of the K Bank closure and the M&T takeover: $198 million.

The average Tier 1 Leverage ratio for Maryland banks on Sept. 30 was 9.11 percent, according to the Federal Deposit Insurance Corp.

Posted by Jay Hancock at 7:18 PM | Permalink | Comments (2)
Categories: Finance
        

This just in from the Federal Deposit Insurance Corp. Another one bites the dust:

K Bank, Randallstown, Maryland, was closed today by the Maryland Office of Financial Regulation, which appointed the Federal Deposit Insurance Corporation (FDIC) as receiver. To protect the depositors, the FDIC entered into a purchase and assumption agreement with Manufacturers and Traders Trust Company (M&T Bank), Buffalo, New York, to assume all of the deposits of K Bank, except certain brokered deposits. Brokered deposit customers should contact their brokers directly about the status of their accounts.

The seven branches of K Bank will reopen on Saturday as branches of M&T Bank. Depositors of K Bank will automatically become depositors of M&T Bank. Deposits will continue to be insured by the FDIC, so there is no need for customers to change their banking relationship in order to retain their deposit insurance coverage up to applicable limits. Customers of K Bank should continue to use their existing

branch until they receive notice from M&T Bank that it has completed systems changes to allow other M&T Bank branches to process their accounts as well.

This evening and over the weekend, depositors of K Bank can access their money by writing checks or using ATM or debit cards. Checks drawn on the bank will continue to be processed. Loan customers should continue to make their payments as usual.

As of September 30, 2010, K Bank had approximately $538.3 million in total assets and $500.1 million in total deposits. M&T Bank did not pay the FDIC a premium for the deposits of K Bank. In addition to assuming all of the deposits of the failed bank, M&T Bank agreed to purchase approximately $410.8 million of the failed bank's assets. The FDIC will retain the balance of the assets for later disposition.

The FDIC and M&T Bank entered into a loss-share transaction on $289.0 million of K Bank's assets. M&T Bank will share in the losses on the asset pools covered under the loss-share agreement. The loss-share transaction is projected to maximize returns on the assets covered by keeping them in the private sector. The transaction also is expected to minimize disruptions for loan customers. For more information on loss share, please visit: http://www.fdic.gov/bank/individual/failed/lossshare/index.html.

Customers who have questions about today's transaction can call the FDIC toll-free at 1-800-830-4697. The phone number will be operational this evening until 9:00 p.m., Eastern Daylight Time (EDT); on Saturday from 9:00 a.m. to 6:00 p.m., (EDT); on Sunday from noon to 6:00 p.m., Eastern Standard Time (EST); and thereafter from 8:00 a.m. to 8:00 p.m., EST. Interested parties also can visit the FDIC's Web site at http://www.fdic.gov/bank/individual/failed/kbank.html.

The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) will be $198.4 million. Compared to other alternatives, M&T Bank's acquisition was the least costly resolution for the FDIC's DIF. K Bank is the 140th FDIC-insured institution to fail in the nation this year, and the fourth in Maryland. The last FDIC-insured institution closed in the state was Ideal Federal Savings Bank, Baltimore, on July 9, 2010.

Posted by Jay Hancock at 6:32 PM | Permalink | Comments (2)
Categories: The Great Recession
        

Here are MPT's Jeff Salkin and me talking about one of the biggest economic imbalances in the world: China's supression of the value of its currency, which was the topic of this column a few weeks ago.

Posted by Jay Hancock at 2:06 PM | Permalink | Comments (0)
        

Andrea Walker reports that the Russian Severstal is extending a partial shutdown of the Sparrows Point steel mill in Baltimore County well into next year.

Severstal has left Sparrows dangling. But it's not because it lacks the wherewithal to invest and upgrade the plant, which is what it badly needs. Last month Severstal issued a prospectus for a $3 billion bond offering that outlines ambitious capital expenditure plans -- mostly in Russia, but also at other U.S. steel mills. From the WSJ:

Russian steel producer OAO Severstal is planning to spend $6.4 billion on capital expenditure, excluding maintenance, through 2014, of which about 68% will be invested in Russian mills, and about 12.3% in U.S.-based mills, according to a document.

Severstal said in a preliminary prospectus for a $3 billion loan participation that its capital spending will be focused on the so-called brownfield expansion of its mining businesses in Russia, Africa and the U.S., and on expanding its share of the Russian domestic steel products market.

Severstal said that out of $6.4 billion of capital outlays, only $786 million, or about 12.3%, will be invested in the company's mills in the U.S. Severstal's U.S. mills contributed 39% of all the company's steel revenue in the first half of 2010.

And here is an excerpt from Minesite.com (free registration required), which goes into further detail:

Severstal says it views the Russian market for steel products as “providing significant growth potential”. Accordingly, it continues, “the Group plans to continue to invest in its production facilities in Russia in order to increase production capacity, particularly of long products, pipes, sections and other products used in the construction and infrastructure industries, where the Group expects demand to grow in the long term....

Elsewhere, after almost two years of attempts to sell off its heavily indebted and loss-making US steelmills, all unsuccessful to date, Severstal now plans to spend more money on almost all the North American units. At the Columbus, Ohio, steel mill, for example, the prospectus says the strategy calls for fresh investment that will result “in an expected doubling of that facility’s production capacity by the beginning of 2012”. Meanwhile, Dearborn, the former Rouge steel mill, which was Mordashov’s first US steel acquisition, is expected to benefit from its long-term contract with Cliffs Natural Resources. And, the prospectus adds, “investments in the pickling line and tandem cold mill in Dearborn is expected to further improve its cost position and enable it to produce advanced automotive steels” And still in the US: “each of Sparrows Point, Severstal Wheeling and Severstal Warren are expected to focus on continuous cost optimisation and restructuring to achieve sustainable profitability levels”.

Posted by Jay Hancock at 9:31 AM | Permalink | Comments (1)
Categories: Manufacturing
        

The jobs report exceeds expectations for a change. The Labor Department reports that employers added 151,000 jobs in October. Economists had predicted about 60,000. Unemployment remains at 9.6 percent, probably reflecting folks renewing their job searches as the economy shows slight signs of life.

Don't expect this to take the edge off of the momentum to extend the Bush tax cuts, however. It's a decent report compared with what we've been seeing -- job losses every month since June. But it hardly marks a sustained recovery. Employers need to be adding at least 200,000 jobs each and every month to reach escape velocity from this terrible slump. One month's favorable report won't make any difference in the Federal Reserve's decision this week to buy $600 billion in longer-term bonds. And it won't stop the campaign to extend all the Bush tax cuts on the grounds that the economy is still too weak to support any tax increases.

Posted by Jay Hancock at 8:45 AM | Permalink | Comments (4)
Categories: The Great Recession
        

Federal Reserve Chairman Ben Bernanke has a piece in today's Washington Post. He explains what they're doing with QE2. He defends the Fed against charges that quantitative easing will stoke hyperinflation. And he says that Congress and the White House are part of the solution, but he doesn't state what their roles might be.

Although asset purchases are relatively unfamiliar as a tool of monetary policy, some concerns about this approach are overstated. Critics have, for example, worried that it will lead to excessive increases in the money supply and ultimately to significant increases in inflation.

Our earlier use of this policy approach had little effect on the amount of currency in circulation or on other broad measures of the money supply, such as bank deposits. Nor did it result in higher inflation. We have made all necessary preparations, and we are confident that we have the tools to unwind these policies at the appropriate time. The Fed is committed to both parts of its dual mandate and will take all measures necessary to keep inflation low and stable.

The Federal Reserve cannot solve all the economy's problems on its own. That will take time and the combined efforts of many parties, including the central bank, Congress, the administration, regulators and the private sector. But the Federal Reserve has a particular obligation to help promote increased employment and sustain price stability. Steps taken this week should help us fulfill that obligation.

Posted by Jay Hancock at 9:15 AM | Permalink | Comments (0)
Categories: The Great Recession
        

Cost of a three-kilometer taxi ride, from Price of Travel:

$11.11 – $13.89 Rome, Italy
$11.29 – $14.52 London, England
$12.05 – $15.06 Stockholm, Sweden
$12.50 – $16.67 Nice, France
$13.03 – $16.13 Tokyo, Japan
$13.89 – $19.44 Helsinki, Finland
$13.89 – $16.67 Amsterdam, Netherlands
$15.28 – $19.44 Monaco, Monaco
$17.12 – $22.26 Oslo, Norway
$18.18 – $24.24 Zurich, Switzerland

Of course because the prices are expressed in dollars, warped exchange rates are a factor. (See China, below.) The full list is here. And now for the cheapest:

$0.90 – $1.58 Delhi, India
$0.97 – $1.28 Mumbai, India
$1.04 – $1.73 Cairo, Egypt
$1.14 – $1.71 La Paz, Bolivia
$1.17 – $1.87 Manila, Philippines
$1.22 – $2.03 Mexico City, Mexico
$1.23 – $2.94 Panama City, Panama
$1.23 – $1.68 Kuta, Bali, Indonesia
$1.24 – $1.86 Fez, Morocco
$1.29 – $1.94 Kuala Lumpur, Malaysia
$1.50 – $2.99 Beijing, China

HT Marginal Revolution.

Posted by Jay Hancock at 9:04 AM | Permalink | Comments (0)
        

Here's is T. Rowe Price Chief Economist Alan Levenson's take on the Fed announcement:

Bottom line: No change in assessment of current environment, dimensions of QE2 slightly light of expectations; with additional easing course in place, policy bias returns to balance. Economic assessment remains that "the pace of recovery in output an employment continues to be slow." Inflation assessment remains that underlying inflation is "somewhat low" relative to levels judged to be consistent, over the longer run, with the Fed's price stability objective. QE2 a bit light of consensus expectations. Today's action calls for purchases of $600 billion of Treasury securities by the end of 2011 Q2 -- roughly $75 billion/month. Including reinvestment of principal from mortgage-related securities, the Fed is likely to buy $850b-$950b through 2011 Q2. Outlook for further action now balanced. The Committee will continue to monitor the economic outlook and financial developments and will employ its policy tools as necessary to support the economic recovery and to help ensure that inflation, over time, is at levels consistent with its mandate. [In the September 21 statement, the italicized portion read, "is prepared to provide additional accommodation if needed to support the economic recovery and to return inflation, over time, to levels consistent with its mandate." -- underlining added for emphasis]

UPDATE. And more from Swiss Re:

Fed rate action commentary from Swiss Re chief US economist

New York, 3 November 2010 – After today’s decision by the Federal Reserve to maintain the target fed funds rate at zero to 25 basis points, Swiss Re’s chief US Economist, Kurt Karl, commented, “Growth is moderate and inflation is very low, so the Fed is now expected to be on hold through all of next year. The quantitative easing program signals a strong commitment to the Fed’s

mandate of low unemployment.” “Though economic indicators remain mixed, there is only a small risk of another recession – still estimated to be about 10% for both the US and Europe. Nevertheless, the Fed has now begun a new program of quantitative easing to keep long-term interest rates low. So far, low interest rates have not been able to revive the housing sector, but companies are borrowing and bank profits are up. Real GDP growth is expected to be 2.7% this year, and only a bit stronger, 2.8%, next year as employment increases and housing starts finally begin to increase. All-items inflation is expected to be close to 1.5% this year and next, while core inflation will be closer to 1%. The yield on the 10-year Treasury note will be mostly rising in 2011, reaching about 3.8% by year-end. With low inflation and modest growth, the Fed is expected to keep the fed funds rate at 0.0% to 0.25% until the first quarter of 2012,” Karl said.

“Both the Euro area and the UK are expected to grow by 1.5% to 2.0% this year and next. China's outlook remains robust, but growth is expected to slow from about 10% this year to 9% and 8% over the next two years. Japan's growth will slow to about 1.5% next year from 2.5% this year. Inflation is only an issue in the UK currently, but it is expected to decline to close to 2% by 2012 as special factors, such as VAT increases, disappear. The European central banks are expected to move earlier than the Fed, raising rates slowly and cautiously beginning in the third quarter of next year. This will hold down yields on 10-year government bonds as well. The low interest rates in developed economies will continue to aggravate exchange

Posted by Jay Hancock at 2:45 PM | Permalink | Comments (2)
Categories: The Great Recession
        

The referendum against slots at the mall always was a long shot. The margin of victory for the David Cordish-backed project, however, is surprising, considering how much dough the Jockey Club spent on advertising. It has been buying TV ads -- tons of them -- since August.

I suspect the nonstop ads -- eventually from both sides -- blurred together and prompted voters to draw a larger desire from the slots debate: Make it stop. Make it stop now, please. The best way to do that was to vote for Cordish. Had he lost, we would have been reading and hearing about slots-site debates for years. The Jockey Club would have tried to get a license for Laurel Park. Cordish may have tried for another site. More money would have been blown on lawyers. More neighborhood groups -- the ones in Laurel, this time, especially Russett -- would have gone militant against slots in their neighborhood. Even if you didn't care about slots at the mall, the way to put an end to the noise was to vote for Cordish.

The Jockey Club and other mall-slots opponents made the decision to tout Laurel Park as the alternative site -- saying over and over again in their ads that it was the appropriate place for slots, not the "family" mall. I wonder if that was the right tactic. In doing so they focused attention on the Jockey Club's botched attempt to put slots at the track in the first place. Every time they promoted the track as the right place, the subtext was: "Well, you already had a chance to get slots, and you blew it."

Posted by Jay Hancock at 8:36 AM | Permalink | Comments (22)
Categories: Slots
        

Today's column is about 1st Mariner Bank and Chairman Ed Hale's attempts to save it. Hale is soliciting private-equity firms for capital to shore up 1st Mariner, which he founded in the 1990s. A couple other thoughts on the situation. Anybody putting in enough capital to make a difference for 1st Mariner is likely to want a substantial hand in running the bank. This year's secondary offering had the advantage of being spread among many passive investors. Under a new investor, Hale's influence may diminish, although he's a key part of the bank's persona and marketing image.

The second point is this: Many of the people Hale is talking to would probably contemplate cashing out at a later date by selling 1st Mariner to a larger competitor. Hale has been adamant about keeping the bank independent. This may be a complicating factor in the attempt to raise new capital.

Posted by Jay Hancock at 8:29 AM | Permalink | Comments (0)
Categories: Finance
        

David Broder of the WP seems to be inciting more preemptive war as the solution for the economy and the Democrats' political problems:

Look back at FDR and the Great Depression. What finally resolved that economic crisis? World War II.

Here is where Obama is likely to prevail. With strong Republican support in Congress for challenging Iran's ambition to become a nuclear power, he can spend much of 2011 and 2012 orchestrating a showdown with the mullahs. This will help him politically because the opposition party will be urging him on. And as tensions rise and we accelerate preparations for war, the economy will improve.

Lots of problems, only one of which is that fact that any war with Iran won't be even close to the scale of World War II in terms of fiscal stimulus. Maybe Broder thinks that's a bad thing.

Washington's Blog doesn't think the economics work, either:

Broder is also plain wrong on the economics.

In a blog entry entitled "Has David Broder Lost His Mind?," Foreign Policy managing editor Blake Hounshell writes that Broder's proposal is "crazy for a number of reasons."

One is that markets don't like tensions, and certainly not the kind that jack up oil prices. Second, World War II brought the United States out of the Great Depression because it was a massive economic stimulus program that mobilized entire sectors of society. Today's American military has all the tools it needs to fight Iran, and there isn't going to be any sort of buildup. Hasn't Broder been reading his own newspaper? The Pentagon is looking to find billions in cuts as it confronts the coming world of budget austerity.

And as I have repeatedly pointed out, "military Keynesianism" - that is, launching wars to stimulate the economy, doesn't work.

Posted by Jay Hancock at 8:50 AM | Permalink | Comments (1)
Categories: The Great Recession
        

Mortgage-foreclosure operations are getting hammered for filing court papers that often aren't all they're supposed to be. But David Segal in the NYT says people who buy credit-card debt, auto loans and other kinds of consumer debt have been robo-signing affidavits and otherwise cutting corners for a long time.

But lawyers who defend consumers in debt-collection cases say the banks did not invent the headless, assembly-line approach to financial paperwork. Debt buyers, they say, have been doing it for years.

“The difference is that in the case of debt buyers, the abuses are much worse,” says Richard Rubin, a consumer lawyer in Santa Fe, N.M.

“At least when it comes to mortgages, the banks have the right address, everyone agrees about the interest rate. But with debt buyers, the debt has been passed through so many hands, often over so many years, that a lot of time, these companies are pursuing the wrong person, or the charges have no lawful basis.”

Posted by Jay Hancock at 8:26 AM | Permalink | Comments (0)
Categories: The Great Recession