Exelon's announced purchase of Constellation Energy prompted speculation that the dormant project to build a third reactor at Calvert Cliffs on Maryland's Chesapeake shore would be revived. Exelon is the country's biggest operator of nuclear power plants. Calvert Cliffs 3 is shovel ready if only somebody would finance it. The French EDF Group, which owns 100 percent of the project at the moment, may have approached Exelon as a potential partner.

But one of the first things Exelon boss John Rowe did on yesterday's conference call was to say: No way.

"That is simply not the case," Rowe said. "At today's gas prices you can't build a new nuclear plant in a competitive marketplace."

Seemingly permanently lower natural gas prices make electricity from gas-powered plants much cheaper than electricity would be from a new, un-depreciated nuclear power plant. Older nuclear plants are quite profitable because the mortgages are paid off. But a new one would cost many billions with big financing costs. The French would like the state of Maryland or somebody else to guarantee the purchase of electricity from Calvert Cliffs 3, but that's not going to happen.

And it's not going to get built on spec, either.

UPDATE: Bill Vanko and I talk on WBAL about how Constellation is trying to sell the merger to customers, employees, politicians and regulators.

Posted by Jay Hancock at 9:16 AM | Permalink | Comments (4)
        

11:00: Analyst: Are there change in control agreements furnishing merger bonsues to Constellation execs? Shattuck: There are no change in control agreements and no employment contracts.

10:50: Analyst: Who will be in charge of the combined company? Shattuck will be "executive chairman" and Chris Crane will be CEO. Who's the boss?
Shattuck: "I can answer that. Chris is in charge. He's the CEO, and I'm going to help him any way I can."

10:47: Several questions about Constellation's joint nuclear venture with the French EDF Group. Execs said several times there are no plans to change that.

10:43: Rowe: "We think long-run value lies in being greener and cleaner."
Shattuck: "More diversification among the regulated territories is nice... I think that's a plus for us." -- referring to the combined company having regulated utilities in Illinois and Pennsylvania, not just BGE in Maryland.
Shattuck: "Each of us coveted what the other had" -- Constellation was trying to add generation, Exelon was interested in Constellation's energy marketing.

10:35: Analysts are concerned about whether the Maryland PSC will approve the deal, given how it dragged its feet on Shattuck's attempt to merge with FPL in 2006. Analyst says to Shattuck: "The history there, particularly for your company, has been a challenged one."
Shattuck responds by saying it's a different environment, with a stable commission and falling BGE prices, in contrast to the spike in BGE prices in 2006.

Shattuck: "We have had now a sitting commission for five years. Across the board we felt like they have dealt with these cases to the letter of the law. Six years ago the status of that commission was less stable. We're also dealing with an environment that is substanatially different," not least because BGE prices are going down.
Shattuck says he thinks the package of benefits, including the $100 BGE rebate, will be attractive to Maryland officials.
In Maryland, he said, "they care about renewables. They care about efficiency projects. They care about electric vehicle infrastructure" and programs for low-income customers. "The combination of these things is meant to respond to five years worth of observations here, and I think what we've done is hopefully doing to be well received."

10:23: Chris Crane, Exelon president: Corporate consolidation will lead to an annual reduction in costs of $260 million per year.

10:18: Shattuck: To satisfy the antitrust cops, the companies expect to have to sell off 2,600 megawatts worth of generation plants within the PJM, midatlantic grid.

10:15: Constellation Chairman & CEO Shattuck:
Refers to "the benefits of this transaction to Constellation shareholders and to Maryland."
Shattuck: "We are maintining a significant employee and headquarters presence here in Baltimore."
For BGE employees: "No involuntary merger related job reductions" within two years after deal closes.

10:10: Rowe: "We believe the transaction can be executed. We expect to close in early 2012."

10:08: John Rowe, Exelon CEO and Chairman, belabors the benefits for Exelon shareholders. "The combination gives us the scope and scale we want.... It's not just about bigger. It's about a sustainable platform for smarter growth." Reduces collateral requirements for both companies moreso than either company could do on its own.

Rowe is quick to bat down speculation that the Constellation acquisition will revive the Calvert Cliffs 3 nuclear reactor project that Constellation abandoned last year.

"That is simply not the case," he says. "At today's gas prices you can't build a new nuclear plant in a competitive marketplace." (Cheap natural gas, he's saying, makes new nuclear uncomptitive.)

9:55: They're not letting reporters ask questions: "Media representatives are invited to participate on a listen-only basis."

Posted by Jay Hancock at 9:54 AM | Permalink | Comments (9)
Categories: BGE/electricity
        

Constellation's board is selling one of Maryland's heritage companies to Chicago-based Exelon, so it is quite sensitive about trying to show how this is a great development for Baltimore. It's not a great development for Baltimore. However the merger announcement includes several paragraphs on purported upsides for Maryland, including a $100 rebate for each residential BGE customer.

The combined company would commit to $10 million in charitable giving in Maryland for a decade after the merger. It would spend $50 million to build 25 megawatts of renewable electricity generation in the state and $10 million on developing Maryland electric-vehicle infrastructure. The news release says "the growth engine of the combined company will be headquartered in Baltimore," meaning Exelon's power marketing division will be combined with Constellation's and based here, and the companies' renewable energy operation will be based here. And: "To house the expanded Baltimore commercial and renewable energy headquarters, the new company intends to build or substantially renovate a state-of-the-art Leadership in Energy and Environmental Design (LEED) office center in Baltimore."

Total benefits for Maryland, the companies claim, are $250 million. Despite all the talk about growth, however, Constellation may end up having fewer employees in Baltimore. Mergers like this make money for shareholders through efficiencies, and efficiencies usually include layoffs.

The Maryland Public Service Commission will almost certainly seek more than $100 from this for each BGE customer. And it's not at all clear that this deal, like previous Constellation or BGE combinations, won't founder on the shoals of PSC demands.

The bigwigs are having a conference all at 10, which I'll be liveblogging.

Posted by Jay Hancock at 8:06 AM | Permalink | Comments (12)
Categories: BGE/electricity
        

Mayo Shattuck was an investment banker before he was an electricity executive. I always figured he would sell Constellation Energy, parent of Baltimore Gas & Electric, before he was through with it. In 2006 he was trying to seal a deal to sell Constellation to Florida-based FPL Group, but it petered out amid that year's brouhaha over BGE's 72 percent rate increase.

Now he may be at it again. There is been building speculation in recent weeks that Constellation, whose stock price had lagged since its near-bankruptcy during the 2008 financial crisis, would seek a deal with another big energy company. Several news outlets are reporting tonight that the company is close to an agreement with Chicago-based Exelon. This from Bloomberg:

Exelon Corp. (EXC) is near an agreement to buy Constellation Energy Group Inc. (CEG) in a stock deal that values the company at about $7.7 billion, according to a person with knowledge of the matter.

The offer values Constellation at more than $38.50 a share based on Exelon’s closing stock price today, said the person, who declined to be identified because the talks are private.

In the plan under discussion, Constellation Chief Executive Officer Mayo Shattuck would become chairman of the combined company, and Chris Crane, currently the president of Exelon, would become chief executive officer, succeeding Rowe, the person said. The talks started last year, the person said.

Constellation is by far the largest Baltimore-based company, an outgrowth of BGE, which was the nation's first natural-gas utility in the 1800s. Unclear what exactly this deal might mean for Constellation and its Baltimore workforce, but it's probably not good. However much of the company's employment is tied to BGE, the local utility, and can't be moved or downsized.

UPDATE: Here's a March 14 column: Stock price may push Shattuck to sell Constellation

Posted by Jay Hancock at 8:49 PM | Permalink | Comments (10)
Categories: BGE/electricity
        

I'm out of the office this week, so posting will be light/nonexistent. Back on Monday May 2.

Posted by Jay Hancock at 9:26 AM | Permalink | Comments (1)
        

WBAL's Bill Vanko and I talk about the record container volume at the Port of Baltimore and Gov. O'Malley's trade mission to China, South Korea and Vietnam.

Posted by Jay Hancock at 11:09 AM | Permalink | Comments (1)
        

Baltimore Gas & Electric is in the process of locking up the remainder of its juice for the fall, winter and spring. But the company has already bought most of the power and pretty much knows what it will cost. Mark Case, BGE's senior vice president for strategy and regulation, told me last week that the default BGE price (what you get if you don't switch to a different electricity supplier) will dip substantially starting Oct. 1.

BGE's standard price now until the end of May for power and transmission is 10.229 cents per kilowatt-hour. (You pay extra on top of that for BGE to deliver the electricity to your house.) Starting June 1 it'll be 9.960 cents. And after Oct. 1, says Case, "I think we'll see 9 cents or lower."

That would be the lowest price for BGE's standard offer since early 2006, before price caps associated with deregulation were removed. Compared with the present price it would save a typical household (1,000 kwh/month) more than $100 a year.

For alternatives to BGE's default fare, prices are already below 9 cents. As always check the Office of People's Counsel's Web site for a list of current deals and terms. Castlebridge Energy, for example, is offering one- and two-year deals for 8.95 cents. It may be more difficult for alternative suppliers to beat BGE's standard price after October. The period of declining electricity prices that began with the financial crisis may be coming to an end.

Posted by Jay Hancock at 6:08 AM | Permalink | Comments (11)
Categories: BGE/electricity
        

I get some creative comment spam, which always gets deleted, but I especially enjoyed this one.

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Posted by Jay Hancock at 12:01 PM | Permalink | Comments (1)
        

From the Stanford Center for Social Innovation:

In this quarter's column, we explore research showing that the most generous, trusting, and helpful people are not those with more money, but, rather, those with less. Individuals in lower socio-economic classes tend to act in a more prosocial fashion because of a greater commitment to egalitarian values and heightened feelings of compassion for others. Put simply, the life stressors and challenges faced by those who struggle economically often spur greater social cooperation. Might the "haves" take a lesson from the altruism of the "have nots?"

However, don't forget this.

Posted by Jay Hancock at 6:18 AM | Permalink | Comments (2)
        

Arindrajit Dube, Ethan Kaplan, and Suresh Naidu a paper to be published in the Quarterly Journal of Economics.

We estimate the impact of coups and top-secret coup authorizations on asset prices of partially nationalized multinational companies that stood to benefit from US-backed coups. Stock returns of highly exposed firms reacted to coup authorizations classified as top-secret. The average cumulative abnormal return to a coup authorization was 9% over 4 days for a fully nationalized company, rising to more than 13% over sixteen days. Pre-coup authorizations accounted for a larger share of stock price increases than the actual coup events themselves.

However, we show that firms benefit not only
from publicly announced events but also from top-secret events, suggesting informa-
tion flows from covert operations into markets.

In other words, insiders who knew about CIA coups in Iran, Guatemala, Congo, Cuba, and Chile were buying stock beforehand in United Fruit, Anglo-Iranian Oil and other multinationals that would benefit. Or they were leaking the information to other investors.

Posted by Jay Hancock at 4:53 AM | Permalink | Comments (1)
        

An economic indicator, I suppose. From the National Association of Catering Executives: "More Weddings, Bigger Budgets."

In the 2011 survey, almost half – 45 percent – reported increases in wedding budgets. This compares favorably to one year ago, when only 30 percent reported seeing an increase in expenditures per event. And it reflects a growing, upwards trend. In 2009, nearly 90 percent reported seeing a decline in overall wedding spending due to the economy. "We continue to see positive growth in the area of wedding spending," said Bonnie Fedchock, executive director of the National Association of Catering Executives. "Many had wondered whether weddings were recession-proof and in fact, they were not. We definitely saw a drop in spending when the recession began, but for two years now we are seeing a strong rebound.

Posted by Jay Hancock at 2:47 AM | Permalink | Comments (0)
        

WBAL's Bill Vanko and I discuss the proposed rescue of 1st Mariner Bank by private-equity investors in New York.

Posted by Jay Hancock at 10:18 AM | Permalink | Comments (0)
        

60 Minutes had an expose Sunday on Greg Mortenson and his Central Asia Institute. Mortenson became famous after co-writing Three Cups of Tea, the inspiring story of how he came to build schools for girls in Afghanistan and Pakistan. Apparently piggybacking on the work of author John Krakauer, 60 Minutes quoted key personalities in Mortenson's story who said he made stuff up. As I recall, the program also noted that the institute paid Mortenson's expenses for promoting his books and that the institute got little if any book royalties. It found that some of the schools the institute built were empty.

I recommend Kraukauer's written account, Three Cups of Deceit, which is even more damning than the 60 Minutes piece. It's a classic tale of a nonprofit gone wrong: Inspiring story and charismatic founder bring in millions. Charismatic founder runs roughshod over a spineless board and jeopardizes the organization and the mission. Lots of disturbing allegations, including one that Mortenson used the nonprofit as his personal ATM. (Mortenson says he stands by his book, and the CAI board, such as it is, says a lawyer found he wasn't gaining "excess benefits" from the nonprofit.)

Among other problems, CAI seemed to have pursued widespread and dirty nonprofit trick -- that of classifying its fundraising and promotion costs as "program" expense. Because selling Mortenson's books spread the message of educating young people in rural parts of central Asia, that was supposedly part of the "mission" -- on an equal footing with building the schools and hiring teachers. This kind of shuffle lets nonprofits claim they're spending a high portion of donor money on the mission even when they're just panhandling for dollars.

Here's Krakauer:

What this statement fails to
disclose is that for accounting purposes, CAI reports the millions
of dollars it spends on book advertising and chartered
jets as “program expenses,” rather than as fundraising or
other overhead. Were they reported honestly, CAI’s fundraising
and administrative expenses would actually exceed 50
percent of its annual budget. In 2009, according to an audited
financial report, CAI spent just under $4 million building
and operating schools in Pakistan and Afghanistan, a sum
that includes construction costs, school supplies, teachers’
salaries, student scholarships, and travel expenses for program
managers. In the same year, CAI spent more than $4.6
million on “Domestic outreach and education, lectures and
guest appearances across the United States”—an amount that
included $1.7 million to promote Mortenson’s books. CAI
reported all of this $4.6 million on its tax return as expenses
for “programs.”...

(Since 1998, Mortenson has served as both CAI’s
executive director and as a board member; presently, the
board of directors consists solely of Mortenson and two other
members.)

Posted by Jay Hancock at 2:41 AM | Permalink | Comments (0)
Categories: Nonprofits
        

You may have had your fill of Schaefer coverage. If not, here is a Schaefer tribute I wrote as he was about to leave the comptrollership five years ago.

He didn't start it, of course. There was a broad coalition of politicians and businesspeople laying ground for reviving Baltimore's seedy waterfront when Schaefer was still a city councilman.

Future Harborplace developer James Rouse was thinking about Baltimore's long-term health even earlier, while Schaefer was still lawyering drunk-driving and divorce cases.

Downtown's Charles Center redevelopment project was launched by the Greater Baltimore Committee and Mayor Tommy D'Alesandro Jr. in the late 1950s. Legislation allowing the Inner Harbor to be rehabilitated went through under Mayor Theodore R. McKeldin in the 1960s.

Posted by Jay Hancock at 9:27 AM | Permalink | Comments (0)
        

In the green shoots category, from the Las Vegas Sun. Perhaps no other place in the country got hit harder by the housing boom/bust than Vegas:

Employment in the Las Vegas area increased by more than 10,000 jobs in March -- the first increase in 38 months.

The additional jobs helped to bring down the unemployment rate down to 13.3 percent, the lowest mark since August 2010.

The state Department of Employment, Training and Rehabilitation reported today the Nevada jobless rate fell to 13.2 percent, down from 13.6 percent in February. There were 1,114,400 Nevadans with jobs, an increase of more than 10,000 from a month earlier.

”Nevada's labor markets showed signs of life in March, hinting what may be the beginnings of an economic recovery,” says Bill Anderson, chief economist of the department. Employment increased on a over-the year basis for the first time since January 2008.

Posted by Jay Hancock at 9:13 AM | Permalink | Comments (1)
Categories: The Great Recession
        

The Obama administration may eventually get something done about greenhouse gases via the Environmental Protection Agency or, if there is a second Obama term, Congress.

Meanwhile however it is fighting an ongoing attempt to allow states and activists to sue the likes of Constellation Energy and Exelon to reduce their CO2 output. Arguments are today at the Supreme Court. The case is American Electric Power Co. v. Connecticut. Constellation and Exelon are not parties but they would be affected if the high court were to allow such suits.

From the Christian Science Monitor:

Fed up with the slow pace of government efforts to address global warming, a group of conservationists and state attorneys general filed lawsuits in 2004 asking a federal judge to order five major US power companies to cap and then reduce their emissions of carbon dioxide.

Seven years later, the case arrives at the US Supreme Court, where the justices must decide whether concerned citizens and state officials have the legal power to force suspected polluters to cut their alleged level of pollution – though the federal government itself has not yet taken action on carbon emissions.

Posted by Jay Hancock at 9:00 AM | Permalink | Comments (3)
Categories: BGE/electricity
        

Ritholtz: If the outlook for U.S. debt is negative, S&P helped make it that way:

If ever there was an organization more corrupt, incompetent, and less capable of issuing an intelligent analysis on debt than S&P, I am unaware of them. Why do I write this?

A huge part of the reason the US is in its awful financial position is due to the fine work of S&P.
Consider what Nobel Laurelate Joseph Stiglitz, economics professor at Columbia University in New York observed:

“I view the ratings agencies as one of the key culprits. They were the party that performed that alchemy that converted the securities from F-rated to A-rated. The banks could not have done what they did without the complicity of the ratings agencies.”

Posted by Jay Hancock at 11:11 AM | Permalink | Comments (1)
Categories: Slo-mo fiscal train crash
        

The FBI busted three big online poker outfits today, the LAT reports: "Eleven executives at PokerStars, Full Tilt Poker and Absolute Poker were charged with bank fraud and money laundering in an indictment unsealed in a Manhattan court."

Of course already people are online criticizing Obama for cracking down on Freedom. Problem is that George W. Bush was the one who signed the law outlawing online gambling, in 2006. OK, the Obama Justice Department is the one bringing the prosecution. But trust me, online gamblers: the Obama FBI is doing you a big favor.

UPDATE: No, I don't mean they're doing you a favor by shutting down Internet poker accounts with substantial amounts of money in them. That's a blow and you have my sympathies if it's a big hit or causes hardship.

Posted by Jay Hancock at 4:47 PM | Permalink | Comments (40)
        

A reader who locked in with Constellation Electric a year ago at 9.7 cents kwh is being offered a one-year renewal at 9.49 cents per kilowatt hour. He called and told them he could get a deal from Castlebridge Energy for only 8.95 cents.

He says they agreed to lower the Constellation Electric price to 8.9 cents flat. The lesson: If you have a third-party electricity provider and it comes time for a contract rollover, always shop around. And Constellation Electric, at least, seems willing to negotiate.

Here are the reader's comments. You may also empathize with his feelings on having to shop and negotiate for everything these days.

I called Constellation and told them I wanted to terminate as of the end of my current contract. Of course they asked why, and I told them I had been offered a better deal from Castlebridge, which was listed at 8.95 cents on their web site as you indicated. But Constellation passed me on to a representative in their contracts department, who offered me 8.9 cents for one year if I would stay with them. I accepted, as it seemed the logical thing to do at that moment. You know, Jay, it really is not my preference that so many goods and services are now negotiated this way, like buying a car. I have done a similar thing several times now with Comcast for my TV and internet service, as many others have. It is a pain.

Posted by Jay Hancock at 10:37 AM | Permalink | Comments (2)
Categories: BGE/electricity
        

The right-leaning American Enterprise Institute utters the deficit amelioration tool which shall not be mentioned in certain circles.

What are the lessons to be learned from Sweden's handling of its latest financial and economic crises? Can Sweden's policies and institutional frameworks inspire US actions? Similar to the United States today, Sweden faced an excessive fiscal deficit and a ballooning debt in the nineties. At this AEI event, Sweden's minister of finance, Anders Borg, will explain Sweden's consolidation efforts, which were based on a mixture of expenditure cuts and tax increases.

Minister Borg will demonstrate that a robust fiscal policy framework, with an explicit expenditure ceiling and surplus target, as well as structural reforms, has helped maintain strong public finances and stimulate rapid recovery in the recent economic downturn.

Posted by Jay Hancock at 1:59 PM | Permalink | Comments (1)
Categories: Taxes
        

BGE told WBAL it changed how it notifies late-paying customers about security-deposit requirements. When you miss a few bills BGE can seek a deposit, which seems kind of perverse. As a credit-risk tool I wonder how effective it is. Seems like the time to seek a security deposit is when the customer is solvent, not when s/he's already missing payments.

BGE told WBAL it used to notify customers about the deposits by phone and bill messages, not by separate letters. Seems at least like the new method is getting people's attention. WBAL:

Harriet Sellman said she recently received a letter from BGE that made her angry and sick, saying she isn't sure how she is going to pay the extra money the company is asking for in the form of a security deposit.

"They decided we needed to pay a $532 security deposit which they estimate is two months of our estimated service costs," Sellman said. "I have been late. We're trying very hard to make do on one paycheck right now."

Posted by Jay Hancock at 11:12 AM | Permalink | Comments (23)
Categories: BGE/electricity
        

From a USA Today story on executive perks in the Great Recession:

•Black & Decker CEO Nolan Archibald received compensation worth $25.8 million in 2010. As chairman of the newly merged Stanley Black & Decker, he’ll get $43.3 million in 2011 and a bonus of up to $45 million in 2013. His 2010 perks were valued at more than $600,000, including $526,391 for personal travel on the company jet, $39,676 for financial planning, $25,722 for cars, $4,528 for sports and entertainment tickets, $1,820 for club dues, and Black & Decker products valued at $2,685.

Meanwhile the guy's laying off numerous employees as a result of Black & Decker's sale to Stanley Works.

Posted by Jay Hancock at 8:56 AM | Permalink | Comments (5)
Categories: Executive Pay
        

Superfresh has only about two dozen stores in Maryland, which is a really tough way to make a buck in the grocery store business these days. You need volume and store footprints as well as an identity. As analysts told Gus Sentementes, Superfresh struggled to build an identity in the region. But its store presence was the bigger problem.

Nationwide the company is big enough to get decent volume deals from manufacturers. But with only two dozen stores, it's hard to leverage your local marketing dollar. It costs just as much to buy an ad in The Sun or on WBAL whether you have 24 stores or 124. Superfresh has some good locations and nice stores, but it has been an underdog for years.

It's also a union shop. The increasing market share taken by nonunion Walmart and Target (and their less-expensive labor) over the last decade hasn't helped. The sale of the stores could diminish the presence of the United Food & Commercial Workers in Maryland. But the main factor was probably the number of stores. Superfresh just never established enough of a Maryland presence.

Posted by Jay Hancock at 9:47 PM | Permalink | Comments (29)
        

Can't find any news organizations reporting this online, but industry types tell me the Federal Energy Regulatory Commission has answered an emergency cri de coeur from Constellation Energy and other big power companies to raise the minimum offer price for generation capacity. It's complicated, but the upshot is that it will help keep your electric costs higher than they otherwise would have been. Here is the FERC decison.

UPDATE: Here's an account from Energy Choice Matters, with a good headline: FERC Orders Retail Customers in PJM to Pay $3 Billion More for Capacity

From a column a few weeks ago:

So you might wonder why two weeks ago power companies such as BGE parent Constellation Energy frantically urged Washington to slap price controls on electricity.

The answer is obvious only if you've been following the industry. Traditional controls, decreed by governments to try to protect consumers, keep prices low.

Electricity companies want regulators to keep prices high! Genius, from Constellation's point of view.

But these price controls are just as poisonous as the other kind. They'll block construction of badly needed power plants while forcing consumers to continue to pay billions of dollars extra for electricity.

Basically FERC just said "yes" to price controls to keep prices high.

Posted by Jay Hancock at 1:06 PM | Permalink | Comments (5)
Categories: BGE/electricity
        

Great coverage by Barry Ritholtz on what looks like a great speech (can't find it on the KC Fed's Web site) Kansas City Fed President Thomas Hoenig's speech. The basic idea: What did Fannie and Freddie have that City and BOA don't? Huge intermingling of public and private funds? Implicit taxpayer backing of debt? Enormous systemic risk amplified by leverage? Taxpayer subsidies of enormous executive compensation?

The answer is that you basically can't tell the difference. So the conservatives who are all for breaking up Fannie Mae ought to be for the same treatment for BOA and Citi. Hoenig to the big banks: “You’re public utilities for goodness sakes.”

Posted by Jay Hancock at 11:43 AM | Permalink | Comments (0)
Categories: The Great Recession
        

Gov. O'Malley repeatedly said the legislature "choked" on offshore wind and septic tanks. People are interpreting this as an offensive comment. "Gov. Martin O’Malley drew the ire of some in Annapolis this week when he suggested members of the General Assembly had 'choked' on two of his initiatives," The Sun's Peter Jensen writes. O'Malley "settled on a confrontational line that laid blame on members of the General Assembly," said the Washington Post's Aaron Davis.

However the word "choked" seems aggressive only if you think about it in the way it's used in sports. "He choked at the charity stripe when the game was on the line etc etc." But was O'Malley really using it that way? He's an opinionated guy, but it doesn't seem to be in his best interests to gratuitously tick off the Assembly. It seems to me that he was trying to use choke as an inoffensive metaphor for not being able to swallow a big bite. Here's the Post:

“I think the size of the one and the sweep of the other made the General Assembly kind of choke on those and refer them to summer study,” O’Malley said in an afternoon briefing with reporters. “We will work with the leadership and with the members [before next year] in hopes of their becoming more comfortable with these proposals,” he said.

PS: Go read my columns if you think I'm a kneejerk O'Malley apologist.

Posted by Jay Hancock at 9:37 AM | Permalink | Comments (3)
Categories: Politics
        

Mostly positive response to Sunday's column on sacrificing to fix Medicare. Thanks for all the feedback. Unfortunately some of the causes cited by readers of high health costs -- illegal immigrants, Viagra prescriptions, prescription drugs in general -- are a small part of the problem. Several readers smartly propose expanding Medicare to those 55 and over or to everybody -- ideas that were brought up in the discussion about Obamacare.

One reader suggests I don't call it Obamacare, saying that's pejorative. But nobody knows what the Affordable Care Act is. Here are a few emails:

You are absoslutely right , Medicare is in deep truble and causing trouble for our country. You are also right I suspect, that some forme of tax increases and benefit cuts are needed. There is one other approach in additon to the above that will help the solvency of Medicare. Interstingly, Paul Ryan's prorposal contains a tiny nudge in that direction. My suggestion is to lower the age of eligibility for Medicare immediately to 55. There are approximatley 20 million people between the age of 55 and 65. Adding this cohort of younger relatively healthier premium paying subscribers to Medicare who require statistically far less in serivces than their older counterpart will add a great deal of money to Medicare's bottom line.

And:

I beg to differ with your math. I agree that I paid in $ 55,000 into the system, and I now expect $ 161,000 back. But if I had been allowed to invest those payments I made to Medicare instead into my account in the Stock Market, I would have more than the $ 161,000 needed to cover my needs. The same is true for Social Security. If the government had invested my payments the way I could have done it, I would not worry.

And:

People say that costs are going up because of all the illegal aliens using the system. If so, why don't the hospitals triage these folks when they come in with the flu and send them to a low cost clinic instead of treating them in a $500/hr. facility? For the most part, the ER is a cash cow for hospitals.... too many people use the ER for their family doctor.

That leads to the question of why medical costs are going up and up. The docs I've discussed this with say it's prescription medications.

And:

Thank you for facts, figures, instead of fear-mongering.

I'm 58, and long before now, I wondered why I should feel "entitled"
to have "everything" covered for me ... at little/no cost.
Especially if I were leading or had led an un-healthy life style (not the case).

Somehow, I find we Americans more and more demand our "rights" and "entitlements" without any sense of "responsibility." It frustrates me ... when did we get that way? How did we get that way? And how do we get out of it?

And:

This morning you write that higher taxes and limits on Medicare spending are inevitable saying that "arithmetic allows no other conclusion." Perhaps so, if medicare continues as a program for seniors only. But it does not have to. An "improved medicare for all"--in other words, for the younger and healthier as well as for older--would solve many financial problems and as well be an excellent way to achieve universal healthcare.

And:

I very much appreciated your column in the Sunday Sun yesterday. The truth about the unsustainable Medicare situation needs to be clearly stated, as you have done, and repeated often. As parents, we are horrified about the mess we are leaving our children. We, as parents, are being collectively irresponsible by allowing this mythology to continue unabated. I anticipate future generational wars. In fact, if the younger generations' activism were to be sparked, like the Vietnam War galvanized my generation, then perhaps real and necessary changes will finally occur. Neither political party presently seems capable of "acting as adults".

And:

I tend to agree with the title of your article in The Sun on April 10, 2011, and I think you make some valid points. However, a serious discussion of health care needs to avoid the pejorative “Obamacare”. That term has a smirking negative connotation and was coined precisely to cast a negative light on President Obama and on the Patient Protection and Affordable Care Act. Even if you didn’t intend to disparage, use of the term tends to distracts from the points being made.

Posted by Jay Hancock at 7:00 AM | Permalink | Comments (2)
Categories: Health Care
        

Last week the Feds pulled the plug on Nevada Commerce Bank of Las Vegas, Nevada. As well they might have. Hammered by the housing meltdown, which was possibly worse in Vegas than anywhere else, Nevada Commerce's Tier 1, risk-based capital cushion had evaporated to 3.21 percent of its assets. Total risk-based capital was down to 4.49 percent, according to the Dec. 31 call sheet.

That's a heck of a lot worse than Baltimore's 1st Mariner Bank, which is also under pressure from the Feds to raise capital. As of Dec. 31 the ratio of 1st Mariner's Tier 1 capital to risk-adjusted assets was 6.79 percent -- twice as high as Nevada Commerce's. FMAR's total risk-based capital ratio was 8.05 percent compared with Nevada Commerce's 4.49 percent.

I pulled the last four bank seizure reports from the FDIC, and the former institutions all had much lower capital levels than 1st Mariner Bank, which was still considered "adequately" capitalized at the end of the year but not "well" capitalized. Poor Legacy Bank of Milwaukee had Tier 1 risk-based capital of 0.051 percent and total risk-based capital of 1.02 percent.

Given that there are more than 900 banks on Calculated Risk's Unofficial Problem Bank List, perhaps the FDIC has work to do other than in Baltimore. On the other hand, 1st Mariner's capital at its holding-company level is lower than at the bank level. Don't know how much the FDIC cares about that. And 1st Mariner's asset quality still isn't great. At the end of 2010 its ratio of nonperforming assets (delinquent loans etc.) to total assets was 5.48 percent, even higher than a year or two years earlier.

The usual reassurances apply: 1st Mariner deposits are insured up to the FDIC limit, which is pretty high.

Posted by Jay Hancock at 5:13 AM | Permalink | Comments (0)
Categories: The Great Recession
        

Brilliant stuff from Michele Bachmann in Iowa. She says gay marriage goes against "5,000 years of recorded human history."

Here is what else goes against 5,000 years of human history:

Outlawing slavery
Cars
Antibiotics
Civil rights
The scientific method
Outlawing infanticide
Average lifespans of more than 50 years
Democracy
The Bill of Rights
Central heating
Widespread literacy
Declining infant mortality
Outlawing capital punishment for stealing, adultery etc.
5 billion humans living above subsistence levels
The Universal Declaration of Human Rights
Vaccination
Women's rights

Posted by Jay Hancock at 1:43 PM | Permalink | Comments (1)
        

As I have written, malpractice lawsuits and malpractice-avoidance costs are not a major contributor to soaring health costs. But they are a contributor -- 2 percent of health-care costs, according to the Congressional Budget Office. And of course they are a hobby-horse of the right.

So if Obama wants to make his deficit-reducton plan bipartisan, he'll have to make a pass at tort reform. This is from the 2010 state of the union speech: “I’m willing to look at other ideas to bring down costs, including one that Republicans suggested last year: medical malpractice reform to rein in frivolous lawsuits."

Serious and fair reform would start with imposing a federal ban on joint and several liability, in which somebody or some company can be 10 percent at fault for harm suffered by the plaintiff but liable for 100 percent of the damages awarded. From a 2009 letter from CBO to Sen. Orrin Hatch:

The two most common ways of imposing limits on liability are to shorten the statute of limitations on malpractice claims and to change the rules regarding joint-and-several liability. The principle of joint-and-several liability allows a claimant to recover the entire amount of a damage award from any one of the parties found to be responsible for an injury, regardless of the party’s degree of responsibility for that injury. Replacing jointand- several liability with a “fair-share” rule would limit each defendant’s financial liability to his or her percentage share of responsibility for the injury.

Posted by Jay Hancock at 12:50 PM | Permalink | Comments (3)
        

Far less hate mail in response to Sunday's Medicare column than expected. I'll publish more responses on Tuesday, but here is my favorite. Always refreshing to hear someone honest enough to give "evidence against interest" -- to argue against a program that benefits the arguer in favor of some higher principle.

He makes a good point about the fraud. Many patients see funny stuff going on but are reluctant to second-guess "care givers" who are ripping off the system.

That was a great article on "Fixing Medicare" in Sunday's paper. You really laid it out openly and honestly.

Something has to be done. I
am 92 and I know that I am taking out much more than I ever put in.
The one thing that no one seems to know how to fix or even address is
the terrible amount of waste and fraud. Over the years I have seen
many questionable bills submitted on my behalf but have not known how
to address these issues without jeopardizing my own medical care.

Posted by Jay Hancock at 9:42 PM | Permalink | Comments (3)
Categories: Health Care
        

Baltimore County Dem. Sen. Jim Brochin seems to be leading the fight in the Senate against even greater slots welfare for horse tracks.

Emailing from Annapolis, he says he has a dozen votes against the bill (which passed the House and the Senate Budget & Tax Committee) and is working on more for the vote on the Senate floor. There are 47 Maryland senators, so it may be an uphill fight.

Posted by Jay Hancock at 12:35 PM | Permalink | Comments (1)
        

A recent column on new leadership at Maryland Business for Responsive Government suggested that the historically pro-free-markets, anti-Democrat business group had lost its edge in an attempt to cozy up the Gov. O'Malley.

However its legislative postmortem interview pitch to reporters suggests it's finding its old voice. Whatever you think of the group's positions, perhaps you would agreed that two-party government is better than one. From the media pitch:

Highlights of this legislative session:

1. Offshore wind: the Governor's legislative proposal would have added untold thousands of dollars per month in higher utility bills to energy-intensive businesses and would have all but obliterated other alternative energy providers' ability to compete in the marketplace.

2. Septic tank ban: the Governor's legislative proposal to ban septic tanks would have essentially halted new residential development in rural areas of Maryland.

3. Taxes / fees: legislation to raise the fuel tax, institute "combined reporting" and reinstate the millionaire's tax would have further damaged Maryland's business climate. An alcohol tax is problematic because there is no guarantee that programs will continue to get funded through this levy. Fees ranging from car titling to birth certificates will take affect, and a new hospital assessment amounts to a nearly $300 million tax.

4. Fiscal management: Maryland continues to increase spending, while other states' Governors, including Ohio, New Jersey, New York and Wisconsin take the political fallout from public sector unions to get control of state budgets.

Posted by Jay Hancock at 11:35 AM | Permalink | Comments (1)
        

Northwestern law professor James Lindgren has a paper that's getting a lot of interest. He looks at differences in attitudes of "anti-redistributionists" and "redistributionists," defining these as those who "favor or oppose capitalism or income redistribution." Among his conclusions:

I first show that respondents who express traditionally racist views (on segregation, interracial marriage, and inborn racial abilities) tend to support greater income redistribution. Traditional racists also tend to oppose free-market capitalism and its consequences, wanting the government to guarantee jobs for everyone and fix prices, wages, and profits....

[C}ompared to anti-redistributionists, strong redistributionists have about two to three times higher odds of reporting that in the prior seven days they were angry, mad at someone, outraged, sad, lonely, and had trouble shaking the blues. Similarly, anti-redistributionists had about two to four times higher odds of reporting being happy or at ease. Not only do redistributionists report more anger, but they report that their anger lasts longer.

The problem, of course, is definitions. What is redistributionist? Lindgren uses various surveys from the last three decades. Here is one question, on which respondents were asked to rank their attitude on seven-point scale: "Some people think that the government in Washington ought to reduce the income differences between the rich and the poor, perhaps by raising the taxes of wealthy families or by giving income assistance to the poor. Others think that the government should not concern itself with reducing this income difference between the rich and the poor."

Does favoring a progressive income tax, Medicaid and aid for poor families with children make you a redistributionist? Here is another one: "We would have fewer problems if we treated people more equally." And: "We should strive to make incomes as equal as possible." How Lindgren weighed each question and answer in defining his categories would have been crucial.

Posted by Jay Hancock at 9:20 AM | Permalink | Comments (2)
        

WBAL's Bill Vanko and I talk this morning about the tabling of Gov. O'Malley's offshore wind proposal and the chance and potential effect of a federal shutdown. I bet the shutdown negotiators reach a deal today.

Posted by Jay Hancock at 10:45 AM | Permalink | Comments (0)
        

I hadn't seen M&T on the list of affected companies, which seems to keep getting longer and longer. Here is my personal collection of Epsilon letters. I think I got one from Capital One too.

At M&T Bank, your privacy is very important to us. We were recently notified by Epsilon, an email marketing service provider, that an unauthorized third party gained access to customer email addresses of a number of companies, including those of M&T Bank. We want to assure you that no account or other personal information was obtained as we do not share this information with Epsilon.

Dear Verizon Customer, We have been informed by Epsilon, a provider of Verizon's email marketing services, that your email address was exposed due to unauthorized access to its systems. Verizon uses Epsilon to send marketing communications on our behalf.

Epsilon has assured us that the information exposed was limited to email addresses, and that no other information about you or your account was exposed.

Dear Valued Best Buy Customer,

On March 31, we were informed by Epsilon, a company we use to send emails to our customers, that files containing the email addresses of some Best Buy customers were accessed without authorization.

We have been assured by Epsilon that the only information that may have been obtained was your email address and that the accessed files did not include any other information. A rigorous assessment by Epsilon determined that no other information is at risk. We are actively investigating to confirm this.

Posted by Jay Hancock at 8:59 AM | Permalink | Comments (7)
        

From the NYT:

This year, the United Nations Food and Agriculture Organization reported that its index of food prices was the highest in its more than 20 years of existence. Prices rose 15 percent from October to January alone, potentially “throwing an additional 44 million people in low- and middle-income countries into poverty,” the World Bank said.

Soaring food prices have caused riots or contributed to political turmoil in a host of poor countries in recent months, including Algeria, Egypt and Bangladesh, where palm oil, a common biofuel ingredient, provides crucial nutrition to a desperately poor populace. During the second half of 2010, the price of corn rose steeply — 73 percent in the United States — an increase that the United Nations World Food Program attributed in part to the greater use of American corn for bioethanol.

Expect an indignant press release shortly from the Renewable Fuels Association.

Posted by Jay Hancock at 10:38 AM | Permalink | Comments (4)
        

How gross is CEO pay in the Fortune 1000? Even conservatives are criticizing it.

One item on my column-idea list is to catch up with the damage wrought by Stanley Black & Decker bigwigs John Lundgren and Nolan Archibald. The two agreed to combine Stanley with Black & Decker a while back with plans to increase profits by firing thousands.

Never thought I'd get beat to it by Cal Thomas. My impression of Thomas was that he's a social conservative more than an economic conservative, and this column supports that:

The moral issue in executive pay is whether management deserves these high salaries while employees are laid off, or denied pay increases.

Last April the Baltimore Sun reported that Stanley-Black and Decker in Towson, Md., announced plans to lay off 4,000 of its 38,000 employees. Yet, according to USA Today, Stanley-Black & Decker CEO John Lundgren made more than $32 million in 2010, up 253.1 percent from the previous year....

If I were a CEO being paid such astronomical amounts and people were being laid off, or struggling in a recession, at least in part due to the lack of pay increases, I would feel morally obligated to take less money. I would ask the chief financial officer of my company to share some of my wealth with loyal employees so that they could continue caring for their families.

Thomas obviously hasn't been reading his Milton Friedman. George Will once made a good conservative response to criticism of corporate layoffs, which was: Why should any company employ more people than it needs? But the combo of layoffs and gargantuan pay is especially distasteful.

Here is the whole Thomas column:

During the 2008 presidential campaign when candidate Barack Obama told “Joe the Plumber” that he wanted to “spread the wealth around,” it sounded to a lot of conservatives like socialism: “From each according to his ability, to each according to his need,” in the words of Karl Marx.

There is a kind of wealth spreading, however, that ought to meet the political litmus test of conservative Republicans, liberal Democrats and radical Independents. At a time of high

unemployment, too many layoffs and too few new jobs in the private sector (230,000 jobs were created last month, according to the Labor Department, but unemployment continues to officially hover at just under 9 percent and Gallup calculates it, without seasonal adjustment, at 10.0 percent), it is disheartening to see so many CEOs having recovered enough from their personal recession to pay themselves salaries and benefits that would have shamed the super-rich in America’s Gilded Age.

USA Today reported last week in a story on CEO compensation that “three-quarters of CEOs got raises — and, in many cases, the increases were substantial.” Employee pay, on the other hand, effectively stalled. Median CEO pay, reported the newspaper, increased 27 percent last year, meaning the average CEO received $9 million in 2010. Even in a struggling economy, I wager most people could get by on $9 million a year. In a strange twist, General Electric, whose chairman Jeffrey Immelt now advises President Obama on job creation, paid no taxes last year, despite earning $14 billion. But that’s another column.

Unlike my liberal friends, I don’t obsess about how much money other people make. Whatever compensation someone can negotiate is fine with me. Whether a person is “worth” their pay is a subjective matter and open to debate.

The moral issue in executive pay is whether management deserves these high salaries while employees are laid off, or denied pay increases.

Last April the Baltimore Sun reported that Stanley-Black and Decker in Towson, Md., announced plans to lay off 4,000 of its 38,000 employees. Yet, according to USA Today, Stanley-Black & Decker CEO John Lundgren made more than $32 million in 2010, up 253.1 percent from the previous year.

U.S. Bancorp Chairman Richard Davis was paid $16.1 million in 2010, a 143.0 percent compensation boost. In January, U.S. Bancorp announced that 64 workers in its Milwaukee office would be cut.

If I were a CEO being paid such astronomical amounts and people were being laid off, or struggling in a recession, at least in part due to the lack of pay increases, I would feel morally obligated to take less money. I would ask the chief financial officer of my company to share some of my wealth with loyal employees so that they could continue caring for their families.

One doesn’t have to be a liberal who believes in income redistribution to see the unfairness in disproportionate pay. Think of the kudos and favorable press coverage that would come to a corporate chief who shared his wealth, rather than lay off employees. It could change not only the media coverage of big business, but also the way the public perceives the super rich. Heck, some of them might even start voting Republican!

Five CEOs saw a slight decline in compensation, according to the USA Today/GovernanceMetrics international data, but they still earned more than most lottery winners receive. President Obama has spoken of some of these CEOs as not “needing” the money they get. Again, that is a subjective judgment. What he should be doing is shaming those companies that lay off workers while paying their top management such exorbitant salaries and benefits. Stockholders ought to demand that no competent worker should be laid off if a CEO earns above a certain amount. Stockholders also have a moral responsibility beyond the dividends they receive.

Making money is a noble American objective, making a living is a nobler one. Corporations ought to have enough decency and compassion to make sure no worker is let go solely to increase the bottom line or pad the boss’ pockets with more money than he (or she) can ever hope to spend in a lifetime.

Posted by Jay Hancock at 6:12 AM | Permalink | Comments (11)
Categories: Executive Pay
        

If you tour the Federal Reserve branch on Conway Street, you can get a little baggie of shredded currency. Each piece of the former money is like 2 millimeters wide. I took a couple home to my kids and they briefly tried to reassemble the bills. Unsuccessfully.

However, some enterprising Chinese with the help of some Lufthansa flight attendants are alleged to have made some 20 million euros in a similar enterprise. HT Marginal Revolution.

From upgrd.com:

Euro coins have two color tones, gold and silver, and when the German Central Bank takes the coins out of circulation, the two colors (see picture to the left) are separated then sent to China to be melted down into scrap metal.

 A wily group in China reassembled the coins rather melting them, then sent them back to Germany with four LH flight attendants serving as "mules." Because FA's don't have baggage weight limits and can typically carry-on their bags and breeze through customs, they became the ideal method of transporting this discarded money.

Posted by Jay Hancock at 4:53 PM | Permalink | Comments (0)
        

The anti-wind-power John Muir Trust releases a report finding several shortcomings to Scottish wind farms, including that the turbines turned less and delivered less power than had been advertised.

1. 'Wind turbines will generate on average 30% of their rated capacity over a year' In fact, the average output from wind was 27.18% of metered capacity in 2009, 21.14% in 2010, and 24.08% between November 2008 and December 2010 inclusive.

Stuart Young, author of the report, said, “Over the two-year period studied in this report, the metered windfarms in the U.K. consistently generated far less energy than wind proponents claim is typical. The intermittent nature of wind also gives rise to low wind coinciding with high energy demand. Sadly, wind power is not what it's cracked up to be and cannot contribute greatly to energy security in the UK."

Posted by Jay Hancock at 4:40 PM | Permalink | Comments (1)
        

The other day I posted objections to the offshore wind project from Sen. E.J. Pipkin. He wonders, among other things, why it doesn't have a requirement to put the windmills in Maryland waters, why the components aren't required to be made here etc.

Here's a response from the Chesapeake Climate Action Network. Communications Director Jamie Nolan says the response was put together with a coaltion of environmental and labor groups. I believe they are correct on cost overruns -- No. 6. However I assume developers will build lots of (internalized) overrun risk into their bids.

Responses to Senator Pipkin’s questions. Pipkin's questions are in bold. CCAN Response in lightface.

1. There is no requirement that the wind farm be located in Maryland.

Any project that would qualify under this bill would not be "in" Maryland or any state. It would be 10 miles offshore in federal waters, in a federally designated "Wind Energy Area". The two Wind Energy Areas that are close to Delmarva Peninsula load centers are referred to as the "Maryland" and "Delaware" areas, but these aren't official maritime boundaries. They are two parcels of federal waters, leased by DOI, separated by a shipping channel. Development of an offshore wind farm on either side of this shipping channel would result in similar jobs, environmental, health and rate stability benefits for Marylanders.

Maryland needs additional power on the Delmarva Peninsula, so this bill requires that an offshore wind farm reduce transmission congestion and increase reliability in this area. It's unrealistic to think that an offshore wind farm can achieve this far from major load centers like Ocean City and Salisbury because in this type of PPA, the developer has to cover the transmission costs. Any developer who entered a bid like this would be almost certainly disqualified because they would not be priced "comparable to other offshore wind projects.”

2. There is no requirement that the transmission lines from the wind farm come into Maryland.

Under this bill, an offshore wind farm has to reduce transmission congestion and increase reliability on the Delmarva Peninsula. The market and what interconnection point offered the

lowest price to consumers would ultimately determine whether the subsea transmission cables interconnect in Ocean City or just over the border. The PSC will evaluate whether the transmission strategies that developers propose create net benefits for the state of Maryland.

3. There is no requirement that any of the components used in building the wind farm must be manufactured in Maryland.

This type of provision would be in blatant violation of the Commerce Clause of the U.S. Constitution. Luckily, offshore wind turbine components are so massive that they need to be manufactured as close as possible to the deployment area. This is one reason offshore wind farms have proven to have such strong economic development benefits around the worlds. Maryland can't be sure to snag every job related to offshore wind deployment, but we will also benefit from regional offshore wind development. The Google Atlantic wind backbone is preparing for 6,000 megawatts of wind in the Mid-Atlantic, enough to provide the foundation for a tremendous new industry. Maryland can't afford to be passed by in this development.

4. There is no cap on the amount of additional charges the utility can pass on to the consumer.

The $2 figure contained in the proposed amendments to HB 1054 is a suggested upper limit on the amount of an estimated charge that a developer may use when estimating pricing in its project proposal. The proposal will be based on 2011 dollars but the actual price assessed against the ratepayer will be set in 2016 and will be based on the market prices at that time. The actual price will be subject to change in accordance with market rates for the entire 20-year duration of the contract.

No new generation will be built without long-term contracts. Only renewables like offshore wind offer fixed costs. The price of offshore wind is fixed while fossil fuel electricity prices are subject to volatility. Over the last 20 years, we've seen those fossil electricity prices increase 4% per year, while damaging our health and environment. If that trend were to reverse in unprecedented ways, then our offshore wind price would be relatively higher, while still creating jobs and improving our air and water. In that case, it can't be 100% guaranteed that offshore wind wouldn't one day go over $2 in ratepayer impact. But this bill does guarantee that the PSC will hire the best experts and consultants it can find to study proposals carefully and disqualify any that its economists predict would present an unacceptable likelihood of this.

6. There is no limit on the amount of cost overruns that the developer could pass on to the consumer. Although the Administration states that cost overruns and other types of cost components are “for the developers’ account,” the developer would be factoring in a margin for cost overruns in its proposal price and those would be passed on to consumers.

This bill absolutely limits this type of "cost overrun margin" by requiring that proposals are comparable to similar projects in other states, have a limited ratepayer impact, and compete with other proposals to provide the lowest possible price. Any cost of insurance and financing will be fully included in the proposals developers submit and will be compared fairly with other proposals.

7. There are no constraints on the creditworthiness of the developer.

Several of the developers who have requested leases from the Department of Interior in federal waters off Maryland's coast are globally recognized, very well-capitalized firms. However, this opportunity is available to smaller companies as well, provided they can satisfy Interior's financial qualifications review in the leasing process. DOI rigorously examines the seriousness of commercial leasing proposals and will not issue leases to companies that it feels cannot successfully bring offshore wind to market.

8. The Administration did not submit a “small business impact statement” as required. Therefore, the fiscal note does not address this issue at all except to say that a revised note would be produced when the statement is received. All estimates that have been published so far have only addressed the impact on residential ratepayers. There have been no projections on the extra cost to hospitals, local governments, colleges and businesses.

The Administration has made available to legislators and the Department of Legislative Services detailed projections of rate impacts on different types of consumers under many different scenarios. While describing the potential cost or benefit to ratepayers in terms of the effect on homeowners is helpful in understanding the parameters of the bill, the Administration has distributed widely its projections of possible rate effects on hospitals, local governments, colleges and businesses of different sizes.

Posted by Jay Hancock at 1:49 PM | Permalink | Comments (1)
Categories: BGE/electricity
        

Well, at least somebody acknowledges the quid pro quo that's expected by some public-sector workers. Here's a retired nurse in Annie Linskey's pension story on her resentment that Democrats are cutting retirement benefits for state workers.

"We voted for them, and we're not getting appreciated at all," said Josephine Ball-Sivels, a clinical nurse specialist who retired in 1996 after 32 years with the state Department of Health and Mental Hygiene. She said changes to the plan are like "being kicked in the shin."

Yes, of course, there is the same dynamic, only more powerful, in the relationship between corporate interests and Republicans. Oh, and Democrats, too.

Posted by Jay Hancock at 8:56 AM | Permalink | Comments (4)
        

Tuesday's column was on the continuing struggles of Ed Hale and his bank, 1st Mariner.

If Hale can't raise capital or there isn't a major turnaround in 1st Mariner's profits, the bank is in danger of being seized by the government and forced to merge with another bank. The buyer could well be one of the "big, out-of-town banks" that Hale has railed against since founding 1st Mariner in the 1990s.

I thought the piece was pretty straightforward. The bank is in jeopardy. Its own accountants believe its future in its present form is in doubt. The newspaper has a duty to tell everybody who bought 1st Mariner stock what's going on.

Reader Alan Christian believes The Sun's coverage has been unfair. He writes:

Jay, I have always had respect for the Sun, but that feeling has been slipping away from me. The realities are clear. There still is a Sunpaper published every morning, but you would not wrap many fish in it. No further comment is necessary. First Mariner is a case in point. I have known Ed Hale for over 40 years and he has been right there when Baltimore needed him. Years ago, I was helping the DAV Thrift Stores market their stores. We had a golden opportunity tossed out way. Several of the hotels in Ocean City were going to change their mattresses and Box springs. One problem, we had to pick up the material in Ocean City and transport it to Baltimore.

My first reaction was, "With What?" Long story short, I contacted Ed Hale and he provided a truck (free of charge) to transport the bedding supplies to Baltimore where they were distributed to the DAV Thrift Stores. Never saw the story in the paper, never wanted the story in the paper. He did it, because it was the right thing to do. There are hundreds of stories like this one concerning Ed Hale. Now, He is still trying to keep the last private bank in Baltimore afloat and the Sun not only every bad story they can find. When they run the followup story, they repeat all the bad news again. You know better. Shame on you and the Sun. Are you that desperate for readers? What do think Mencken would say if he came back and read the Sun today? Think he would be pleased? Alan Christian

Thanks for your feedback Alan. I would love to know Mencken's opinion of Ed Hale. Unfortunately we can't find out.

Posted by Jay Hancock at 6:13 AM | Permalink | Comments (2)
Categories: Finance
        

In this economy, with the incentives given to Stanley Black & Decker Executive Chairman Nolan Archibald to downsize his former company, I suppose the $1 million in taxpayer money being given to SBD is a good buy. On Tuesday I talked to Tim Doyle, program manager for financing at the Maryland Department of Business and Economic Development, about the deal.

The $1 million is described as a "conditional loan," but it's really a conditional grant. To keep the money SBD has to:
-- Spend $12 million on capital improvement on the former Black & Decker headquarters in Towson by 2016.
-- Employee 1,100 people at the facility and 200 people elsewhere in Maryland between now and 2016.
-- Keep its headquarters for construction and do-it-yourself in Towson for the five years.

As usual SBD seems to have threatened that to move the jobs elsewhere unless Maryland ponied up.

"This is seen by the state and by the department as a very good economic development project," Doyle said. "There was the potential for them to go somewhere else. There was the potential for all of it leaving or part of it leaving."

When Stanley announced that it was buying Black & Decker, I would not have predicted that Maryland would keep 1,300 jobs in the combined company.

Posted by Jay Hancock at 5:35 AM | Permalink | Comments (5)
Categories: Corporate welfare
        

I haven't thought much about Paul Ryan's Medicare reform plan. The argument is going to be about letting Medicare patients choose coverage with a government voucher or having government experts decide administratively what gets covered and what doesn't. Vouchers would undermine Medicare's single-payer status and create new layers of administration at insurance companies. Would the insurance Medicare bureaucracies be any more efficient than the government Medicare bureaucracy? That's what the health care argument is largely about.

I suspect that Ryan's plan could ultimately lead to the same kind of gaps in coverage that exist for people under 65. Tax increases will be needed generally for Washington, and Ryan doesn't mention that. But in any event, it's envigorating to hear somebody in Washington tell Americans that Medicare can't continue on its present course, that fixing it will involve decreasing benefits and that seniors can't have unlimited health coverage and free ponies, too.

Ryan: Medicare’s open-ended, fee-for-service model distorts the health care market, inflates costs and invites fraud and abuse. With tens of trillions of dollars in unfunded promises, Medicare is on an unsustainable trajectory, and yet ‘do-nothing’ politicians irresponsibly insist the program remain on autopilot.

Posted by Jay Hancock at 1:45 PM | Permalink | Comments (11)
        

Potomac Forum is hawking its "Reducing Improper Payments in Government" seminar to federal Employees for April 13. $895 if you act now. But what if the government shuts down? No worries. Potomac says:

Special No Risk to Register "Shut Down" Cancellation Policy Special "NO RISK" policy in the event of a government "shut down". In the event of a government "shut down" - no cancelation fee and all registration charges will either be returned or used for the Workshop held at a new date - at the option of the student. There is NO RISK to Agencies or Students in registering early for the Workshop.

Posted by Jay Hancock at 11:59 AM | Permalink | Comments (0)
        

Pipkin's office put out a list of what he calls "flaws with the proposal." The gloss on No. 1 is that there is no assurance that much of the electricity generated by the wind farm would be used by Marylanders even if the wind farm is located here. As for No. 5, perhaps the larger problem is that the $2 cap is $2 above what conventional power would cost -- a value that will very much depend on how the PSC projects the cost of conventional power.

1. There is no requirement that the wind farm be located in Maryland.
2. There is no requirement that the transmission lines from the wind farm come into Maryland.
3. There is no requirement that any of the components used in building the wind farm must be manufactured in Maryland.
4. There is no requirement that any jobs related to the wind farm be held by Maryland residents or taxpayers.
5. There is no cap on the amount of additional charges the utility can pass on to the consumer. The $2 figure contained in the proposed amendments to HB 1054 is a suggested upper limit on the amount of an estimated charge that a developer may use when estimating pricing in its project proposal. The proposal will be based on 2011 dollars but the actual price assessed against the ratepayer will be set in 2016 and will be based on the market prices at that time. The actual price will be subject to change in accordance with market rates for the entire 20 year duration of the contract.
6. There is no limit on the amount of cost overruns that the developer could pass on to the consumer. Although the Administration states that cost overruns and other types of cost components are “for the developers’ account”, the developer would be factoring in a margin for cost overruns in its proposal price and those would be passed on to consumers.
7. There are no constraints on the creditworthiness of the developer.
8. The Administration did not submit a “small business impact statement” as required. Therefore, the fiscal note does not address this issue at all except to say that a revised note would be produced when the statement is received. All estimates that have been published so far have only addressed the impact on residential ratepayers. There have been no projections on the extra cost to hospitals, local governments, colleges and businesses.

More to follow as the committee continues to meet on the bill.

Posted by Jay Hancock at 11:50 AM | Permalink | Comments (2)
Categories: BGE/electricity
        

McDonald's is getting huge play on the Web today for its announced hiring binge on April 19. The company said it will hire up to 50,000 people that day. But McDonald's hires tens of thousands of people all the time. The company's annual turnover, an executive told the Wall Street Journal three years ago, is 700,000. So that year, anyway, it had to hire 58,000 people every month just to keep the lights on.

That's a worldwide number. Today's announcement concerns only U.S. jobs. Still, it's not like there's likely to be a permanent increase of 50,000 in McDonald's U.S. work force. The company says its turnover has slowed because of the recession, and it says it's keeping more restaurants open 24 hours a day. But people still quit all the time.

UPDATE: I finally found the press release, which doesn't seem to be on McDonald's own site. The company implies without saying so that this will be a net increase of 50,000 jobs in its U.S. stores. Color me skeptical.

The addition of 50,000 potential hires translates into $54 million more in payroll taxes contributed to the broader economy. Using a statistical multiplier effect, 50,000 new workers will generate almost $1.4 billion in annual spending – more than $3.5 million per day.

Posted by Jay Hancock at 1:55 PM | Permalink | Comments (4)
        

You have $100 in the bank. You write four checks: one for $20; one for $10; one for $15 and one for $130. They all present on the same day. In one of many consumer abuses in the last few years, banks often processed the $130 check first, instantly creating an overdrawn account and setting the stage for ~$35 overdraft fees on each of the smaller checks processed afterwards.

Under this scenario our bank gets $105 in bounced-check fees. It it had processed the smaller checks first it could have scored only one, $35 charge. Now Citi says it's changing its practice, says AP:

In an internal memo sent Monday, the bank said it will process checks starting with the smallest amounts first as of July 25. Most banks process larger checks first, a practice consumer advocates say increases the potential for multiple overdraft violations on checking accounts.

Posted by Jay Hancock at 1:22 PM | Permalink | Comments (0)
        

Hanke channels Julian Simon on the Cato blog:

When thinking about oil reserves, we must also acknowledge another economic reality: Oil is sold in a world market in which every barrel, regardless of its source, competes with every other barrel. Think globally, not locally. When we do, the dwindling reserves dogma becomes nonsense. In 1971, the world’s proven oil reserves were 612 billion barrels. Since then the world has produced approximately 990 billion barrels. We should have run out of reserves fourteen years ago, but we didn’t. In fact, today’s proven reserves are 1,354 billion barrels, or 742 billion barrels more than in 1971.

Posted by Jay Hancock at 11:44 AM | Permalink | Comments (5)
        

The Labor Department's newest figures on employer compensation costs came out last month, showing that pay for the average state and local government worker was 45 percent more than for the average private-sector worker. That's a slight increase in the 44 percent gap from 2009. The gap has stayed pretty steady, however, in the last decade.

The average private-sector worker made $19.64 per hour in wages or salary in December, while the average state and local government worker earned $26.42 per hour. (For some reason federal worker pay isn't surveyed.) The gap between benefits for private sector workers and those for state and government workers was larger: $13.86 an hour in benefits for the government workers vs. $8.11 for the private sector folks.

All told, the government workers made $40.28 an hour while the private sector workers made $27.75.

So the benefits for public sector workers were 71 percent higher than those for the private sector. Of course this is all fodder for the raging debate over public pensions. Many argue that government workers are more highly trained and have greater skills than those in the private sector. Len Lazarick at MarylandReporter.com has a good summary of where things stand on pension legislation in Maryland.

Benefits for state and government workers

state and local government worker made $40.28 an hour but the benefits were $13.86;

Posted by Jay Hancock at 9:25 AM | Permalink | Comments (6)
        

Nearly three-quarters of Americans wish China would "just hurry up and overtake America already," according to a new survey by The Economist Simulation Unit, published on April 1st. Constant worrying about exactly when the superpower will fall into second place is causing anxiety throughout American society, the survey found.

 "Will it be 2015? 2020? 2025? I wish it would just happen, and then we could all stop agonising about it and get back to dentistry," said Adam Barnes, a dentist from Iowa. The report examines in detail the relationship between the two countries and finds that in some important fields, China has already surpassed America. A summary of the findings is presented below.

Posted by Jay Hancock at 10:28 AM | Permalink | Comments (1)