Saturday, April 24, 2010



Bay Area United Against War Newsletter
Table of Contents:




April 26th: Demand Justice in D.C.!

Join the Free Mumia Abu-Jamal Coalition (NYC), the NAACP-LDF, the Center for Constitutional Rights, Cornel West, Ramsey Clark, the National Conference of Black Lawyers, the Peoples Law Office, and SEIU Local 1199 TO DEMAND A CIVIL RIGHTS INVESTIGATION BY THE JUSTICE DEPARTMENT.

1313 New York Ave. NW, Washington, DC

950 Pennsylvania Ave. NW (betweeen 9th AND 10th St.)

Busses and carpools will leave from Philadelphia, Pittsburgh, New York and other cities.

For more information call 212-330-8029 or go to


March, Rally at Wells Fargo Shareholder Meeting
Date: Tuesday, April 27
Time: Rally Begins at Noon
Location: Justin Herman Plaza (Embarcadero and Market)

Big Wall Street banks like Wells Fargo/Wachovia helped cause the worst economic crisis since the Great Depression, with millions of Americans losing their jobs, homes and retirement savings.

We have a message for the reckless Wall Street titans who made people jobless on Main Street: We want Good Jobs Now and Wall Street Must Pay.

To send our message loud and clear, we're going to rally and march to the Wells Fargo annual shareholders meeting next Tuesday in San Francisco. Join us and help make a difference.

For more information, call the California Labor Federation Jobs Campaign hot line: 510-663-4054.

While millions of America's hard-working men and women have lost their jobs, Wells Fargo's CEO John Stumpf made $21.3 million last year, after the company took $25 billion in taxpayer bailout money. It's not right and Stumpf and his entire board of directors and executive committee are going to hear it from us next Tuesday.

In solidarity,

Marc Laitin
AFL-CIO Online Mobilization Coordinator


SF Workers Memorial Day
Stand Up For Injured Workers
& Commemorate Workers Killed On The Job
Wed April 28, 7:00 PM
ILWU Local 34 2nd St./Embarcadero SF

Shiela Davis, Executive Director Silicon Valley Toxic Coalition
Mike Daly, Ironworkers Local 377* delegate to San Francisco Labor Council
Leuren Moret, Geo-scientist who worked at the Livermore nuclear weapons lab
Carol Criss, SEIU-UHW Kaiser Steward Transcriptionist
Roland Sheppard, Retired BA Painters Local 4
Dina Padilla, Injured Worker Advocate
Becky McClain, Injure Pfizer Molecular Biologist by telephone
Sandy Trend, mother of injured Agraquest injured biotech worker David Bell

Workers in the bay area and nationally continue to get injured and killed on the job. In California, OSHA inspectors have been threatened and retaliated against for speaking out about the decline of the agency and the failure of the agency to do a proper job protecting injured workers and the public. Additionally all the OSHA doctors for California's 17 million workers have also been terminated thereby threatening the safety of workers and the public. There are more CA Fish and Game Inspectors than Ca-OSHA inspectors and this needs to change.

Hundreds of NUMMI injured workers who have been on disability are also now being discriminated against by the company and treated as 2nd class workers in the compensation plan. Is this fair? Many of these workers have given decades of their lives to the company yet they are now being punished for being disabled. This is cost shifting since their healthcare will now be paid for by the State and SSI when they go on permanent disability. This is yet another example of cost shifting by the corporations making the tax payer pay for their liabilities.

Workers Memorial Day is held every year to commemorate those workers killed and injured on the job. The deregulation of workers compensation has also allowed employers and the insurance industry to deny seriously injured workers prompt healthcare and also has cut the permanent disability payments by 50% as well as completely eliminating retraining.

There is a national struggle to strengthen OSHA protection called the Protecting America's Workers Act H.R. 2067 needs to be supported and also to require that all injured workers are entitled to their exposure records on the job. Health and safety must trump privacy/secrecy laws.

We also support H.R. 635 which will create a US Commission on State Workers Compensation Laws and will study the affect of deregulation for injured workers in the U.S. At the same time, OSHA plans to remove some chemical warnings on exposure limits for workers.

We need to educate and reactivate the labor movement to protect our lives and health and safety in the workplace. Please join with workers and their families at this memorial meeting and speak out and demand healthcare and justice for all workers and people in the community.

California Coalition For Workers Memorial Day CCWMD
(415) 867-0628


There will be an important meeting at ILWU Local 10 to organize support for the 600 Boron miners, now locked out in the Mojave Desert by global mining giant Rio Tinto for nearly 3 months. This solidarity committee will be similar to ones organized in the Bay Area in the past to support the ILWU in the 2002 employer lockout, the Charleston 5 defense committee, the sacked Liverpool dockers and the anti-apartheid struggle. Members of all ILWU locals and retirees are invited to participate as well as other union members, antiwar activists and May Day organizers. The ILWU miners' struggle is at a critical stage and solidarity actions at this point could turn the tide in favor of the union. The alternative would be a defeat not only for a local of arguably the most militant union in this country, but could become another PATCO, spreading dire consequences for the rest of the ILWU and organized labor. Please make every effort to attend. Victory to the Boron miners!

PLACE: ILWU LOCAL 10, Henry Schmidt room
400 North Point St.
San Francisco

In solidarity,
Jack Heyman


Protest on International Workers' Day
Full Rights for Undocumented Workers
Legalization/Amnesty for All!
Money for Jobs and Education, Not War and Occupation
Jobs for All!
No Budget Cuts or Fee Hikes
Tax the Rich and Corporations!
March and Rally
Saturday May 1, 12noon
March Assembles: 24th and Mission Sts., SF
Sponsored by the May Day 2010 Coalition, of which the ANSWER Coalition is a member.

Proteste durante el Día Internacional del Trabajador
¡Derechos Incondicionales para Trabajadores Indocumentados
Legalización/Amnistía para todos!
¡Dinero Para Trabajos y Educación, No para Guerra y Ocupación
Trabajos para todos!
¡No Recortes o Aumentos-Cobren a los Ricos y Corporaciones!
Marcha y Mitin
Sab. 1º de Mayo, 12pm
Uniéndose sobre la calle 24 y Misión, SF
Patrocinado por la Coalición Día de Mayo 2010, la cual la Coalición ANSWER es un participante.

A.N.S.W.E.R. Coalition
Act Now to Stop War & End Racism
2489 Mission St. Rm. 24
San Francisco: 415-821-6545


Please post and distribute widely -

A message from the Labor Action Committee To Free Mumia Abu-Jamal -

Accusing Cop Is a No-Show, But...
Holly Works Still Faces A Felony Frame-up!

An Injury To One Is An Injury To All -

Holly's Trial Continued to May 10th.

Demonstrate & Attend Holly's Trial!
Monday, May 10, 2010
8 AM - demonstrate to drop the charges!
9 AM - attend Holly's trial
Alameda County Courthouse
12th and Oak St, Oakland CA

Holly Works is the last remaining defendant of the "Oakland 100," who were the victims of a vicious and arbitrary police crackdown against the protests in Oakland over the police murder of Oscar Grant, on New Years Day, 2009. (More on Oscar Grant, see below)

Holly's trial was to have begun on April 5th, but the officer, Christopher Cox, who accused Holly of assaulting him with a deadly weapon, apparently had more important things to do on April 5th than repeat this blatant lie in court. He was a no-show!

But, instead of tossing out this garbage "case" when the cop failed to appear, the judge promptly "continued" it to May 10th.

A local musician, bakery worker and activist, Holly was walking with a friend in Oakland in January 2009, to the protest against the police murder of Oscar Grant. But... She was arrested before she even arrived at the protest, and at least an hour before the protest had started! She was detained and fraudulently charged with... assault with a deadly weapon on a police officer!

Originally charged with assaulting the cop with a knife, Holly had no knife, and so a convenient change was made. Since she happened to have a screw driver in her purse, Holly was accused of using this to assault the officer.

A total fabrication! The charge against Holly was made up by the police on the spot, right in front of her! Later, while sitting in a police van, Holly overheard cops on the radio discussing what excuses to use to arrest people in the upcoming protest.

The purpose of the Oakland 100 prosecutions was to tie up protesters with time-consuming prosecutions, and intimidate and silence opposition. Holly particularly was victimized partly in order to blame violence on out-of-town white radicals, "anarchists," etc., who it is said came into Oakland to make trouble. But Holly is a local Oakland activist! She was walking from her home, just a few blocks away from where she was arrested. And she didn't do anything!

Holly in auto accident! Meanwhile, Holly was the victim in an auto accident last Saturday, April 10th. The other driver admitted fault at the scene, but Holly suffered severe whiplash, her head hit the windshield, and her car was totaled. Treated and released at Highland Hospital, she's OK, but... let's send her a little love!

Donate to Holly's Defense! Send Holly a little love, and solidarity, by donating to her defense against the felony frame-up she still faces. She has a good lawyer, but little money to pay him. Donations can be made by Pay Pal at Holly's web site: Donate to the defense of Holly (Works) Noll at this site. Please be as generous as you can!

Oscar Grant was a young black retail grocery worker in Oakland, and the father of a young daughter. He was out with friends for New Years Eve, 2009, when he and some others were detained by BART police. He was shot in the back at point blank range by a BART cop, as he lay face-down on the Fruitvale station platform early in the morning.

Cell-phone videos taken of the incident by witnesses on the station platform were posted on the internet, and protests erupted in Oakland. Over a week later, the officer, Johannes Mehserle, was finally charged with murder. He was one of the very few police officers ever to be charged with murder in one of the huge number of killings of black males by police in California. Mehserle was granted a change of venue, and is now being tried in Los Angeles.


- The Labor Action Committee To Free Mumia Abu-Jamal
PO Box 16222 • Oakland CA 94610 • 510 763-2347 12 April 2010


A National Conference
To Bring the Troops Home Now!
JULY 23, 24, 25, 2010
Crowne Plaza Hotel, Albany, New York

AN INVITATION FROM: After Downing Street, Arab American Union Members Council, Black Agenda Report, Campaign for Peace and Democracy, Campus Antiwar Network, Code Pink, Iraq Veterans Against the War, National Assembly to End the Iraq and Afghanistan Wars and Occupations, Peace of the Action, Physicians for Social Responsibility, Progressive Democrats of America, U.S. Labor Against the War, The Fellowship of Reconciliation, Veterans for Peace, Voices for Creative Nonviolence, and Women's International League for Peace and Freedom [list in formation]

We demand the immediate and total withdrawal of U.S. military forces, mercenaries and contractors from Afghanistan and Iraq. Moreover, we recognize that the Middle East cauldron today also encompasses Iran, Pakistan, Yemen, Palestine and Israel, while Haiti, Honduras, Colombia, Venezuela, Cuba and other countries in Latin America are targeted for intervention, subversion, occupation and control as a consequence of a militarized U.S. foreign policy. Our challenge is not only to end wars and occupations, but to fundamentally change the aggressive policies that inevitably lead our country to militarism and war.

Join us in Albany, New York, July 23-25, 2010!
Issued by the United National Antiwar Conference (UNAC) Planning Committee
For more information, write, or UNAC at P.O. Box 21675, Cleveland, OH 44121 or call 518-227-6947 or visit our website at




URGENT: Support the Fight of Florida Students & Teachers Against Privatization of Public Schools and Resegregation and the Assignment of Students and Teachers in Black and Latina/o Areas to Permanent, Legal, Second-Class Status

Over 1500 Miami/Dade Teachers staged a sick-out and rally today (Monday, April 12) to demand that Governor Crist veto Senate Bill 6.

"If passed, this law will hasten the privatization of public education and the proliferation of charters in Florida, penalize teachers who teach the least privileged students and punish students who perform poorly on standardized tests (particularly English language learners) by withholding a high school diploma from even those who have earned the highest grades," said Ceresta Smith, a teacher from Dade County.

The 1500 teachers who called in sick assembled in Tropical Park, where they were joined by an additional 2500 supporters, including parents, students and community members.

"If passed, SB6 would assign both teachers and students in black and Latino areas to a permanent, legal, second-class status. In the south, where many charters are all white, the charter school movement has increased segregation - SB6 would accelerate this trend by widening the doors to publicly funded, privately-operated schools such as those that the segregationists founded in the 1950's to avoid the mandate of integration ordered by Brown v. Board of Education," said Shanta Driver, spokesperson for BAMN (By Any Means Necessary), the civil rights organization that sponsored a March on Washington to Defend Public Education last Saturday, and is supporting the fight of Florida teachers.

The teachers plan to caravan to Tallahassee later this week to protest at the Governor's office.

For more information and to support and build the movement, contact BAMN National Coordinator Donna Stern 313-468-3398 or
Coalition to Defend Affirmative Action, Integration, and Immigrant Rights and Fight for Equality By Any Means Necessary (BAMN) (313) 468-3398
Equal Opportunity Now (NOW) Caucus


Greetings All:

This letter was written by Yuri Kochiyama who has asked us to spread this letter far and wide. Please do :).


March 1, 2010
Dear Friends of Mumia Abu Jamal:

Mumia's birthday is April 24 and we would like to celebrate the whole month of April with a gigantic Freedom Birthday Remembrance for Mumia Abu Jamal.

Please join Pam and Ramona Africa and all who love and admire Mumia by avalanching him through the month of April with Freedom Birthday wishes. And, to those who can afford to, please send a few dollars through postal money orders. This would be helpful when he is released.

Mail cards to:
Mumia Abu Jamal AM 8335
SCI Greene
175 Progress Drive
Waynesburg, PA 15370-8090

Tell your family members, friends, fellow workers, neighbors, classmates, etc. Also, notify progressive radio stations, newspapers and organizations. Please do so immediately as April is almost upon us. Remember what Mumia has endured at the hands of the U.S. government and the Pennsylvania criminal justice system. Mumia has already done 32 years and is still on death row because of prosecutorial misconduct. Yet he is innocent! Act now before it is too late.

Don't let Mumia become another victim of a government's destructive history. Mumia's life is in peril and must be saved. He is needed to teach us how to fight for a better world for all. If ever Mumia was needed, it is now!

Join us in celebrating Mumia's birthday throughout April and let it be a celebration for Mumia's freedom!

Remember we need him more than he needs us. We need him, not only for today, but for all the tomorrows coming. Join us. Write to Mumia now.

From Friends and Family of Mumia Abu Jamal


Please sign the petition to stop the execution of Mumia Abu-Jamal and
and forward it to all your lists.

"Mumia Abu-Jamal and The Global Abolition of the Death Penalty"

(A Life In the Balance - The Case of Mumia Abu-Jamal, at 34, Amnesty Int'l, 2000; www.

[Note: This petition is approved by Mumia Abu-Jamal and his lead attorney, Robert R. Bryan, San Francisco (E-mail:; Website:]

Committee To Save Mumia Abu-Jamal
P.O. Box 2012
New York, NY 10159-2012


Donations for Mumia's Legal Defense in the U.S. Our legal effort is the front line of the battle for Mumia's freedom and life. His legal defense needs help. The costs are substantial for our litigation in the U.S. Supreme Court and at the state level. To help, please make your checks payable to the National Lawyers Guild Foundation indicate "Mumia" on the bottom left). All donations are tax deductible under the Internal Revenue Code, section 501c)3), and should be mailed to:

It is outrageous and a violation of human rights that Mumia remains in prison and on death row. His life hangs in the balance. My career has been marked by successfully representing people facing death in murder cases. I will not rest until we win Mumia's case. Justice requires no less.

With best wishes,

Robert R. Bryan
Lead counsel for Mumia Abu-Jamal


Collateral Murder



5th April 2010 10:44 EST WikiLeaks has released a classified US military video depicting the indiscriminate slaying of over a dozen people in the Iraqi suburb of New Baghdad -- including two Reuters news staff.

Reuters has been trying to obtain the video through the Freedom of Information Act, without success since the time of the attack. The video, shot from an Apache helicopter gun-site, clearly shows the unprovoked slaying of a wounded Reuters employee and his rescuers. Two young children involved in the rescue were also seriously wounded.


San Francisco City and County Tramples on Civil Liberties
A Letter to Antiwar Activists
Dear Activists:
On Saturday, March 20, the San Francisco City and County Recreation and Parks Department's Park Rangers patrolled a large public antiwar demonstration, shutting down the distribution of Socialist Viewpoint magazine. The rally in Civic Center Plaza was held in protest of the illegal and immoral U.S. wars against Iraq and Afghanistan, and to commemorate the 7th anniversary of the U.S. invasion of Iraq. The Park Rangers went table-to-table examining each one. They photographed the Socialist Viewpoint table and the person attending it-me. My sister, Debbie and I, had set up the table. We had a sign on the table that asked for a donation of $1.25 for the magazine. The Park Rangers demanded that I "pack it up" and go, because selling or even asking for donations for newspapers or magazines is no longer permitted without the purchase of a new and expensive "vendors license." Their rationale for this denial of free speech is that the distribution of newspapers, magazines, T-shirts-and even food-would make the political protest a "festival" and not a political protest demonstration!
This City's action is clearly a violation of the First Amendment to the Constitution-the right to free speech and freedom of the press-and can't be tolerated.
While they are firing teachers and other San Francisco workers, closing schools, cutting back healthcare access, cutting services to the disabled and elderly, it is outrageous that the Mayor and City Government chose to spend thousands of dollars to police tables at an antiwar rally-a protest demonstration by the people!
We can't let this become the norm. It is so fundamentally anti-democratic. The costs of the permits for the rally, the march, the amplified sound, is already prohibitive. Protest is not a privilege we should have to pay for. It's a basic right in this country and we should reclaim it!
Personally, I experienced a deep feeling of alienation as the crisply-uniformed Park Ranger told me I had to "pack it up"-especially when I knew that they were being paid by the City to do this at this demonstration!
I hope you will join this protest of the violation of the right to distribute and, therefore, the right to read Socialist Viewpoint, by writing or emailing the City officials who are listed below.1
In solidarity,

Bonnie Weinstein, Editorial Board Member, Socialist Viewpoint
60 - 29th Street, #429
San Francisco, CA 94110

1 Mayor Gavin Newsom
City Hall, Room 200
1 Dr. Carlton B. Goodlett Place
San Francisco, CA 94102

Board of Supervisors
City Hall
1 Dr. Carlton B. Goodlett Place, Room 244
San Francisco, Ca 94102-4689

San Francisco Recreation & Parks Department Park Rangers
McLaren Lodge & Annex
501 Stanyan Street
San Francisco, CA 94117

San Francisco Recreation and Park Commission
501 Stanyan Street
San Francisco, CA 94117

Chief of Police George Gascón
850 Bryant Street, #525
San Francisco, CA 94103
(I could not find an email address for him.).



Lynne Stewart in Jail!

Mail tax free contributions payable to National Lawyers Guild Foundation. Write in memo box: "Lynne Stewart Defense." Mail to: Lynne Stewart Defense, P.O. Box 10328, Oakland, CA 94610.



U.S. Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530-0001
Department of Justice Main Switchboard - 202-514-2000
Office of the Attorney General Public Comment Line - 202-353-1555

To send Lynne a letter, write:
Lynne Stewart
150 Park Row
New York, NY 10007

Lynne Stewart speaks in support of Mumia Abu-Jamal


Troy Anthony Davis is an African American man who has spent the last 18 years on death row for a murder he did not commit. There is no physical evidence tying him to the crime and seven out of nine witnesses have recanted. New evidence and new testimony have been presented to the Georgia courts, but the justice system refuses to consider this evidence, which would prove Troy Davis' innocence once and for all.

Sign the petition and join the NAACP, Amnesty International USA, and other partners in demanding justice for Troy Davis!

For Now, High Court Punts on Troy Davis, on Death Row for 18 Years
By Ashby Jones
Wall Street Journal Law Blog
June 30, 2009

Take action now:


Short Video About Al-Awda's Work
The following link is to a short video which provides an overview of Al-Awda's work since the founding of our organization in 2000. This video was first shown on Saturday May 23, 2009 at the fundraising banquet of the 7th Annual Int'l Al-Awda Convention in Anaheim California. It was produced from footage collected over the past nine years.
Support Al-Awda, a Great Organization and Cause!

Al-Awda, The Palestine Right to Return Coalition, depends on your financial support to carry out its work.

To submit your tax-deductible donation to support our work, go to and follow the simple instructions.

Thank you for your generosity!


FLASHPOINTS Interview with Innocent San Quentin Death Row Inmate
Kevin Cooper -- Aired Monday, May 18,2009
To learn more about Kevin Cooper go to:
San Francisco Chronicle article on the recent ruling:
Ninth Circuit Court of Appeals ruling and dissent:


Support the troops who refuse to fight!




1) Soldier Jailed for Rap Lyrics Is Discharged
By Dahr Jamail, t r u t h o u t | Report
April 18, 2010

2)'Tiny' climate changes may trigger quakes
By Emily Beament, PA
Monday, 19 April 2010

3) Pennsylvania: School District Took 56,000 Secret Photographs
April 19, 2010

4) Goldman Tops Forecast, With $3.46 Billion in Earnings
"Going forward, Goldman should profit from fast-paced growth in overseas markets, Mr. Shahrawat said, but it also may face new pressures like financial regulation and questions about its reputation."
April 20, 2010

5) Benefit for Uninsured May Still Pose Hurdle
April 19, 2010

6) Health insurers make big bucks from Big Macs
"Safeguarding people's health and well-being take a back seat to making money."
By Katherine Harmon
April 15, 2010

7) Health and Life Insurance Companies Invest $2 Billion in Burgers, Tacos and Pizzas
Harvard study critical of insurers holding stock in major fast-food chains
By Candy Sagon
Source: AARP Bulletin
April 15, 2010

8) One-third of Americans say own government a threat: Poll
By Agence France-Presse
Monday, April 19th, 2010 -- 12:53 pm

9) NATO Apologizes for Killing 4 Unarmed Afghans
April 21, 2010

10) Transit Cuts Are Protested in Atlanta
April 20, 2010

11) Ex-Adviser to Obama Now Lawyer for Goldman
April 20, 2010

12) Districts Warn of Deeper Teacher Cuts
April 20, 2010

13) Challenging China in Rare Earth Mining
April 21, 2010

14) Student Suspended after Finger Gun Incident
Sunday, April 18, 2010
Eyewitness News

15) Coal Disaster Company Massey Energy Denied Time off for Miners to Attend Their Friends' Funerals
By Brad Johnson
April 22, 2010

16) BART fires second officer involved with shooting of Grant
By Reginald James
April 22, 2010

17) Moyers: Six Banks Control 60% of Gross National Product -- Is the U.S. at the Mercy of an Unstoppable Oligarchy?
By Bill Moyers, Bill Moyers Journal
Posted on April 23, 2010, Printed on April 23, 2010

18) Firm Run by Ex-Israeli Special Forces Soldier Wants US Security Contracts in Jerusalem, Iraq, Afghanistan
As the Obama Administration continues the military privatization agenda, a CIA-connected firm and an Israeli-run company named Instinctive Shooting International are looking to cash in
By Jeremy Scahill
April 21, 2010

19) HCAN on WellPoint: 'Murder By Spreadsheet'
by David Dayen
Thursday, April 22, 2010 by

20) U.S.'s Toughest Immigration Law Is Signed in Arizona
April 23, 2010

21) The Good, the Bad, and the "Misguided"
By Jayne Lyn Stahl
Created Apr 23 2010 - 9:01pm

22) Goldman Sachs Messages Show It Thrived as Economy Fell
April 24, 2010

23) Rating Agency Data Aided Wall Street in Mortgage Deals
April 23, 2010

24) Don't Call It 'Pot' in This Circle; It's a Profession
April 23, 2010

25) Legal Victory Raises Profile of an Atheist Group
April 23, 2010

26) Health Care Cost Increase Is Projected for New Law
April 23, 2010

27) For School Company, Issues of Money and Control
April 23, 2010

28) Schools in New Jersey Plan Heavy Cuts After Voters Reject Most Budgets
April 21, 2010


1) Soldier Jailed for Rap Lyrics Is Discharged
By Dahr Jamail, t r u t h o u t | Report
April 18, 2010

Until April 17, US Army Spc. Marc Hall sat in a military brig at Camp Arifjan, Kuwait, facing an imminent court-martial for challenging the US military's stop-loss policy in a song.

Sunday morning, Spc. Hall was granted a discharge by the military.

On December 17, 2009, Hall was jailed for writing a song about the personal impact of being forced to remain in the military beyond the scope of his contract by the stop-loss policy.

Stop-loss is a practice that allows the Army to keep soldiers active beyond the end of their signed contracts. According to the Pentagon, more than 120,000 soldiers have been affected by stop-loss since 2001, and currently 13,000 soldiers are serving under stop-loss orders, despite public pledges by President Barack Obama to phase out the policy.

Hall's song included lyrics the Army claimed were veiled threats of violence.

He was charged with five specifications in violation of Article 134 of the Uniform Code of Military Conduct, two of those for wrongfully communicating a threat based on song lyrics. Article 134 is a vague rule that outlaws anything "to the prejudice of good order and discipline."

Lyrics included Hall saying he may "go Fort Hood," a reference to the mass shooting at Fort Hood on November 5, which prosecutors for the Army claimed was a threat of violence.

"I explained to [my first sergeant] that the hardcore rap song was a free expression of how people feel about the Army and its stop-loss policy," Hall said at the time. "I explained that the song was neither a physical threat nor any threat whatsoever. I told him it was just hip-hop."

According to Jeff Paterson of Courage to Resist, an Oakland-based organization dedicated to supporting military objectors like Hall, he was not jailed for the song, but was instead jailed "in retaliation for his formal complaint of inadequate mental health services available to him at Fort Stewart. The Army used an angry song that Spc. Hall, a combat veteran of the Iraq War suffering from post-traumatic stress, had produced criticizing the stop-loss policy as the pretext."

What put the 34-year-old New York City native in the brig were, according to Paterson, Hall's persistent assertions of inadequate mental health care that culminated in a December 7 complaint to the Army Investigator General. Just five days after that, Hall was charged with violating "good order and discipline" at Fort Stewart, Georgia, and was shipped out of the country for a court martial in Kuwait.

On Feb. 20 Hall wrote, "A charge that was not a threat before, but all of a sudden became a threat now. I communicated a need for mental evaluation - not a threat."

On Feb. 26 Hall was put on plane to Iraq and transferred to Kuwait for pre-trial confinement. This put him out of reach of his civilian legal defense team, friends and family.

Shipping Hall to the Middle East to be court-martialed was, according to Hall's lawyer, an extreme move by the military.

"Not just the Constitution, but the rules for courts-martial, prohibit prosecutors from holding a court-martial in a combat zone as a pretext for depriving an accused of a public trial, counsel of his choice and necessary witnesses," David Gespass, Hall's civilian attorney and the president of the National Lawyers Guild, told Truthout in February of the Army's decision to try Hall in Iraq. "Whatever the Army may claim, that is exactly what the Army is doing to Marc."

Moving the court-martial from Fort Stewart, Georgia, to the Middle East effectively prohibited Hall's supporters from attending the trial, made it nearly impossible for the defense to call witnesses to the stand and made it dangerous for Gespass himself to attend.

In a message to supporters nationwide who organized a grassroots campaign on his behalf, Hall provided the following message by phone from Camp Arifjan in Kuwait: "I'm out of the confinement facility! Thank you to everyone for all the efforts everyone made. Hopefully I'll be home very, very soon. I appreciate all of the love and support so many people gave me through my ordeal."

Paterson told Truthout that he believes the military backed down because its chances of victory were looking slim.

"We had a real chance of winning this outright at the trial," Paterson said. "The military believed we wouldn't be able to get Gespass and an independent medical evaluator to Kuwait, but we got that together so they then moved it [the trial] from Kuwait to Iraq. But we kept at it, and they gave up. At the end of the day, the military decided it wasn't worth that effort. They did what they should have done four months ago - which was to let Marc out."

According to Paterson, when the Army realized that Gespass had successfully obtained a visa from the Iraqi embassy in Washington and "we were going forward with getting people into Iraq and forcing the military to be responsible for their safety, they backed off. The military was very effective at slandering Marc and portraying him as a dangerous gangster rap artist; it was difficult to overcome that in the mainstream media, but we did. The fact the military had to back down was a great thing for us."

Both Paterson and Gespass contend that an important factor in the case was that Hall has untreated post-traumatic stress disorder.

"Hall was near an IED [improvised explosive device] explosion during his combat tour in Iraq," Paterson told Truthout. "Part of our defense was to put up evidence that he's never been evaluated for TBI [traumatic brain injury]."

Gespass told Truthout that another factor in the Army's decision to discharge Hall was simply the general weakness of its case.

"They had such a terrible case to begin with," Gespass said. "I think it we tried the case we would have won. The things the Army claimed, there were no witnesses to back them up."

Like Paterson, Gespass believes Hall's case underscores the military's unwillingness to care for its soldiers.

"While I'm gratified that the Army finally decided to discharge Marc, I'm appalled at the disregard it has shown for Marc's well-being and fundamental rights for nine months," Gespass stated in a press release. "Whatever lip service the Army gives to its concern for its soldiers, its only real concern is insuring they risk their lives without questioning why. Marc's greatest transgression was asking that question."

Gespass told Truthout that it has not yet been determined whether Hall has PTSD or TBI, because the Army has not had him evaluated.

The president of the National Lawyer's Guild was clear as to why he thinks the Army handled Hall's case as it did.

"I think they waited as long as they did to be vindictive. This is something they should have agreed to weeks ago when we asked," Gespass said.

Hall's discharge is a general discharge under other-than-honorable conditions.

"The VA [Veteran's Administration] is a hard system to navigate, so even though he has service-related injuries, he will have to fight for what he gets," Paterson said. "But we're behind him. We're going to push to get that discharge upgraded."

Gespass feels similarly.

"We are very, very happy with the outcome, and I think there's a good chance we can get him benefits for military related disabilities and we can upgrade the discharge, which is the thing I plan on working on next."


2)'Tiny' climate changes may trigger quakes
By Emily Beament, PA
Monday, 19 April 2010

Climate change could spark more "hazardous" geological events such as volcanoes, earthquakes and landslides, scientists warned today.

In papers published by the Royal Society, researchers warned that melting ice, sea level rises and even increasingly heavy storms and rainfall - predicted consequences of rising temperatures - could affect the Earth's crust.

Even small changes in the environment could trigger activity such as earthquakes and tsunamis.

And some evidence suggests the consequences of climate change were already having an impact on geological activity in places such as Alaska, researchers writing in the journal the Philosophical Transactions of the Royal Society A said.

Bill McGuire, of the Aon Benfield UCL Hazard Research Centre at University College London, and the author of a review in the journal of research in the area, said warming temperatures melted ice from ice sheets and glaciers and increased the amount of water in the oceans.

As the land "rebounds" back up once the weight of the ice has been removed - which could be by as much as a kilometre in places such as Greenland and Antarctica - then if, in the worst case scenario, all the ice were to melt - it could trigger earthquakes.

The increase in seismic activity could, in turn, cause underwater landslides that spark tsunamis.

A potential additional risk is from "ice-quakes" generated when the ice sheets break up, causing tsunamis which could threaten places such as New Zealand, Newfoundland in Canada and Chile.

The reduction in the ice could also stimulate volcanic eruptions, according to the research.

And the greater weight of the water in the oceans where sea level has risen as ice melts can "bend" the Earth's crust. This produces magma and causes volcanic and seismic activity in coastal or island areas - where the majority of 550 volcanoes whose eruptions have been historically documented are found.

Increased volcanic activity could cause more landslides, and have impacts well beyond the area where the volcano is situated - for example by releasing sulphur clouds into the atmosphere or by affecting air travel.

Prof McGuire said the changes could occur in the coming decades or over centuries, rather than thousands of years, depending on factors such as how quickly sea levels rose.

And he warned: "The rise you may need may be much smaller than we expect. Looking ahead at climate change, we may not need massive changes.

"One of the worries is that tiny environmental changes could have these effects."

His review said there was "mounting evidence" of seismic, volcanic and landslide activity being triggered or affected by small changes in the environment - even specific weather events such as typhoons or torrential rain.

Prof McGuire said that in Taiwan the lower air pressure generated by typhoons was enough to "unload" the crust by a small amount and trigger earthquakes.

Other impacts of rising temperatures include glacial lakes bursting out through rock dams and causing flash flooding in mountain regions such as the Himalayas, as well as rock, ice and landslides as permafrost melts.

And he said there may be "tipping points" in the geological systems, where the crust reaches a threshold that causes a step-change in the frequency of such events - but it was not clear where those thresholds might lie.

At times in the past climate change has been seen to have links with enhanced levels of potentially hazardous geological activity - for example after the end of the last ice age.

But they have not been fully considered as potential impacts of the rapid changes in the climate expected in the future and there was a great deal of uncertainty about what might happen in coming years.

Prof McGuire called for a programme of research focusing on the potential geological hazards that global warming could bring, with the leading body on global warming, the Intergovernmental Panel on Climate Change (IPCC), addressing the issue directly in its future assessments.


3) Pennsylvania: School District Took 56,000 Secret Photographs
April 19, 2010

A suburban Philadelphia school district says it secretly captured 56,000 Webcam photographs and screen shots from laptops issued to high school students. Henry Hockheimer, a lawyer for the Lower Merion School District, said students were most likely photographed inside their homes. He said none of the images appear inappropriate. A tracking program took images every 15 minutes to find missing computers. A student is suing the district, alleging wiretap and privacy violations.


4) Goldman Tops Forecast, With $3.46 Billion in Earnings
"Going forward, Goldman should profit from fast-paced growth in overseas markets, Mr. Shahrawat said, but it also may face new pressures like financial regulation and questions about its reputation."
April 20, 2010

Beset by accusations of securities fraud, Goldman Sachs nevertheless showed Tuesday that it was still very good at what it does best: making money.

Earnings for the Wall Street giant rose 91 percent in the first quarter of 2010, to $3.46 billion or $5.59 a share, up from $1.81 billion or $3.39 a share in the same period last year. Revenues increased 36 percent to $12.78 billion, up from $9.42 billion in the quarter a year ago.

Analysts surveyed by Bloomberg had expected revenue of $11.05 billion and earnings of $4.14 a share.

Dushyant Shahrawat, a senior research director for TowerGroup, said the results reflected the depths to which Goldman had fallen during the financial crisis. "Things had fallen off the cliff so badly that frankly the only way from there was up," he said.

Going forward, Goldman should profit from fast-paced growth in overseas markets, Mr. Shahrawat said, but it also may face new pressures like financial regulation and questions about its reputation.

"Unless the Dow goes to 14,000 anytime soon, the revenues are not going to blow the barn doors off," Mr. Shahrawat said.

In the first quarter, the bank's bond, commodities and currency trading once again bolstered the results.

In addition, Goldman said it had set aside 43 percent of revenue in the first quarter for employee salaries and bonuses, down from 50 percent for the period a year ago.

In a statement, the chief executive, Lloyd C. Blankfein said that the results reflected "more signs of growth across the economy and the strength of our client franchise."

Tuesday's quarterly results showed the dominance of the bank's trading operations. Profit in the trading division jumped 43 percent to $10.25 billion in the quarter. Fixed-income trading had revenue of $7.39 billion, a 13 percent increase. Equities trading earned $2.35 billion, an 18 percent increase from the quarter a year ago.

The strong results are likely to be overshadowed by the Securities and Exchange Commission's civil suit against the firm, filed on Friday, which accuses Goldman of not fully disclosing how the securities were selected, as well as Mr. Paulson's role in advising the selection agent, ACA Management, on the overall makeup of the securities package.

"We would never intentionally mislead anyone, certainly not our clients or counterparties," said Gregory K. Palm, Goldman's general counsel, who joined David A. Viniar, Goldman's chief financial officer, on the earnings call. "We certainly had no incentive to design a transaction that was designed to lose money."

In the earnings statement, Mr. Blankfein said, "In light of recent events involving the firm, we appreciate the support of our clients and shareholders, and the dedication and commitment of our people."

During the earnings call, Mr. Viniar said: "You can see from our results last quarter that our clients still support us. That's the key to our success and has been the key to our success for a very, very long time."

The S.E.C. suit has rocked Wall Street and sent Goldman shares reeling - they fell nearly 13 percent on Friday when the suit was disclosed - before recovering slightly Monday to close at $163.32.

The accusations from the S.E.C. have damaged the reputation of a firm that had come through the subprime debacle relatively unscathed, but which has been criticized more recently for its huge profits and bare-knuckle trading.

According to the S.E.C. suit, the hedge fund manager, John Paulson, helped select securities that had a high likelihood of defaulting, which were then bundled together and sold. The S.E.C. said the European banks ABN Amro and IKB lost more than $1 billion in the deal.

Goldman has denied any wrongdoing. In a statement Friday, Goldman called the commission's accusations "completely unfounded in law and fact" and said it would "vigorously contest them and defend the firm and its reputation."

With its results, Goldman became the fourth major bank to report this quarter, all benefiting from hefty trading profits. JPMorgan reported a profit of $3.3 billion, Bank of America earned $3.2 billion and Citigroup $4.4 billion. Morgan Stanley reports results on Wednesday.

In addition, Goldman's directors declared a dividend of 35 cents a common share.

Javier C. Hernandez contributed reporting.


5) Benefit for Uninsured May Still Pose Hurdle
April 19, 2010

William Mann of Pittsburgh earns just enough to get by. He is 46, doesn't own a car, hasn't taken a vacation in three years and hasn't had health insurance for most of his adult life.

He is just the kind of person who should benefit from the health care overhaul, and he is, in fact, eligible for heavily subsidized insurance that will cost him an estimated $1,845 a year, while the government contributes about $2,756.

But Mr. Mann says he still can't afford it. He lives too close to the edge, and won't be buying insurance, even though he will face a fine under a provision called the individual mandate, which penalizes most Americans who don't buy coverage starting in 2014. The requirement is one of the most controversial aspects of the overhaul.

"I just can't put that kind of money out for a 'maybe' - maybe I'll get sick and use it," said Mr. Mann, who makes just over $25,000 a year as an administrative assistant at a small wine distribution company. "That's a lot of money."

"The people who make all these decisions don't live like the way I do," Mr. Mann added, echoing other uninsured people in his income group. "They don't live like the rest of us."

Legal questions about the individual mandate aside, the choices made by people like Mr. Mann are crucial. One reason the individual mandate was created was to attract as many healthy people as possible to the individual market to offset the demands of the many sick people who will be buying in, and who have medical needs that drive up costs.

Yet no one really knows which way the Mr. Manns of the nation, people struggling in a tough economy, will go.

"Given the choice, a lot of people are going to purchase coverage rather than pay the penalty - they simply want the security of having health insurance," said Jennifer Tolbert, principal policy analyst at the Kaiser Commission on Medicaid and the Uninsured, an initiative of the Kaiser Family Foundation (not associated with Kaiser Permanente, the health insurance company). She said that had been the experience in Massachusetts under a similar initiative. But she added, "The key is to make coverage affordable."

According to the Congressional Budget Office, some 32 million more Americans will have insurance by 2019 under the new law, about half of whom will be buying health insurance on the individual market for the first time (the other half will be covered for the first time under Medicaid, which is being expanded to include more of the poor).

But Edmund F. Haislmaier, senior research fellow of health policy studies at the Heritage Foundation, a conservative research group, said he was skeptical that so many uninsured people would actually start buying insurance. "We're premising all this on the idea that we'll cross-subsidize older, sicker people with a lot of young healthy people, whom we assume will buy the coverage," he said. "But what if they don't?"

Many of the uninsured in America are in the same economic boat as Mr. Mann. Some 60 percent of the uninsured earn less than 200 percent of the federal poverty level ($21,660 for a single person and $44,100 for a family of four), according to Sara R. Collins, of the Commonwealth Fund, a health care research group. As earnings increase, people are more likely to be insured, experts say.

A recent study by the fund said that about one-third of people who tried to buy health insurance on their own were turned down or charged more because of a medical condition. But three-quarters walked away for other reasons, and most cited price; 60 percent said it was either "difficult" or "impossible" to find an affordable plan, said Ms. Collins, vice president for the fund's Affordable Health Insurance Program.

Jacqui Brownstein, 63, a freelance copy editor and proofreader, said she moved to Lancaster, Pa., from New Jersey in 2004 primarily because health insurance was more affordable there. But she can't afford it anymore; the last time she bought insurance, she paid $4,300 a year, but the rate quoted last year was $5,700. "There was no way I could afford it, so I dropped it," said Ms. Brownstein, a smoker who has Type 2 diabetes and a family history of ovarian cancer.

Premium subsidies, which will be available to people who buy insurance through the exchanges being established, are supposed to address that problem, experts say. A 40-year-old in a medium-cost geographic area who earns $21,660 (200 percent of the federal poverty level) and whose annual premium is $3,500, for example, would receive a subsidy of $2,135 that goes directly to the insurer, while he or she pays $1,365. A family of four with an income of $44,100 would pay $2,778 while the government subsidizes the plan to the tune of $6,656.

The proportion of income people at this level have to pay for insurance is capped at no more than 6.3 percent of their earnings.

As income increases, the subsidy drops; families earning 300 to 400 percent of the federal poverty level are expected to pay up to 9.5 percent of their income, an amount that ranges from $6,284 to $8,379 per year; the federal subsidy is from $3,150 to $1,056. At the same time, however, a provision states that anyone who cannot find a premium that costs less than 8 percent of their income is exempted from the penalty.

It's hard to predict whether the carrots and sticks of subsidies and penalties will suffice to bring people into the system, when there are so many are unemployed or underemployed people, many earning less in today's economy than before and worried about job security and prospects.

From a pure dollars-and-cents point of view, it is cheaper for people just to pay the penalty. Even when fully implemented in 2016, the penalty is limited to no more than 2.5 percent of taxable income, and it starts out even lower, with a penalty of $95 or 1 percent of income in 2014.

"It's hard to analyze because people are making health decisions based on their wallets," said Sara Horowitz, who founded the Freelancers Union, a nonprofit organization that offers health insurance to freelancers.


6) Health insurers make big bucks from Big Macs
By Katherine Harmon
April 15, 2010

Like most businesses, health and life insurance companies are out to make a buck, and one way they augment their income is by investing in other industries.

But a new study has found that $1.88 billion from this industry is backing the top five publicly traded fast food chains. Excessive consumption of this sort of food has been repeatedly linked to a host of health problems, including obesity and diabetes.

"Life and health insurance firms profess to support health and wellness, but their choice of financial investments has raised doubts," wrote Arun Mohan and his coauthors, all at the Department of Medicine at Cambridge Health Alliance and Harvard Medical School, in an article published online April 15 in the American Journal of Public Health.

The largest burger backer was Northwestern Mutual, which had invested $422.2 million in publicly traded fast food corporations, including $318.1 million in McDonald's, according to Mohan's research.

It's already common knowledge that the insurance industry has made even bigger investments in tobacco (handing over almost $4.5 billion, according to a 2009 study), but evidence is mounting that obesity and other dietary diseases are becoming as much of a burden on health-both individual and national-than smoking. People who live near fast food restaurants are more likely to have a stroke than residents living farther away, according to another 2009 study. And high-fat foods have been shown to be rather addictive, at least in animal models.

The researchers conceded that "fast food can be consumed responsibly," but Mohan and his colleagues asserted that "the marketing and sale of products by fast food companies is done in a manner that undermines the public's health."

Although most companies-and many individuals-hand their investment portfolios over to financial firms (or separate company departments) to manage, the authors argued that, "insurers ought to be held to a higher standard of corporate responsibility."

"Our data illustrate the extent to which the insurance industry seeks to turn a profit above all else," Wesley Body, senior author of the study, said in a prepared statement. "Safeguarding people's health and well-being take a back seat to making money."


7) Health and Life Insurance Companies Invest $2 Billion in Burgers, Tacos and Pizzas
Harvard study critical of insurers holding stock in major fast-food chains
By Candy Sagon
Source: AARP Bulletin
April 15, 2010

The fast-food industry is regularly criticized for contributing to Americans' obesity and other health problems, yet a new study shows that major health and life insurance companies have invested nearly $2 billion in McDonald's and other popular fast-food chains.

Researchers at the Cambridge Health Alliance and Harvard Medical School looked at the stock holdings of major health and life insurers in five leading fast-food companies. The results, published online today in the American Journal of Public Health, found that insurance firms have invested $1.9 billion in stock of companies like Jack in the Box, Burger King and Yum! Brands, owner of Pizza Hut and Taco Bell, among others.

The researchers used shareholder data from the Icarus database, which draws on Securities and Exchange Commission filings and other information.

The $1.9 billion represents only about 2 percent of the total value of fast-food company stock, but the researchers argue that insurers "ought to be held to a higher standard of corporate responsibility." They call for insurance companies to divest themselves of holdings in fast-food firms because of the firms' negative impact on public health.

"Life and health insurance firms profess to support health and wellness, but their choice of financial investments has raised doubts," the researchers write.

At least one insurer, however, rejected the study's findings. A spokesman for Massachusetts Mutual Life Insurance, which the study said had invested more than $366 million in fast-food stock, said in an e-mail that the figures were "absolutely incorrect."

Spokesman Mark Cybulski wrote that, as of Dec. 31, 2009, MassMutual's fast-food-related holdings were approximately "$1.4 million, representing less than one-hundredth of one percent of cash and total invested assets of $86.6 billion."

A spokesman for Prudential Financial, which the study also cited as a substantial investor in fast food, declined to discuss specific investments. However, Theresa Miller, Prudential's vice president for global communications, added in an e-mail that the company has a responsibility to its clients to seek "strong investment performance ... while managing risk and investing responsibly."

Senior author J. Wesley Boyd, M.D., an assistant professor of psychiatry at Harvard Medical School, contends insurers are more concerned with making a profit than in helping people stay healthy.

"Based on their investments, these companies are showing themselves to be amoral. They're just about making money, and they will make money off bad habits even if those habits are making you sick or killing you," he says.

But Mark Pauly, a professor of health care management at the Wharton School at the University of Pennsylvania, thinks trying to pressure insurers to divest their fast-food holdings is a bit naive.

"It may be a nice gesture for insurers to say they're not investing in evil things anymore," he says, "but it's hard to imagine that it would have a substantial impact."

A better idea, he says, "would be for the insurance companies to invest a lot more in fast food, then go to the company's annual meeting and get them to change their policies."


8) One-third of Americans say own government a threat: Poll
By Agence France-Presse
Monday, April 19th, 2010 -- 12:53 pm

Nearly one out of three Americans view the US government as a "major threat" to their freedoms, and four out of five say they don't trust Washington to solve their problems, according to a new poll out Monday.

Just 19 percent say they are "basically content" with the federal government, against 56 percent who say they are "frustrated" and 21 percent who describe themselves as "angry," the Pew Research Center survey found.

Only 22 percent say they trust Washington to do what is right4 almost always or most of the time, according to the survey, which had an error margin of plus or minus four percentage points.

The first time Pew asked the question, in 1958, 73 percent of Americans said they trusted the government. In mid-1994, just 17 percent said the same.

The US public has historically expressed distrust in Washington, but a sour economy, epic frustration with the US Congress, and an increasingly polarized electorate have fanned the flames, Pew said.

The findings could spell trouble for President Barack Obama's Democrats in November mid-term elections, with 53 percent saying the federal government needs "very major reform," though Republicans do not get high marks either.

When Obama took office in January 2009, 62 percent of Americans said they viewed Democrats favorably, against just 40 percent for Republicans -- and the president's party now only has a 38 percent-37 percent edge over his critics.

Just 25 percent said they had a favorable view of the Congress, just half of what it was one year ago and the lowest in a quarter century of Pew surveys.

But while 58 percent say the government has gone too far in regulating the economy, 61 percent say they want tougher government rules for Wall Street -- a boon to Obama and Democrats who have made that their top domestic goal now that the president has signed his historic health care overhaul into law.


9) NATO Apologizes for Killing 4 Unarmed Afghans
April 21, 2010

KABUL, Afghanistan - NATO apologized Wednesday for shooting to death four unarmed Afghan civilians earlier this week in Khost Province and acknowledged that it had wrongly described two of the victims as "known insurgents."

The shootings on Monday evening marked the latest occasion in which Afghan civilians have been killed by military convoys, at NATO or United States checkpoints, or in bungled Special Operations raids. The spate of civilian deaths have infuriated

Afghan leaders and undermined the West's war plan just as it is about to enter its most crucial phase - a planned summer offensive in Kandahar.

NATO military officials said on Wednesday that they were rushing to deploy training teams across Afghanistan so troops "implement critical lessons learned from previous incidents."

But in some parts of the country American and NATO convoys are already considered by Afghans to be as dangerous a threat as Taliban checkpoints and roadside bombs, raising questions about whether the damage can be reversed to any real degree.

"People hate the international forces," said Bakhtialy, a tribal elder in Kandahar who, like many Afghans, goes by one name. "Their presence at the moment is too risky for ordinary people. They are killing people, and they don't let people travel on the road."

In the shooting on Monday, a NATO convoy opened fire on a Toyota carrying four men returning home about 6 p.m. in a rural district near the border with Pakistan. Local Afghan officials said the four men were civilians, and said they included a police officer and a 12-year-old boy.

In the military's account of the shooting, the vehicle accelerated toward the convoy and ignored warning shots, posing a threat to the troops. After the fact, the military initially said, troops used "biometric data" such as fingerprints to identify two of the dead men as "known insurgents."

But on Wednesday the United States-led NATO military command in Kabul apologized for "this tragic loss of life" and said the biometric data "has not yet been determined to be relevant" to the killings.

Maj. Gen. Mike Regner, a NATO official, said that commanders "at all levels are increasing efforts to protect the Afghan people affected by our operations."

The military said that NATO and Afghan investigators were continuing to review the shooting and that a "formal, more thorough joint investigation may also be conducted."

Taimoor Shah contributed reporting from Kandahar.


10) Transit Cuts Are Protested in Atlanta
April 20, 2010

ATLANTA - When Danielle White boarded her bus to go to work on Tuesday morning, it was emblazoned from top to bottom with a giant, painted red X. Ms. White knew what that meant.

"This is one of the buses that's getting cut," said Ms. White, a security guard at the Georgia Aquarium. "I'm going to have to figure out how to get there."

On Monday night, workers and officials at the Metropolitan Atlanta Rapid Transit Authority volunteered to paint the X's on a third of the system's buses and trains to symbolize the 30 percent cut in service the agency is facing because of a decline in sales tax revenue and a Republican-dominated Statehouse that has been slow to help.

On Tuesday morning, with a parade of X'd-out buses stopping on the street behind them, more than 200 public transit workers and riders gathered at the system's main hub, Five Points. They were kicking off a week of rallies, telephone campaigns and other events in 11 cities across the country coordinated by the Transportation Equity Network, an advocacy group based in St. Louis, to protest transportation cuts and fare increases.

"We are just crawling out of a recession," said Sam Massell, a former mayor of Atlanta, "but we will be knocked back into another one if the salespersons are not behind the store counters, if the restaurant workers are not in the kitchens, if the office staff are not behind their desks."

About 46 percent of the more than 100,000 people who use Marta to get to work each day say they do not have access to other forms of transportation.

More than 80 percent of the nation's transit systems are considering or have recently enacted fare increases or service cuts, including those in Kansas City, Mo., Los Angeles, New York and Washington, D.C., according to a survey released this month by the American Public Transportation Association.

But Marta, the ninth-largest system in the country, faces a particular difficulty because it is the only major system that does not receive any dedicated money from the state. Instead, it depends on fares and a one-cent sales tax in only two of metro Atlanta's 28 counties, Fulton and DeKalb. While Atlanta chokes on traffic, Georgia ranks 49th in per capita government spending on transportation, according to a report commissioned by Gov. Sonny Perdue.

The agency has requested one significant change in its spending rules that would not require any new state money: a release from a requirement that half of Marta's sales tax revenues be set aside for capital projects. Though the agency ranks very high in efficiency measures, lawmakers seem to think its distress was caused by more than the recession.

"I've been trying to understand how Marta got in the problem they're in," the speaker of the State House, David Ralston, said in an interview with WABE radio this month. "I think that we have to have a better understanding of what brought us to this point before we know how to get out of the problem."

This is the second year that Marta, which faces a $120 million shortfall in its $400 million operating budget, has been in severe financial straits. Last year, the agency raised fares to $2 from $1.75, decreased services, cut health care benefits to employees and required furloughs. This year, in addition to the 30 percent cut in service, it may have to increase fares again and lay off as many as 1,500 of its 5,000 employees, said Beverly A. Scott, the agency's chief executive.


11) Ex-Adviser to Obama Now Lawyer for Goldman
April 20, 2010

WASHINGTON - Word that President Obama's former White House counsel, Gregory Craig, is now representing Goldman Sachs led the administration on Tuesday to say that it had no advance knowledge of the move and to distance itself from any suggestion that Mr. Craig might try to lobby the government on behalf of the investment firm.

The White House seemed sensitive to the revolving-door quality of a top Obama adviser now representing a financial giant that has been accused of wrongdoing, especially at a moment when the president is lobbying for legislation to tighten regulation of Wall Street firms.

Asked about Mr. Craig's new job, Bill Burton, a White House spokesman, recited the president's ethics policy barring former White House officials from lobbying for two years after leaving office. "I assume that people who leave the administration know those rules and are following those rules," Mr. Burton said.

But the policy applies only to lobbying as defined under federal law and does not restrict former officials from providing advice to clients with business or other interactions with the federal government.

"I am a lawyer, not a lobbyist," Mr. Craig said Tuesday. "Goldman Sachs has hired me as a lawyer - to provide legal advice and to assist in its legal representation - and that is what I am doing."

Mr. Craig, one of Washington's most prominent lawyers, was a top adviser to Mr. Obama during his campaign and went on to serve as White House counsel, but left after a year of tension over issues like closing the prison at Guantanámo Bay, Cuba.

He went to Skadden, Arps, Slate, Meagher & Flom, which has long represented Goldman, and the financial firm engaged him to advise it on litigation strategy before the Securities and Exchange Commission filed its civil suit last week.


12) Districts Warn of Deeper Teacher Cuts
April 20, 2010

School districts around the country, forced to resort to drastic money-saving measures, are warning hundreds of thousands of teachers that their jobs may be eliminated in June.

The districts have no choice, they say, because their usual sources of revenue - state money and local property taxes - have been hit hard by the recession. In addition, federal stimulus money earmarked for education has been mostly used up this year.

As a result, the 2010-11 school term is shaping up as one of the most austere in the last half century. In addition to teacher layoffs, districts are planning to close schools, cut programs, enlarge classes and shorten the school day, week or year to save money.

"We are doing things and considering options I never thought I'd have to consider," said Peter C. Gorman, superintendent of the Charlotte-Mecklenburg schools in North Carolina, who expects to cut 600 of the district's 9,400 teachers this year, after laying off 120 last year. "This may be our new economic reality."

Districts in California have given pink slips to 22,000 teachers. Illinois authorities are predicting 17,000 job cuts in the public schools. And New York has warned nearly 15,000 teachers that their jobs could disappear in June.

Secretary of Education Arne Duncan estimated that state budget cuts imperiled 100,000 to 300,000 public school jobs. In an interview on Monday, he said the nation was flirting with "education catastrophe," and urged Congress to approve additional stimulus funds to save school jobs.

"We absolutely see this as an emergency," Mr. Duncan said.

Everywhere, school officials tend to overestimate the potential for layoffs at this time of year, to ensure that every employee they might have to dismiss receives the required notifications.

Whether the current estimates rise or fall will depend in part on labor negotiations under way in hundreds of districts, and on how taxpayers vote on school levy proposals in many states and towns. But those adjustments will affect the likely layoff numbers only at the margins.

Some of the deepest cuts are in Los Angeles, where Superintendent Ramon C. Cortines sent notices to 5,200 of the district's 80,000 employees last month, telling them that they were losing their jobs.

"I've been superintendent in five major school districts, and had responsibility for cuts for years - but not this magnitude, not this devastating," Mr. Cortines said.

And there is no end in sight, he said. He cut his district's $12 billion budget this school year by $1 billion, has prepared $600 million in cuts for the term beginning in the fall and is looking ahead to a deficit for the following year of $263 million.

"I don't see this being over in the year 2014-15," Mr. Cortines added.

In the economic stimulus bill passed in February 2009, Congress appropriated about $100 billion in emergency education financing. States spent much of that in the current fiscal year, saving more than 342,000 school jobs, about 5.5 percent of all the positions in the nation's 15,000 school systems, according to a study by the Center on Reinventing Public Education at the University of Washington.

States will spend about $36 billion of the stimulus money in the next fiscal year, leaving their budgets short by some $144 billion, according to the Center on Budget and Policy Priorities, a liberal-leaning research group.

About a quarter of all state spending goes to public schools, said Jon Shure, a state fiscal expert at the center, so without new aid, the continuing job losses will add to the nation's employment woes.

Warning of an educational emergency, Senator Tom Harkin, Democrat of Iowa, proposed a $23 billion school bailout bill last Wednesday that would essentially provide more education stimulus financing to stave off the looming wave of school layoffs.

"This is not something we can fix in August," said Mr. Harkin, chairman of the Senate education committee. "We have to fix it now."

Michael J. Petrilli, who served in the Education Department under President George W. Bush, predicted that the bill could attract significant support. But even if it is approved, Mr. Petrilli said, it would leave an underlying problem unresolved.

"Is the federal government going to try to prop up states and districts forever?" he said. "If not, we're just kicking the can down the road. Eventually, districts need to learn to live with less."

Senior Democratic aides said that because Mr. Harkin's bill would add to the deficit, it was unlikely to pass.

A survey by the American Association of School Administrators found that 9 of 10 superintendents expected to lay off school workers for the fall, up from two of three superintendents last year. The survey also found that the percentage considering a four-day school week had jumped to 13 percent, from 2 percent a year ago.

One of those districts is Atwater-Cosmos-Grove City in Minnesota, which has asked the state to let it shorten the school week. The district's business manager, Dan Tait, called the measure "another tool in the toolbox" for reducing costs.

"We're a district that's spread across 340 square miles, so we spend an inordinate amount of money on transportation for our 812 students," Mr. Tait said.

The current round of cuts is particularly wrenching, superintendents said, because their financing was already cut to the bone last year. For example, Barbara Thompson, superintendent of the Montgomery public schools in Alabama, said the state used to give her district $975 per student for supplies, technology and library costs.

"They cut it to zero," Ms. Thompson said. "So they can't cut it any more."

Not all school systems are in trouble. State mineral revenues, for instance, have largely spared Montana, North Dakota and Wyoming from serious belt-tightening.

But they are the exceptions. In early April, the Flagstaff, Ariz., school district's preliminary list of people who might not have jobs next year included almost a third of its 1,500 employees - every art, music and physical education teacher, every counselor and librarian, every teacher with three or fewer years in the district, and all temporary hires.

By the time reduction-in-force notices went out April 15, though, the number was trimmed to 223 teachers and 47 administrators. And if Arizona voters approve a 1-cent sales tax next month, the cuts will be much less drastic.

In the U-46 district in Elgin, Ill., José M. Torres, the superintendent, said he also had to contend with a budgeting roller coaster this spring. At this point, the only uncertainty is whether the district's 53 schools in Chicago's western suburbs will feel "high pain or low pain," Mr. Torres said.

Seeking to cut at least $44 million from the district's $400 million budget, Mr. Torres has eliminated early childhood classes for 100 children, cut middle school football, increased high school class sizes from 24 to 30 students, drained swimming pools to save chlorine, and dismissed 1,000 employees, including 700 teachers.

"This stuff really hurts," Mr. Torres said. And what is worse, he said, "I think next year will be tougher than this year."

David M. Herszenhorn contributed reporting.


13) Challenging China in Rare Earth Mining
April 21, 2010

On a high plateau wandered by burros and jack rabbits an hour's drive southwest of Las Vegas, a chasm hewn from volcanic rock sits at the center of an international policy debate.

The chasm, in Mountain Pass, California - 400 feet, or 120 meters, deep - used to be the world's main mine for rare-earth elements, minerals crucial to military hardware and the latest wind turbines and hybrid gasoline-electric cars. Molycorp Minerals, which owns the mine, announced Monday that it had registered with the U.S. Securities and Exchange Commission for an initial public offering to help raise the nearly $500 million needed to reopen and expand the mine.

Molycorp is making a big bet that its mine, now a rusting relic, can be made competitive again. Global demand is surging for the minerals. And customers, particularly the U.S. military, are seeking alternatives to China, which now mines 97 percent of the world's rare-earth elements.

As part of reopening the mine, Molycorp plans to increase its capacity to mine and refine neodymium for rare-earth magnets, which are extremely lightweight and are used in many high-technology applications. It would also resume bulk production of lower-value rare-earth elements like cerium, used in industrial processes like polishing glass and water filtration.

But Molycorp, like other foundation stones of U.S. industrial pre-eminence that have cracked or eroded under the pressure of foreign competition, faces challenges that may prevent its bet from paying off.

Even riskier are efforts by nearly six dozen other companies in the United States, Canada, South Africa and elsewhere to open new rare-earth mines.

Worldwide sales of freshly mined rare-earth oxides, although growing more than 10 percent a year, are still worth only about $1.4 billion a year, limiting the potential sales from new mines. Molycorp and the other companies face a challenge in matching China's low costs, a result of low wages and China's willingness to tolerate heavy environmental damage from such mines, which have turned nearby areas into moonscapes.

Very low prices for rare-earth elements from China contributed to cutbacks at the Mountain Pass mine before it closed in 2002. They also discouraged most entrants to the industry until the past two years, when prices began to climb because of strong demand.

According to the Metal Pages database, cerium prices more than doubled to $4 a pound, or $8.80 a kilogram, in 2007 and have barely fallen since. Neodymium prices quintupled at the same time to $23 a pound and slumped before almost fully recovering over the past winter.

"The pricing of the rare-earths doesn't make sense - they've been way too low for way too long," said John Benfield, the senior chemical engineer at the Mountain Pass mine. As he spoke, he watched pumps removing from the bottom of the open-pit mine a deep pond of accumulated rainwater and seepage, dyed violent green by mineral contamination.

Molycorp's plan for an initial public offering on the New York Stock Exchange coincides with a flurry of interest in Washington on whether the United States should reduce its dependence on China for rare-earth elements.

A U.S. Government Accountability Office report, released last week, concluded that American military systems, including army tank navigation systems and navy radars, rely on rare-earth elements from China. The report made no recommendations on what policy makers should do, noting that the U.S. Defense Department planned to finish its own review by the end of September.

Representative Ike Skelton, the Missouri Democrat who is the chairman of the House Armed Services Committee, announced on the same day the report was released that the committee would hold a hearing soon on the U.S. military's dependence on imported rare-earth elements.

And a bill introduced in March in the House by Representative Mike Coffman, Republican of Colorado, calls for the creation of a national security stockpile and for government loan guarantees for companies that want to mine and process rare-earth elements in the United States. Similar legislation is being drafted in the Senate.

China raised concerns by reducing its export quotas for raw rare-earth elements from 2005 through 2009. A year ago, the Chinese government caused further alarm for Western corporations and governments by proposing a ban on the export of 5 of the 17 rare-earth elements, although no ban has actually been imposed.

China's actions have ignited frenzied investor interest, as pinstriped investment bankers pack conferences and newsletters tout shares in rare-earth mining companies.

But with the exception of Molycorp and Lynas, an Australian company, most of the companies lack environmental permits and mineral processing equipment, much less the experience to handle safely the radioactive thorium and uranium that almost always contaminate rare-earth ore.

With each start-up typically raising $10 million to $30 million and signing up one or two long-term customers, the ventures are fragmenting the market's search for reliable supply sources beyond China. A result could be that few mines actually open outside China, which would remain the dominant supplier.

"The customers and the industry are not being discerning enough, and we're going to end up with 70 rare-earth companies employing geologists and rare-earth directors and no more than five new mines by 2020," predicted Dudley J. Kingsnorth, the best-known consultant in the industry and an adviser to some of the start-ups.

The Kaiser Bottom-Fish Online index of share prices of rare-earth companies soared eightfold last year and has kept most of its gains. That has encouraged worries about a possible bubble.

"Most of them will get nice share prices for a while, and then what goes up, comes down," said Judith Chegwidden, a managing director and longtime rare-earth specialist at Roskill Consulting Group in London.

Canadian and Australian producers like the idea that the U.S. government might buy rare-earth elements for a stockpile, supporting prices. But they hate the prospect that Congress might use government-backed loan guarantees to help American producers.

Nicholas Curtis, the executive chairman of Lynas, which is based in Sydney, said that Australia should be considered as reliable a supplier as if it were the 51st state of the United States.

Meanwhile, Molycorp hopes to turn the various business, geological and political forces to its advantage. The company's Mountain Pass mine, discovered in 1949 by uranium prospectors who noticed local radioactivity, dominated rare-earth element production through the 1980s. Europium from the mine made the world's color televisions possible.

But a reporter who recently visited the mine site noted that everything, including the processing equipment and the buildings' door frames, was rusty. Molycorp plans to replace most of the gear by raising as much as $350 million through the sale of a minority stake in an initial public offering and borrowing the rest, using government-backed loans if they are available.

The Mountain Pass mine shut down in 2002, even as researchers elsewhere were perfecting a welter of green energy applications for rare-earth elements. It closed because China's production costs were lower, because a mine pipeline leaked faintly radioactive water in a nearby desert and because state regulators temporarily delayed renewal of its operating permit.

China increased production in the 1980s, initially hiring American advisers who had worked at Mountain Pass. Cnooc, a government-controlled Chinese oil company, tried to buy the mine in 2005 as part of Unocal, which owned Molycorp then. But Congress effectively blocked the Unocal transaction.

Mark A. Smith, the longtime chief executive of Molycorp, said that after Chevron bought Unocal, Chinese companies were rebuffed in two attempts to buy the mine from Chevron. A group of private equity firms and Mr. Smith bought Molycorp from Chevron in 2008. Goldman Sachs was one of the investors, but it sold its stake to the others last month.

Molycorp hopes to improve safety and environmental protection at the Mountain Pass mine while using new technologies to drive operating costs below the level of those for Chinese mines. The Mountain Pass mine plans to recycle more of the costly acid used in ore processing; use a separate recycling system to reduce the need for fresh water to 30 gallons, or 114 liters, a minute from 850; and install a natural gas power plant to reduce its need to buy costlier, less reliable electricity from distant cities.

At the same time, Chinese costs may be about to rise if the Chinese government follows through on recent pledges to start requiring the rare-earth industry to reduce pollution.

Whatever efficiencies Molycorp achieves, many specialists say that an American national renaissance in rare-earth elements may be a long time coming. The Government Accountability Office said that even if the Mountain Pass mine reopened, the United States had already lost much of its technical capacity to use rare-earth elements in manufacturing.

Molycorp has trimmed its staff of industrial chemists to six, from 30 before the mine closed eight years ago. Chinese rare-earth institutes in Beijing and Baotou have hundreds of researchers.

"They have more employees in rare-earth research," Mr. Field said, "than we'll ever have."


14) Student Suspended after Finger Gun Incident
Sunday, April 18, 2010
Eyewitness News

HOUSTON (KTRK) -- A 13-year-old girl was suspended from school after she was accused of threatening her teacher. Her family says it's a misunderstanding under a zero tolerance policy.

Bleyl Middle School student Taylor Trostle and her parents say it's a classroom game that got her kicked out of school, and now has her labeled as a "terrorist."

"I was shocked because it just seems ludicrous and appalling," Bleyl Middle School student Taylor Trostle's mother, Kristin Trostle, said.

When Kristin Trostle and her fiancee got a phone call from the principal's office at her daughter's school, they knew something was wrong. But the story they got blew them away.

"I mean, terroristic threat, to me that's a serious statement," Kristin Trostle said. "That's one of the most serious things you could say to somebody."

Taylor was wearing an NYPD shirt at school. She says in the last moments of math class, she and some friends were pretending to be police officers.

"I was shooting the markers at the front of the board," Taylor Trostle said. "It was just like this and I was like 'pow pow' and then she just turned around."

Taylor was sent to the principal's office and immediately suspended for three days. Her write up says the finger gun was pointed in the teacher's direction.

"That was considered a terroristic threat because the teacher feared for her life," Kristin Trostle said.

According to Cy-Fair ISD's code of conduct, a terroristic threat is a level four violation, which is on par with assault, public lewdness, or selling alcohol or drugs at school. Any threat to a teacher falls under a 'zero tolerance policy.'

"Now she's got a very serious mark on her record and she's labeled," Kristin Trostle said.

Cy-Fair ISD denied our repeated requests for comment, so did Taylor Trostle's 7th grade math teacher. Now- Taylor Trostle says she's being mocked at school, for a silly game that got her kicked out.

"They all say that I'm gonna kill somebody, and...they know that I wouldn't do that," she said.

Her mother wants the school district to take a hard look at policies because she believes can tarnish the reputation of an honor roll student like Taylor.

"Really and truly make an honest decision -- is this a legitimate threat, do i really feel threatened by what this child just said?" Kristin Trostle said.


15) Coal Disaster Company Massey Energy Denied Time off for Miners to Attend Their Friends' Funerals
By Brad Johnson
April 22, 2010

This post originally appeared on Think Progress.

Coal baron Don Blankenship's Massey Energy has prevented miners from attending funerals of the 29 victims of the killer explosion at Massey's Upper Big Branch mine in Montcoal, WV. Massey has taken steps to keep up the mining in the grief-stricken community. The "threat of job loss" from Massey's non-union mines, "be it spoken or simply understood - has created a culture of fear in some corners of Southern West Virginia, where coal is the only real industry, and Massey is king of the hill":

Massey Energy, the Virginia-based coal giant that runs the Upper Big Branch Mine, has denied time off for miners to attend their friends' funerals; has rejected makeshift memorials outside the mine site; and, in at least one case, required a worker to go on shift even though the fate of a relative - one of the victims of the April 5 disaster - remained unknown at the time, according to some family members and other sources familiar with those episodes. In short, the company might be taking heat for putting profits and efficiency above its workers, but it doesn't appear to have changed its tune in the wake of the worst mining tragedy in 40 years.

"They told my husband, 'You've got a job to do and you're gonna do it,'" the wife of one Massey miner told the Washington Independent's Mike Lillis, referring to the funerals he's missed this month for friends who died in the blast. "What else are we gonna do?"


16) BART fires second officer involved with shooting of Grant
By Reginald James
April 22, 2010

The BART police officer accused of punching Oscar Grant in the face and calling him a racial epithet moments before his death on New Year's Day 2009 was fired Thursday.

Officer Tony Pirone, who called Grant a "bitch ass nigger," was also seen in a video attacking Grant. Pirone was the officer kneeling on Grant's back when then-BART police officer Johannes Mehserle shot Grant in the back. Grant later died.

Mehserle was charged with murder and had his trial moved to Los Angeles [3]. The trial is scheduled to begin in June.

Daschel Butler, interim BART police chief, made the decision to fire Pirone Thursday. Last week, Butler announced a temporary ban on the BART police force's use of Tasers [4].

Pirone is the second BART police officer to be fired in connection with the shooting of Grant. Last month, Pirone's partner, Marysol Domenici, was also fired [5]. They were the first to arrive on the scene at the Fruitvale BART station on New Year's Day 2009 when Grant was killed.

Pirone is responsible for "setting up and escalating the situation that Johannes Mehserle walked into just minutes before he shot Oscar Grant in the back" in the words of Dave Id of [6]. Id added that he is also the "officer who pulled one of Oscar Grant's friends to the ground by his hair - a 'hair pull takedown,' as Pirone bragged in court."

Looking forward to Mehserle's trial, Id observes that now that Pirone has been fired, he "will no longer be able to testify as a police officer in good standing within his department."

On April 8, 200 protesters disrupted the evening commute at Embarcadero Station in San Francisco to demand the firing of Pirone [8], along with the disbanding of BART police. According to Dave Id, it was "the largest demonstration for justice for Oscar Grant in over a year [9]."

"We're not going to give up until Tony Pirone is fired," Hannibal Shakur, organizer with Oakland for Justice, had said that evening. "BART is not qualified to run a police force. They are accountable to no one. BART police must be disbanded. Actions will be escalated. We will continue to be peaceful and non-violent. We won't stop fighting until justice is truly served."

With the firing of Pirone, three of the officers involved with the death of Grant are no longer on the force. BART police officer Emery Knudtson, who was present at the April 8 demonstration - but was taunted until he left the platform - is still on the force. Pirone and Domenici were placed on paid administrative leave since last year's shooting. Some estimate the expense of keeping those officers on the payroll for 14 or more months to be upwards of $200,000.

BART reached a settlement with Grant's daughter for $1.5 million [11] in January. Due to accrued interest, the total is estimated to be larger.

Though Butler could not be reached for comment, a statement from the BART police chief has since been posted to [13] saying, "I have announced to my staff that Officer Tony Pirone is no longer employed by the District. Mr. Pirone's last day of employment was today."

In an email, BART chief spokesperson Linton Johnson wrote, "I can simply say that Mr. Pirone is no longer an employee with the District effective immediately."

It is expected that BART will name a permanent chief this week. Embattled former chief Gary Gee was allowed to retire without incident last year.

This story first appeared on [14]. Bay View staff contributed to this expanded version. Bay Area journalist Reginald James can be reached at [15].

URLs in this post:

[1] [Translate]: http://www.sfbayview.comjavascript:show_translate_popup(

[2] Image:

[3] charged with murder and had his trial moved to Los Angeles:

[4] temporary ban on the BART police force's use of Tasers:

[5] Marysol Domenici, was also fired:

[6] in the words of Dave Id of

[7] Image:

[8] 200 protesters disrupted the evening commute at Embarcadero Station in San Francisco to demand the firing of Pirone:

[9] the largest demonstration for justice for Oscar Grant in over a year:

[10] Image:

[11] BART reached a settlement with Grant's daughter for $1.5 million:

[12] Image:




[16] Image:

[17] Embarcadero BART protests keep spotlight on Justice for Oscar Grant movement:

[18] Students protest fee hikes: an interview wit' journalist Dave Id of Indy Bay Media:

[19] JR brings Justice for Oscar Grant Campaign to LA Saturday:

[20] Watching the murder trial of Mehserle: an interview with Cop Watch Oakland cofounder Rekia Mohammed Jabrin:

[21] Oscar Grant murder: Double standard of justice in Oakland:


17) Moyers: Six Banks Control 60% of Gross National Product -- Is the U.S. at the Mercy of an Unstoppable Oligarchy?
By Bill Moyers, Bill Moyers Journal
Posted on April 23, 2010, Printed on April 23, 2010

The following is a transcript taken from Bill Moyers' recent interview with Simon Johnson and James Kwak on Bill Moyers Journal.

So even if the Tea Party folks saw the light, what can ordinary Americans do?

That's the question I want to put to my guests, Simon Johnson and James Kwak. They have written this new book, 13 Bankers: The Wall St. Takeover and the Next Financial Meltdown. It's a must read - already a best seller -- and it couldn't have come at a better time. This book could change the debate over financial reform by tipping it in favor of the public.

Simon Johnson is a former chief economist at the International Monetary Fund. He now teaches at MIT's Sloan School of Management and is a Senior Fellow at the Peterson Institute for International Economics.

James Kwak is studying law at Yale Law School - a career he decided to pursue after working as a management consultant at McKinsey & Company and co-founding the successful software company, Guidewire. Together James Kwak and Simon Johnson run the indispensable economic website

Welcome to you both.

Let me get to the blunt conclusion you reach in your book. You say that two years after the devastating financial crisis of '08 our country is still at the mercy of an oligarchy that is bigger, more profitable, and more resistant to regulation than ever. Correct?

Simon Johnson: Absolutely correct, Bill. The big banks became stronger as a result of the bailout. That may seem extraordinary, but it's really true. They're turning that increased economic clout into more political power. And they're using that political power to go out and take the same sort of risks that got us into disaster in September 2008.

Bill Moyers: And your definition of oligarchy is?

Simon Johnson: Oligarchy is just- it's a very simple, straightforward idea from Aristotle. It's political power based on economic power. And it's the rise of the banks in economic terms, which we document at length, that it'd turn into political power. And they then feed that back into more deregulation, more opportunities to go out and take reckless risks and-- and capture huge amounts of money.

Bill Moyers: And you say that these this oligarchy consists of six megabanks. What are the six banks?

James Kwak: They are Goldman Sachs, Morgan Stanley, JPMorgan Chase, Citigroup, Bank of America, and Wells Fargo.

Bill Moyers: And you write that they control 60 percent of our gross national product?

James Kwak: They have assets equivalent to 60 percent of our gross national product. And to put this in perspective, in the mid-1990s, these six banks or their predecessors, since there have been a lot of mergers, had less than 20 percent. Their assets were less than 20 percent of the gross national product.

Bill Moyers: And what's the threat from an oligarchy of this size and scale?

Simon Johnson: They can distort the system, Bill. They can change the rules of the game to favor themselves. And unfortunately, the way it works in modern finance is when the rules favor you, you go out and you take a lot of risk. And you blow up from time to time, because it's not your problem. When it blows up, it's the taxpayer and it's the government that has to sort it out.

Bill Moyers: So, you're not kidding when you say it's an oligarchy?

James Kwak: Exactly. I think that in particular, we can see how the oligarchy has actually become more powerful in the last since the financial crisis. If we look at the way they've behaved in Washington. For example, they've been spending more than $1 million per day lobbying Congress and fighting financial reform. I think that's for some time, the financial sector got its way in Washington through the power of ideology, through the power of persuasion. And in the last year and a half, we've seen the gloves come off. They are fighting as hard as they can to stop reform.

Simon Johnson: I know people react a little negatively when you use this term for the United States. But it means political power derived from economic power. That's what we're looking at here. It's disproportionate, it's unfair, it is very unproductive, by the way. Undermines business in this society. And it's an oligarchy like we see in other countries.

Bill Moyers: And you say they continue to hold the global economy hostage?

James Kwak: Exactly. Because what's happened- what we learned in 2008 were certain institutions are so big and so interconnected that if they were to fail, they would cause systemic shocks throughout the economy. That's essentially what happened in September 2008 when Lehman Brothers collapsed. And what's remarkable, and I think what essentially proves the point of our book is that almost two years later, nothing has changed.

Or the only thing that has changed is that these banks have gotten larger, more powerful, both economically and politically. And they've been flexing their muscles in Washington for the last year and a half. So Neal Wolin, the Deputy Treasury Secretary gave a blistering speech to the U.S. Chamber of Commerce in which he said, look, the financial sector has been spending more than one million dollars per day lobbying against the reforms we need to fix the financial system. Now, Simon and I think those reforms that the Administration has proposed do not go far enough. But we think they're certainly better than nothing. What Wall Street wants is they want nothing. They want to stop this in its tracks and go back to where we were five years ago.

Simon Johnson: It's amazing, Bill. But this is this is politics and this is money. And you know, there's a ground game, which is campaign contributions, which are surging in. I'm sure on both sides of the aisle. And there's also the ideological space. It's amazing. The Chamber of Commerce that claims to represent the broad cross section of American business is siding with six big banks, who favor policies that are directly contrary to the interests of most of the membership of the Chamber of Commerce. And that's just not just me saying that. That's Neal Wolin. That's Treasury. That's the White House saying that now. Calling fortunately, they've come to the point where they're willing to call the Chamber of Commerce on that. But I don't know if that message is getting through to people.

James Kwak: You see what the bankers have done is they have taken a basic principle which is more or less true. Which is that free financial markets do enable money to go to the places where people need it. But on top of that, they've erected a system that is indescribably complex. And gives many opportunities to make money at the expense of their customers, at the expense of their counterparties. Even at the expense of their own employers. So, one of the things that has happened has been that Wall Street finance has become so complex and the internal systems of Wall Street banks has become so complex that if you are a smart banker, who is out to maximize your own income, you can find the loopholes in the system and you can exploit them, even if it means taking money from your own-- from your own company

Bill Moyers: You've been writing this week on your website-- about this hedge fund in Chicago that's made a lot of money. In effect, betting against the American Dream. What was that?

James Kwak: Magnetar is a hedge fund which means that other people gave them money to invest. And their job is to make as much money as possible. And these were the smart guys in the room. They saw that the system was broken. And they found a specific way to exploit it. And they knew that they could go for example, they could go to Wall Street banks and the banks would collaborate in making these extremely toxic securities. Because they knew what the bankers incentives were. They knew that the banker's incentives were to do the deal, to do the transaction, to get the fees up front. And they knew that there was nobody watching out for the investors. There was nobody watching out to make sure that securities they manufactured were actually good securities. But essentially what they were doing is they wanted to short the housing market. And they shorted the market in such a way that they actually made the problem worse, because what they did is they encouraged they tried to create these very toxic securities explicitly so that they could then short those securities. And that's why in a sense, they were they were shorting the American Dream. But what the real story of Magnetar, I think, is that they were exploiting a system that was deeply broken.

So, we like to think that the financial system we have in Wall Street are set up so that as people try to make lots of money they are they are indirectly helping the economy by making sure their capital goes where it's needed most. What the Magnetar story shows us that this is a casino, where you can make money you can make money exploiting the weaknesses in the casino. And it has nothing to do with the American Dream. It has nothing to do with making sure that capital goes to the places where it's needed most. I have to say that we owe a great to debt to "ProPublica" and "Planet Money" and "This American Life" for uncovering this story

Bill Moyers: Public radio's excellent program, "This American Life", did a terrific broadcast on this subject, based upon the ProPublica investigation that you talked about. And there's a song in it that I have to play for the two of you and for my audience. Take a listen.

UNIDENTIFIED MAN: Step one. You write a check for 10 million dollars. Hand the check to a Wall Street bank, and ask them to make us a CDO. Step two: they create the CDO, using risky stuff, very risky stuff, extremely risky stuff. Step three: other investors commit hundreds of millions of dollars to the CDO. Step four: we bet against the CDO, using a credit default swap. Step five: the housing market crashes. The CDO's value goes to zero, our bet pays off and we make hundreds of millions of dollars and before you can say step six, we're rich! We're going to bet against the American Dream, we're going to be on the winning team, purchase risky debt on a massive scale. Then place a bet that the debt will fail. Hundreds of millions for Magnetar, the economy collapsing like a dying star. No one will know till it's on NPR, and who cares? It's time to hit the town, this sucker could go down. The housing market's losing steam. And all we got to do to make our dreams come true is bet against the American Dream!

Bill Moyers: You're smiling, James, but is it really that funny?

James Kwak: Well for decades, we've been told that Wall Street and financial innovation were promoting the American Dream. And what they've I think what the show and the song have really hit the hit the nail on is that in fact, you can make even more money betting against the American Dream. And that's the kind of system we have today.

Simon Johnson: My bumper sticker from this and I hope it does become a bumper sticker is, "Trust me, I'm a banker."

I mean, you need to break through there's a level of progress here, Bill. Which is when people can laugh about it. When people can break it down into pieces. When you've got the 60-second version. And you can hammer that. And people understand it. Then you're starting to fight back. This is about ideology. This is about belief. This is about these guys are smart. These guys are well paid. So they must know what they're doing. And that's wrong.

Bill Moyers: You wrote on your website this week about how JPMorgan Chase lost $880 million on one of these kind of whacky obscure deals? But the executives still paid themselves millions of dollars in up front fees. And you conclude that bankers placed a ticking bomb on their own bank balance sheet. It exploded and personally they still made money.

James Kwak: Exactly. Because this is an example so, this is from the "ProPublica" investigation of Magnetar. essentially the bankers at JPMorgan Chase involved in the transaction created a new CDO. A new collateralized debt obligation. Which was very, very toxic. And either they knew at the time that it was toxic, or they should have known, I have no way of knowing. JPMorgan decided to hold onto most of this toxic product they-- they had built. A billion dollars worth of toxic product. And then when the market collapsed, it turned out they lost $880 million on that position.

So, if we think about it, there are really two possibilities here. The bankers involved in the transaction either really thought that this was a good product and a good investment, in which case they're incompetent. Or they had- they may have doubts, they may have thought it was toxic, but they knew that the way the internal systems at JPMorgan Chase worked, they could get the fees front, they could get bonuses based on those fees, and leave the bomb for later.

Bill Moyers: Somebody wrote on your blog this week, "If I were to buy an old house. Make some cosmetic improvements that mask an underlying rot. Got my insurance company to write an exorbitant homeowners policy exceeding any leans against the property. Then burned it down, wouldn't that be fraud?" Did you answer this guy?

James Kwak: I haven't. That would

Bill Moyers: Would you?

James Kwak: That would be fraud.

Bill Moyers: That would be fraud. So, explain to me how you manage to lose $880 million on your own company's money to make a quick buck for yourself and you get away with it?

James Kwak: Well, I think that there are laws in this area. So, for any securities, there has to be-- for this type of security, there has to be a document which explains those securities. And that's a document that you give to the investors who might buy them. And there are laws governing those. And if you put in facts in there that that are materially false. That you know to be true, that is fraud. But I think the problem is that in many of these cases, I don't think that many of these people are criminals. I get a lot of criticism for saying that I don't think these people are criminals. But I think it's relatively easy to write these documents in such a way that you're not saying anything you know to be false. And so, they pass through, they pass through any kind of you avoid any possible criminal liabilities there. But yet, they can be misleading in a way that encourages people to buy them.

Simon Johnson: I think it's actually worse in some instance, Bill. Certainly for offshore activities. Goldman Sachs was involved in hiding a lot of Greek government debt. They then sold new Greek government obligations to people in the United States as far as far as we understand it. And didn't reveal that they'd hidden the levels of the true levels of government debt. Now, that is withholding material information. That's a violation of rule 10B-5. and where is the legal process, you should ask, that holds them accountable for that? I've talked to lots of very good lawyers about this. And there are many complicated stories about why Goldman Sachs won't face any civil action or criminal action. There are huge loopholes in our legal system with regard to financial services that need to be closed.

Bill Moyers: There were some interesting hearings, as I know you saw, before the Financial Crisis Inquiry Commission. And some of the first, some of the most interesting testimony came from the former honchos at Citigroup. Mr. Prince and Mr. Rubin. Take a look.

CHARLES PRINCE: Let me start by saying I'm sorry. I'm sorry that our management team, starting with me, like so many others, could not see the unprecedented market collapse that lay before us.

ROBERT RUBIN: My role at Citi, defined at the outset, was to engage with clients across the bank's businesses, here and abroad. Having spent my career in positions with significant operational responsibility at Treasury and, prior to that, at Goldman Sachs, I no longer wanted such a role at this stage of my life, and my agreement with Citi provided that I would have no management of personnel or operations.

ROBERT RUBIN: But almost all of us, including me, who were involved in the financial system, missed the powerful combination of factors that led to this crisis and the serious possibility of a massive crisis. We all bear responsibility for not recognizing this, and I deeply regret that.

PHIL ANGELIDES: The two of you, in charge of this organization did not seem to have a grip on what was happening. I don't know that you can have it two ways. You were either were pulling the levers or asleep at the switch.

Bill Moyers: How can it be that a Robert Rubin, former Secretary of the Treasury, pulls down $100 million as a senior advisor to Citigroup and claims he doesn't know the risk that was involved in what he was trying to sell to clients and foreign officials? How can that be?

James Kwak: I think there are two things. There's a narrow and a broad view of this. The narrow view is I think Rubin is actually not lying. I think it is true that Rubin did not know what the risks were. Although he certainly should have known what the risks were. And that's because he was fully subscribed to this ideology that free markets are good. That the market will take care of itself. That, he also suffered from a lot of the blindness that corporate officers and directors have. Corporate officers and directors manage these enormous organizations with tens of hundreds of thousands of people. They have very little idea what's going on. They're getting their information from subordinates, who are giving them a filtered view of the world. On the other hand, when he says, no one could have foreseen this. This is what I call an intellectual cover up. And I say that because it's very disingenuous. Over the past 20 years, these banks used their economic power and their political power to engineer an unregulated financial environment in which precisely this sort of thing could happen. And in that sense, I think that this was not an accident. It was not a natural disaster. It was not unforeseeable. It was the product of the efforts by the sector over the past 20 years to reshape Washington and to engineer an environment that would allow them to make as much money as possible. Simon talked earlier about money. And we know that the financial sector, especially Wall Street, has been, has made enormous contributions to both campaign contributions and lobbying expenses. But I think there were, there were two more potent weapons in their arsenal. One is the revolving door. So, we've seen an enormous number of people passing back and forth between Washington and Wall Street over the past 20 years. This is not a new phenomenon. It happens in every industry. But there are certain things that make it especially pernicious when it comes to finance. One is that, one is a question of incentives. So, compared to other industries, Wall Street can simply offer enormous amounts of money. I'm not saying that everyone did that. I'm not saying that even the majority of people did that. But that is, that is very clear.

Bill Moyers: The New York Times has a story this week saying that 125 former members of Congress and staffers are now working for the financial industry in Washington. One of them is Michael Oxley, whose name is on one of the most important pieces of business legislation in the last 20 years. The Sarbanes-Oxley bill, which was designed to impose some very strict accounting rules after Enron on all of this. And there he is now, he's a lobbyist for the securities industry.

Simon Johnson: But Bill, it goes even further and deeper than that. Robert Rubin was Secretary of the Treasury in the 1990s. He oversaw the deregulation. He fought hard against Brooksley Born, the only regulator in living memory who tried to prevent derivatives from getting out of control. He then went to Citigroup. He presided over this nonsense and this mess. He's now and he was he's clearly éminence grise of this administration. Mr. Geithner and Mr. Summers are his protégés. But that's, that's not all. Next week, the Hamilton Project, a project of the Brookings Institution founded by Mr. Rubin, will have a big public event. Probably Mr. Rubin's most prominent Washington appearance since the crisis broke. The headline act at this event will be Vice President Joe Biden. Now, maybe Mr. Biden will be taking on the view of finance that we all should fear greatly. But I'm not so optimistic.

Bill Moyers: You know, I don't get it. Recently when "Newsweek" wanted to give big space to somebody to explain how we get out of this, who wrote the piece? Robert Rubin. I mean, are they locked into this worldview so that they cannot see the consequences of their own actions?

James Kwak: Well, I think there are a couple things going on. One of the things we talk about in the book is how the Democratic Party became taken over by this Wall Street friendly view in the 1990s, which is, you know, extremely important, because in the 1980s, we had a deregulatory administration that was largely opposed by a Democratic Congress. And it became very convenient for Democrats, because if you believed in the ideology of finance, you could sincerely think, I am a Democrat, I am a servant of the poor and the working class. And yet, I can take campaign contributions from Wall Street, because I sincerely believe that Wall Street is doing what's best, what's in the interest of the country.

I think it's been exposed in the last year and a half that a lot of what Wall Street did was not in the best interest of the country, not in the interest of the people getting these subprime loans, not in the interest of the taxpayer who was paying for the immense fiscal costs of the financial crisis and the recession. But it's, there's a curious time lag going on in the, in the Wall Street, intellectual and political establishment, where they think they're still in 2005.

Simon Johnson: As I travel around the country, Bill, I'm really struck by the fact that while people in Washington talk about populist anger in the country, most of what I encounter is legitimate, sensible anger. People actually understand what happened. They understand what went wrong. And they want to stop it. And the banks don't get this. The belief system on Wall Street is the same. Jamie Dimon, head of JPMorgan Chase, one of the most powerful men in the country. If you don't know his name, you should look him up because this is a man to fear.

Bill Moyers: Very close to the President. Has dinner- lunch with the President.

Simon Johnson: The President called him a savvy businessman, recently. Jamie Dimon told his shareholders, we just had probably our best year ever. They didn't have their best year ever. They went through crisis. They were saved like the rest of the financial system by the government, by the taxpayers, but that's not how they see it. That's not what they believe. That's really important. That belief must be shaken if we're to make any progress at all.

Bill Moyers: But we can't compete with those lobbying dollars. We can't compete with this interlocking oligarchy that you say. That's a fact.

Simon Johnson: Bill, in 1902, when Theodore Roosevelt took on the industrial trusts, nobody knew what he was doing. Nobody thought he could win. The Senate was called the Millionaires Club for a reason. And it wasn't even any theory. The antitrust theory, everything we know and believe about monopoly, why monopoly is bad for society, didn't really exist, certainly not in the mainstream consensus, when Roosevelt decided to take on J.P. Morgan, okay?

Ten years later, the mainstream consensus has shifted completely. People understood from the debate and from the struggle, from the fact- from the way the trusts fought back and the way they spent their money, they began to understand this was profoundly dangerous, politically and socially. 1912, everyone agreed that breaking up Standard Oil was a good idea. Had to be done. They broke into 35 companies, most of them did well. The shareholders actually made money. It's a very American resolution, Bill. And it's very clear that we've had this confrontation before in American history: Andrew Jackson against the Second Bank of the United States in the 1830s, Jackson won, barely; Theodore Roosevelt, the beginning of the 20th Century; FDR in the 1930s.

The American democracy was not given to us on a platter. It is not ours for all time, irrespective of our efforts. Either people organize and they find political leadership to take this on, or we are going to be in big trouble, okay? Now, I agree, we don't have Theodore Roosevelt. I agree. The only Senator who speaks complete truth and clarity on this issue is Ted Kaufman from Delaware, who's an appointed Senator, he got- he was appointed to Joe Biden's seat, and he's not running for reelection. He therefore doesn't care about the money. I take that point. But there are others. There must be others. We must find them and we must fund them, individually, sufficiently, to fight against this nonsense from the corporate sector.

I would like to emphasize, Bill, I'm a professional entrepreneurship, James is a successful entrepreneur. We're not anti-finance. We have many people endorsing the book, backing us, and you know, they, we put their blurbs in the book for a reason, who are from finance. Who really appreciate and understand this key point. Which is the complexity has gone too far. It's become dangerous. And we need to return our financial system to a simpler, more direct, easier to manage way.

Bill Moyers: You both paid attention last week, to the hearings in Washington, on the Financial Crisis Inquiry Commission. Was there a theme that you heard emerge there?

James Kwak: I think the biggest theme that I heard emerge was that this was an innocent mistake. So, what I mean by that is-

Bill Moyers: You mean the collapse of 2008? All of this? What- was-

James Kwak: Exactly.

Bill Moyers: An accident?

James Kwak: Yes, an accident in the sense that-

Bill Moyers: Natural disaster?

James Kwak: As we heard Chuck Prince say and Robert Rubin say, we couldn't see it coming. These were, there were risks that build up in the system, and our models didn't account for it. We're sorry that it happened. Not even, we're sorry that we did it. We're sorry that it happened.

And I think that this is, I mean, it's unfortunate if they really believe this. Because again, if we just take a very small example, one of the things that clearly went wrong is these banks were not able to manage their own risk. They did not know what positions they had. They did not know what market forces they were exposed to. You would think that should be the first job of a bank. And I don't think this was an innocent mistake. And I say that for this reason. It was in the bank's short term financial interest to underestimate their risk. Because if they had estimated their risk accurately, they should have had to set more capital aside, they would have been less profitable.

So, yes, it's possible that the CEOs of these banks honestly did not understand their risk positions. But that mistake-- there was an incentive behind that mistake. You know, banks never overestimate their risk. These mistakes always only go in one direction. Because that's the direction they have an incentive to make the mistake in.

Bill Moyers: What do you mean they have an incentive to make a mistake?

James Kwak: So, in the short term, a bank's profitability is going to depend on how much capital it has to set aside. So, in banking, if I have a certain position, I have to set aside a certain amount of capital to protect myself from that position going bad. If I think the position is less risky than it actually is, I'm going to set aside less capital to cover that position, and that's going to give me a higher profit margin.

If I'm the head of this bank, that means that in the short term, I'm going to have higher profits, higher stock price, more money for me, but I'm underestimating the risk of something blowing up several years down the line. But we know that the, essentially, the incentive systems within these banks favor short term profits over long term solvency.

Simon Johnson: The most profound thing, observation, on this structure, inadvertent, I would say, observation, was by Chuck Prince, the former head of Citigroup. In July 2007, right before the whole structure began to crumble. He said, "As long as the music is playing, you've got to get up and dance." And that's a statement about the incentive structure. Saying, well, everybody's doing it. That's how we all make money. We've got to do it, too. I'm just a bank doing what all the other banks are doing. That's absolutely the heart of the problem. I would also say and tell you, and emphasize, these people will not come out and debate with us. The heads of these companies or their representatives, they will not come out. They're afraid. They don't have the substance. They don't have the arguments. We have the evidence. They have the lobbyists. And that's all they have.

Bill Moyers: They've got the power, the muscle, the money.

Simon Johnson: They have money.

Bill Moyers: You just have the arguments. You just have the facts. On your side.

Simon Johnson: Absolutely. That's exactly what it comes down to.

Bill Moyers: Let me show you one of my favorite moments of the week. The commission on the crisis is looking into two former executives of the big mortgage giants, Fannie Mae and Freddie Mac. And the Fannie Mae guy tries to say, what happened was Congress made us do it.

BILL THOMAS: Was there an opportunity, perhaps, to reprioritize your charter and focus on those things that were most relevant in the marketplace that would have made the institution more sound?

ROBERT J. LEVIN: That wasn't done at my pay grade.

BILL THOMAS: My understanding is, between 2000 and 2008, you made $45 million. So only people above 45 thousand-- 45, excuse me, million dollars, between two and 2008, could answer that question?

ROBERT J. LEVIN: What I meant by the, what I was addressing was the question of, could we have affected the charter act--

BILL THOMAS: Right. And it was above--

ROBERT J. LEVIN: Of the company--

BILL THOMAS: Your pay grade.

ROBERT J. LEVIN: Yes. And my language was sloppy, and--

BILL THOMAS: No, it wasn't sloppy.

ROBERT J. LEVIN: And what I meant by that--

BILL THOMAS: It was flippant, if you want that as a choice.

ROBERT J. LEVIN: What I meant by that, sir, was that that was in the purview of the Congress, not the company.

Bill Moyers: You're laughing.

Simon Johnson: So, look, what I say to my, to all my Republican friends: on Fannie Mae and Freddie Mac, you were right. They became too big to fail. They captured Congress. They were known as some of the most formidable financial lobbyists in the 1990s. They argued for the rights to take on these kinds of risks, okay?

And the Republicans were right. The Republicans called them on this. But now it's the big private banks that have the same incentive structure. That have bulked themselves up so big that you can't let them fail. That's what we saw in September 2008. Hank Paulson looked at his options. And they are all pretty awful. And I'm not a big fan of Hank Paulson, but I think the moment where he looked at it, he was right. That if you let JPMorgan Chase or Goldman Sachs fail, the consequences would have been devastating, because they're so big. It's a Fannie May and Freddie Mac structure come to Wall Street, come to the top guys on Wall Street. And our Republican colleagues and friends should recognize this, they should acknowledge it. And then we can all fix this together.

Bill Moyers: Well then why is Mitch McConnell, the Senator from Kentucky, who is the Republican Leader in the Senate saying what he said this week? Let me show you from his statement.

SEN. MITCH MCCONNELL: If there's one thing Americans agree on when it comes to financial reform, it's that it's absolutely certain they agree on this: never again, never again should taxpayers be expected to bail out Wall Street from its own mistakes [...] This bill not only allows for taxpayer-funded bailouts of Wall Street banks, it institutionalizes them. The way to solve the problem is to let the people who made the mistakes pay for them. We won't solve this problem until the biggest banks are allowed to fail.

Bill Moyers: He seems to be saying what you say, right?

Simon Johnson: It's a clever piece of political manipulation. It's not at all what we say. What he says is dangerous and deliberately misleading.

Bill Moyers: How so?

Simon Johnson: He says let the biggest banks fail, go bankrupt, don't do anything, leave the situation as it is now and when they get in trouble, let them fail. If you do that, you'll have catastrophe. The bankruptcy system clearly and manifestly cannot deal with the failure of a complex, global, financial institution. And we have the evidence before us in what happened after Lehman Brothers failed. That was bankruptcy. It caused chaos around the world, Bill. That's what the Republicans are advocating. Is we just leave things as they are and next time we'll take that chaos and we'll get a second Great Depression. We're arguing for reform. We're arguing for change. We're arguing for ways to make those biggest banks smaller and safer. If they were small enough to fail, that's a very different story. And that's a much safer place to be.

Bill Moyers: What do these big six banks think about what Senator McConnell is saying?

James Kwak: Well, the big six banks don't want any reform at all, essentially. So, I think that they are, and there's some evidence that Senator McConnell has been talking to the big banks and to other people on Wall Street.

Bill Moyers: There have been published reports that he attended a fundraiser with hedge funds and other Wall Street poobahs just last week, before he made this statement. And the reporters, knowing that he had been at this big fundraiser for hedge fund and Wall Street tycoons a week before, begin to press him in an unusual, and actually promising way. Take a look at this.

REPORTER: How do you push back against this perception that you're doing the bidding of the large banks? You know, there was a report that you guys met with hedge fund managers in New York. A lot of people are viewing this particular line of argument, this bailout argument as spin--

SEN. MITCH MCCONNELL: You could talk to the community bankers in Kentucky.

REPORTER: I'm not asking you about the community bankers--

SEN. MITCH MCCONNELL: But, I'm telling you about the community bankers in Kentucky. This is not, everybody--

REPORTER: Have you talked with other people other than community bankers?

SEN. MITCH MCCONNELL: Well, sure. We talk to people all the time. I'm not denying that. What's wrong with that? That's how we learn how people feel about legislation. But the community bankers in Kentucky, the little guys, the main street guys, are overwhelmingly opposed to this bill.

REPORTER: Well what would you say to folks who say that this is just spin to deflect attention from the fact that you're representing the large banks?

Bill Moyers: So, he deflects their questions about being at this meeting with the large banks, the oligarchs, as you called them. And talks about community banks back in Kentucky. What do you make of that?

Simon Johnson: Well, two things, Bill. First of all, he's embarrassed, as he should be, and that's good. I don't think they used to be embarrassed. I think-- I hope Vice President Biden is somewhat embarrassed by the event he's going to attend next week with Robert Rubin, unless he criticizes Rubin and goes after Rubin's view of the world. In which case, I'm okay with that.

James Kwak: This other part of the problem which Simon and I talk about more in the book, and that we don't think is fully solved by the legislation in the Senate, is why do you have to have these too big to fail banks in the first place? So, we think that's the obvious and simplest and almost unarguable solution that you should simply not have banks that are too big and too interconnected to fail.

Simon Johnson: There are no benefits to society, Bill, from having banks that are larger than $100 billion in total assets. This is a well-established fact. The evidence does-

Bill Moyers: You make the case.

Simon Johnson: There's nearly 100 pages of footnotes for a reason.

Bill Moyers: But don't let the facts get in the way.

Simon Johnson: I understand. But there's no evidence, okay? We've let our banks get to $2 trillion-- Citigroup when it almost failed or did fail in fall 2008 was a $2.5 trillion bank. Jamie Dimon runs a $2 trillion bank at JPMorgan Chase and says, if we're big, it's 'cause we're beautiful and efficient. And we should be allowed to get bigger. It's not true. They're big because of the government subsidy, right? That's what gives them the profits at this level. If they get bigger, they'll become more dangerous. That's, those are the costs. On the benefit side, there's no economy of scale or scope or anything else to support the case that banks bigger than $100 billion. That's on a pure cost/benefit basis.

James Kwak: So, there's no way that Jamie Dimon, who according to many observers is perhaps the savviest bank CEO, the best one out there, there's no way that he can know what's going on within his organization. There's no way he can even have an information system that will let him know, efficiently, all the things that he needs to know. So, why is JPMorgan Chase so big? One reason is that it's in the interest of CEOs to have large banks. Because if you have, the larger your bank, the bigger your salary. But then at the same time, it creates this incentive among the traders, the people who really make the money or lose the money in these banks. It creates an incentive to the traders to essentially exploit the management failings of the company.

Bill Moyers: The toughest hearing in Washington this week was conducted by Senator Carl Levin in the Senate, looking into Washington Mutual. That's the largest bank ever to go under in our history, and there are some friends of mine in Washington say there's some possible criminal indictments going to be coming out of this. Let me show you Senator Levin laying out some of the evidence.

SEN. CARL LEVIN: To keep that conveyor belt running and feed the securitization machine on Wall Street, Washington Mutual engaged in lending practices that created a mortgage time bomb...WaMu built its conveyor belt of toxic mortgages to feed Wall Street's appetite for mortgage-backed securities. Because volume and speed were king, loan quality fell by the wayside and WaMu churned out more and more loans that were high risk and poor quality.

Destructive compensation schemes played a role in the problems just described. These incentives contributed to shoddy lending practices in which credit evaluations took a back seat to approving as many loans as possible.

Bill Moyers: He goes on, you know? There's evidence that WaMu knowingly sold fraudulent loans to investors in the form of securities. That loan offices were falsifying documentation in order to churn out as many lousy loans as they could. And that senior management was putting pressure on the loan officers to do just this. And he claims, what we were talking about, that destructive compensation schemes were part of the problem.

James Kwak: I think that some people may go to jail. I think that falsifying loan documents, I think there's a good chance people could go to jail for that. I think that if there are- you know, when you get the emails of people at midlevel managers at these banks saying, you know, falsify the loan documents. They might go to jail as well. I don't think anyone who's high up in these banks is going to go to jail for this reason.

I think that, for example, these loans were eventually sold on to investment banks which used them to manufacture new securities. Those investment banks were getting documents from Washington Mutual. These are like representations and warranties. So Washington Mutual is saying, you know, these loans meet these criteria. And the investment bank is going to say, I got this document from Washington Mutual. They told me the loans were good. You can't send me to jail.

And he's absolutely right. So, you've got investment bankers who must have known. Who should have known that a lot of these loans are bad. But they've got a piece of paper from the person selling them the loan saying they meet these criteria. He's pretty much Scott free when it comes to criminal liability. So--

Bill Moyers: Mistakes were made, but not by me, right?

James Kwak: Exactly.

Bill Moyers: I mean, that seems to be the mantra that came through all these hearings this week: mistakes were made but not by me.

Simon Johnson: Or, no, I think they also say, Bill, well, everyone made mistakes, Bill. You know, we're just human. This was beyond our control. And that's not true, these are systems they controlled, they designed. Mr. Rubin designed this, right? And I want to point out there's something very interesting in this WaMu conversation.

It's only when a firm collapses that you get full discovery. Now, Senator Levin is a great voice on this. And I think he's absolutely nailing this. But he only has the ability to get at this level of detail and documentation from a company that failed like WaMu. For the people who were able to keep going. The Goldman Sachses of this world, you'll never know what they were really up to.

These are incredibly smart people. They're very well paid. They have ever incentive. The regulators are totally outgunned. It's not an accident that this complexity allows them to get away with it. It's by design. That's the system. Not a conspiracy, Bill. Don't say that.

Bill Moyers: I wouldn't.

Simon Johnson: It's a system of--

Bill Moyers: A system.

Simon Johnson: It's a system of beliefs and incentives, much more profoundly dangerous than a conspiracy.

Bill Moyers: Why?

Simon Johnson: Conspiracies you can unroot. Conspiracies you can have, you know, a couple of hearings. People can understand it on TV. You get the sound bite. This is very complex. This is about what many, many PhDs and specialists in finance have cooked up over 20 years with the active participation of the people who were supposed to oversee that in Washington.

Bill Moyers: Is this what the blogger meant when he posted on "The Baseline Scenario" this week, "Unnecessary complexity just creates rich opportunities for systemic corruption"?

James Kwak: That is certainly one of the things he meant.

Bill Moyers: What should be the purpose of reform? Should it change the behavior of Wall Street, or should it change the regulation of Wall Street? And there is a difference, is there not?

Simon Johnson: Absolutely. Look, I don't know if this will work or not. I don't know if at the end of the day, we will end up supporting the bill. I hope we will, okay? But whatever happens, this is one legislative cycle. Theodore Roosevelt did not change the mainstream consensus in this country with regard to power and monopoly and the dangerous side effects of big business overnight.

He didn't do it in one year or two years. It was a ten year process. The consensus has to change, Bill. And regulation, the role of regulation or understanding of regulation with regard to finance has to change. The regulation is there to limit the downside to society and to make sure that all of these activities have as much as possible of the positive effect on the economy without generating these massive negative shocks. And we're a long way from that point.

James Kwak: I think the distinction you made is a very good one. Between changing the regulation of Wall Street and changing Wall Street itself. I think the bill does a lot of things that will improve the regulatory system.

I think it does not do a lot to change Wall Street. Certainly, better regulation will change Wall Street a little bit, but some of the basic fundamental issues, I think, for example, the fact that in many realms, Wall Street banks knowingly make money by finding, because they want to put on a trade, they find a sucker to take the other side of that trade.

They're making money directly off of their customers. You can't really have it any other way when you're engaged in proprietary trading. These, this is not going to change. The fact that we have these enormous banks that are too big to manage and that have a competitive advantage, because they're big. That's not going to change.

And that's one reason I think why it's not going to satisfy the many people in America right now who are upset and frustrated about what's happen. Because they're going to see that what we've done is we've made Washington a little bit better at regulating Wall Street. We haven't changed the fundamental causes.

Bill Moyers: Well, I've seen one regulatory agency after another taken over by the very industries they were supposed to regulate.

Simon Johnson: This is absolutely right, Bill. And, you know, the person who nailed this intellectually a long time ago was from the University of Chicago. George Stigler. Not a man of the left. He got a Nobel Prize for his observation. All regulated industries end up with the industry capturing the regulators.

And what's happened to us is a Stigler, exactly what Stigler warned against on a massive scale. And you have to think very hard about this. The Administration still argues that we should delegate responsibility, going forward, for lots of things around finance. Like how much capital you should have. Delegate that to the regulators.

Now, that's crazy. That's not acceptable. That is not what they should do. Particularly because, and any Democrat should say, well, wait a minute, next time a free market President who doesn't believe in regulation comes in will gut the system. And any person from the right who's read Stigler should say, Well, these regulators are just going to get captured. You've got to put it in legislation. You've got to design the legislation. You've got to go after the things that can be legislated. Congress must not abdicate this responsibility.

Bill Moyers: So, you would break up the banks. That's what you would do, right?

Simon Johnson: We would set a hard size cap on the banks. And the banks, in order to comply with that, would have to break themselves up. So, take a bank like Goldman Sachs, for example. It's about ten times bigger than what we would be comfortable with. And, you put that cap in-- they have to figure out how to do it. They have a fiduciary responsibility to their shareholders not to lose value as they comply with this law, not a regulation, law, right? Our book is called "13 Bankers" because it was 13 bankers who were pulled into the White House last March, and they were saved completely and unconditionally in the most amazing deal ever: their jobs, their pensions, their board of directors, their empires. But the title is also an echo of a remark made forcefully in 1998 by Larry Summers, who was then Deputy Treasury Secretary to Brooksley Born, who was trying to regulate over the counter derivatives.

And she was way ahead of her time, by the way. None of this nonsense existed. But she had- she saw this coming in a very profound sense. And she wanted to act in a preemptive and preventive way. Now, Larry Summers called her up. This is according to the public record and it's not been disputed by any of the protagonists here.

He called her up and he said, Brooksley, if you do what you want to do, which is regulate the derivatives. Over- regulate all this over the counter derivatives, you- I have 13 bankers in my office who say you will cause the greatest financial crisis since World War II., right? That was what he believed. That was the prevailing philosophy of the Rubin wing, the Wall Street wing of the Democratic Party.

That was Alan Greenspan's view. That is what brought us to this point. The idea that if you regulate, in any fashion, in any form, you will cause problems, you will prevent growth, you will cause crisis. That view is profoundly wrong. It has been manifestly and repeatedly demonstrated to be wrong. And the people who hold that view must change their minds or they should be voted out of office.

Bill Moyers: If Wall Street's behavior doesn't change, can we have another financial catastrophe like the one in 2008?

James Kwak: The definition of insanity is repeating the same thing over and over again and expecting a difficult result. And I think one of the core messages in our book is that the fundamental conditions of the financial system today are the same as the ones we had leading up to this crisis. And it would be folly to expect a different outcome.

Now, the legislation will help in certain ways. It will certainly, you know, it'll bolt the barn door after the horses have fled. The Consumer Financial Protection Agency will make it much harder to have a bubble built on subprime mortgages. But we'll have a bubble built on something else. And it may even be on a market or a product that doesn't even exist yet.

And that's why, again, legislation is helpful, but if you're going to have the same kind of incentive structures on Wall Street and the same degree of concentration, the same degree of political power, it's likely that we'll have another financial crisis.

The financial world has gotten much more dangerous in the last 30 years. We had this one. We had the stock market bubble of 2000. We had the long term capital management crisis. We had the S & L crisis. We had the Latin American debt crisis. And the question is, are these crises going to-- are we going to somehow figure out a way to have fewer of them, or a way to make them less damaging? And I'm not sure I've seen that.

Simon Johnson: The structure of the system is such that people will take these egregious risks. That's what they're paid to do. They will mismanage their companies. That is absolutely in their incentive. And they get the upside, remember? Goldman Sachs just helped Geely Automotive, a Chinese car company, buy Volvo from Ford.

Now, that's an interesting investment. It's a very risky investment. If that goes well, Goldman will get tremendous upside. If it goes badly or if Goldman's other investments go badly, who gets the downside? Well, Goldman Sachs is a bank holding company now. They were allowed to become that in September 2008 as a way to rescue them. They have access to the Federal Reserve discount window. Okay? If Goldman Sachs gets into trouble, that's the responsibility of the Federal Reserve and the downside is for society. That is an untenable, unacceptable position in America today.

Bill Moyers: We are moving now toward the decisive moment in this fight for reform, sometime in the next two or three weeks, we may well have a vote in the Senate. But what are you going to be looking for over the next two weeks that will convince you there is some possibility of true reform?

James Kwak: Well, it's going to be a little bit difficult, because right now a lot of the action is in the fine print. As often happens in the last phase of bills. But I think there's going to be an attempt to weaken the Consumer Financial Protection Agency. Even more than it's been weakened already.

And essentially, what will happen is opponents will try to make the C.F.P.A. subordinate to some other regulators, who can veto it. I think that on derivatives, there's going to be a lot of action, essentially on this issue of exemptions.

So, the derivative legislation looks quite good if you read the first page and look at the headlines. But then there are exemptions inside it. And the question is how big are the exemptions. The thing that we care about most is on the too big to fail issue. So, are we going to have real constraints on the size and scope of these banks? Things that the Obama Administration unveiled in principle to great fanfare in January.

They had a press conference with Paul Volcker and said we're going to have these Volcker rules. Those rules have been considerably watered down in the legislation. And I think that, you know, what we would most like to see are serious constraints on the scope and the size of these banks. Those are the main issues that I'll be looking at.

Simon Johnson: So, the second Volcker rule was proposed in January was to put a size cap on our largest banks at their current size. Now, that-

Bill Moyers: $2 trillion?

Simon Johnson: Yes.

Bill Moyers: 2 trillion- a

Simon Johnson: Now, a size cap is a good idea. Obviously, the current size makes no sense at all, because that's how we got into this mess. There will be amendments brought forward to the floor of the Senate, if this process has any integrity at all. For example, Senator Sherrod Brown has a very good draft amendment.

Bill Moyers: Ohio, right?

Simon Johnson: Absolutely. And he will, in that amendment, press for a hard cap on the size. And I think also restrictions on the scope. And they'll give a lot more restrictions in legislation, which regulators will have a hard time getting out to, in terms of what can be allowed in our biggest financial institutions.

For me, at least Bill, that is going to be the critical moment. How many people support that amendment or that kind of amendment. Does the Democratic leadership come out in favor of it? Where does the White House stand on this? If the White House steps back and the White House says well, it's all up to the Senate, we're staying out of this. I think you know what's going to happen. You're going to get mush, right? Nothing really meaningful will come of it.

If the President takes the lead, the President takes this one, if the President takes this to the country, takes on the Chamber of Commerce, goes directly to people. And explains why you need to make our biggest banks smaller. As one way, that's not a sufficient condition for financial stability, but it's necessary and it gets at the heart of their political power. Take on the big banks. Take them on directly. That's what Jackson did. That's what Theodore Roosevelt did. That's what Franklin Roosevelt did, too.

Bill Moyers: Simon Johnson, James Kwak, thank you for being with me. The book is 13 Bankers: The Wall St. Takeover and the Next Financial Meltdown. We will link this conversation with your website,

Bill Moyers is the host of Bill Moyers Journal on PBS.
(c) 2010 Bill Moyers Journal All rights reserved.
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18) Firm Run by Ex-Israeli Special Forces Soldier Wants US Security Contracts in Jerusalem, Iraq, Afghanistan
As the Obama Administration continues the military privatization agenda, a CIA-connected firm and an Israeli-run company named Instinctive Shooting International are looking to cash in
By Jeremy Scahill
April 21, 2010

The Obama administration has continued the Bush-era reliance on private contractors to sustain the US occupation of Iraq and the US operations in Afghanistan. In Afghanistan, Obama has surpassed Bush's reliance on contractors with current contractor levels surpassing 100,000 Defense Department contractors deployed. In Iraq, Obama has maintained the long-standing ratio of one contractor to every US soldier.

General Stanley McChrystal, the US commander in Afghanistan/Pakistan, said recently that he believes the US has "created in ourselves a dependency on contractors that is greater than it ought to be." He added: "I think it doesn't save money. I actually think it would be better to reduce the number of contractors involved, increase the number of military if necessary."

Despite such proclamations, the pattern of dependence on contractors is continuing unabated-and not just within the Department of Defense.

This week the US State Department posted a solicitation for armed private security contractors to deploy in "critical or higher than critical threat areas" globally under its Worldwide Protective Services program. Among the firms that have held these contracts are Blackwater, DynCorp, Triple Canopy and Armor Group. ArmorGroup was exposed last year by whistleblowers for a range of misconduct at the US embassy in Kabul, Afghanistan. Among the actions revealed by the Project on Government Oversight were hazing rituals involving nudity and heavy drinking that at times included personnel urinating on each other. The whistleblowers alleged that ArmorGroup personnel created a general atmosphere of fear and intimidation. Last December, following POGO's revelations, the State Department said it was phasing out ArmorGroup.

In its solicitation for contract bids this week, the State Department says it will hire as many as six "qualified US firms" for "anticipated and unanticipated personal protective, static guard, and emergency response" functions. The contracts are slated to last one year with the potential for four, year-long options.

To qualify for the contracts, security companies must have a total annual value of at least $15 million in security contracts and must possess a valid "Final Secret Facility Security Clearance." After the contracts are awarded, the State Department says that it will then sponsor the contractor for "Top Secret Facility Clearance." In addition, bidding companies must have at least two years of experience operating in "austere and hostile environments overseas" such as Pakistan, Afghanistan and Iraq and experience in "operating long term personal protective security details for executive level dignitaries." The solicitation indicates that the work will include "a static guard and emergency response team requirement in Baghdad, Iraq, a static guard and emergency response team requirement in Kabul, Afghanistan, and a personal protective security service requirement in Jerusalem."

Among the companies listed as "interested vendors" to bid on the contracts are the predictable list of industry giants: L-3 Services, SAIC, USIS, Northrop Grumman, and DynCorp. Two lesser-known firms in particular that have expressed interest in the contracts jump out: Instinctive Shooting International and Evergreen International Aviation.

Hiring Instinctive Shooting International for any type of armed contract in a Muslim country, particularly to operate in Jerusalem with a stamp of US government legitimacy, should be cause for serious concern and Congressional inquiry. Instinctive Shooting International (ISI) was founded by Hanan Yadin, a former member of the Israel National Counter-Terrorism Agency and a veteran of the Israeli Defense Forces. According to his bio [PDF], Hanan "received advanced training at the Israeli Anti-Terror Academy and served as an instructor at the Israeli Military Intelligence Academy. As part of a Special Ops unit he executed high-risk missions against terrorist's cells. Hanan is an expert marksman and has completed advanced training in crisis response, Krav Maga (the Israeli unarmed fighting system), urban warfare and tactical operations."

I encountered ISI operatives, all former Israeli soldiers, manning an armed check-point in New Orleans in the immediate aftermath of Hurricane Katrina. At the time, in 2005, its website described ISI's personnel as "veterans of the Israeli special task forces from the following Israeli government bodies: Israel Defense Force (IDF), Israel National Police Counter Terrorism units, Instructors of Israel National Police Counter Terrorism units, General Security Service (GSS or 'Shin Beit'), Other restricted intelligence agencies."

Today the website has changed dramatically. Its main graphic is of US soldiers wearing ISI websiteAmerican flag patches, wielding automatic weapons in what appears to be Iraq. "After 9/11, ISI was able to bring to bear all of its resources, expertise and experience to work with U.S. military and government agencies in gaining a deeper understanding of radical Islam and provide proven tactical techniques to improve counter-terror operations," according to the website. This would hardly be ISI's first US government contract. It has received many training and security contracts since its founding in 1993. According to the company, it is currently under a five-year contract with the US Army that began in November 2009.

Evergreen has had long-standing ties to the CIA. "In 1980 an Evergreen plane flew the recently deposed Shah of Iran from Panama to Egypt, hours before the Panamanian government was due to receive an extradition request from the new government in Tehran," according to SourceWatch. "Giving rides to dictators is something of a specialty for the company - it also allowed El Salvador's President Duarte to use its helicopter, which was officially in the country to help repair power lines. And according to a series of articles in The Oregonian in 1988, Evergreen's owner and founder Delford M. Smith '...acknowledged one agreement under which his companies provide occasional jobs and cover to foreign nationals the CIA wants taken out of other countries or brought into the United States.'"

Evergreen is perhaps best known more recently for offering-unsolicited-its security services to Oregon county clerks ahead of the 2008 elections. "During this crucial election Evergreen Defense and Security Services has recognized the potential conflict that could occur on November 4," an email from company president Evergreen president Tom Wiggins to election officials stated. "Never has there been a more heated battle in the race for president and voters seem more involved and determined to achieve their respective goals. EDSS proposes to post sentries at each voting center on November 4 to assure that disputes among citizens do not get out of control. All guards will be unarmed but capable of stopping any violence that may occur, and detaining troublemakers until law enforcement help arrives." The offer was suspect on several fronts, not the least of which being that Oregon has no polling places and votes by mail.

According to State Department documents, among the projects up for bidding are:

-Private security teams in Jerusalem. The solicitation calls for 46 personnel, including 36 "security specialists" and team/shift leaders for armed details.

-Embassy guards and an Emergency Response Team in Kabul. The solicitation calls for 219 personnel, including a 142-member embassy guard force and 49 "emergency response" personnel.

-Embassy guards and an Emergency Response Team in Baghdad, Iraq. The solicitation calls for 551 personnel, including 357 "armed guards" and an Emergency Response Team consisting of 30 protective security specialists and four "designated defense marksmen."

The US embassy in Iraq, according to the documents, requires the greatest number of contractors. This is likely because the embassy there is the largest of any embassy of any nation in history.

The State Department has a conference for prospective bidders scheduled for April 27-28 in Arlington, Virginia. Attendance is mandatory for interested companies.


19) HCAN on WellPoint: 'Murder By Spreadsheet'
by David Dayen
Thursday, April 22, 2010 by

Using some of the strongest language I've ever seen from this group, Health Care for America Now basically charged WellPoint with murder today, responding to the Murray Waas article showing that the insurance giant systematically dropped breast cancer patients from the rolls. HCAN spokesman Avram Goldstein released this statement, intimating that criminal prosecutions should be pursued in this case:

"WellPoint is committing murder by spreadsheet, and it has to stop now. This is a matter of life and death, and the executives and board members of WellPoint need to be held to account to the fullest extent of the law.

"WellPoint's Blue Cross-Blue Shield companies' disregard for human life to maximize profits is immoral and outrageous. The Reuters report shows an unconscionable pattern of denying needed health care to line the pockets of wealthy executives and shareholders.

"Today's disclosure provides more evidence of why Congress needed to pass national health reform in the first place, and it also shows why we need to curb the extraordinary influence of insurance companies so they don't interfere with enforcement of the new law. We need the forthcoming federal regulations to shine a light on the insurance companies and hold them accountable for their bad practices."

Actually, what we needed is for groups like HCAN to ensure during the debate that practices like this would truly get outlawed by the Affordable Care Act. In actuality, insurance companies, led by WellPoint, lobbied for changes to the restrictions on their business and a de-fanging of the law. Much like in the current financial reform debate, they ended up leaving a lot of the regulatory authority open-ended and at the discretion of regulators, in this case the Health and Human Services Secretary and the National Association of Insurance Commissioners. Jon Walker laid out how WellPoint successfully removed independent third-party review of all rescission cases.

Reuters reports that WellPoint is under federal investigation for singling out breast cancer patients and dropping their coverage "based on either erroneous or flimsy information." They also report that language in the House bill would have protected these women, but it was removed in the Senate version of the bill because "lobbyists for WellPoint and other top insurance companies successfully fought proposed provisions of the legislation."

Max Baucus, head of the Senate Finance Committee, credits former WellPoint VP Liz Fowler with writing the "blueuprint" of the bill, and her name appears as "author" on the bill PDF released by the committee [...]

As you can see, the Senate bill does not mandate either independent third party review or the continuation of coverage while the review is taking place. Theoretically it's possible for the Secretary of HHS to require a similar independent third party review framework for rescission, but unlike the House bill, the Senate bill which ultimately passed does not require her to do so - something WellPoint actively lobbied for.

The White House might argue that rescission is a thing of the past because the law guarantees issue of health insurance, and with risk adjustment insurers will have an incentive to even pick up sick patients. However, in reality the risk adjustment mechanism is far smaller than the liability of sick patients, and insurers will undoubtedly work hard to avoid as many patients with pre-existing conditions as possible.

We now have a whodunit, where we have to ask who in the Senate pushed to eliminate the toughest regulatory restrictions from insurance companies who obviously have no compunction against systematically denying coverage to breast cancer patients. Obviously Liz Fowler, the former WellPoint VP, is a good place to start. So far, nobody privy to those discussions has been willing to say on the record that Fowler is culpable. But the insurance industry, already hated in the country, has now committed what even cautious groups like HCAN call murder. Covering for the culprit here is tantamount to being an accessory to the crime.

(c) 2010


20) U.S.'s Toughest Immigration Law Is Signed in Arizona
April 23, 2010

PHOENIX - Gov. Jan Brewer of Arizona signed the toughest illegal immigration bill in the country into law on Friday, aimed at identifying, prosecuting and deporting illegal immigrants. The governor's move unleashed immediate protests and reignited the divisive battle over immigration reform nationally.

Even before she signed the bill at a 4:30 p.m. news conference here, President Obama strongly criticized it.

Speaking at a naturalization ceremony for 24 active-duty service members in the Rose Garden, he called for a federal overhaul of immigration laws - an overhaul that Congressional leaders signaled they were preparing to take up soon.

Saying the failure of officials in Washington to act on immigration would open the door to "irresponsibility by others," he said the Arizona bill threatened "to undermine basic notions of fairness that we cherish as Americans, as well as the trust between police and our communities that is so crucial to keeping us safe."

The law, which opponents and critics alike said was the broadest and strictest immigration measure in the country in generations, would make the failure to carry immigration documents a crime. It would also give the police broad power to detain anyone suspected of being in the country illegally. Opponents have decried it as an open invitation for harassment and discrimination against Hispanics regardless of their citizenship status.

The political debate leading up to Governor Brewer's decision, and Mr. Obama's criticism of the law - presidents very rarely weigh in on state legislation - underscored the power of the immigration debate in states along the Mexican border. It presaged the polarizing arguments that await the president and Congress as they take up the issue nationally.

Governor Brewer said the law "represents another tool for our state to use as we work to solve a crisis we did not create and the federal government has refused to fix."

The law would take effect 90 days after the legislative session ends, meaning by August. Court challenges are expected immediately.

Hispanics, not long ago courted by the Republican Party as a swing voting bloc, in particular railed against the law as a recipe for racial and ethnic profiling. "Governor Brewer caved to the radical fringe," said a statement by the Mexican American Legal Defense and Educational Fund, predicting that the law would create "a spiral of pervasive fear, community distrust, increased crime and costly litigation, with nationwide repercussions."

The Catholic archbishop of Los Angeles called the authorities' ability to demand documents Nazism. While police demands of documents are common on subways, highways and in public places in some countries, including France, Arizona is the first state to demand that immigrants meet federal requirements to carry identity documents legitimizing their presence on American soil.

Governor Brewer acknowledged critics' concerns but sided with arguments from the law's sponsors that it provides an indispensable tool for the police in a border state that is a leading magnet of illegal immigration.

She said that racial profiling would not be tolerated, adding, "We have to trust our law enforcement."

President George W. Bush had attempted comprehensive reform but failed when his own party split over the issue. Once again, Republicans facing primary challenges from the right, including Governor Brewer and Sen. John McCain of Arizona, have come under tremendous pressure to support the Arizona law, known as SB 1070.

Mr. McCain, locked in a competitive primary with a challenger campaigning on immigration, only came out in support of the law hours before the state senate passed it Monday afternoon. Governor Brewer, even after the senate had passed the bill, had been silent on whether she would sign it. Though she was widely expected to, given her primary challenge, she refused to give her position on it even at a dinner on Thursday for a Hispanic social service organization, Chicanos Por La Causa, where several audience members called out "Veto!"

Among other things, the Arizona measure is an extraordinary rebuke to Janet Napolitano, who had vetoed similar legislation repeatedly as a Democratic governor before she was appointed homeland security secretary by Mr. Obama. Her successor, Governor Brewer, is a Republican.

The law opened a deep fissure in Arizona, with a majority of the thousands of callers to the governor's office urging her to reject the law.

In the days leading up to Governor Brewer's decision, Representative Raúl M. Grijalva, a Democrat, called for a convention boycott of his state.

Sponsored by Russell Pearce, a state senator and a firebrand on immigration issues, SB 1070 has several provisions.

It requires police officers "when practicable" to detain people they reasonably suspect are in the country without authorization and to verify their status with federal officials, unless doing so would hinder an investigation or emergency medical treatment.

It also makes it a state crime, a misdemeanor, to not carry immigration papers. It also allows people to sue local governments or agencies if they believe federal or state immigration law is not being enforced.

States across the country have proposed or enacted hundreds of bills addressing immigration since 2007, the last time a federal effort to reform immigration law collapsed. Last year, there were a record number of laws enacted (222) and resolutions (131) in 48 states, according to the National Conference of State Legislatures.

The prospect of plunging into a national immigration debate this year is being increasingly talked about on Capitol Hill, spurred in part by recent statements by Senator Harry Reid of Nevada, the majority leader, that he intends to bring legislation to the floor of the Senate sometime after Memorial Day.

Senator Charles E. Schumer, Democrat of New York, has been meeting with lawmakers and interest groups to try to draft a measure in concert with Senator Lindsey Graham, Republican of South Carolina.

But the outlook is mixed. While an immigration debate could help energize Hispanic voters and provide political benefits to embattled Democrats who are seeking re-election in November - like Mr. Reid - it could also energize conservative voters. The issue makes many House and Senate Democrats nervous.

It could also take time and attention from other Democratic priorities, including an energy measure that Speaker Nancy Pelosi has described as her flagship issue.

Mr. Reid declined on Thursday to say that immigration would take precedence over an energy measure, which he has pledged to finish this year. But he called immigration an imperative that needed attention: "The system is broken," he said.

He noted that in addition to energy and immigration, the Senate would also be dealing with confirmation proceedings this summer for a Supreme Court nominee.

Ms. Pelosi and Representative Steny H. Hoyer, Democrat of Maryland and the majority leader, have said in recent days that the House would be willing to take up immigration policy only if the Senate produces a bill first; otherwise they are not inclined to move ahead.

"If the Senate is ready with an immigration bill, we don't want anybody holding it up for any reason, and we'd be pleased to welcome it to the House," Ms. Pelosi said Thursday. "Send it to us."

Helene Cooper and Carl Hulse contributed reporting from Washington

This article has been revised to reflect the following correction:

Correction: April 23, 2010

A earlier version of this article misspelled the last name of the Arizona state senator who sponsored several provisions of the bill. He his Russell Pearce, not Pierce.


21) The Good, the Bad, and the "Misguided"
By Jayne Lyn Stahl
Created Apr 23 2010 - 9:01pm

In what may be easily called the understatement of the decade so far, President Obama has characterized an Arizona measure that criminalizes undocumented immigration, just signed into law by Arizona Governor Jan Brewer, as "misguided." Frankly, higher octane words come to mind. How about unconstitutional?

In these days of gosh, darn, and heck how better euphemize than with a word like "misguided?" Too bad we don't fire off more "misguided" missiles. And, if language is any indication of purpose, the benign appellation can only spell defeat at the polls for Democrats in November, and beyond

After more than eight years of listening to the likes of George W. Bush, Dick Cheney, and Donald Rumsfeld using terms like "bad guys," it's reassuring to know that the commander-in-chief can master polysyllables, but words with higher testasterone levels are needed to describe a law that just passed in a state that nearly produced our 44th president.

Lest there be some surprise about this latest move by Arizona's Republican governor, keep in mind that Brewer also signed legislation that allows people to carry guns into bars, and a measure that lets Arizona citizens possess concealed weapons without a permit.

Okay, but forget Brewer. What do we know about Russell Pearce, the Arizona state senator who sponsored the bill? Apart from being a conservative Republican who served in the National Guard during the Vietnam War, Pearce's Web site boasts of being a fifth generation Arizonan. But, where did the previous generations of Pearces come from, and could they provide legal documentation that meets citizenship requirements now if called upon to do so?

More importantly, could John Adams provide proof of citizenship that might satisfy the new Arizona state law? If Mahatma Gandhi were to find himself in Tucson on a dark street, would he find himself the target of the kind of reasonable suspicion clause of this new law?

A quick visit to Mr. Pearce's Web site will also show how much he values the Declaration of Independence, and entitlement of all to "life, liberty, and the pursuit of happiness." What his Web site neglects to mention is that evidently Pearce also believes the pursuit of happiness must come only with a green card.

What about "maverick" John McCain? Even the incumbent Arizona senator has been outspoken in his support for this law that now enables law enforcement to target anyone suspected of being in the country illegally; whatever "reasonable suspicion" may be.

But, is there a difference between being undocumented, and being illegal? Let's be clear here. You are now a criminal in the state of Arizona if you are stopped by police, and you are unable to produce documents establishing an acceptable citizenship status.

The irony is inescapable considering all the fuss about illegality when it comes to immigrants given that there isn't a peep when it comes to thousands of illegal wiretaps, or substantial evidence that a practice, waterboarding, which has long been considered torture was variously used by interrogators at Guantanamo Bay, in Iraq, and elsewhere.

For a country that was founded with what can only now be called the misguided belief in egalitarianism, it is abundantly clear that it isn't breaking the law that is at stake here, but who's breaking it.

True, this isn't the first draconian immigration legislation passed by a state that is also moving to demand future presidential candidates provide documentation that they were born in the U.S., but it is certainly the most hateful in that, if passed, it will put police officers in the position of immigration officials, a concept that has legal precedent thanks to the USA Patriot Act.

For the better part of two and half centuries, immigration policies have been regulated by the federal government, and not by the states. Surely, the president can find more potent language with which to denounce legalizing profiling by skin color, and under the guise of "questioning," one that enables authorities to harass with the objective of deporting those who lack requisite documentation.

Consider that from 1769 through 1882 according to a Smithsonian Institution exhibit, the U.S. excluded only convicts, prostitutes, idiots, and lunatics. From 1882-1943, Chinese were not allowed to immigrate. In 1885, U.S. immigration mandated that there be "no gangs of cheap laborers," according to a Smithsonian Institution exhibit.

Moreover, from the vantage point of Native Americans, those who came here on the Mayflower were illegals who did more than shoot one Arizona rancher. But, this isn't about crime. This is about jobs, and the Democrats better stand up and stand up fast to show that the furthest thing from the minds of people like John McCain, and Arizona's Republican governor, Jan Brewer, is helping working people. All they care about is saving their own jobs.

For the president, and Democratic leadership, not to speak out now in the strongest possible terms, but instead to pussyfoot around, will be not only a missed opportunity, but professional misconduct.


22) Goldman Sachs Messages Show It Thrived as Economy Fell
April 24, 2010

In late 2007 as the mortgage crisis gained momentum and many banks were suffering losses, Goldman Sachs executives traded e-mail messages saying that they were making "some serious money" betting against the housing markets.

The e-mails, released Saturday morning by the Senate Permanent Subcommittee on Investigations, appear to contradict some of Goldman's previous statements that left the impression that the firm lost money on mortgage-related investments.

In the e-mails, Lloyd C. Blankfein, the bank's chief executive, acknowledged in November of 2007 that the firm indeed had lost money initially. But it later recovered from those losses by making negative bets, known as short positions, enabling it to profit as housing prices fell and homeowners defaulted on their mortgages. "Of course we didn't dodge the mortgage mess," he wrote. "We lost money, then made more than we lost because of shorts."

In another message, dated July 25, 2007, David A. Viniar, Goldman's chief financial officer, remarked on figures that showed the company had made a $51 million profit in a single day from bets that the value of mortgage-related securities would drop. "Tells you what might be happening to people who don't have the big short," he wrote to Gary D. Cohn, now Goldman's president.

The messages were released Saturday ahead of a Congressional hearing on Tuesday in which seven current and former Goldman employees, including Mr. Blankfein, are expected to testify. The hearing follows a recent securities fraud complaint that the Securities and Exchange Commission filed against Goldman and one of its employees, Fabrice Tourre, who will also testify on Tuesday.

Actions taken by Wall Street firms during the housing meltdown have become a major factor in the contentious debate over financial reform. The first test of the administration's overhaul effort will come Monday when the Senate majority leader, Harry Reid, is to call a procedural vote to try to stop a Republican filibuster.

Republicans have contended that the renewed focus on Goldman stems from Democrats' desire to use anger at Wall Street to push through a financial reform bill.

Carl Levin, Democrat of Michigan and head of the Permanent Subcommittee on Investigations, said that the e-mail messages contrast with Goldman's public statements about its trading results. "The 2009 Goldman Sachs annual report stated that the firm 'did not generate enormous net revenues by betting against residential related products,' " Mr. Levin said in a statement Saturday when his office released the documents. "These e-mails show that, in fact, Goldman made a lot of money by betting against the mortgage market."

A Goldman spokesman did not immediately respond to a request for comment.

The Goldman messages connect some of the dots at a crucial moment of Goldman history. They show that in 2007, as most other banks hemorrhaged losses from plummeting mortgage holdings, Goldman prospered.

At first, Goldman openly discussed its prescience in calling the housing downfall. In the third quarter of 2007, the investment bank reported publicly that it had made big profits on its negative bet on mortgages.

But by the end of that year, the firm curtailed disclosures about its mortgage trading results. Its chief financial officer told analysts at the end of 2007 that they should not expect Goldman to reveal whether it was long or short on the housing market. By late 2008, Goldman was emphasizing its losses, rather than its profits, pointing regularly to write-downs of $1.7 billion on mortgage assets and leaving out the amount it made on its negative bets.

Goldman and other firms often take positions on both sides of an investment. Some are long, which are bets that the investment will do well, and some are shorts, which are bets the investment will do poorly. If an investor's positions are balanced - or hedged, in industry parlance - then the combination of the longs and shorts comes out to zero.

Goldman has said that it added shorts to balance its mortgage book, not to make a directional bet that the market would collapse. But the messages released Saturday appear to show that in 2007, at least, Goldman's short bets were eclipsing the losses on its long positions. In May 2007, for instance, Goldman workers e-mailed one another about losses on a bundle of mortgages issued by Long Beach Mortgage Securities. Though the firm lost money on those, a worker wrote, there was "good news": "we own 10 mm in protection." That meant Goldman had enough of a bet against the bond that, over all, it profited by $5 million.

Documents released by the Senate committee appear to indicate that in July 2007, Goldman's daily accounting showed losses of $322 million on positive mortgage positions, but its negative bet - what Mr. Viniar called "the big short" - came in $51 million higher.

As recently as a week ago, a Goldman spokesman emphasized that the firm had tried only to hedge its mortgage holdings in 2007 and said the firm had not been net short in that market.

The firm said in its annual report this month that it did not know back then where housing was headed, a sentiment expressed by Mr. Blankfein the last time he appeared before Congress.

"We did not know at any minute what would happen next, even though there was a lot of writing," he told the Financial Crisis Inquiry Commission in January.

It is not known how much money in total Goldman made on its negative housing bets. Only a handful of e-mail messages were released Saturday, and they do not reflect the complete record.

The Senate subcommittee began its investigation in November 2008, but its work attracted little attention until a series of hearings in the last month. The first focused on lending practices at Washington Mutual, which collapsed in 2008, the largest bank failure in American history; another scrutinized deficiencies at several regulatory agencies, including the Office of Thrift Supervision and the Federal Deposit Insurance Corporation.

A third hearing, on Friday, centered on the role that the credit rating agencies - Moody's, Standard & Poor's and Fitch - played in the financial crisis. At the end of the hearing, Mr. Levin offered a preview of the Goldman hearing scheduled for Tuesday.

"Our investigation has found that investment banks such as Goldman Sachs were not market makers helping clients," Mr. Levin said, referring to testimony given by Mr. Blankfein in January. "They were self-interested promoters of risky and complicated financial schemes that were a major part of the 2008 crisis. They bundled toxic and dubious mortgages into complex financial instruments, got the credit-rating agencies to label them as AAA safe securities, sold them to investors, magnifying and spreading risk throughout the financial system, and all too often betting against the financial instruments that they sold, and profiting at the expense of their clients."

The transaction at the center of the S.E.C.'s case against Goldman also came up at the hearings on Friday, when Mr. Levin discussed it with Eric Kolchinsky, a former managing director at Moody's. The mortgage-related security was known as Abacus 2007-AC1, and while it was created by Goldman, the S.E.C. contends that the firm misled investors by not disclosing that it had allowed a hedge fund manager, John A. Paulson, to select mortgage bonds for the portfolio that would be most likely to fail. That charge is at the core of the civil suit it filed against Goldman.

Moody's was hired by Goldman to rate the Abacus security. Mr. Levin asked Mr. Kolchinsky, who for most of 2007 oversaw the ratings of collateralized debt obligations backed by subprime mortgages, if he had known of Mr. Paulson's involvement in the Abacus deal.

"I did not know, and I suspect - I'm fairly sure that my staff did not know either," Mr. Kolchinsky said.

Mr. Levin asked whether details of Mr. Paulson's involvement were "facts that you or your staff would have wanted to know before rating Abacus." Mr. Kolchinsky replied: "Yes, that's something that I would have personally wanted to know."

Mr. Kolchinsky added: "It just changes the whole dynamic of the structure, where the person who's putting it together, choosing it, wants it to blow up."

The Senate announced that it would convene a hearing on Goldman Sachs within a week of the S.E.C.'s fraud suit. Some members of Congress questioned whether the two investigations had been coordinated or linked.

Mr. Levin's staff said there was no connection between the two investigations. They pointed out that the subcommittee requested the appearance of the Goldman executives and employees well before the S.E.C. filed its case.


23) Rating Agency Data Aided Wall Street in Mortgage Deals
April 23, 2010

One of the mysteries of the financial crisis is how mortgage investments that turned out to be so bad earned credit ratings that made them look so good.

One answer is that Wall Street was given access to the formulas behind those magic ratings - and hired away some of the very people who had devised them.

In essence, banks started with the answers and worked backward, reverse-engineering top-flight ratings for investments that were, in some cases, riskier than ratings suggested, according to former agency employees.

The major credit rating agencies, Moody's, Standard & Poor's and Fitch, drew renewed criticism on Friday on Capitol Hill for failing to warn of the dangers posed by complex investments like the one that has drawn Goldman Sachs into a legal whirlwind.

But while the agencies have come under fire before, the extent to which they collaborated with Wall Street banks has drawn less notice.

The rating agencies made public computer models that were used to devise ratings to make the process less secretive. That way, banks and others issuing bonds - companies and states, for instance - wouldn't be surprised by a weak rating that could make it harder to sell the bonds or that would require them to offer a higher interest rate.

But by routinely sharing their models, the agencies in effect gave bankers the tools to tinker with their complicated mortgage deals until the models produced the desired ratings.

"There's a bit of a Catch-22 here, to be fair to the ratings agencies," said Dan Rosen, a member of Fitch's academic advisory board and the chief of R2 Financial Technologies in Toronto. "They have to explain how they do things, but that sometimes allowed people to game it."

There were other ways that the models used to rate mortgage investments like the controversial Goldman deal, Abacus 2007-AC1, were flawed. Like many in the financial community, the agencies had assumed that home prices were unlikely to decline. They also assumed that complex investments linked to home loans drawn from around the nation were diversified, and thus safer.

Both of those assumptions were wrong, and investors the world over lost many billions of dollars. In that Abacus investment, for instance, 84 percent of the underlying bonds were downgraded within six months.

But for Goldman and other banks, a road map to the right ratings wasn't enough. Analysts from the agencies were hired to help construct the deals.

In 2005, for instance, Goldman hired Shin Yukawa, a ratings expert at Fitch, who later worked with the bank's mortgage unit to devise the Abacus investments.

Mr. Yukawa was prominent in the field. In February 2005, as Goldman was putting together some of the first of what would be 25 Abacus investments, he was on a panel moderated by Jonathan M. Egol, a Goldman worker, at a conference in Phoenix.

The next month, Mr. Yukawa joined Goldman, where Mr. Egol was masterminding the Abacus deals. Neither was named in the Securities and Exchange Commission's lawsuit, nor have the rating agencies been accused of wrongdoing related to Abacus.

At Goldman, Mr. Yukawa helped create Abacus 2007-AC1, according to Goldman documents. The safest part of that earned an AAA rating. He worked on other Abacus deals.

Mr. Yukawa, who now works at PartnerRe Asset Management, a money management firm in Greenwich, Conn., did not return requests for comment.

Goldman has said it will fight the accusations from the S.E.C., which claims Goldman built the Abacus investment to fall apart so a hedge fund manager, John A. Paulson, could bet against it. And in response to this article, Goldman said it did not improperly influence the ratings process.

Chris Atkins, a spokesman for Standard & Poor's, noted that the agency was not named in the S.E.C.'s complaint. "S.& P. has a long tradition of analytical excellence and integrity," Mr. Atkins said. "We have also learned some important lessons from the recent crisis and have made a number of significant enhancements to increase the transparency, governance and quality of our ratings."

David Weinfurter, a spokesman for Fitch, said via e-mail that rating agencies had once been criticized as opaque, and that Fitch responded by making its models public. He stressed that ratings were ultimately assigned by a committee, not the models.

Officials at Moody's did not respond to requests for comment.

The role of the rating agencies in the crisis came under sharp scrutiny Friday from the Senate's Permanent Subcommittee on Investigations. Members grilled representatives from Moody's and Standard & Poor's about how they rated risky securities. The changes to financial regulation being debated in Washington would put the agencies under increased supervision by the S.E.C.

Carl M. Levin, the Michigan Democrat who heads the Senate panel, said in a statement: "A conveyor belt of high-risk securities, backed by toxic mortgages, got AAA ratings that turned out not to be worth the paper they were printed on."

As part of its inquiry, the panel made public 581 pages of e-mail messages and other documents suggesting that executives and analysts at rating agencies embraced new business from Wall Street, even though they recognized they couldn't properly analyze all of the banks' products.

The documents also showed that in late 2006, some workers at the agencies were growing worried that their assessments and the models were flawed. They were particularly concerned about models rating collateralized debt obligations like Abacus.

According to former employees, the agencies received information about loans from banks and then fed that data into their models. That opened the door for Wall Street to massage some ratings.

For example, a top concern of investors was that mortgage deals be underpinned by a variety of loans. Few wanted investments backed by loans from only one part of the country or handled by one mortgage servicer.

But some bankers would simply list a different servicer, even though the bonds were serviced by the same institution, and thus produce a better rating, former agency employees said. Others relabeled parts of collateralized debt obligations in two ways so they would not be recognized by the computer models as being the same, these people said.

Banks were also able to get more favorable ratings by adding a small amount of commercial real estate loans to a mix of home loans, thus making the entire pool appear safer.

Sometimes agency employees caught and corrected such entries. Checking them all was difficult, however.

"If you dug into it, if you had the time, you would see errors that magically favored the banker," said one former ratings executive, who like other former employees, asked not to be identified, given the controversy surrounding the industry. "If they had the time, they would fix it, but we were so overwhelmed."


24) Don't Call It 'Pot' in This Circle; It's a Profession
April 23, 2010

OAKLAND, Calif. - Like hip-hop, health food and snowboarding, marijuana is going corporate.

As more and more states allow medical use of the drug, and California considers outright legalization, marijuana's supporters are pushing hard to burnish the image of pot by franchising dispensaries and building brands; establishing consulting, lobbying and law firms; setting up trade shows and a seminar circuit; and constructing a range of other marijuana-related businesses.

Boosters say it is all part of a concerted effort to trade the drug's trippy, hippie counterculture past for what they believe will inevitably be a more buttoned-up future.

"I don't possess a Nehru jacket, I've never grown a goatee, I've never grown my hair past the nape of my neck," Allen St. Pierre, the executive director of the National Organization for the Reform of Marijuana Laws said. "And I don't like patchouli."

Steve DeAngelo, the president of CannBe - a marketing, lobbying and consulting firm here - will not even use the word "marijuana." Calling it pejorative, he prefers the scientific term "cannabis."

"We want to make it safe, seemly and responsible," Mr. DeAngelo said of marijuana.

That extends to his main dispensary and headquarters, the Harborside Health Center in Oakland, with its bright fluorescent lights, a clean, spare design, and a raft of other services including chiropractic care and yoga classes. On a recent Friday, the center was packed, with a line of about 50 people waiting as the workers behind the counter walked other customers through the various buds, brownies and baked goods that were for sale.

"If we can't demonstrate professionalism and legitimacy, we're never going to gain the trust of our citizens," Mr. DeAngelo said. "And without that trust, we're never going to get where we need to go."

The ultimate destination, for many supporters, is legalization. Californians will decide in November if that is where they want to go, when they vote on a ballot measure that would legalize, tax and regulate marijuana.

Regardless of the outcome, CannBe says it expects to expand its business model nationwide to become what admirers say will be "the McDonald's of marijuana."

The for-profit company is made up of four proprietors of nonprofit dispensaries and their lawyer. Mr. DeAngelo calls them an "A-team of cannabis professionals."

In late March, it helped lobby the City Council in San Jose, the nation's 10th-largest city, to pass ordinances regulating dispensaries, a crucial step toward a legitimate industry. And last week at a cannabis conference in Rhode Island, Mr. DeAngelo was diversifying his product line, introducing a kind of "pot lite" with less psychoactive agents than regular marijuana and thus popular with what he calls "cannabis-naïve patients."

John Lovell, a California lobbyist who represents two major police groups that oppose legalization, scoffed at the notion that marijuana proponents were cleaning up their act or gaining traction with the public, citing a recent decision by the Los Angeles City Council to sharply curtail the number of medical marijuana dispensaries there.

"They are a neighborhood blight," he said. "Here you have dispensaries that have cash and dope. So, duh? Is it any surprise that they've been magnets for crime?"

But advocates call that characterization unfair and outdated.

"This is an emerging business opportunity, as it would be in any other area," said Ethan Nadelmann, the founder and executive director of the Drug Policy Alliance, which favors legalization.

In California, dispensaries already employ all manner of business gimmicks to survive in an increasingly competitive market. West Coast Cannabis, a trade magazine, has dozens of advertisements for daily specials, free samples, home delivery, gift certificates, scientific testimonials, yoga classes, hypnotherapy, Reiki sessions, coupons, recipes and, of course - being California - free parking.

There are also new schools and seminars that can be used as credit for required continuing education classes for doctors and lawyers.

That includes the Cannabis Law Institute, which was certified last month by the California state bar. It was co-founded by Omar Figueroa, a graduate of Yale University and Stanford law school, who is hosting a seminar in Sonoma County in June that promises to teach attendees about "this fascinating area of the law."

Mr. Figueroa, who said he was voted "most likely to fail a Senate confirmation hearing" at Stanford, said he was earning a good living in marijuana law, but was in it for the experience. "My passion has always been cannabis," he said. "It's the world's most interesting law job."

But it is not just California. Business is also booming in Colorado, which has seen an explosion in the number of dispensaries in the last year. That rapid expansion has alarmed some authorities and sent legislators scrambling to pass new regulations, but has been a boon for law firms like Kumin Sommers L.L.P. in San Francisco, which has merged with Warren C. Edson, a lawyer in Denver representing about 300 Colorado dispensaries. Mr. Edson said many of his clients were curious about decidedly staid fields like workers' compensation, tax withholding and occupational safety.

"There's this real Al Capone fear that they're going to get our guys, not on marijuana, but on something else," Mr. Edson said, referring to how Capone was eventually charged with tax evasion rather than criminal activity.

The federal government continues to oppose any decriminalization of the drug. And while the Obama administration has signaled some leeway when it comes to medical marijuana, raids on dispensaries and growers by law enforcement agencies are still common - even in California, where the industry effectively began in 1996, with the passage of the landmark Proposition 215, which legalized medical marijuana.

Today, rules vary widely in the 14 states that allow medical marijuana, and a final vote on legalization is pending in the District of Columbia. Some states require sellers to prove nonprofit status - often as a collective or cooperative - and all states require that patients have a recommendation from a physician. But even those in favor of medical marijuana believe that the system is ripe for abuse or even unintentional lawbreaking.

"Almost all the dispensaries in California are illegal," said William Panzer, an Oakland lawyer who helped draft Proposition 215. "They're sole proprietorships, not collectives."

Mr. Nadelmann's organization, the Drug Policy Alliance, says it does not take a position on whether those who sell the drug should be nonprofit or not. But he added, "The key people involved are not becoming personally wealthy."


25) Legal Victory Raises Profile of an Atheist Group
April 23, 2010

MADISON, Wis. - Annie Laurie Gaylor clicked through a flurry of e-mail messages warning her to repent or she would burn in hell.

"Herod," one messenger called her.

Ms. Gaylor leaned back and sipped from a cup of tea, unfazed and even a bit surprised at the relative tameness of the attacks. Fresh from her latest godless triumph, she had expected more vitriol.

"It used to be a lot worse," said Ms. Gaylor, 54, an atheist whose organization, the Freedom From Religion Foundation, recently won a suit in federal court here that declared the National Day of Prayer to be a violation of the First Amendment. "Things are changing. Society is becoming more secularized. It's becoming acceptable to be atheist and agnostic. And there are more of us."

The nation's population continues to show signs of becoming less religious, according to the American Religious Identification Survey. The number of people in 2008 calling themselves atheist or agnostic, or stating no religious preference, is an estimated 15 percent, nearly double the percentage in the early 1990s. Around the country, nonbeliever clubs are springing up on college campuses.

Headquartered in a former Episcopal rectory in the shadow of the State Capitol, Freedom From Religion was founded in 1976 by Ms. Gaylor - then a student at the University of Wisconsin - and her mother, Anne Nicol Gaylor, who remains a fierce advocate for "free thought" at age 83. The co-president of the group is Annie Laurie Gaylor's husband, Dan Barker, a former evangelical minister.

The Freedom From Religion Foundation claims a membership of more than 14,000, the largest group in the country advocating for atheists and agnostics. It has doubled its staff to eight in the last year, publishes a newspaper 10 times a year, Freethought Today, and has a weekly radio show. The group counts among its members and vocal supporters Janeane Garofalo, Christopher Hitchens and Ron Reagan.

Over the years, the group has won a suit to stop Bible instruction in a Tennessee school district, overturned a Madison law ordering businesses to close for hours on Good Friday and stopped a Colorado public school from requiring students to do volunteer work at churches.

The group's biggest victory to date came last week when Judge Barbara B. Crabb of Federal District Court ruled that the federal government could not enact a law in support of prayer any more than it could "encourage citizens to fast during the month of Ramadan, attend a synagogue, purify themselves in a sweat lodge or practice rune magic." The law, signed by President Harry S. Truman in 1952, calls on the president to sign a proclamation annually in observance of a National Day of Prayer.

The judge said the ruling would be stayed for 60 days to give the Obama administration, whose lawyers defended the prayer day in court, the chance to file an appeal. On Thursday, the White House said it would appeal and that, in the meantime, the president would sign this year's prayer proclamation, as scheduled, on May 6.

The court ruling drew fire from the private National Day of Prayer Task Force. Michael Calhoun, a spokesman, described it as "an attack upon the religious heritage" of the nation. He criticized the Madison organization.

"It is a sad day in America when an atheist in Wisconsin," he said, "can undermine this tradition for millions of others."

It is still not easy being an atheist in public. No corporate group gives money to the foundation. Ms. Gaylor said she typically avoids making her views on political candidates public, calling it "the kiss of death" to be endorsed by an organization of nonbelievers.

She acknowledged voting for Mr. Obama, and expressed disappointment that his administration has defended the prayer day law. "I don't give him a pass," she said. "He's a constitutional scholar. He knows we're right."

As a middle school student, young Annie Laurie would travel around the state with her mother, who barnstormed for feminist causes like legal abortion and access to contraceptives.

Children at school would sometimes look askance when they learned that she and her siblings were growing up without religion. "But there was a little envy, too," she said. "It was like, 'You mean you don't have to get up in the morning and go to church?' "

The elder Ms. Gaylor, who wrote a book titled, "Abortion is a Blessing," regarded religion as the enemy of equal rights for women. "I never liked fairy tales," she said. "And I didn't like people passing them off as truths."

For his part, Mr. Barker, 60, grew up in Southern California and began evangelizing as a teenager. He left the ministry in his early 30s after coming to realize that he did not believe the Bible.

"I just had to fess up and say, 'This is nonsense,' " Mr. Barker said.

He travels the country spreading the word of another sort - doing what his wife calls "reverse penance" - engaging in debates, delivering talks and offering musical performances in the name of godlessness. He plays the piano and sings atheist songs. One of his favorite numbers: "You Can't Win Original Sin."


26) Health Care Cost Increase Is Projected for New Law
April 23, 2010

WASHINGTON - A government analysis of the new health care law says it will not slow the overall growth of health spending because the expansion of insurance and services to 34 million people will offset cost reductions in Medicare and other programs.

The study, by the chief Medicare actuary, Richard S. Foster, provides a detailed, rigorous analysis of the law.

In signing the measure last month, President Obama said it would "bring down health care costs for families and businesses and governments."

But Mr. Foster said, "Overall national health expenditures under the health reform act would increase by a total of $311 billion," or nine-tenths of 1 percent, compared with the amounts that would otherwise be spent from 2010 to 2019.

In his report, sent to Congress Thursday night, Mr. Foster said that some provisions of the law, including cutbacks in Medicare payments to health care providers and a tax on high-cost employer-sponsored coverage, would slow the growth of health costs. But he said the savings "would be more than offset through 2019 by the higher health expenditures resulting from the coverage expansions."

The report says that 34 million uninsured people will gain coverage under the law, but that 23 million people, including 5 million illegal immigrants, will still be uninsured in 2019.

Republicans said the report vindicated their concerns about the law, which was approved without a single Republican vote. The White House pointed to bright spots in the report and insisted that the law would help bring down costs. In 2004, when Mr. Foster raised questions about cost estimates by the Bush administration, Democrats lionized him as a paragon of integrity.

Mr. Foster says the law will save Medicare more than $500 billion in the coming decade and will postpone exhaustion of the Medicare trust fund by 12 years, so it would run out of money in 2029, rather than 2017. In addition, he said, the reduction in the growth of Medicare will lead to lower premiums and co-payments for Medicare beneficiaries.

But, Mr. Foster said, these savings assume that the law will be carried out as written, and that may be an unrealistic assumption. The cuts, he said, "could become unsustainable" because they may drive some hospitals and nursing homes into the red, "possibly jeopardizing access to care for beneficiaries."

Nancy-Ann DeParle, director of the White House Office of Health Reform, said that fear was unfounded.

Mr. Foster's report, which analyzes the effect of the law on national health spending of all types, has a different focus from studies by the Congressional Budget Office, which concentrated on federal spending and revenues and concluded that the law would reduce budget deficits by a total of $143 billion over 10 years.

In his report, Mr. Foster made these points:

¶The government will spend $828 billion to expand insurance coverage over the next 10 years. Expansion of Medicaid accounts for about half of the cost. The number of Medicaid recipients will increase by 20 million, to a total of 84 million in 2019.

¶People who go without insurance and employers who do not provide coverage meeting federal standards will pay $120 billion in penalties from 2014 to 2019. Individuals will pay $33 billion of that amount, while employers pay $87 billion.

¶The law will reduce consumers' out-of-pocket spending on health care by $237 billion over 10 years, to a total of $3.3 trillion.

Cuts in federal payments to private Medicare Advantage plans will "result in less generous benefit packages," the report said. By 2017, it said, "enrollment in Medicare Advantage plans will be lower by about 50 percent, from its projected level of 14.8 million under the prior law to 7.4 million under the new law."


27) For School Company, Issues of Money and Control
April 23, 2010

When the energy executive Dennis Bakke retired with a fortune from the AES Corporation, the company he co-founded, he and his wife, Eileen, decided to direct their attention and money to education.

Mrs. Bakke, a former teacher, said she had been interested in education since the summer she was a 12-year-old and, together with a friend, opened the Humpty Dumpty Day School, charging $2 a week in "tuition" to parents of the children attending. Mr. Bakke was eager to experiment with applying business strategies and discipline to public schools.

The Bakkes became part of the nation's new crop of education entrepreneurs, founding a commercial charter school company called Imagine Schools. Beginning with one failed charter school company they acquired in 2004, they have built an organization that has contracts with 71 schools in 11 states and the District of Columbia. Imagine is now the largest commercial manager of charter schools in the country.

But as Imagine continues to expand, it is coming under growing scrutiny from school boards and state regulators questioning how public money is spent and whether the company exerts too much control over the schools.

The concerns are being raised as charters, designed by education reformers to create alternatives to hidebound and failing public schools, are becoming an indelible part of the nation's education landscape. Such schools are among the biggest beneficiaries of the billions of dollars the Obama administration plans to spend to improve public education.

Because public money is used, most states grant charters to run such schools only to nonprofit groups with the expectation that they will exercise the same independent oversight that public school boards do. Some are run locally. Some bring in nonprofit management chains. And a number use commercial management companies like Imagine.

But regulators in some states have found that Imagine has elbowed the charter holders out of virtually all school decision making - hiring and firing principals and staff members, controlling and profiting from school real estate, and retaining fees under contracts that often guarantee Imagine's management in perpetuity.

The arrangements, they say, allow Imagine to use public money with little oversight. "Under either charter law or traditional nonprofit law, there really is no way an entity should end up on both sides of business transactions," said Marc Dean Millot, publisher of the report K-12 Leads and a former president of the National Charter Schools Alliance, a trade association, now defunct, for the charter school movement.

"Imagine works to dominate the board of the charter holder, and then it does a deal with the board it dominates - and that cannot be an arm's length transaction," he said.

Such concerns have thwarted efforts by Imagine to open a school in Florida, threaten to stall its push into Texas, and have ended its business with a school in Georgia and another in New York, as well as other states.

Imagine is not shy about the way it wields its power, which it calls essential to its governing philosophy. "Imagine Schools operates the entire school, and is not a consultant or management company," its Web site says. "All principals, teachers, and staff are Imagine Schools people. The Imagine Schools culture is meant to permeate every aspect of the school's life."

Mrs. Bakke, who is paid $100,000 as vice president of education at Imagine, says it works in "close partnership" with the boards of the schools it manages. "The governing boards are definitely in charge, but they look to us, frankly, because as you know, nonprofit boards are well meaning but don't always have the experience and expertise running the schools," she said in an interview.

She said that she and her husband, who is paid $200,000 as the company's chief executive, sank $155 million into Imagine and that they were able to run schools efficiently. "We offer a great deal for communities and for taxpayers," Mrs. Bakke said, "because we're providing education at less than what a traditional school is spending."

She says the company should be judged by its educational results, not its business and financial arrangements.

As measured by testing mandated under the No Child Left Behind law, the academic achievements of schools managed by Imagine are mixed, like those of most charter schools. But Imagine says that many students in the schools it manages enter with academic abilities below their grade level and that a better measurement of its success is the rate at which they are catching up.

Its analysis of test data taken at the beginning and end of the 2008-9 school year shows that 89 percent of its schools had learning gains better than public schools serving similar populations of students.

"We have high expectations," Mrs. Bakke said. "Academic performance matters."

Nonprofit or Commercial?

Mrs. Bakke said her company "is operated as a not-for-profit." But Imagine is not a nonprofit group, and it has so far failed to gain status as a charity from the I.R.S.

Imagine applied for federal tax exemption in 2005 and has repeatedly said approval is imminent. It typically takes four to six months for such approvals. "We're not sure why it's taking so long," said Mrs. Bakke, who is 56. "We suspect it's because we're trailblazers in a sense, and they haven't had an application quite like this."

The I.R.S., as is its policy, declined to comment.

The lack of status as a federally approved nonprofit group is proving to be one of Imagine's biggest challenges. So it often gets involved with schools at their inception, recruiting board members or hitching its wagon to nonprofit groups that can obtain a charter, as it did in Las Vegas, where it teamed with 100 Black Men of Las Vegas to open an elementary school, the 100 Academy of Excellence. The school opened in 2006, and the county school board soon began documenting problems. It found the school's bookkeeping under Imagine to be lax, and it said that the school lacked enough licensed teachers.

The school has had three principals in four years, two of whom were pressured to resign after complaining that there was not enough money for essentials like textbooks and a school nurse. The state said that by paying Imagine for necessities like furniture and computers, the school had violated regulations requiring competitive bidding. It further violated state law by running a deficit, which left it in debt to Imagine.

Mrs. Bakke declined to comment on issues raised at specific schools. "In all cases we strive to operate with high ethical standards, set high standards for performance, hire the best possible people, and correct mistakes as quickly as possible," she wrote in an e-mail message.

Some schools say they are happy with Imagine's management. At Hope Community Charter School in the District of Columbia, which opened in 2005 and where Imagine helped identify board members, the board agreed to pay Imagine virtually all of the school's revenue, to allow Imagine to set the school's budget subject only to approval that "shall not be unreasonably withheld or delayed," and to seek Imagine's approval for how it spends charitable gifts.

James Kemp, the board chairman, said that District of Columbia charter school regulators had repeatedly expressed concerns about the arrangements. He also said that even the school's own auditors chided the board for allowing Imagine to pay several large bills without its approval, as required under contract.

"The charter board has alerted us and me specifically that this is not the normal way charter schools run, having their management company as involved as Imagine is with our school," Mr. Kemp said. "But that's the way we've set this up, and we're happy with it."

Josephine Baker, executive director of the District of Columbia Public Charter School Board, which grants and oversees charters in Washington, said the board had concerns about who was running the show at Hope Community.

"It's not just Imagine, though Imagine is the one that probably has given us the most concern," she said. "We find it is very hard for schools that hire management companies to maintain their independence, and charter schools are supposed to be independent."

Mrs. Baker said she did not think the contract between Imagine and Hope Community would be approved today, in part because the entire model of using management companies is flawed. "There are not a whole lot of charter schools that are just marvelous, and those that are do not have management companies," she said.

In Texas, parents trying to open a charter school for elementary school students thought that Imagine was going too far.

"Imagine did a few things that indicated they thought the charter belonged to them, which was not our understanding at all," said Karelei Munn, who is part of a group working to establish a charter school in Georgetown, Tex., near Austin. "We were looking to control our board, and they were looking to control our board."

Ms. Munn and other members of the group holding the charter broke their ties with Imagine and are trying to form a school on their own.

Regulators in Texas have been slow to approve a second Imagine school, citing concerns that include an e-mail message from Mr. Bakke to the company's senior staff members that was reported on by The St. Louis Post-Dispatch last fall. In the message, dated Sept. 4, 2008, Mr. Bakke cautioned his executives against giving boards of schools the "misconception" that they "are responsible for making big decisions about budget matters, school policies, hiring of the principal and dozens of other matters."

Instead, he wrote, "It is our school, our money and our risk, not theirs."

Mr. Bakke, who is 64, suggested requiring board members to sign undated letters of resignation or limiting board terms to a single year.

In a statement after the e-mail message was disclosed, Mr. Bakke apologized to board members "who felt offended or maligned," saying he had "overstated my personal frustration in ensuring that the dedicated, caring people who hold the seats of charter governing boards at Imagine Schools understand and support our mission and operating philosophy."

As Texas continues its consideration, the e-mail message helped upend Imagine's plans to open a school in the Hillsborough County School District in Florida, which encompasses Tampa.

"That e-mail was very, very bad for them," said Jenna Hodgens, the local supervisor of charter schools. "All the things we had been questioning, things about control of the school, he answered in his own words."

The Hillsborough school board rejected the application in December. "Charter schools are not private schools, they are public schools and are governed as such," said Susan Valdes, who heads the board. "Some, though, are starting to forget that - and they're getting away with it. But not here."

Fees, Rent and Bank Accounts

Some schools that have contracted with Imagine have feuded with the company over fees. Imagine typically charges 12 percent of a school's revenue for basic services. It then may tack on fees, for example, for guaranteeing a school access to credit if needed or to cover the costs of flying Imagine personnel in to address problems.

The Kennesaw Charter School in Kennesaw, Ga., ended its contract with Imagine in February over such issues.

Under its original contract with Imagine, the Kennesaw school board forwarded all revenue it received from the state and district to a bank account in Florida controlled by Imagine to pay salaries and other expenses. Kennesaw's board had full discretion over just $20,000, said Lori Hardegree, a board member.

If the school had money left over at the end of the year, the surplus was paid as a fee to Imagine.

Minutes of board meetings and reporting by the local school district show that the board had trouble getting information from Imagine about how it was using the money. And the school owed Imagine $1.2 million, in part for what the company spent to cover damage from a hurricane but also partly for expenses the company described as "off the books" and never fully accounted for to the school board's or the district's satisfaction.

It took Kennesaw more than a year of negotiations to break up with Imagine, and it still owes the company roughly $480,000. But board members say they are finding that they are saving money by running the school themselves.

"For one thing, we're saving $30,000 that went out each month to pay Imagine's fees," Ms. Hardegree said. "We're finding we're saving money on every contract that we're negotiating on our own."

In New York, the Bronx Academy of Promise Charter School agreed to pay Imagine 12 percent of its revenue as a fee, and an additional 2.5 percent was charged to ensure Imagine would extend a loan to the school should it need one. The doors had hardly opened when the school's board and principal began having problems with Imagine.

"It was rather baffling, but as a management company, they weren't providing any management services," said one person who has worked with the school and spoke anonymously for fear of retaliation. "With the exception of payroll processing and some accounting support, it wasn't really clear what they were doing for the school."

At the end of its first school year last May, Bronx Academy broke its contract with Imagine. Mrs. Bakke said that Imagine provided a full battery of educational, financial and administrative services to the Kennesaw school and the Bronx Academy. "Both boards were fully aware of start-up and other costs incurred by Imagine, and the obligation to repay those costs in the event of a termination of contract," she wrote in an e-mail message.

The Ties That Bind

One of the most difficult tasks for a charter school is getting a building. Only a few cities like New York or Washington help such schools with real estate. And charter schools cannot use tax-exempt bonds to raise money the way public school systems can.

Mrs. Bakke said that Imagine's real estate activities ease that burden for charter schools and are one of the biggest assets it brings to the table. "Our organization brings new investment into public education and avoids the need for the local community to float school bonds," she wrote in an e-mail message.

But some regulators and school officials say that Imagine uses debt and real estate to bind schools to it.

Imagine typically buys or leases buildings through a real estate arm, SchoolhouseFinance, and uses those properties to attract groups wanting to open charter schools that then pay to rent them.

Last year, Imagine sold 27 of its school buildings to Entertainment Properties Trust, a real estate investment trust that is the country's largest owner of movie theaters, as part of a deal that won the company $206 million. The buildings that were sold were leased back by Imagine, which then subleased them to the schools that occupy them.

In February, the company sold seven more schools to Inland American Real Estate Trust for $61 million in a similar arrangement.

Mrs. Bakke said a portion of the proceeds from the sale of those buildings was used to pay off bank debt and construction costs, with the remainder going to buy or construct new buildings and into the operations of existing schools. But board members of eight schools said they were never consulted about the sales or the decision by Imagine to commit them to leases. In at least some cases, Imagine makes money on the subleases. Bronx Academy, for example, paid Imagine $10,000 a month more in rent than the company paid the owner of its building.

The rents the company charges schools it manages now are one of the things threatening to scuttle its agreements with the two schools it manages in Nevada, the 100 Academy of Excellence and Imagine School in the Valle.

Last year, almost 40 percent of the $3.6 million that Nevada paid 100 Academy was spent on rent. Less than half of its total revenue, about 41 percent, was used to cover salaries and benefits for teachers and administrators, who are employees of Imagine.

In contrast, a charter school in Las Vegas of about the same size that operates without a commercial management company, Innovations International Charter School of Nevada, spent 74 percent of its total revenue on salaries and benefits, according to figures provided by Gary A. Horton, an administrator at the Nevada Department of Education.

"After paying for real estate and management, 100 Academy has very little left over for education," Mr. Horton said.


28) Schools in New Jersey Plan Heavy Cuts After Voters Reject Most Budgets
April 21, 2010

School officials across New Jersey said on Wednesday that they would most likely have to lay off hundreds of teachers, increase class sizes, eliminate sports teams and Advanced Placement classes, cut kindergarten hours and take other radical steps to reduce spending after 58 percent of districts' budgets were rejected by voters on Tuesday, the most in at least 35 years.

Residents went to the polls in record numbers for the normally low-profile school-budget elections, and rejected 316 of the 541 budgets on the ballot. They were angered by higher property taxes that were sought to make up for unusually large state aid reductions proposed by Gov. Christopher J. Christie, along with resentment toward teachers' unions for not agreeing to wage freezes or concessions.

The message of "enough is enough" resounded across the state, from urban to rural districts, and even in well-to-do suburban communities like Ridgewood, where residents are particularly proud of their schools. It was a drastic change from a year ago, when voters approved nearly three-quarters of the school budgets during the height of the economic downturn.

The election results sent school officials hurrying to prepare contingency plans to present to their town councils, or local municipal boards, which now must review the budgets and decide by May 19 whether to demand more cuts. (School officials can appeal those decisions to the state.) Many students and parents were anxious and unsure about what else they could lose.

At Teaneck High School, hundreds of students walked out of their classrooms Wednesday morning for an hourlong march around the school's football field to protest the budget's defeat in a vote of 4,790 to 3,618. The $94.9 million budget had called for a record 10.2 percent increase in school taxes.

Teaneck officials said they would now have to consider cuts that they had hoped to avoid, like increasing some classes to more than 30 students; reducing AP courses; cutting athletic teams; and eliminating several dozen positions more than the 21 that had been planned. "At this point, all bets are off," said Dave Bicofsky, a spokesman for the district.

Tuesday's elections capped weeks of political drama between Governor Christie and the state's largest teachers' union, the New Jersey Education Association, over his efforts to pressure teachers to renegotiate their contracts. Mr. Christie, who is trying to close an $11 billion deficit, has proposed to cut direct state aid to districts by up to 5 percent of their operating budgets.

Mr. Christie exhorted New Jerseyans to use the budget votes to take a stand against school spending, particularly in districts where unions refused to freeze wages. The results suggest that people listened: Statewide, voter turnout rose to 26.7 percent from 15 percent last year.

"You have schools saying they were efficient but they could not accept a 5 percent cut," said Jerry Cantrell, president of the New Jersey Taxpayers Association and a former school board president in Randolph. "That just did not ring true to a lot of people. I think the bottom line was economics."

Stephen K. Wollmer, communications director for the New Jersey Education Association, said that Mr. Christie had made a difficult situation worse. "He whipped the public into a frenzy, and convinced some of them that if they would vote down their budgets and extract a pay freeze from teachers, they could solve all their problems," Mr. Wollmer said. "It's just not true."

Budgets also failed in 6 of the 19 districts where there had been wage freezes or concessions by teachers.

In Ridgewood, where a 4 percent tax increase was narrowly rejected on Tuesday, residents have expressed frustration at recent school board meetings over what they saw as teachers unwilling to make sacrifices like everyone else in a tough economy. The district had proposed an $84.9 million budget. (Voters last rejected the budget in 2003.)

Many school officials said students were the losers in Tuesday's elections.

"We've made our budget as lean as possible, and even beyond that, so any further cuts will have an impact on our students," said John Crowe, the Woodbridge superintendent.

In West Orange, the district's budget - $118 million, including a 7.3 percent tax revenue increase - was rejected for the first time in a decade.

Anthony Cavanna, the superintendent, said he had already planned to lay off 84 employees, including 39 teachers, reduce bus service, cut back on music and art instruction, offer fewer vocational education courses, and trim extracurricular activities. Now he is considering heavier steps, like cutting kindergarten to a half day, ending Spanish classes and guidance counselors in the elementary schools, reducing library and nursing staffs, and dropping middle school and freshman sports teams.

"These would be devastating cuts," Mr. Cavanna said.