September 30, 2009

Swine Flu: CDC Mixes H1N1, H5N1 Viruses in Tests

CDC Novel H1N1 Vaccination Planning Q&A

From the Centers for Disease Control Website:

Vaccine Distribution

Q. When will the decision to administer vaccine be made?
A. For planning purposes, it should be assumed that vaccine will be administered beginning in the fall.

Q. When will vaccine shipping begin?
A. Planners should assume shipping of vaccine will begin mid-October, although there is a possibility that some vaccine will be available for shipping starting late September.

Q. How many manufacturers are producing vaccine?
A. Five manufacturers are producing vaccine for the U.S.: Sanofi Pasteur, Novartis, GSK, Medimmune and CSL.

Q. How will vaccine be shipped to projects areas (CDC Public Health Emergency Preparedness grantees)?
A. Vaccine will be shipped to clinics, offices, health departments, and other project area-designated sites which may include a mix of public health and private sector sites via centralized distribution. This is the same process that is used to ship vaccines for the childhood immunization program to immunization providers. CDC's centralized distribution mechanism will be substantially enhanced to provide capacity for this activity in addition to shipping of other vaccines.

Q. Will project areas (CDC Public Health Emergency Preparedness grantees) be able to limit the amount of vaccine they receive?
A. Yes, project areas will be able to determine what proportion of their allocation they wish to receive.

Q. How frequently will vaccine shipments arrive?
A. As details of distribution are finalized, CDC will communicate with states about the anticipated time period between placing vaccine orders and receiving shipments.

Q. How many sites can be designated as vaccine receiving sites?
A.One of the key benefits of using a centralized, third party distributor to support H1N1 vaccine distribution is that it allows distribution of doses to a much larger number of providers sites than would be feasible with direct manufacturer distribution. Thus, we will be able to serve a significantly larger provider base than the original state ship to sites, and are planning to be able to accommodate more providers than are currently served by the VFC program. More information, including any limitations in the number of vaccine receiving sites, will be shared with state planners as soon as it becomes available.

Q. Will vaccine be in multi-dose vials?
A. The majority of vaccine will be in multi-dose vials, the remainder in single dose syringes or nasal sprayers. The aim is to have enough vaccine in single dose syringes (i.e. preservative free) for young children and pregnant women.

Vaccine Purchase

Q. How will novel H1N1 vaccine be purchased?
A. Novel H1N1 vaccine will be procured and purchased by the federal government and made available for vaccinators at no cost. See section below titled “Vaccine administration fees” for information on cost of administration.

Vaccine Administration Fees

Q. Will insurance plans reimburse private providers for administration?
A. CDC asked America's Health Insurance Plans (AHIP) and on behalf of its members, AHIP provided this response:

"Every year health plans contribute to the seasonal flu vaccination campaign in several ways:

a) Health plans communicate directly with plan sponsors and members on the current ACIP recommendations and encourage immunization; they also provide information on where to get vaccinations, and who to contact with any questions.

b) Just as health plans have provided extensive coverage for the administration of seasonal flu vaccines in the past, public health planners can make the assumption that health plans will provide reimbursement for the administration of a novel (A) H1N1 vaccine to their members by private sector providers in both traditional settings e.g., doctor’s office, ambulatory clinics, health care facilities, and in non-traditional settings, where contracts with insurers have been established"

Q. Will private providers be able to charge patients for vaccine administration if they are uninsured?
A. Yes, providers may charge patients if they are uninsured. The administration fee cannot exceed the regional Medicare vaccine administration fee.

Q. Can persons be charged for vaccine administration in public health-organized large scale vaccination clinics?
A. There will be no administration fee for vaccination in public-health organized large scale vaccination clinics.

Vaccine Allocation

Q. How will vaccine be allocated among project areas (the CDC PHEP grantees)?
A. Vaccine will be allocated to each project area in proportion to its population (pro rata).

Q. Will there be a separate allocation for active duty DOD?
A. Yes, there will be a separate allocation for active duty DoD. It is not included in the project area allocations.

Q. Will there be a separate allocation for DoD dependants, retirees and civilian employees?
A.There is no separate allocation for these groups. Military facilities may be willing to vaccinate these groups, but will need to be allocated vaccine for these populations by the project areas.

Q. Will there be a separate vaccine allocation for IHS-served populations and other tribal communities?
A. There will be no separate allocation. States and local areas need to work with their tribal populations to ensure access to vaccine.

Ancillary Supplies

Q. Which ancillary supplies will be provided with vaccine?
A. HHS will provide needles, syringes, sharps containers and alcohol swabs.

Q. How will ancillary supplies be distributed?
A. Ancillary supplies will be distributed to the same project area-designated sites as vaccine. Plans for ensuring the distribution of these products are currently being developed.

Vaccine Administration

Q. Will two doses of vaccine be required?
A.The U.S. Food and Drug Administration (FDA) has approved the use of one dose of 2009 H1N1 flu vaccine for persons 10 years of age and older. Data from trials among children are not available at this time, so dosing schedules for children are not yet known. Data from trials among children will be available soon. At this time, FDA has approved two doses for children 9 years of age and younger. Immunogenicity data for the 2009 flu H1N1 vaccine among adults is similar to that for seasonal influenza vaccines. If this is also the case among children, then it is likely that younger children will require two doses and older children will require one dose, as licensed. As with seasonal vaccine, children ages 6 months through 35 months get two doses of 2009 H1N1 flu vaccine that contains one-half the dose used for older children and adults.

Q. What will be the recommended interval between the first and second dose for children under 9 years of age?
A. This will not be known until clinical trials are complete. For planning purposes, planners should assume 21-28 days between the first and second vaccination.

Q. How much Thimerosal-free vaccine will be available?
A. It is anticipated that enough thimerosal-free vaccine in pre-loaded syringes will be available for young children and pregnant women.

Q. Will there be federal requirements to recall persons for their second dose, if a second dose is needed?
A. There will be no federal requirement to send out recall notices. Providing information on second dose at the time of the first dose, as well as using the media to disseminate this message will be the primary means of educating persons about who needs a second dose administered.

Q. Will it be necessary for the first and second dose to be the same product?
A. Ideally, first and second doses would be from the same product. However, practical considerations make this difficult to implement. Planners should assume they will be interchangeable.

Q. Can seasonal vaccine and novel H1N1 vaccine be administered at the same time?
A. Inactivated 2009 H1N1 vaccine can be administered at the same visit as any other vaccine, including pneumococcal polysaccharide vaccine. Live 2009 H1N1 vaccine can be administered at the same visit as any other live or inactivated vaccine EXCEPT seasonal live attenuated influenza vaccine

Q. Will vaccine be adjuvanted?
A. It is unlikely H1N1 vaccine will be adjuvanted. Definitive information will be available once clinical trial data are available.

Q. If vaccine is adjuvanted, how will it be formulated?
A. Formulation will vary by provider. For Novartis, vaccine may be preformulated with adjuvant. For CSL, GSK and Sanofi Pasteur, mixing of vaccine and adjuvant at the site of administration will be necessary. Specific information on storage requirements and procedures for mixing vaccine and adjuvant will be provided by CDC. Medimmune vaccine will not be adjuvanted.

Q. Will the vaccine be administered under EUA (Emergency Use Authorization)?
A. EUA will not be used for unadjuvanted vaccine if FDA licenses the vaccine under the current BLA (Biologics License Application) as a strain change.

Q. For whom will novel H1N1 vaccine be recommended?
A. The Centers for Disease Control and Prevention’s Advisory Committee on Immunization Practices (ACIP) met on July 29th to develop recommendations on who should receive the novel 2009-H1N1 vaccine when it becomes available, and to determine which groups of the population should be prioritized if the vaccine is initially available in extremely limited quantities. The committee recommended that vaccination efforts initially focus on 5 target groups: vaccination for pregnant women, people who live with or care for children younger than 6 months of age, healthcare and emergency medical services personnel, persons between the ages of 6 months through 24 years, and people ages 25 through 64 years who are at higher risk for novel H1N1 because of chronic health disorders or compromised immune systems. We do not expect that there will be a shortage of novel H1N1 vaccine, but flu vaccine availability and demand can be unpredictable and there is some possibility that initially, the vaccine will be available in limited quantities. So, the ACIP also made recommendations regarding which people within the groups listed above should be prioritized if the vaccine is initially available in extremely limited quantities. For more information see the CDC press release CDC Advisors Make Recommendations for Use of Vaccine Against Novel H1N1. Once the demand for vaccine for the prioritized groups has been met at the local level, programs and providers should also begin vaccinating everyone from the ages of 25 through 64 years. Current studies indicate that the risk for infection among persons age 65 or older is less than the risk for younger age groups. However, once vaccine demand among younger age groups has been met, programs and providers should offer vaccination to people 65 or older. (see

Q. Will there be flexibility in how states implement the recommendations?
A. The recommendations are broad and allow for flexibility to accommodate local variability in vaccine needs and demands. Providers should be aware of and follow any additional guidance provided by their state or local health departments. If no additional guidance is provided at the state or local level, providers should vaccinate among the initial target group populations on a first come, first served basis.

Q. Given the potential for large amounts of vaccine available during the first month of vaccine shipments, are priority groups needed?
A. It is not expected that there will be a shortage of novel H1N1 vaccine, but availability and demand can be unpredictable, and there is some possibility that initially the vaccine will be available in limited quantities and priority groups may be needed.

Q. Will there be requirements regarding documentation of priority group membership?
A. There will be no federal requirements for vaccinators to require documentation of priority group status such as a doctor’s note documenting pregnancy or risk status.

Ten Swine Flu Lies Told By the Mainstream Media (Excerpt)

September 18, 2009

NaturalNews - The mainstream media is engaged in what we Americans call "bald faced lies" about swine flu. It seems to be true with this issue more than any other, and it became apparent to me recently when a colleague of mine -- a nationally-syndicated newspaper columnist -- told me their column on natural defenses for swine flu was rejected by newspapers all across the country. Many newspapers refused to run the column and, instead, ran an ad for "free vaccine clinics" in the same space.

The media, it seems, is so deeply in bed with the culture of vaccinations that they will do almost anything to keep the public misinformed. And that includes lying about swine flu vaccines.

There are ten key lies that continue to be told by the mainstream media (MSM) about swine flu and swine flu vaccines.

Lie #1 - There are no adjuvants used in the vaccines
Lie #2 - The swine flu is more dangerous than seasonal flu
Lie #3 - Vaccines protect you from swine flu
Lie #4 - Vaccines are safe
Lie #5 – The vaccine isn’t mandatory
Lie #6 – Getting a vaccine shot is a good bet on your health
Lie #7 – The vaccine isn’t made with “attenuated live virus”
Lie #8 – Wash, wash, wash your hands (to avoid exposure)
Lie #9 – Children are more vulnerable to swine flu than adults
Lie #10 – There is nothing else you can do beyond a vaccine and Tamiflu...

VIDEO: Dr. Mercola Interviews Dr. Baylock On Vaccines

First U.S. H1N1 Vaccines Will Be Nasal Spray: CDC

September 18, 2009

Reuters - The first U.S. roll-out of vaccines against the new swine flu virus will be 3.4 million doses of MedImmune's nose spray, the Centers for Disease Control and Prevention said on Friday.

The CDC's Dr Jay Butler said the vaccines would be distributed the first week of October.
"Initially we anticipate that 3.4 million doses of vaccine will be available," Butler told a telephone briefing.

"We anticipate being able to start receiving orders for the vaccine by early October," Butler added. The U.S. government is providing the H1N1 vaccine for free to about 90,000 distributors, including doctor's offices, retail chains and state health departments.

"We estimate that the amount of vaccine that will be available will increase through October," Butler said, adding that eventually delivery would rise to about 20 million doses a week.
The United States has ordered 195 million doses of H1N1 swine flu vaccine from five companies -- MedImmune, a unit of AstraZeneca, Sanofi-Aventis, Australia's CSL, GlaxoSmithKline and Novartis.

It has recommended that about 160 million people, roughly half the population, get vaccinated first -- pregnant women, healthcare workers, children and people with chronic conditions such as diabetes or asthma who are most at risk of getting very ill from flu. There is no enforcement of this, however, and it will be up to the people giving the vaccine to decide who goes first.
MedImmune's vaccine is not approved for people with asthma, people over age 50 or very young children, mostly because it has not yet been tested widely in these groups. State health officials say that might affect who gets the first doses.

Some of the other vaccines contain thimerosal, a preservative that scientists say is safe but which worries some people, and the state of Washington, for instance, says infants and pregnant women may not be given thimerosal-containing vaccines, another factor that could affect distribution.


The CDC officials said they are racing to try to stay ahead of the virus, which is now active in all 50 states. It spread around the world to cause a pandemic within a few weeks in April and May.
"The flow of vaccine the first week or so may be slower than we like," Butler said.
So far, the virus is causing moderate disease, with a death rate similar to that seen in seasonal flu. Every year, seasonal influenza kills between 250,000 and 500,000 people globally and around 36,000 in the United States.

But H1N1 may infect far more people than seasonal flu does, because so few people have any immunity to it. It also causes symptoms in a far younger age group than does seasonal flu, which is worse among the elderly.
"We expect that if the H1N1 (virus) remains the predominate strain, that more younger people might be affected than we have seen in the past," the CDC's Dr Daniel Jernigan said.

"There is some increase in the rate of hospitalization for younger children and for adults, but it is not up at the levels that we would see for seasonal flu."

He said it was very unusual to have so much flu spreading this time of year in the United States. It is usually more common in the United States from January to March.

"It's about twice as much, at least for what we would expect this time of year," Jernigan told the briefing.

"If you talk to doctors they will tell you, 'boy I am seeing a lot of flu for this time of year,'" he added.

More Deadly Swine Flu? CDC Mixes H1N1, H5N1 Viruses in Tests

September 17, 2009

WSJ's Health Blog - Public-health officials are breathing a small sigh of relief that the H1N1 swine flu virus hasn’t mutated to become more deadly since emerging last spring. But what are the chances it will?

To find out, scientists at the CDC recently launched experiments in the agency’s labs in which they infected ferrets with both the new H1N1 virus and the highly lethal H5N1 avian flu virus to see if they might “reassort” to create a new hybrid.

The scientists want to know whether a combination of the H1N1 virus -– highly transmissible, but not terribly deadly -– and the H5N1 flu virus could create an easily transmissible, deadly scourge.
The H5N1 virus has only sickened 440 people world-wide since 2003 and generally isn’t transmitted from one person to another. But it has killed 262, or about 60%, of those people, according to the World Health Organization.

As the new H1N1 flu has spread, flu experts have kept a close eye on Egypt and parts of the world where human H5N1 infections are occurring too. The new H1N1 virus was also detected recently in turkeys in Chile, proving that it has the capacity to jump to birds, another potential source for reassortment.
The two viruses could mix if they infected the same person simultaneously.

The CDC scientists don’t have results of their lab experiments in ferrets yet, said Michael Shaw, associate director for laboratory science for the agency’s influenza division. While the experiments could produce viable combinations of the two viruses, the real question is whether any could create a virus that would spread, he said.
“Viability is one thing,” he cautioned. “Whether it’s easily transmissible is another.”
Other experiments conducted so far suggest the new H1N1 virus isn’t terribly prone to doomsday changes. Viruses can change through either mutation of genetic material, or by reassorting with another flu virus. The new virus is lacking certain characteristics that would allow it to mutate to become more virulent, said Nancy Cox, chief of the CDC’s influenza division.
“It would be difficult for this virus to acquire some of those known virulence markers,” she said.
As for reassortment, so far the new H1N1 virus hasn’t shown a penchant for mixing with other common flu viruses. In a research note published in late August on the web site PloS Currents: Influenza, scientists infected ferrets both with the new H1N1 virus and common seasonal strains of H1N1 and H3N2 flu. The new H1N1 pandemic virus didn’t reassort.
“Co-infection of seasonal and pandemic strains did not result in the rapid selection of reassortant viruses that either improved replication or transmission or exacerbated virulence,” they concluded. The federally funded study was led by scientists at the University of Maryland.
Whatever any of the experiments show, CDC officials warn against drawing definitive conclusions.
“Influenza is really unpredictable,” Cox said.

H1N1 Trials to Use Drug Cocktail

September 13, 2009

USA TODAY — Scientists are racing to launch the first major trials of a multi-drug flu cocktail to see if it can prevent complications in high-risk H1N1 (swine flu) patients, researchers said Sunday.

All three of the drugs — amantadine, ribavirin and Tamiflu — are already on the market. All are mainstays of flu treatment that have lost much of their punch because of flu viruses’ ability to throw up new defenses against antivirals. But research reported Sunday suggests that doctors may be able to breach viruses’ defenses by using them together.

Researchers said the triple combination is broadly effective against many different flu viruses, even those resistant to one or more of the drugs in the combo. The most unexpected finding was that each drug appears to regain some measure of its effectiveness against resistant viruses when given with the other two drugs, said lead researcher Mark Prichard of the University of Alabama-Birmingham.
“We were frankly very surprised,” Prichard told participants at a meeting of the American Society for Microbiology.
Secretary of Health Kathleen Sebelius on Sunday offered an upbeat vaccine report, saying on ABC’s This Week that some flu shots may arrive the first week of October, a few days earlier than expected.

Nancy Cox of the Centers for Disease Control and Prevention said the first shipments will be small and reserved for priority groups such as young people and pregnant women “as far as possible.” She said evidence that one shot offers protection was a big confidence-booster that prompted the government to speed up its timetable.

Tests of the triple-drug combo are underway in the Southern Hemisphere and are starting in the USA, Canada and Europe, said virologist Amy Patick of Adamas Pharmaceuticals in Emeryville, Calif. Adamas sponsored the tests using a fixed-dose mix of amantadine and ribavirin and Roche’s Tamiflu. Researchers will pit the combo against Tamiflu alone in 250 people at 40 medical centers.

Jon McCullers of St. Jude Children’s Research Hospital in Memphis said Adamas has asked him to take part. Doctors may now use combination therapy, he said, but so far they haven’t had to because in most cases Tamiflu alone is effective against swine flu which is still vulnerable to it.

Combo therapy will be most useful when swine flu develops resistance to Tamiflu or when more drug-resistant viruses begin to circulate, crowding swine flu out, he said.

Commercial Real Estate Lurks as Next Potential

For Commercial Real Estate, Hard Times Have Just Begun

September 1, 2009

New York Times - ...These days, the people who buy and sell office buildings, shopping centers, warehouses, apartment buildings and hotels are hardly in a festive mood, despite some recent encouraging signs relating to the job and housing markets and a recent increase in sales of small office buildings.

Even though industry lobbyists were able to persuade Congress to extend a loan program aimed at prodding the stalled securitization market back to life, several analysts said it was unlikely to head off a spate of defaults, foreclosures and bankruptcies that could surpass the devastating real estate crash of the early 1990s. “It will prop up a few deals, but you can’t stop the wave that’s coming,” said Peter Hauspurg, the chief executive of Eastern Consolidated, a New York brokerage firm.

The distress is still in its early stages, analysts said. “We are between the first and second inning,” said Richard Parkus, who directs research on commercial mortgage-backed securities for Deutsche Bank. “We’re going to have to get through a very difficult period.”

Mr. Parkus said that vacancy increases and rent declines already mirrored what happened in the 1990s, and until new jobs were created, generating an increase in demand for commercial space and more retail spending, this was not likely to be reversed.

Building values have declined by as much as 50 percent around the country, and even more in Manhattan, where prices soared the highest. As many as 65 percent of commercial mortgages maturing over the next few years are unlikely to qualify for refinancing because of the drop in values and new stricter underwriting standards, he said.

Fitch Ratings recently reported that $36.1 billion in securitized loans — mortgages pooled, sliced into different categories of risk and sold to investors — have been transferred so far this year to a “special servicer,” an agency that handles troubled loans. Such a transfer is prompted by a bankruptcy, a 60-day delinquency or the prospect of an imminent default. In all, some 3,100 loans representing $49.1 billion, or 6.1 percent of the total, are currently in special servicing, an amount that could grow to nearly $100 billion by the end of the year, Fitch said.

But the damage is expected to be even greater for banks, which are holding $1.3 trillion in commercial mortgages (including apartment buildings) and $535.8 billion in construction and development loans, said Sam Chandan, the president of Real Estate Economics, a New York research company. About $393 billion worth of mortgages are scheduled to mature by the end of next year alone, and an estimated $39 billion more were due to expire this year but have been extended, he said.

By midyear, Real Capital Analytics, a New York research company, had identified $124 billion worth of distressed property. Less than 10 percent of the distress had been resolved through loan modifications or sales.

The downturn in commercial real estate is already having repercussions for local governments. New York City’s general fund, to cite an example, collected $2.1 billion from transfer and mortgage recording taxes at the peak of the market in the 2007 fiscal year, according to Frank Braconi, chief economist for the comptroller’s office. This fiscal year, it is expected to receive only $767 million, he said.

In New York, with its concentration of tall office towers, commercial mortgage-backed securities play a bigger role than they do elsewhere. The brokerage firm CB Richard Ellis estimates that about half the transactions in recent years involved securitized financing...

Commercial Real Estate Lurks as Next Potential Mortgage Crisis

August 31, 2009

Wall Street Journal - Federal Reserve and Treasury officials are scrambling to prevent the commercial-real-estate sector from delivering a roundhouse punch to the U.S. economy just as it struggles to get up off the mat.

Their efforts could be undermined by a surge in foreclosures of commercial property carrying mortgages that were packaged and sold by Wall Street as bonds. Similar mortgage-backed securities created out of home loans played a big role in undoing that sector and triggering the global economic recession. Now the $700 billion of commercial-mortgage-backed securities outstanding are being tested for the first time by a massive downturn, and the outcome so far hasn’t been pretty.

The CMBS sector is suffering two kinds of pain, which, according to credit rater Realpoint LLC, sent its delinquency rate to 3.14% in July, more than six times the level a year earlier. One is simply the result of bad underwriting. In the era of looser credit, Wall Street’s CMBS machine lent owners money on the assumption that occupancy and rents of their office buildings, hotels, stores or other commercial property would keep rising. In fact, the opposite has happened. The result is that a growing number of properties aren’t generating enough cash to make principal and interest payments...

States in Dire Straits: New Debts, New Taxes, Pension Cuts

California: Hardships Mount for State Workers Facing Furloughs

September 7, 2009

WSWS - As California’s economy continues its slide, state employees are ever more acutely feeling the effects of the three-days-per-month furloughs—increased from two days per month—imposed by Governor Arnold Schwarzenegger and the Democratic-majority legislature. Confronting a 14 percent reduction in their monthly income, many who were just barely making ends meet prior to the furloughs are facing dire circumstances.

An article by Shane Goldmacher in the August 30th Los Angeles Times, entitled "State’s workers pay for furloughs program," points to the rise in car repossessions, foreclosures and bankruptcies suffered by state workers since the furloughs were imposed...

Philadelphia in Free Fall: New Debts, New Taxes, Pension Cuts

September 2, 2009

LPAC — Philadelphia Mayor Michael Nutter announced on Tuesday that the city will take out a $275 million loan from JP Morgan Chase, at 3% until Nov. 30, and 8% after that. The city is also preparing a plan to cut pensions, at the demand of the state government, in exchange for the state's permission to raise the city sales tax by 1%.

The city will delay about $150 million worth of pension payments this year, and current pension benefits will be frozen, while new workers' pensions will be cut by 20 percent. The average yearly pension for city workers is $17,350. The local CBS station notes that this is "not exactly a golden parachute."
"We've fought hard over the years for that," said Herman "Pete" Matthews, President of AFSCME District Council 33, the city's blue-collar union. "Our pension benefits are not out of line. It's something that we bargain for; it's something our members deserve."

U.S. Dollar Will Weaken, Currency Crash Possible

U.S. Dollar Will Weaken, Currency Crash Possible, Roubini Says

September 4, 2009

Bloomberg - The dollar will weaken and the U.S. risks seeing a crash of the currency unless it does more to control the deficit and reduce debt, said New York University Professor Nouriel Roubini, who predicted the financial crisis.
“If markets were to believe, and I’m not saying it’s likely, that inflation is going to be the route that the U.S. is going to take to resolve this problem, then you could have a crash of the value of the dollar,” Roubini said in an interview today in Cernobbio, Italy. “The value of the dollar over time has to fall on a trade-weighted basis, but not necessarily relative to euro and yen.”
Roubini said he didn’t see a risk of a dollar crash in the “‘short term.”
The value of the U.S. currency relative to currencies such as the yen or the euro “cannot change too much compared to current levels because if the dollar were to weaken a lot and the euro strengthen a lot, that’s going to warp any chance for the European economy to recover, same argument as to the yen,” he said.

“Most of the adjustment of the dollar in the future has to occur relative to China, relative to emerging Asia and relative to some of the other commodity exporters in the world, whether these are advanced economies or emerging markets,” he said.
Foreign creditors need assurances that the U.S. will address its deficit, Roubini said.
“Unless in the medium term these issues of fiscal sustainability are addressed, and unless we mop up that excess liquidity from the financial system, eventually the financial markets and the foreign creditors of the United States might get more concerned about the sustainability of the U.S. fiscal deficit and about the U.S. being tempted to use the inflation tax as a way of resolving its private and public debt problems,” he said.

A Year After Financial Crisis, the Consumer Economy Is Dead

September 8, 2009

McClatchy Newspapers — One year after the near collapse of the global financial system, this much is clear: the financial world as we knew it is over, and something new is rising from its ashes.

Historians will look to September 2008 as a watershed for the U.S. economy.

On Sept. 7, the government seized mortgage titans Fannie Mae and Freddie Mac. Eight days later, investment bank Lehman Brothers filed for bankruptcy, sparking a global financial panic that threatened to topple blue-chip financial institutions around the world. In the several months that followed, governments from Washington to Beijing responded with unprecedented intervention into financial markets and across their economies, seeking to stop the wreckage and stem the damage.

One year later, the easy-money system that financed the boom era from the 1980s until a year ago is smashed. Once-ravenous U.S. consumers are saving money and paying down debt. Banks are building reserves and hoarding cash. And governments are fashioning a new global financial order.

Congress and the Obama administration have lost faith in self-regulated markets. Together, they're writing the most sweeping new regulations over finance since the Great Depression. And in this ever-more-connected global economy, Washington is working with its partners through the G-20 group of nations to develop worldwide rules to govern finance...

The first faint signs that the U.S. economy may be clawing its way back from the worst recession since the Great Depression are only now starting to appear, a year after the panic began. Similar indications are sprouting in Europe, China and Japan.

Still, economists concur that a quarter-century of economic growth fueled by cheap credit is over. Many analysts also think that an extended period of slow job growth and suppressed wage growth will keep consumers — and the businesses that sell to them — in the dumps for years...

The unemployment rate rose to 9.7 percent in August and is expected to peak above 10 percent in the months ahead. It's already there in at least 15 states. Regalia thinks that it could be five years before the U.S. economy generates enough jobs to overcome those lost and to employ the new workers entering the labor force.

All this is likely to keep consumers on the sidelines...

Read Entire Article

Iran Dumps Dollar for Euro

September 21, 2009

Arabian Business - Iran's President Mahmoud Ahmadinejad has ordered the replacement of the US dollar by the euro in calculating the value of the country's Oil Stabilisation Fund (OSF).

The edict, issued on September 12, follows a recommendation by the trustees of the country's foreign reserves, Iran's English-language daily The Tehran Times said on Monday, citing Iran's semi-official Mehr News Agency.

The move was taken because the government wishes to protect itself from the fragility of the US economy and the weak dollar.

The OSF, which forms part of Iran’s foreign exchange reserves, is a contingency fund set aside to cushion the economy against fluctuating international oil prices.

It is also used to help both the public and private sectors with their hard currency needs by extending loans.

Press TV meanwhile reported that following the switch the interest rate for facilities provided from the foreign exchange reserves is to be cut to 5 percent from 12 percent.

Since its introduction in 1999 by the EU, the euro has gained popularity internationally and there are now more euros in circulation than the dollar.

U.S. May Face 'Armageddon' If China, Japan Don't Buy Debt

September 24, 2009

CNBC - The US is too dependent on Japan and China buying up the country's debt and could face severe economic problems if that stops, Tiger Management founder and chairman Julian Robertson told CNBC.
"It's almost Armageddon if the Japanese and Chinese don't buy our debt,” Robertson said in an interview. "I don't know where we could get the money. I think we've let ourselves get in a terrible situation and I think we ought to try and get out of it."
Robertson said inflation is a big risk if foreign countries were to stop buying bonds.
“If the Chinese and Japanese stop buying our bonds, we could easily see [inflation] go to 15 to 20 percent,” he said. “It's not a question of the economy. It's a question of who will lend us the money if they don't. Imagine us getting ourselves in a situation where we're totally dependent on those two countries. It's crazy.”
Robertson said while he doesn’t think the Chinese will stop buying US bonds, the Japanese may eventually be forced to sell some of their long-term bonds.
“That's much worse than not buying,” he said. “The other thing is, they're buying almost exclusively short-term debt. And that's what we are offering, because we can't sell the long-term debt. And you know, the history has been that people who borrow short term really get burned.” The only way to avoid the problem, he said, is to "grow and save our way out of it."

"The U.S. has to quit spending, cut back, start saving, and scale backward," Robertson said. "Until that happens, I don't think we're anywhere near out of the woods.”

Robertson is not very optimistic about the short-term.

“We're in for some real rough sledding,” he said. “ I really do think the recession is at least temporarily over. But we haven't addressed so many of our problems and we are borrowing so much money that we can't possibly pay it back, unless the Chinese and Japanese buy our bonds.”

Climate Change Bill Would Lead to Job Loss and Slower Economic Growth

Senate Democrats to Offer Climate Bill

September 29, 2009

Reuters - A climate change bill circulating in the Senate on Tuesday is slightly more ambitious than one passed in the House of Representatives, but still has many details to be worked out on how to encourage companies to reduce their emissions of greenhouse gases...

A central component of the "cap and trade" initiative still undetermined, Republicans complained, will identify which industry sectors are to get a fixed number of free government permits to emit declining amounts of carbon dioxide in coming years.

The "Waxman-Markey" bill passed by the House laid out how many free permits would initially be granted to coal-fired utilities, oil refineries, and certain factories.

According to Republican staffers on the Environment and Public Works Committee, the Boxer-Kerry bill would set a "price collar" on only 1 percent of carbon emissions. They said the floor would be set at around $12 per ton of carbon emissions, with a ceiling of $28.

They complained that the legislation would do nothing to stop the Environmental Protection Agency from also getting involved in regulating carbon emissions for the first time under the Clean Air Act.

Senator James Inhofe, the senior Republican on the Environment and Public Works Committee and an outspoken opponent of climate change legislation, told reporters that he "can't imagine" the bill being debated and passed by the full Senate this year.

He noted that Democrats already were embroiled in a difficult fight over healthcare reform and were not likely to engage in battle on a second front, especially with time running short this year.

A senior Senate Republican aide said that as of now he knew of no Republican senators who would initially support the bill. But as more details are filled in during coming weeks, the aide said some Republicans could join the Boxer-Kerry effort.

Under "cap and trade," fewer and fewer carbon pollution permits would be issued to companies. The permits that are issued could be traded, or sold, between companies on an as-needed basis.

The Senate Democrats' bill also aims to encourage more "clean vehicles" and to improve airliners' fuel efficiency. It also would help those who suffer job losses from climate control efforts with a "worker adjustment assistance" program.

Like the House-passed bill, the Senate measure aims to protect consumers, especially low-income families, from higher energy prices related to switching from fossil fuels to solar, wind and other more expensive energies.

President Barack Obama is hoping for as much legislative progress as possible this year, before an international meeting in Copenhagen in December to work out new global emission reductions.

Climate Lawsuits are Coming, Gore & Browner Warn

September 22, 2009

Politico - Former Vice President Al Gore and current White House climate change czar Carol Browner are warning companies and lawmakers that the courts will step in to regulate greenhouse gases if Congress fails to act.
"All of the discussion has been about the president and the Congress," Gore told journalists at a U.N. press conference Tuesday. "We have a third branch of government: the courts."
He pointed approvingly to a decision issued Monday by the U.S. Court of Appeals for the Second Circuit allowing public-nuisance lawsuits to proceed against companies that produce large amounts of greenhouse gases. (The three-judge panel initially included Judge Sonia Sotomayor, but the two judges resolved the case after she was elevated to the Supreme Court.)

Gore said the trend in the courts was favoring greater regulation.
"The Supreme Corurt ruled over a year ago that CO2 emissions are pollution as covered in the Clean Air Act," he said. "The U.S. EPA as a result of that court ruling has the [authority] to mandate reductions… Yes, there would be some efforts in the legislative branch to remove that authority but anything in the legislative branch of that sort would be vetoed by the president."

"Even in the absence of legislation, exisiting law will requiring significant reduction of CO2. As a practical matter, that puts significant pressue on business lobbies resisting legislation to reassess their position," Gore said.
Browner called attention to the same appeals court ruling and also argued that the (electric) train was leaving the station, one way or another.
"The courts are starting to take control of this issue. If they were to follow this out, they would be setting the standards," Browner told reporters at a separate briefing in New York Tuesday. "Obviously, that’s not something that anybody wants… Everything is moving towards getting legislation done because it is the best way to do it."

Manufacturers Study Finds House Climate Change Bill Would Lead to Job Loss and Slower Economic Growth

August 14, 2009

Water Environment Federation - A study released on August 12 by the National Association of Manufacturers (NAM) and the American Council for Capital Formation (ACCF) on the impact of The American Clean Energy and Security Act of 2009, also known as the Waxman-Markey Bill (H.R. 2454), cites job losses and slower economic growth in the U.S.

The bill aims to reduce greenhouse gas emissions and to cap the amount of carbon that is emitted by U.S. industry. The legislation does so by mandating a cap and trade program and other provisions governing fuel choices available to businesses and consumers. This bill passed the House of Representatives by a slim margin (219-212) earlier this summer. The Senate is expected to release its version of climate legislation in September.

The study, which was commissioned by the NAM and ACCF and conducted by Science Applications International Corporation (SAIC) using NAM and ACCF input assumptions, assesses the impact of the Waxman-Markey Bill on manufacturing, jobs, energy prices and our overall economy.

The NAM and ACCF released national data as well as the analysis for 15 industrial states that would be impacted greatly if this or similar legislation is signed into law. The NAM/ACCF study accounts for all federal energy laws and regulations currently in effect. It accounts for increased access to oil and natural gas supplies, new and extended tax credits for renewable generation technologies, increased World Oil Price (WOP) profile, as well as permit allocations for industry and international offsets.

Key findings include: Cumulative Loss in Gross Domestic Product (GDP) up to $3.1 trillion (2012-2030), Employment losses up to 2.4 million jobs in 2030, Residential electricity price increases up to 50 percent by 2030; and Gasoline price increases (per gallon) up 26 percent by 2030. The full report, including the data covering the remaining 35 states will be released in the coming weeks.

Bankrupting the Common People

U.S. Census Bureau Report: 40 Million Living in Poverty

September 30, 2009

WSWS - The overall poverty rate in the US rose to 13.2 percent in 2008, as workers across all sectors of the economy became jobless and increasing numbers of families were forced into destitution, according to a new government report. Real median household income also declined by 3.6 percent.

The report released Tuesday, part of the US Census Bureau’s American Community Survey, is the most recent to measure the recession’s impact on working class families and the poor. Based on the changes between 2007 and 2008, the first full year of the recession, its findings do not reflect increases in poverty and joblessness this year as the consequences of the crisis have become even more acute.

The official poverty rate of 13.2 percent in 2008 was up from 12.5 percent in 2007. This figure translates into 39.8 million people in poverty across America. The official poverty level is set at $22,000 annually for a family of four with two children or $12,000 for an individual, an absurdly low threshold. This means that far more people than indicated by the survey do not have adequate resources to pay for food, shelter, medical care and other basic necessities...

Report: 1 in 3 Loan Applications Denied

September 30, 2009

AP - Nearly one in three borrowers who applied for a mortgage last year was denied as lenders kept their standards tight as the mortgage crisis accelerated, the government reported Wednesday.

In its annual look at mortgage practices among lending institutions, Federal Reserve said the denial rate for all home loans was about 32 percent last year — about the same as in 2007, but up from 29 percent in 2006. The denial rates for blacks and Hispanics were more than twice as high as the rate for white borrowers.

The report highlights massive changes in the lending industry after the housing market bust. Overall loan applications were down by a third from a year earlier, and were half the level in 2006.

Loans backed by the Federal Housing Administration soared to 21 percent of all loans made last year from less than 5 percent in both 2005 and 2006.

For black borrowers, more than half of all loans were FHA-insured, more than triple a year earlier. For Hispanics, that number shot up to 45 percent, more than four times as high as in 2007. That was troubling news for consumer advocates.
"I'm hard-pressed to believe that many of those borrowers couldn't have been served by the private sector," said John Taylor, chief executive of the National Community Reinvestment Coalition, a consumer group in Washington. "It implies that the industry has shut down in serving this population."
High-priced loans with rates at least 3 percentage points above the rate for prime loans, shrunk to nearly 12 percent of the market from a high of 29 percent in 2006. But that figure mainly reflects unusually low interest rates during the recession, the report said, and understates the disappearance from the market of high-priced subprime loans made to borrowers with poor credit.

Last year, about 17 percent of blacks and 15 percent of Hispanics got high-priced loans, compared with about 7 percent of whites. Even controlling for factors that might widen that discrepancy, there still a gap of almost 8 percentage points between the number of blacks and whites who got high-cost loans.

The mortgage industry says lenders are not discriminating by race, and are making adjustments based on borrowers' risk profile — such as their credit score and the size of their down payments.
"You still have a certain degree of risk-based pricing in the market," said Jay Brinkmann, the Mortgage Bankers Association's chief economist.
Lenders also scaled back dramatically on the amount of so-called "piggyback" mortgages, in which borrowers used second mortgages to avoid making a 20 percent down payment. Those loans have virtually disappeared from the market: Only 98,000 were made last year, down from 1.3 million annually in 2006.

The data, collected from nearly 8,400 lenders, is required under the Home Mortgage Disclosure Act of 1975.

Job Losses, Early Retirements Hurt Social Security

September 27, 2009

Associated Press - Big job losses and a spike in early retirement claims from laid-off seniors will force Social Security to pay out more in benefits than it collects in taxes the next two years, the first time that's happened since the 1980s.

The deficits — $10 billion in 2010 and $9 billion in 2011 — won't affect payments to retirees because Social Security has accumulated surpluses from previous years totaling $2.5 trillion. But they will add to the overall federal deficit.

Applications for retirement benefits are 23 percent higher than last year, while disability claims have risen by about 20 percent. Social Security officials had expected applications to increase from the growing number of baby boomers reaching retirement, but they didn't expect the increase to be so large.

What happened? The recession hit and many older workers suddenly found themselves laid off with no place to turn but Social Security.
"A lot of people who in better times would have continued working are opting to retire," said Alan J. Auerbach, an economics and law professor at the University of California, Berkeley. "If they were younger, we would call them unemployed."
Job losses are forcing more retirements even though an increasing number of older people want to keep working. Many can't afford to retire, especially after the financial collapse demolished their nest eggs.

Some have no choice.

Marylyn Kish turns 62 in December, making her eligible for early benefits. She wants to put off applying for Social Security until she is at least 67 because the longer you wait, the larger your monthly check. But she first needs to find a job. Kish lives in tiny Concord Township in Lake County, Ohio, northeast of Cleveland. The region, like many others, has been hit hard by the recession.

She was laid off about a year ago from her job as an office manager at an employment agency and now spends hours each morning scouring job sites on the Internet. Neither she nor her husband, Raymond, has health insurance.
"I want to work," she said. "I have a brain and I want to use it."
Kish is far from alone. The share of U.S. residents in their 60s either working or looking for work has climbed steadily since the mid-1990s, according to data from the Bureau of Labor Statistics. This year, more than 55 percent of people age 60 to 64 are still in the labor force, compared with about 46 percent a decade ago.

Kish said her husband already gets early benefits. She will have to apply, too, if she doesn't soon find a job.
"We won't starve," she said. "But I want more than that. I want to be able to do more than just pay my bills."
Nearly 2.2 million people applied for Social Security retirement benefits from start of the budget year in October through July, compared with just under 1.8 million in the same period last year.

The increase in early retirements is hurting Social Security's short-term finances, already strained from the loss of 6.9 million U.S. jobs. Social Security is funded through payroll taxes, which are down because of so many lost jobs.

The Congressional Budget Office is projecting that Social Security will pay out more in benefits than it collects in taxes next year and in 2011, a first since the early 1980s, when Congress last overhauled Social Security.

Social Security is projected to start generating surpluses again in 2012 before permanently returning to deficits in 2016 unless Congress acts again to shore up the program. Without a new fix, the $2.5 trillion in Social Security's trust funds will be exhausted in 2037. Those funds have actually been spent over the years on other government programs. They are now represented by government bonds, or IOUs, that will have to be repaid as Social Security draws down its trust fund.

President Barack Obama has said he would like to tackle Social Security next year.
"The thing to keep in mind is that it's unlikely we are going to pull out (of the recession) with a strong recovery," said Kent Smetters, an associate professor at the University of Pennsylvania's Wharton School. "These deficits may last longer than a year or two."
About 43 million retirees and their dependents receive Social Security benefits. An additional 9.5 million receive disability benefits. The average monthly benefit for retirees is $1,100 while the average disability benefit is about $920.

The recession is also fueling applications for disability benefits, said Stephen C. Goss, the Social Security Administration's chief actuary. In a typical year, about 2.5 million people apply for disability benefits, including Supplemental Security Income. Applications are on pace to reach 3 million in the budget year that ends this month and even more are expected next year, Goss said.

A lot of people who had been working despite their disabilities are applying for benefits after losing their jobs.
"When there's a bad recession and we lose 6 million jobs, people of all types are going to be part of that," Goss said.
Nancy Rhoades said she dreads applying for disability benefits because of her multiple sclerosis. Rhoades, who lives in Orange, Va., about 75 miles northwest of Richmond, said her illness is physically draining, but she takes pride in working and caring for herself. In June, however, her hours were cut in half — to just 10 a week — at a community services organization. She lost her health benefits, though she is able to buy insurance through work, for about $530 a month.
"I've had to go into my retirement annuity for medical costs," she said.
Her husband, Wayne, turned 62 on Sunday, and has applied for early Social Security benefits. He still works part time.

Nancy Rhoades is just 56, so she won't be eligible for retirement benefits for six more years. She's pretty confident she would qualify for disability benefits, but would rather work.
"You don't think of things like this happening to you," she said. "You want to be in a position to work until retirement, and even after retirement."

Ensign Receives Handwritten Confirmation on Health Care Penalties

September 25, 2009

Politico - Sen. John Ensign (R-Nev.) received a handwritten note Thursday from Joint Committee on Taxation Chief of Staff Tom Barthold confirming the penalty for failing to pay the up to $1,900 fee for not buying health insurance.

Violators could be charged with a misdemeanor and could face up to a year in jail or a $25,000 penalty, Barthold wrote on JCT letterhead. He signed it "Sincerely, Thomas A. Barthold."

The note was a follow-up to Ensign's questioning at the markup.

Banks Fight to Kill Proposed Consumer Protection Agency

September 24, 2009

McClatchy Newspapers - If you doubt that U.S. banks long to return to the days of impotent regulation, you need only look at one of the financial sector's top legislative priorities: killing a proposed new agency that would be dedicated solely to protecting consumers' financial interests.

The Obama administration is asking Congress to create a new Consumer Financial Protection Agency to regulate consumer financial products ranging from credit cards to mortgages, and to simplify disclosure about them all.

Though virtually every cause of the nation's recent financial crisis was rooted in weak consumer protection, the U.S. Chamber of Commerce is leading the fight against the proposed agency on grounds that it would make credit less available and more costly. The American Bankers Association, the Independent Community Bankers of America, and the Financial Services Roundtable also oppose the measure.
"We have no argument that regulation failed. Consumer protection is just one of the many areas where it fell down," said David Hirschmann, the president of the U.S. Chamber of Commerce's Center for Capital Markets, which opposes the panel. "It just simply adds a new layer of regulation without fixing . . . our outdated, broken regulatory structure that was a contributing factor in our crisis."
The Chamber said it's spending about $2 million on ads, educational efforts and a grassroots campaign to kill the agency. It said that the grassroots effort has led to more than 23,000 letters sent to Congress to date.

The Center for Responsive Politics said that for the 2010 election cycle, commercial banks have donated almost $3.7 million to lawmakers — 54 percent of it to Republicans. Companies that provide credit have given about $1.4 million, 59 percent to Democrats. Mortgage bankers and brokers have given $581,423.
"Maybe instead of making government BIGGER, we should focus on making government BETTER," reads one Chamber ad.
The Chamber warns that the agency could morph into a monster regulator.
"If you look at this actual bill, the powers are so broad and so ill-defined that the scope of who is covered is incredible. They've managed to create a proposed new regulator for anyone who directly or indirectly provides credit to consumers," Hirschmann said. "If you allow people to give gift cards for your store . . . you've got a new regulator. It's amazingly broad in scope, scale and power."
The administration scoffs at those charges.
"Contrary to some advertisements you may have seen, we have no desire to interfere with Main Street retailers' ability to provide credit to their customers. That argument is to the financial regulation debate what the Death Panel argument is to the health insurance debate," Lawrence Summers, the chief economic adviser to President Barack Obama, said in a recent speech. "We have become convinced that it is essential that consumer financial regulation be carried on by an independent body whose mandate is uniquely and exclusively consumer and investor protection."
Until the current crisis, responsibility for these consumer protections fell to several separate regulators, who made consumer protection subservient to their core mission of regulating institutions for safety and soundness.

Predatory lending and no-documentation loans helped spawn the housing crisis. Weak oversight by federal regulators allowed mortgage bonds to be sold to investors as the safest of investments when they were far from it.

When economic times got tough last year, banks began padding their balance sheets by socking surprised consumers with new credit card fees that were hidden in contractual fine print.
"In practice, nobody really took it seriously. . . . I think clearly you have had a lot of abuses, and whatever was on the books wasn't being enforced," said Morris Goldstein, a former top official at the International Monetary Fund and a researcher for the Peterson Institute of International Economics. "I think it makes sense to try to wrap it together and give someone the responsibility to deal with the great bulk of it."
Opponents have suggested that the new agency could impede the way businesses operate, but that concern is rejected by Elizabeth Warren, a Harvard University law professor who's long championed creation of such a regulator. Separately, Warren leads a congressional panel that monitors the Treasury Department's bank bailout program.
"The CFPA will provide real oversight over financial institutions and create some basic safety standards. This will make it safer for your local butcher to take out a mortgage or a credit card, but the CFPA is not going to regulate the way he carries out his business," she told McClatchy, referring to a Chamber ad that suggests even local butcher shops would be regulated...
Advocacy groups say that the financial sector's opposition underscores the need to act.
"I don't see why people don't understand that this should be a measure of why to pass it," said Barbara Roper, the director of investor relations for the Consumer Federation of America. "If you assume, as I do, that they fear anything that threatens the way they do their business, their ability to profit through the abuse of their customers, then this (legislation) should be taken seriously."
In this environment, J.P. Morgan Chase and Bank of America announced this week that they'd modify their overdraft fee policies.

Bailout Banks Raise Rates, Fees

April 15, 2009

The Washington Times - Some of the banks that received bailout money from the federal government are raising credit card interest rates and fees, angering consumer groups and drawing the attention of a congressional oversight panel.

Bank of America and McLean-based Capital One Financial are among several major credit card issuers that raised interest rates after receiving bailout funds, according to Consumers Union.
"We periodically review credit risk for individual accounts and may reprice individual accounts based on that review," said Bank of America spokeswoman Betty Riess.
The bank also is raising rates on accounts with an interest rate of 10 percent or less because they are "underpriced relative to current market conditions," she said, adding that those changes only affect about 10 percent of customer accounts.
"Our costs of providing credit have increased significantly," Ms. Riess said.
In addition, the bank has increased cash-advance fees from 3 percent to 4 percent, she said.
"We did notify some customers back in February that their rates would be increasing to reflect the current risk environment," said Pam Girardo, Capital One spokeswoman.
Pam Banks, policy counsel at Consumers Union, said the industry's rate increases create "a situation where taxpayers remain on the hook, sometimes twice, which is patently unfair."
"These companies are getting tens of billions in taxpayer bailout money. Yet, even as they accept TARP [Troubled Assets Relief Program] funds, they are hurting our chances at economic recovery."
Credit card interest rates have risen to a national average of 12.35 percent from 11.38 percent six months ago, according to

Caleb Weaver, a spokesman for the congressional oversight panel, said that contrary to a published report, the panel is not conducting a formal probe of the matter.

A financial services industry spokesman said market forces are driving the increases, and with so many credit card issuers to choose from, angry consumers vote with their feet.
"In general, the cost of lending is up because the unemployment rate is 8.5 percent. That risk is built in to the interest rates," said Scott Talbott, senior vice president of government affairs at the Financial Services Roundtable, which represents the 100 largest financial firms in the nation.

"Any connection between fees and TARP money is a non sequitur. TARP was designed to strengthen balance sheets, not to change the competitive landscape," he said.

Don't Miss a Credit Card Payment, or the APR Could Soar

February 15, 2009

Los Angeles Times - Even in the best of times, carrying a balance on your credit card is a risky -- and costly -- proposition. These days, it can be downright foolish, at least if there's a chance you might miss a payment or two.

Millions of cardholders have recently received letters from the likes of Citibank, Bank of America Corp., Wells Fargo & Co. and American Express Co. notifying them that their interest rates are going up, in some cases to 30% if a single payment is missed.

JPMorgan Chase & Co., the nation's largest issuer of plastic, has begun charging hundreds of thousands of cardholders a $10 monthly fee for having carried large balances for more than a couple years.

Why? In part it's because default rates are rising and banks are dealing with additional risk. But lawmakers and consumer advocates say the higher rates also reflect banks' massive losses from betting wrong on the housing boom, and they're basically sticking credit card customers with the tab.

At a Senate Banking Committee hearing last week, Sen. Christopher J. Dodd (D-Conn.), the committee chairman, said lenders are "gouging" customers to boost their bottom lines.
"The list of questionable actions credit card companies are engaged in is lengthy and disturbing," he said.
At the same time, rising layoffs and tough economic conditions have caused many people to lean more heavily on their plastic -- sometimes too heavily.

Corona resident Louis Martinez, 39, is carrying about $45,000 in debt on eight credit cards. He says it's not that he's been deliberately reckless. Rather, the debt piled up after his wife got sick several years ago and half the family's income disappeared.
"What can you do?" Martinez asked. "You still want to provide for your family."
He said he grows more anxious with each bank letter that arrives warning him of potential interest-rate increases.
"I've never missed a payment," Martinez said. "But with the way things are now, I wonder every day how I'm going to get through the month."
By ratcheting up the pressure on customers, major banks -- some of which have received billions of dollars in bailout cash from taxpayers -- are making it likely that a growing percentage will be forced to either default on their obligations or seek bankruptcy protection.

Last week, letters arrived at the homes of Citibank cardholders throughout California warning that their rates could rise to 29.99% if they miss a single payment -- even for cards with low-low-low introductory rates....

Medicare Hike Would Pinch Seniors

September 9, 2009

Politico - Low inflation and the twists of Medicare law are creating a political nightmare for Congress: millions of elderly left with higher Part B premiums and no annual cost-of-living increase from Social Security.

The White House, already besieged by Afghanistan and health care reform, has sat back thus far, not wanting to get into the fight. But Tuesday saw a behind-the-scenes scramble as House Democrats readied a stop-gap spending bill for the new fiscal year beginning Oct.1.

Annual cost-of-living adjustments for Social Security recipients have been a way of life for decades, but with the bad economy, the consumer price index for 2009 has fallen into negative territory, all but ruling out any benefit increase next year.

At the same time, Part B premiums, which cover the cost of physician services, will grow, triggering a set of provisions in Medicare law that protect about three-quarters of the elderly but then ask the remainder to take a double whammy.

As now forecast, Part B premiums are slated to grow by about 7 percent, from $96.40 to $103 per month. Under normal circumstances, the COLA would help offset this increase, but without the COLA, most of the elderly won’t pay the increase, meaning those who do will be asked to pay more.

Preliminary numbers indicate this could mean Part B premiums as high as $110 to $120 a month, a better than 14 percent increase — effectively cutting into the Social Security checks for these recipients. A big chunk of them are the poorest elderly, already reliant on Medicaid to help pay their bills; the end result of this burden falls on states, already struggling with budget shortfalls....

American Airlines Ending Retiree Health Plan at Year’s End

September 22, 2009

Star-Telegram - American Airlines has sent letters to its retirees, saying it will be ending its Retiree Standard Medical Plan option for non-union employees.

The health insurance plan will be canceled as of Dec. 31, 2009. Instead, retirees will be able to purchase a supplemental Medicare coverage plan. But under the new programs, retirees will have to pay monthly premiums.

According to the letter, retirees had already pre-paid contributions to their retiree medical plan while they were employed by American Airlines. Those who have an outstanding prefunded balance will receive a refund, plus or minus any gains or loss of investments as of Dec. 31, 2009. Spouses who have been previously covered by the retiree medical plan will also lose coverage.

Jerry Uttz, a 70-year-old who retired from American in 2003, said he was shocked when he received the letter yesterday. He is worried that his spouse, who is only 62 and self-employed, might have to go without insurance until she qualifies for Medicare.
"It’s just not right," Uttz said. "You prepay your insurance in the anticipation you will have insurance after you retire and they just decided to cancel it."
An American Airlines spokesman was not available for comment this morning.

America Out of Work: Is Double-Digit Unemployment Here to Stay?

September 11, 2009

Time - ...The American economy has been shedding jobs much, much faster than Okun's law predicts. According to that rough rule, we should be at about 8.5% unemployment today, not slipping toward 10%. Something new and possibly strange seems to be happening in this recession. Something unpredicted by the experts.
"I don't think," Lawrence Summers [director of the President's National Economic Council] told the Peterson Institute crowd — deviating again from his text — "that anyone fully understands this phenomenon."
And that raises some worrying questions. Will creating jobs be that much slower too? Will double-digit unemployment persist even after we emerge from this recession? Has the idea of full employment rather suddenly become antiquated? Is there something fundamentally broken in the heart of our economy? And if so, how can we fix it?

The speed of America's now historic employment contraction reflects how puzzling this economic slide has been. Recall that the crisis has included assurances from the chairman of the Federal Reserve that it was over when in fact it was just getting started and a confession from a former Fed chairman that much of what he thought was true for decades now appears to be wrong. Nowhere is this bafflement clearer than in the area of employment.

When compiling the "worst case" for stress-testing American banks last winter, policymakers figured the most chilling scenario for unemployment in 2009 was 8.9% — a figure we breezed past in May. From December 2007 to August 2009, the economy jettisoned nearly 7 million jobs, according to the Bureau of Labor Statistics. That's a 5% decrease in the total number of jobs, a drop that hasn't occurred since the end of World War II. The number of long-term unemployed, people who have been out of work for more than 27 weeks, was the highest since the BLS began recording the number in 1948. Jobless figures released Sept. 4 showed a 9.7% unemployment rate, pushing the U.S. — unthinkably — ahead of Europe, with 9.5%.

America now faces the direst employment landscape since the Depression. It's troubling not simply for its sheer scale but also because the labor market, shaped by globalization and technology and financial meltdown, may be fundamentally different from anything we've seen before. And if the result is that we're stuck with persistent 9%-to-11% unemployment for a while — a range whose mathematical congruence with that other 9/11 is impossible to miss — we may be looking at a problem that will define the first term of Barack Obama's presidency the way the original 9/11 defined George W. Bush's.

Like that 9/11, this one demands a careful refiguring of some of the most basic tenets of national policy. And just as the shock of Sept. 11 prompted long-overdue (and still not cemented) reforms in intelligence and defense, the jobs crisis will force us to examine a climate that has been deteriorating for years. The total number of nonfarm jobs in the U.S. economy is about the same now — roughly 131 million — as it was in 1999. And the Federal Reserve is predicting moderate growth at best. That means more than a decade without real employment expansion.

We're a long way from Hoovervilles, of course. But it's not hard to imagine, if we're not careful, a country sprouting listless Obamavilles: idled workers minivanning aimlessly through overleveraged cul-de-sacs with no way to pay their mortgages, no health care, little hope of meaningful work and only the hot comfort of angry politics.

This is why the problem of how America works needs to become the focus of an urgent national debate. The jobs crisis offers an opportunity to think in profound ways about how and why we work, about what makes employment satisfying, about the jobs Americans can and should do best. But the ideas Washington has delivered so far are insufficient. They reflect a pre–9%-11% way of thinking as much as old defense policy reflected a pre-9/11 notion of who our enemies were.

The funding for job creation in the American Recovery and Reinvestment Act was based on an assumed 8.9% unemployment rate. Now 15% is a realistic possibility. And yet we're hearing few interesting ideas about how to enhance America's already groaning unemployment support system as millions of Americans sit idle. Tangled in the debate over health care — and bleeding political capital — the White House may find itself too weak and distracted to deal with the danger of joblessness.

We can't afford to wait. The longer someone is unemployed, the harder it is to get back to work, a fact as true for the nation as it is for you and me. As the Peterson Institute's Jacob Kirkegaard explains,
"It is entirely possible that what started as a cyclical rise in unemployment could end up as an entrenched problem."
Past crises have illustrated that lesson: the longer you wait, the harder it is to contain. This is as true for joblessness as it was for subprime mortgages, al-Qaeda and computer viruses...

Is Your State's Unemployment System in Danger?

August 31, 2009

ProPublica - How does your state's unemployment insurance system stack up? Is it about to go bankrupt? Is it bankrupt already? States with negative balances are in red. Pink states may have to borrow soon.

Read about the states' policies that fed the current crisis. Thanks to a historical compromise, each state has its own unemployment insurance system, and they come in 51 different flavors -- one for each state and Washington, D.C. (Puerto Rice and the Virgin Islands technically make it 53.)

See how your state ranks when it comes to its unemployment system. Fourteen states have simply run out of money to pay benefits and have been forced to borrow from Washington a total of more than $8 billion. That number is almost certain to grow as more states reach the brink. If they are not able to pay that amount back before 2011, which most will not be able to do, they face paying hundreds of millions of dollars in interest.

Meanwhile, many workers are struggling to get by on what the system pays them. Where you live can make all the difference -- workers in the most generous states get twice the average benefits of workers in the stingiest ones. The percentage of unemployed workers who even receive benefits varies greatly by state.

Surge in Homeless Strains Schools

September 6, 2009

New York Times - While current national data are not available, the number of schoolchildren in homeless families appears to have risen by 75 percent to 100 percent in many districts over the last two years, according to Barbara Duffield, policy director of the National Association for the Education of Homeless Children and Youth, an advocacy group.

There were 679,000 homeless students reported in 2006-7, a total that surpassed one million by last spring, Ms. Duffield said.

With schools just returning to session, initial reports point to further rises. In San Antonio, for example, the district has enrolled 1,000 homeless students in the first two weeks of school, twice as many as at the same point last year...

Middle Class Turn to Car Park Handouts

September 6, 2009

Financial Times (Prince George's County, Maryland) - "As they collect unemployment, their resources are diminishing. Many of the families that we're trying to serve are just trying to hang on to their homes, trying to hang on to any assets that they have," says Vicki Escarra, chief executive of Feeding America, which runs a network of 200 food banks across the US.

At the last count, in 2005, Feeding America served 25 million Americans, the majority of whom were not on food stamps.

Last year demand across the U.S. food bank network surged 30 percent. Almost all outlets reported seeing new visitors.
"People who used to donate to the food bank are now coming to the food bank - so imagine the shame," says Shamia Holloway, communications manager at the Capital Area Food Bank in Washington, which supplies food to the Community Ministry and 700 other local agencies. "A lot of these people came from good jobs."

U.S. Unemployment Rate at 9.7 Percent

September 5, 2009

World Socialist Web Site - The unemployment rate in the US rose to 9.7 percent in August, its highest level since 1983, as the economy shed 216,000 jobs. Economists had anticipated a more modest increase in the unemployment rate, to 9.5 percent over the 9.4 recorded in July.

A more realistic gauge of unemployment, one that takes into account those who have been unable to find work for an extended period and those forced to work only part time, rose to 16.8 percent, the highest rate since the government began reporting the figure in 1994.

The US economy has now shed about 7.4 million jobs since the start of the recession. The total number of unemployed workers stands at 14.9 million. Economists believe the official unemployment rate will exceed 10 percent by year's end.

Long-term unemployment is particularly severe. One in three unemployed workers, about five million in all, have been without work for more than six months.

August's unemployment rate among teenagers, 25.5 percent, eclipsed records dating back to 1948. The unemployment rate among recent college graduates, 5.9 percent, is the second highest on record since 1983.

Some commentators were cheered that the pace of job losses slowed in August. In the first quarter, the economy shed an average of nearly 700,000 jobs every month; in the second, about 425,000.

That such a statistic is taken as positive only illustrates the severity of the crisis. To keep up with population growth, the economy would have to add nearly 130,000 jobs per month. Measured in that way, 9.4 million jobs would have to be created to make up for those lost since December 2007.

The construction industry led August’s job losses, trimming its workforce by 65,000. Construction is tied closely to the housing and commercial real estate markets. Under normal economic conditions, it adds jobs throughout the summer months.

Manufacturing was close behind, eliminating 63,000 jobs. Separately, the Commerce Department reported this week that factory orders increased only 1.3 percent in July, far short of economists’ expectations.

The economy shed at least 50,000 “white collar” jobs, 28,000 in the finance industry and 22,000 in professional and business services.

The service sector cut 146,000 jobs. More cuts are on the way, a result of a poor “back-to-school” shopping season. Sales at stores open for more than one year fell two percent in August from last year, according to a study released this week by the International Council of Shopping Centers.

Even government jobs declined by 18,000 in August, an indication of the ineffectiveness of the Obama administration’s stimulus plan. The US Postal Service by itself cut 8,500 positions.

Workers who have jobs are being forced to work harder, even as their wages stagnate. Many companies are furloughing employees and eliminating their contributions to pensions and insurance plans.

A new study by the Economic Policy Institute (EPI), “The Recession’s Hidden Costs,” points out that wages, which increased at 4 percent every year between 2006 and 2008, grew at an annualized rate of only .7 percent over the past three months...

U.S. Jobless Soars as Companies Squeeze Workers

September 2, 2009

Times Online - Private employers cut 298,000 American jobs last month, far above economists’ expectations, and squeezed more work out of staff over fewer hours.

The ADP Employer Services report on jobless numbers in August exceeded the 250,000 staff cuts economists had forecast.

Employees who kept their jobs worked even harder over shorter hours, according to the Labor Department today. Revised productivity figures, which show the amount of output per hour of work done, rose by an annual rate of 6.6 per cent in the second quarter, the biggest rise in nearly six years. Labour costs fell by 5.9 per cent as a result of the rise in productivity. It was the largest drop in costs since the second quarter of 2000. The department had estimated last month that second quarter productivity was up by 6.4 per cent and costs down by 5.8 per cent...

The unemployment rate is expected to rise to 9.5 per cent in August, up from 9.4 per cent in July, and hit 10 per cent by year-end. The Labor Department said last month that 247,000 jobs were lost in July. The ADP Employer Services report today revised down the number of jobs lost in July from 371,000 to 360,000.

Orders to US factories rose by 1.3 per cent, according to the Commerce Department. It was the fifth monthly increase in the past six months but lower than economists' expectations of a 2.2 per cent rise. An 18.5 per cent leap in orders for transport-related products such as commercial aricraft and parts was the force behind the rise.
Durable goods, which includes all products expected to last at least three years, were up 5.1 per cent but non-durable goods such as food and petrol were down 1.9 per cent as oil prices fell.

Further good news came from the Institute for Supply Management, which said that its index rose to 52.9 points in August, up from 48.9 in July. It is the first time the index has risen above 50 since January 2008, boosted by the reopening of General Motors' and Chrysler factories that had been shut since the automakers entered bankruptcy protection. A 50-plus reading means that the manufacturing sector is expanding.

U.S. Insurer of Pensions Sees Flood of Red Ink

May 20, 2009

New York Times - The deficit at the federal agency that guarantees pensions for 44 million Americans tripled in the last six months to a record high, reaching $33.5 billion, largely as a result of surging bankruptcies among companies whose pensions it expects it will soon need to take over.

The agency, the Pension Benefit Guaranty Corporation, faced a shortfall of just $11 billion as of October. The combined effect of lower interest rates, losses on its investment portfolio and rising numbers of companies filing for bankruptcy produced the jump in its projected deficit, officials said Wednesday.

Because the agency has $56 billion in assets — most of which is invested in Treasury bonds — it is not facing any prospect of default in the short term, officials said.
“The P.B.G.C. has sufficient funds to meet its benefit obligations for many years because benefits are paid monthly over the lifetimes of beneficiaries, not as lump sums,” the agency’s acting director, Vince Snowbarger, testified Wednesday at a Senate hearing. “Nevertheless, over the long term, the deficit must be addressed.”
The financial troubles are just a small part of the challenges facing the pension agency, which was created by Congress in 1974 and today is responsible for pension programs covering 1.3 million people. It pays about 640,000 people actual benefits worth about $4.3 billion a year.

The P.B.G.C.’s former director, Charles E. F. Millard, was subpoenaed to testify at the hearing Wednesday. But he cited his constitutional right to avoid self-incrimination and declined to answer any questions.
Mr. Millard, who resigned in January, has been accused by the agency’s inspector general of having inappropriate contact with companies including BlackRock, JPMorgan Chase and Goldman Sachs, all of which competed for and won contracts to help manage $2.5 billion of the agency’s funds. Those contracts will now most likely be canceled.
Employers nationwide with so-called defined-benefit, or traditional, pension plans pay fees to the P.B.G.C. in return for a promise that it will take over their pension plan if a company fails.

On Tuesday, for example, the agency announced that it had assumed the pension plan once run by the Lenox Group, a bankrupt maker of tableware, giftware and collectibles based in Eden Prairie, Minn. Assuming control of pensions for this company’s 4,300 workers will cost the agency an estimated $128 million — the difference between what Lenox had in its pension fund and what the total estimated obligations are.

In the last six months, 93 companies whose pension plans are covered by the agency have filed for bankruptcy, including Chrysler, whose failure alone could cost the agency $2 billion. A bankruptcy by General Motors would make the situation worse. G.M. had 670,000 workers as of late last year in its pension system, whose collapse would cost the agency an estimated $6 billion.

Options to close the $33.5 billion deficit include a federal bailout by taxpayers, a change in insurance premiums it charges employers, or increasing its investment returns.

Last year, the agency’s board voted to allow it to shift its investment strategy to put more money into stocks, private equity and real estate, in an effort to reduce the deficit. If that shift had taken place, the losses would most likely have been larger. But only a relatively small amount of the funds have already been shifted to stocks, so the losses on the investment portfolio were responsible for just $3 billion of the jump in the deficit in the last six months.

Senator Herb Kohl, Democrat of Wisconsin and chairman of the Senate Special Committee on Aging, which held the hearing Wednesday, blamed poor supervision by the agency’s board and management, at least in part, for the troubles, adding that he intended to introduce legislation that would expand the board and require it to meet at least four times a year. The board has not met in person since February 2008.
“The role of P.B.G.C. is too crucial to allow its governance to slip through the cracks,” Mr. Kohl said.

Credit Card Defaults: The Next Banking Crisis

February 25, 2009

Kathleen Barnes - I have a stellar credit rating, over 770, never had a late pay, etc. You can imagine how stunned I was when I received a letter from one of my credit card companies telling me that my current interest rate (8.99%) was being raised to 29%! Of course, I do have the option to “opt-out,” pay off my current balance (which is zero) at the current interest rate and then have the card cancelled.

This is happening everywhere, to people with stellar credit ratings and to those who have been a little shaky. Who isn’t a little shaky in these trying times?

It obvious that the banks are worried that people will default on their credit cards, so to prevent that, they are raising the interest rates to the roof. This is exactly the kind of wrong-headedness and moronic thought processes that got the banks into the sub-prime mortgage crisis and which will precipitate the next crisis of massive credit card defaults.
Imagine you have a credit card with a $10,000 balance at 8.99%. You’re paying $100 a month and making slow headway. The calculator says you’ll crawl out from under that debt in seven years.

Now imagine your most wonderful, most loving and understanding credit card company suddenly raises your rates to the stratosphere. You may or may not be given an “opt-in” offer to have your credit shut down, freeze your current interest rate, and have your account closed when the balance is paid.

At 29% interest, you’ll never pay off your debt at the rate of $100 a month because your payments will not even cover the interest. In order to make any headway, your payments will be raised to at least $250 a month. At that rate, it will take you nearly 12 years to erase the debt.

For argument’s sake, let’s continue with the imaginary scenario that you have just been given notice that you are being laid off.

Your top priorities are (and should be) to keep your car, so you can travel to a new job, and your home. Other priorities are obviously food, utilities and medical insurance. Where do those already unaffordable $250 a month credit card payments fall? You’re right: At the bottom of the list.

Your thinking process goes something like this: You need a car to get a new job and that has to the the most important thing in your life. If you default on your credit card, your credit will be in the toilet for seven years, but you’ll still have the necessities of life: car, house, food, etc.
What choice do you think you (and most people) will make? You’ll grit your teeth, default on your credit cards and let your credit rating suffer.

It’s not pretty, but these hard economic choices are being made every day all over the country.

What does this mean for the credit card companies and the big banks that own them?
It doesn’t take an MBA from Wharton to figure out that the $25 million we collectively owe in credit card debt is going to drag down the fearful and greedy banks that are forcing so many to make the difficult decision to default.

And it doesn’t take a crystal ball to see the banks once again crying for a government bailout. And should we give to them? NO WAY!

The banks are precipitating this situation. They started 15 years ago when they started shoving credit cards at us and encouraging us to spend more and more and more. Now they are bring this festering boil to head by raising interest rates to impossible levels.

What should you do if you’ve gotten one of these letters? Accept the opt-in, which will freeze your rates at their current level. Keep your payments current and take the minor hit you’ll have on your credit rating when the account is closed when you have a zero balance. (By the way, you can’t make any new charges on the card if you accept the opt-in.)

What should the government do to stop the next bank crisis before it hits? Congress should immediately pass legislation regulating credit card interest rates for all banks receiving federal bailout money. Retroactive rate increases for customers who are current on their accounts should be prohibited. Higher interest rates on new purchases should be regulated at reasonable levels, say at 15% or less.

Contact your senator and representative today and tell them the banks have to reined in again before they cause a second crisis which could be the killing blow to our economy.

This is usury, pure and simple. Worse yet, these panicked interest rate hikes are certain to become a self-fulfilling prophecy which will ensure more bank failures.