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Since implementing a program to help millions of homeowners restructure their mortgages to prevent foreclosure, only 235,247 loans have actually been modified, according to the US Treasury Department in its first progress report. After the plan was announced in February, the first banking institutions began accepting applications in April. Between now and 2012, the Obama administration says it is on track to assist 4 million homeowners. The report occurs a week after the administration summoned institutions to Washington to discuss speeding up the program after large numbers of borrowers’ complaints that assistance was barely occurring. The Obama administration plans 500,000 modifications by November 1, and hopes to hold the institutions responsible for their performance with the release of monthly reports that allow consumers to see which banks are slow to implement the plan. So far, institutions have extended offers to 15 percent or 406,542 homeowners in danger of losing their homes, with uneven performances by 38 participating servicers. Morgan Stanley’s subsidiary, Saxon Mortgage Services, tops the list with 25 percent of its delinquent loans placed in trial modifications. Saxon is followed by Aurora Loan Services, a Lehman Brothers Bank subsidiary, with 21 percent. GMAC Mortgage, partially owned by the US government, has put 20 percent of its troubled loans into trial modifications, while major banks JPMorgan Chase, Citigroup, Wells Fargo, and Bank of America have late loan trial modifications of 20 percent, 15 percent, 6 percent, and 5 percent respectively. The lenders acknowledge that they must improve their performance, and say that they are committed to President Obama’s foreclosure prevention plan, stressing that they were already performing modifications prior to the administration’s program. Wells Fargo says that it will soon have the ability to send eligible borrowers trial modification agreements within 48 hours. “We set a high bar for ourselves in terms of customer service, and we didn’t hit that bar in all cases in the first seven months of this year,” says Mike Heid, co-president of Wells Fargo Home Mortgage, “We have added 4,000 employees to our loan workout division this year. JPMorgan Chase says it has another 150,000 applications in need of processing and is currently training an extra 950 workout specialists hired earlier in 2009, bringing its modification staff to 3,500 people. “We know we’ve got more work to do,” says Chase spokesman Tom Kelly. “But the bank is pleased with its performance to date.” CitiGroup’s mortgage agency, CitiMortgage, added 1,400 staffers to its modification team, with 800 dedicated to loss mitigation at its recently opened Tucson, AZ call center. It began placing troubled borrowers in trial modifications in early June. “In the next quarter, one can expect the pace will be even higher,” Sanjiv Das, CitiMortgage head, says. Bank of America says it needs to improve its reach out efforts, while noting that it holds nearly one in four trial modifications offered under the Obama plan and has extended nearly 100,000 offers, although only 28,000 trial modifications are in process. Bank of America purchased mortgage giant Countrywide Financial last year, and has the largest number of eligible delinquent loans with almost 800,000. Borrowers have been pressuring the Obama administration as well as servicers and are complaining that servicers are not responding to applications and calls, are losing their paperwork, and are not making timely decisions. Servicers say they are increasing their staffing and upgrading their computer systems to handle the hefty increase in applications. Says Michael Barr, assistant US Treasury secretary for financial institutions, “We are working with servicers to ensure that they can adequately implement the program and servicers are increasing staff and training, but they must also treat borrowers more respectfully and respond in a much timelier manner.” [CNN News, 8/9/2009]
Entity Tags: Countrywide Financial, Wells Fargo Bank, N.A., Bank of America, Aurora Loan Services, US Department of the Treasury, Citigroup, Tom Kelly, Sanjiv Das, GMAC, JP Morgan Chase, CitiMortgage, Lehman Brothers, Morgan Stanley, Michael Barr, Saxon Mortgage Services
Timeline Tags: Global Economic Crises
McClatchy reports that economies in Latin America are beginning to improve following the global financial crisis. The signs of the recovery include a “booming” construction industry in Peru, strong property sales in Peru, and expanding software companies in Chile. However, McClatchy says that the recovery in Mexico and other Central American countries is lagging behind, due to the slow recovery in the US. Prior to the global financial crash, Latin America had experienced its best five years of prosperity since the 1950s. [McClatchy Newspapers, 9/28/2009]
Research conducted by the Experian credit bureau and the international management consulting group Oliver Wyman reveals an alarming tendency: homeowners with excellent credit are more likely to “strategically default” on their homes than those who are financially strapped. Using an enormous sample of 24 million individual credit files, the study found that those with super prime credit scores are 50 percent more likely to “abruptly and intentionally” dump their mortgage. Researchers found that, with foreclosures, delinquencies, and loan losses at record levels, so-called “walkaways” are at or near the top of the most-discussed real estate finance topics. The Experian-Wyman study group identified specific patterns with strategic defaults. Among its findings:
Strategic default numbers are much higher than industry estimates. For example, 588,000 super-prime credit holders defaulted during 2008, double the number from 2007;
Warning signs, such as non-payment of other debts, are virtually non-existent;
Walkaways often go from perfect payment histories to no mortgage payments whatsoever, in severe contrast with most financially stressed borrowers, who attempt mortgage payments even when delinquent on other credit accounts;
Strategic defaults are located mostly in negative equity markets where home values skyrocketed during the boom before taking a huge dive after 2006. For example, last year in California, strategic defaults were 68 times higher than in 2005; in Florida, they were 46 times higher than in 2005. In most of the rest of the country, walkaways were nine times higher in 2008 than in 2005;
People with large mortgage balances are more likely to walk away. Those with the two highest VantageScore credit ratings (as created by Experian and the other national credit bureaus, Equifax and TransUnion) are far more likely to default than homeowners in lower score categories;
Walkaways seem to understand the consequences of their actions but may view it as a business decision, and the most practical solution under the circumstances.
Although the Experian-Wyman study does not explore the ethical and legal facets of strategic defaults, a major suggestion arising from it is that lenders and loan servicers take steps to spot walkaways in advance to avoid offering them loan modifications, since they will probably default on these as well. [Los Angeles Times, 9/20/2009]
Iranian President Mahmoud Ahmadinejad orders that his country’s foreign exchange reserves be moved from the dollar to the euro, setting the stage for the Iranian Central Bank to cut its foreign currency reserve interests rates from 12 percent to 5 percent. The estimated rate cut makes it cheaper for the bank to acquire foreign currency. “They have been talking about switching their foreign currency reserve from the dollar to the euro for a while now, but it makes them more dependent on the euro and the European Union,” says Dr. Ali Ansari, director of Scotland’s St. Andrews University Iranian Studies Centre.
Followed Call Addressed to OPEC - Ahmadinejad’s decision comes shortly after he called for the Organization of Petroleum Exporting Countries (OPEC) to discard the dollar as the currency standard for oil-related deals. Despite recent declines in dollar value and the fact that most major oil producing countries are outside the US, the dollar remains the prevailing currency for pricing a barrel of oil. The dollar also remains the most frequently used international trade currency.
Possible Motivation - Some analysts believe that exchanging the dollar for the euro may be Iran’s attempt to lessen the effects of US economic sanctions in force since the 1979 Islamic revolution when the US backed the overthrown Shah of Iran, who was replaced by an Islamic republic. US sanctions include prohibiting US involvement with Iran’s petroleum development, as well as prohibiting all trade and investment activities by US citizens around the globe. Sanctions were softened somewhat in 2000, when the US Treasury amended its prohibition edict by allowing US citizens to buy and import carpets and food products like dried fruits, nuts, and caviar produced in Iran. Recent media reports suggest, however, that President Obama is considering an increase in sanctions if Iran persists in its alleged development of nuclear weapons. Iran maintains that its nuclear program is solely for power production. [Media Line, 9/22/2009]
The tasks before the forthcoming Group of 20 (G-20) summit to be hosted by President Barack Obama in Pittsburgh, Pennsylvania, are rolled out in the media. The number one agenda item for global leaders will be restraining financial institutions’ compensation and forcing them to clean their balance sheets to avert a duplicate of the near-meltdown of global financial systems. They will also attempt to find new methods for controlling over-the-counter derivatives markets, which are said to have augmented the global crash. The leaders are also scheduled to “increase oversight of hedge funds, credit rating agencies, and debt securitization.” Most leaders agree that it is essential to find a resolution for the huge financial imbalances in trade, savings, and consumption, all of which played a role in the global financial crisis, and ultimately may leave global economies vulnerable to future financial shocks. Christine Lagarde, the French Finance Minister, says that signs of economic recovery should not act as an excuse to avoid economic reforms. Officials of France and Germany are recommending stringent financial sector regulations, which incorporate limits on executive pay. The mandate of the G-20 is to “promote open and constructive discussion between industrial and emerging-market countries on key issues related to global economic stability.” The G-20 is comprised of finance ministers and central bank governors from 19 countries: Argentina, Australia, Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Japan, Mexico, Russia, Saudi Arabia, South Africa, South Korea, Turkey, the United Kingdom, the United States, and the European Union, which is represented by the rotating council presidency and the European Central Bank. [Reuters, 9/22/2009; New York Times, 9/22/2009; Voice of America, 9/22/2009; G-20.org, 9/22/2009]
Having received what the Obama administration calls “exceptional assistance,” American International Group (AIG), Citigroup, Bank of America, General Motors (GM), GMAC, Chrysler, and Chrysler Financial are now meeting with executive pay czar, Kenneth Feinberg, and must submit 2009 pay plans for their top 25 executives. In turn, Feinberg must perform a 60-day assessment while working with the seven companies on their salary configurations. Plans for the other 75 executives of the seven corporations are due later. Exorbitant executive pay and bonuses has its critics, with many outraged that the companies are collecting taxpayer money only to pay out expensive bonuses during a massive recession. Others fear that the feds have insinuated themselves too deeply into private business affairs. Feinberg himself admits that his job has built-in conflicts. “Historically, the American people frown on the notion of government insinuating itself into the private marketplace,” he says in an interview, one day after his appointment. “My answer to those critics is I understand that concern, I share that concern, and the question is how do you strike a balance between that legitimate concern and the populist outrage at prior industry compensation practices?” The Obama administration has already seen and experienced taxpayers’ fury; Feinberg hopes to avoid such outrage. Corporations must prove to him that they are rewarding good performance and discouraging undue risk-taking. “We are not going to provide a running commentary on that process, but it’s clear that Mr. Feinberg has broad authority to make sure that compensation at those firms strikes an appropriate balance,” say US Treasury Department spokespersons, while noting that Feinberg can’t force companies to renege on contract obligations executed prior to February 12, 2009. However, this hasn’t prevented cries of foul play by critics upset over excessive government interference in private businesses. “No matter which way I turn, you’re facing criticism either from those who are appalled at what these companies did versus those who question the value of the government getting involved,” Feinberg says. The recently appointed executive compensation czar is used to dealing with contentious sides having served as compensation fund chairman for the families of victims of the September 11 attacks. [ABC News, 8/12/2009]
Moody’s Investors Service reports that write-offs for credit cards have risen from 10.52 percent to 11.49 percent, and the number of 30 and 60 day overdue credit balances has increased as well. Many economists say that throughout the recession delinquency rates for credit cards are likely to continue to steadily rise because of a continuously high rate of unemployment. Experts warn that joblessness will stay high for a long time, even after the recovery. Currently, the national unemployment rate is 9.7 percent, with predictions that it will exceed 10 percent before heading for a significant decrease. In the short term, with so many unemployed people behind on credit card payments, delinquencies are expected to remain high. [Credit.com, 9/24/2009]
With unemployment rates for American Indians at 27 percent, African-Americans logging jobless rates of 15 percent, and Hispanics at 13 percent, experts say that for these ethnic groups, the economic recession is more of a “Great Depression.” The foreclosure crisis is equally ominous, having worsened with increasing joblessness, unduly impacting minority groups at a staggering rate. Dr. James Carr, chief operating officer of the National Community Reinvestment Coalition, explains: “The crisis is now fueled by unemployment and loss of income. In 2009, nearly 60 percent of foreclosures are triggered by unemployment.… The Obama administration’s endeavors to curtail foreclosures aren’t working.” He emphasizes that the loan modification program has “plenty of carrots” for the banks, “but no meaningful sticks to compel more responsible actions.” On average, lenders lose 10 times as much on foreclosures than loan modifications, or about $144,000 as opposed to a loan modification tax write-off of $14,000. Because they can, banks are choosing to deduct the greater loss on their current tax bill by foreclosing rather than modifying the loan. Consequently, only 12 percent of homeowners eligible for modification have received such through voluntary Making Home Affordable program set up by the Obama administration. According to Raymond Skinner, Maryland’s secretary of housing and community development: “Foreclosures are taking on a different face. As of the second quarter of 2009, the majority of the nation’s foreclosures are now on prime loans.”
Bankruptcy Law Reform, Homeowners Loan Corporation - What is needed, says Carr, is bankruptcy reform to allow judges to modify mortgages using the same methods they use to modify yacht and investment property payments; at least 30 percent of loans on the way to foreclosure could be helped by reformation of bankruptcy laws. Still, experts agree that even loan modifications won’t help many unemployed persons. Carr is calling for “a new version of the Great Depression-era Homeowners Loan Corporation” (HOLC) to allow the use of eminent domain to purchase loans between current market value and face value cost. The discount could then be used to modify the loans so that the unemployed homeowner could enter into rental agreements to stay in their homes, or even obtain emergency grants or loans to continue paying their mortgages. HOLC, however, is not under consideration by either Congress or the Obama administration.
Insufficient American Recovery and Reinvestment Act Resources - Some argue that the 2009 American Recovery and Reinvestment Act did not provide the resources needed by those hardest hit by the recession, which was supposedly the goal of the bill. As a result, there is now an immediate need for a targeted stimulus for job creation and unemployment benefits extension. “Channeling dollars to the individuals and communities that need them most will immediately stimulate the economy and save and create jobs for both the neediest households and the US population generally,” Carr says. “Families that live on the edge of survival will pour these recovery dollars immediately back into the economy through spending on groceries, medicine, clothing, childcare, energy, transportation, and other basic necessities. That spending would support multiple sectors of the economy and have positive impacts far outside of the communities where dollars are immediately spent.” Additionally, racial barriers and continuing discrimination need to be addressed to guarantee access to affordable housing alternative, transportation, education, and economic opportunity. [Nation, 9/25/2009; NPR, 9/28/2009]
Billionaire investor and philanthropist George Soros says he plans to invest over $1 billion in clean energy technology. Soros is well known for his donations to liberal and progressive causes (see January - November 2004 and February 2007), but has not been prominent in the field of clean energy until now. The online magazine GigaOm reports that Soros’s decision is “another proof point that cleantech has emerged during the recession as one of the few sectors worth investing in.” Clean energy technology, propelled by investments by venture fund manager Vinod Khosla (see September 1, 2009), was the leading investment category in the US in the third quarter of 2009. Soros tells a conference audience in Copenhagen, “I will look for profitable opportunities, but I will also insist that the investments make a real contribution to solving the problem of climate change.” He also intends to start a watchdog group called the Climate Policy Initiative that will, he says, “protect the public interest against special interests.” [GigaOm, 10/12/2009]
The Washington, DC, Circuit Court of Appeals unanimously holds that provisions of the Federal Election Campaign Act (FECA—see February 7, 1972, 1974, and May 11, 1976) violate the First Amendment in the case of a nonprofit, unincorporated organization called SpeechNow.org. SpeechNow collects contributions from individuals, but not corporations, and attempted to collect contributions in excess of what FECA allows. In late 2007, SpeechNow asked the Federal Election Commission (FEC) if its fundraising plans would require it to register as a political committee, and the FEC responded that the law would require such registration, thus placing SpeechNow under federal guidelines for operation and fundraising. In February 2008, SpeechNow challenged that ruling in court, claiming that the restrictions under FECA were unconstitutional. FECA should not restrict the amount of money individuals can donate to the organization, it argued, and thusly should not face spending requirements. It also argued that the reporting limits under FECA are unduly burdensome. The district court ruled against SpeechNow, using two Supreme Court decisions as its precedents (see January 30, 1976 and December 10, 2003), and ruled that “nominally independent” organizations such as SpeechNow are “uniquely positioned to serve as conduits for corruption both in terms of the sale of access and the circumvention of the soft money ban.” SpeechNow appealed that decision. The appeals court reverses the decision, stating that the contribution limits under FECA are unconstitutional as applied to individuals. The reporting and organizational requirements under FECA are constitutionally valid, the court rules. The appeals court uses the recent Citizens United ruling as justification for its findings on contribution limits (see January 21, 2010). [New York Times, 3/28/2010; Federal Elections Commission, 2012; Moneyocracy, 2/2012] The FEC argued that large contributions to groups that made independent expenditures could “lead to preferential access for donors and undue influence over officeholders,” but Chief Judge David Sentelle, writing for the court, retorts that such arguments “plainly have no merit after Citizens United.” Stephen M. Hoersting, who represents SpeechNow, says the ruling is a logical and welcome extension of the Citizens United ruling, stating, “The court affirmed that groups of passionate individuals, like billionaires—and corporations and unions after Citizens United—have the right to spend without limit to independently advocate for or against federal candidates.” [New York Times, 3/28/2010] Taken along with another court ruling, the SpeechNow case opens the way for the formation of so-called “super PACs,” “independent expenditure” entities that can be run by corporations or labor unions with monies directly from their treasuries, actions that have been banned for over 60 years (see 1925 and June 25, 1943). The New York Times will later define a super PAC as “a political committee whose primary purpose is to influence elections, and which can take unlimited amounts of money, outside of federal contribution limits, from rich people, unions, and corporations, pool it all together, and spend it to advocate for a candidate—as long as they are independent and not coordinated with the candidate.” Super PACs are not required by law to disclose who their donors are, how much money they have raised, and how much they spend. CNN will later write, “The high court’s decision allowed super PACs to raise unlimited sums of money from corporations, unions, associations, and individuals, then spend unlimited sums to overtly advocate for or against political candidates.” OpenSecrets, a nonpartisan organization that monitors campaign finance practices, later writes that the laws underwriting Super PACs “prevent… voters from understanding who is truly behind many political messages.” [New York Times, 3/28/2010; Federal Elections Commission, 2012; OpenSecrets (.org), 2012; CNN, 3/26/2012; New York Times, 5/22/2012]
American Crossroads logo. [Source: American Crossroads]American Crossroads, a political advocacy group backed by former Bush administration political adviser Karl Rove, is spending millions on attack advertisements targeting Democrats for the 2010 midterm elections. Ninety-one percent of the funding for American Crossroads comes from three right-wing billionaires. In August, American Crossroads raised $2,639,052. $2.4 million of that, or 91 percent of that total, comes from Trevor Rees-Jones, Robert Rowling, and Carl Linder. Rees-Jones is president of Chief Oil and Gas, a Dallas-based firm; he contributed $1 million in August to go with the $1 million he contributed earlier in the year. Rowling is CEO of TRT Holdings; like Rees-Jones, he gave $1 million in August to go with a previous $1 million contribution. Linder owns American Financial Group (AFG), a Cincinnati-based firm. Linder used to own Chiquita, the fruit corporation, and owns a partial stake in the Cincinnati Reds. AFG donated $400,000 in August. In July, billionaire Jerry Perenchio, who in 2008 chaired presidential candidate Senator John McCain (R-AZ)‘s national finance committee, gave $1 million to American Crossroads. American Crossroads has a partner group, American Crossroads GPS (for Grassroots Political Strategies), that is organized under a section of the tax code that does not require disclosure of donors. The group is raising millions of dollars, but refuses to identify the donors. The two groups were organized earlier in the year by Rove and former Republican National Committee chairman Ed Gillespie. Another political advocacy group, American Action Network, shares a downtown Washington office with the Crossroads group; both are working alongside other right-wing advocacy groups such as Americans for Prosperity and the US Chamber of Commerce. [Salon, 9/20/2010; Politico, 9/20/2010]
Entity Tags: Ed Gillespie, American Crossroads, American Action Network, American Crossroads GPS, Carl Linder, Robert Rowling, US Chamber of Commerce, A. Jerrold Perenchio, Karl C. Rove, Americans for Prosperity, Trevor Rees-Jones
Timeline Tags: Civil Liberties, 2010 Elections
President Obama tells how his ideas of bipartisan compromise with Republican lawmakers were dashed. Obama reflects on the American Recovery and Reinvestment Act of 2009, signed into law in February 2009. Interviewer Jann Wenner of Rolling Stone asks: “When you came into office, you felt you would be able to work with the other side. When did you realize that the Republicans had abandoned any real effort to work with you and create bipartisan policy?” Obama responds: “Well, I’ll tell you that given the state of the economy during my transition, between my election and being sworn in, our working assumption was that everybody was going to want to pull together, because there was a sizable chance that we could have a financial meltdown and the entire country could plunge into a depression. So we had to work very rapidly to try to create a combination of measures that would stop the free-fall and cauterize the job loss. The recovery package we shaped was put together on the theory that we shouldn’t exclude any ideas on the basis of ideological predispositions, and so a third of the Recovery Act were tax cuts. Now, they happened to be the most progressive tax cuts in history, very much geared toward middle-class families. There was not only a fairness rationale to that, but also an economic rationale—those were the folks who were most likely to spend the money and, hence, prop up demand at a time when the economy was really freezing up. I still remember going over to the Republican caucus to meet with them and present our ideas, and to solicit ideas from them before we presented the final package. And on the way over, the caucus essentially released a statement that said, ‘We’re going to all vote “No” as a caucus.’ And this was before we’d even had the conversation. At that point, we realized that we weren’t going to get the kind of cooperation we’d anticipated. The strategy the Republicans were going to pursue was one of sitting on the sidelines, trying to gum up the works, based on the assumption that given the scope and size of the recovery, the economy probably wouldn’t be very good, even in 2010, and that they were better off being able to assign the blame to us than work with us to try to solve the problem.” No House Republican voted for the package; only three Republican Senators voted for it. [BBC, 2/14/2009; Rolling Stone, 9/28/2010]
China is among the nations spending the most on clean and renewable energy technologies, according to investment figures released by the advisory company Bloomberg New Energy Finance. Overall, the world’s nations invested $243 billion in clean energy in 2010, up from $185.5 billion in 2009 and double the amount of money invested in 2006. Bloomberg CEO Michael Liebriech says: “This is a spectacular result, beating previous record investment levels by a clear margin of more than $50 billion. It flies in the face of skepticism about the clean energy sector among public market investors.” Small-scale distributed generation projects such as rooftop solar arrays saw the biggest increase, with Germany investing the most and nations like the Czech Republic, Italy, and the US following behind. China invested more than any other nation in clean energy, spending over $51 billion. Nations in Europe, the Middle East, and Africa still spend the most, collectively, on clean energy technology, but the nations of Asia and Oceania have surpassed American spending and are closing the gap on the regional leaders. Public market investment rose in 2010 after recession-driven lows in 2008 and 2009. [RenewableEnergyWorld, 1/11/2011]
Author and computer scientist Ramez Naam writes a column for Scientific American explaining how “Moore’s Law” is at work in the dropping cost of solar energy generation. The benefits are obvious, he writes: “If humanity could capture one tenth of one percent of the solar energy striking the earth—one part in one thousand—we would have access to six times as much energy as we consume in all forms today, with almost no greenhouse gas emissions. At the current rate of energy consumption increase—about 1 percent per year—we will not be using that much energy for another 180 years.” Currently, solar energy only makes up 0.2 percent of the world’s energy production, mostly because the systems to capture and use solar energy are, he says, “expensive and inefficient.” But that is changing for the better. Moore’s Law is an observation made by Intel co-founder Gordon Moore in 1965, in which he said that the number of transistors per square inch on integrated circuits had doubled each year. Moore predicted that trend would continue. Later observations codified the “law” to say that the number of transistors per square inch would double approximately every 18 months, in essence doubling the amount of computing power available to a given computer every 18 months. Naam is extrapolating the law to apply to the exponential decrease in the cost of generating solar energy. “If similar dynamics worked in solar power technology,” he writes, “then we would eventually have the solar equivalent of an iPhone—incredibly cheap, mass distributed energy technology that was many times more effective than the giant and centralized technologies it was born from.” Naam takes data generated by the National Renewable Energy Laboratory (NREL—see 1977) to note that since 1980, the cost of solar energy has dropped from $22 to $3 per watt. It is an almost perfect exponential drop, on average, trending at an average of a 7 percent drop in the dollars per watt cost per year. 2010 data indicates that the drop in price may be accelerating. Two main factors are driving this price drop: solar manufacturers are continually improving their abilities to reduce the costs of developing solar energy systems, and the efficiency of solar cells is rising dramatically. Laboratory results show solar efficiencies as high as 41 percent, and inexpensive thin-film methods (see 1972 and 1988) are achieving up to 20 percent efficiency in the lab, twice as high as most of the solar systems in use today. Moreover, installation costs are dropping as rapidly as technology costs. Naam writes that the trends indicate that the cost of solar will rival that of average retail conventionally generated electricity, about 12 cents per kilowatt hours, by 2020, or sooner. By 2030, solar electricity will cost half of what it will cost to generate electricity with coal. Naam writes: “Solar capacity is being built out at an exponential pace already. When the prices become so much more favorable than those of alternate energy sources, that pace will only accelerate.” Naam concludes: “The exponential trend in solar watts per dollar has been going on for at least 31 years now. If it continues for another 8-10, which looks extremely likely, we’ll have a power source which is as cheap as coal for electricity, with virtually no carbon emissions. If it continues for 20 years, which is also well within the realm of scientific and technical possibility, then we’ll have a green power source which is half the price of coal for electricity. That’s good news for the world.” [Scientific American, 3/16/2011; Investopedia, 2013]
A list of 10 companies that have avoided paying US income taxes is provided by Senator Bernie Sanders (I-VT), who is pushing for legislation that will close the legal tax loopholes that allow large corporations to avoid the bulk of their tax responsibilities. Chicago Sun-Times reporter Lynn Sweet writes, “Some people call the income tax system with generous loopholes for big companies corporate welfare or corporate entitlements.” Sanders’s list, based on returns and Securities and Exchange Commission (SEC) documents filed in 2009 and earlier, includes:
ExxonMobil. The oil giant made $19 billion in profits in 2009, but paid no federal income taxes, and received a $156 million tax rebate.
Bank of America (BoA). The financial corporation made $4.4 billion in profits in 2009, and received nearly $1 trillion in Federal Reserve and Treasury Department “bailout” funds. The bank received a $1.9 billion tax refund.
General Electric. This multinational conglomerate made $26 billion in profits in the US, and over the last five years has received $4.1 billion in tax refunds.
Chevron. The oil giant made $10 billion in profits in 2009, and received a $19 million refund from the IRS.
Boeing. The defense contractor received a $30 billion contract from the US Department of Defense in 2009 to build 179 airborne tankers, and received a $124 million tax refund.
Valero Energy. This energy corporation, the 25th largest company in the US, garnered $68 billion in sales in 2009, and received $157 million in tax refunds. Over the last three years, Valero has received a $134 million tax break from the oil and gas manufacturing tax deduction.
Goldman Sachs. The financial giant paid only 1.1 percent of its income in taxes in 2008, though it recorded $2.3 billion in profits. It also received nearly $800 billion from the Federal Reserve and the Treasury Department.
Citigroup. The financial conglomerate made over $4 billion in profits in 2010, but paid no federal income taxes. It received a $2.5 trillion “bailout” from the Federal Reserve and Treasury.
ConocoPhillips. The oil conglomerate garnered $16 billion in profits from 2007 through 2009, paid no taxes, and received $451 million in tax breaks through the oil and gas manufacturing deduction.
Carnival Cruise Lines. This entertainment giant made over $11 billion in profits between 2006 and 2011, but paid only 1.1 percent of its income in taxes during that period.
In a press release calling for “shared sacrifice,” Sanders writes: “While hard working Americans fill out their income tax returns this tax season, General Electric and other giant profitable corporations are avoiding US taxes altogether.… [T]he wealthiest Americans and most profitable corporations must do their share to help bring down our record-breaking deficit.” Sanders writes that “it is grossly unfair for Congressional Republicans to propose major cuts to Head Start, Pell Grants, the Social Security Administration, nutrition grants for pregnant low-income women, and the Environmental Protection Agency while ignoring the reality that some of the most profitable corporations pay nothing or almost nothing in federal income taxes.” Sanders calls for closing corporate tax loopholes and eliminating the deductions for oil and gas companies. He is also introducing legislation that would impose a 5.4 percent surtax on millionaires that would garner as much as $50 billion a year in tax revenues. Sanders says: “We have a deficit problem. It has to be addressed, but it cannot be addressed on the backs of the sick, the elderly, the poor, young people, the most vulnerable in this country. The wealthiest people and the largest corporations in this country have got to contribute. We’ve got to talk about shared sacrifice.” [Chicago Sun-Times, 3/27/2011]
Entity Tags: Boeing Company, Carnival Cruise Lines, Citigroup, Bernie Sanders, Bank of America, ConocoPhillips, Goldman Sachs, Chevron, Lynn Sweet, Valero Energy Corporation, General Electric, ExxonMobil
Timeline Tags: Global Economic Crises
The US has slipped to third place in clean energy investment in 2010, despite the federal government’s push to promote investment in clean energy and reduced pollution (see February 2009). China (see January 11, 2011) and Germany are both outspending the US in clean energy investment, according to a report by the Pew Charitable Trusts. Phyllis Cuttino, the director of Pew’s Clean Energy Program, says, “The United States’s position as a leading destination for clean energy investment is declining because its policy framework is weak and uncertain.” As competitors adopt renewable energy standards and incentives for renewable energy investment, the US could fall even further behind, Cuttino warns. The US spent $34 billion last year on clean energy, while China invested $54.4 billion and Germany $41.2 billion. [USA Today, 3/29/2011]
Instead of releasing €12 billion ($17.2 billion) to help the Greek government’s worsening economic and political crises, EU leaders assembling in Luxembourg for seven hours, from Sunday night into Monday morning, place more pressure on the Greek government after the International Monetary Fund (IMF) required Europe to guarantee Greece’s finances for the next 12 months. Rather than act with a sense of urgency, EU finance ministers expect the Greek Parliament and President George Papandreou to pass an austerity bill. Greece’s crises threaten to topple the euro and EU financial markets. [New York Times, 6/20/2011]
Eurozone policymakers fail to reach an agreement over the weekend on financial aid to bail out Greece, resulting in a sharp market drop on Monday morning as disappointed traders react to the leaders’ failure to guarantee the next €12 billion installment of Greece’s original bailout. Widespread speculation is that a disorganized Greek default will send Eurozone single-currency nations, as well as nations around the globe, into another panic. [Guardian, 6/20/2011]
After President Obama exhorts Congress to pass his jobs legislation package, which he calls the “American Jobs Act of 2011,” during his address to a joint session on September 8, some Republican lawmakers note that no legislator has officially submitted the bill and thusly there is no legislation to pass. Representative Louis Gohmert (R-TX) submits his own quickly written “American Jobs Act of 2011” hours before a Democratic House member can submit Obama’s 155-page, $447 billion legislative package. Gohmert’s bill is two pages long and would “amend the Internal Revenue Code of 1986 to repeal the corporate income tax.” Gohmert issues a press release that reads: “We have heard a lot of rhetoric about job creation from President Obama over the last several days. After waiting to see what the president would actually put into legislative language, and then waiting to see if anybody would actually introduce the president’s bill in the House, today I took the initiative and introduced the ‘American Jobs Act of 2011.’ It is a very simple bill, which will eliminate the corporate tax which serves as a tariff that our American companies pay on goods they produce here in America. This bill will actually create jobs in America. Right now, American manufacturing jobs are shipped overseas. What is really insidious about this tax is that corporate taxes are paid by the consumer—built in to the cost of the good or service. Corporate taxes are paid for by people in the form of lower wages to American workers and less money paid out in dividends in everything from 401K retirement accounts and to those who would risk their capital in business ventures. This type of capital investment is where jobs come from. Unlike President Obama’s bill, which clocks in at 155 pages, the ‘American Jobs Act’ is only two pages. The American people want to see jobs and economic growth and this bill guarantees that outcome. America would instantly become a safe haven for businesses resulting in an explosion in revenue increases. If we really want to create jobs and grow the economy, we must pass ‘The American Jobs Act’ now.” [Daily Caller, 9/14/2011; Louis Gohmert, 9/14/2011; Los Angeles Times, 9/15/2011] Gohmert objects to a provision in the Obama legislative package which would forbid employers from discriminating against unemployed workers, accusing Obama of trying to create a “new protected class” of Americans and saying that the point of the anti-discrimination language would be to give “trial lawyers… 14 million new clients.” The National Employment Law Project (NELP) says that Gohmert is wrong in his accusations, and that the legislation “would not make employment status a protected class like race or sex,” but “simply bans hiring discrimination against the jobless.” Employer discrimination against unemployed job applicants is well-documented and on the rise, according to NELP. [Huffington Post, 8/11/2011; Huffington Post, 9/14/2011] Kirsten Boyd Johnson of the satirical political news Web site Wonkette calls Gohmert’s legislation “childish,” and says that, according to recent polls, Americans largely blame Congressional Republicans for, as she writes, “destroying America with their petulant refusal to govern like a dignified body of elected lawmakers in favor of running around like naughty children stealing other peoples’ homework.” Bloomberg News, which reports on the polling, quotes retired New York citizen Ray DiPietro as saying: “I’ve been a registered Republican for 50 years or more, but I don’t like what they are doing. [Republicans] are more concerned about getting Obama out of office than with making things right.” DiPietro says he receives emails on a daily basis from Republicans who denigrate Obama and “tear him apart, and that’s no way for grownups to talk.” Indianapolis Republican Nicole Olin agrees, saying: “I do put the majority of the blame on the Republicans, because they seem to be the least willing to give up anything. Just because a majority votes you in doesn’t mean you don’t have to compromise in one way, shape, or form to make sure you do what’s good for everyone.” Senator Mike Lee (R-UT) warns of the dangers of taking any set of polls in “isolation,” and says the poll result “highlights a broad dissatisfaction among the American people with the way their government has been operating.” [Wonkette, 9/15/2011; Bloomberg, 9/15/2011] David Weigel of Slate writes that Gohmert “prank[ed]” the White House in submitting his legislation, which has no real chance of ever being enacted. Although House Democrats have not yet formally submitted the actual American Jobs Act, it has been posted online by the Obama administration. [Slate, 9/12/2011; Slate, 9/15/2011] Democrats can submit the bill under its original title, as House rules do not forbid two separate pieces of legislation having the same name, though as Los Angeles Times reporter James Oliphant notes, “[I]t could result in a lot of Democrats and Republicans shouting on the floor about two different bills.” [Los Angeles Times, 9/15/2011] In the past, Gohmert has accused the Obama administration of orchestrating the deaths of “one in five” Americans through its health care legislation (see July 16, 2009), of implementing “eugenics” and creating Nazi-like “youth brigades” (see July 24, 2009), and of lying about the likelihood that failing to raise the debt ceiling would lower the nation’s credit rating (see July 13, 2011).
Entity Tags: Kirsten Boyd Johnson, Obama administration, Nicole Olin, Louis Gohmert, Michael Shumway (“Mike”) Lee, James Oliphant, National Employment Law Project, David Weigel, US House of Representatives, Barack Obama, Bloomberg News, Ray DiPietro, US Congress
Timeline Tags: Global Economic Crises, Domestic Propaganda
The US Defense Department increased its spending on clean and renewable energy sources by 300 percent, from $400 million to $1.2 billion, between 2006 and 2009, according to a Pew Research report. By 2010, the Defense Department had spent upwards of $10 billion on clean energy. CleanTechnica reports that the “investments are helping spur development and deployment of clean energy technologies in three key areas: vehicle efficiency, advanced biofuels, and the installation of renewable energy systems at military bases.” Phyllis Cuttino, head of the Pew Clean Energy Program, says: “As one of the largest energy consumers in the world, the Department of Defense has the ability to help shape America’s energy future. DoD’s efforts to harness clean energy will save lives, save money, and enhance the nation’s energy and economic future. Their work is also helping to spur the growth of the clean energy economy.” Fuel shipments make up 80 percent of all supply convoys in Iraq and Afghanistan, and those convoys are premium targets for insurgents. Deploying clean energy alternatives will reduce the number of convoys needed to be dispatched, and as a result will save lives and improve the security of American military operations. Secretary of the Navy Ray Mabus says: “For the Department of the Navy to meet the challenges we face in the 21st century, we must reduce our dependence on foreign oil and find ways to use energy more efficiently. We must ensure that we remain the most formidable expeditionary force in the world, even in these challenging economic times. We can do that in part by changing the way we use, acquire, and produce energy. Before the end of the decade, our programs to develop and use alternative sources of energy, on shore and at sea, will pay for themselves. We will save the department money, but more importantly, these energy initiatives will make us better war fighters and will saves lives.” [CleanTechnica, 9/23/2011]
Main Street Alliance logo. [Source: Alliance for a Just Society]According to a survey conducted by three business groups, two-thirds of small-business owners believe that the Citizens United decision (see January 21, 2010) is bad for small businesses. The survey of 500 small business leaders is released by the American Sustainable Business Council, the Main Street Alliance, and the Small Business Majority. Sixty-six percent of respondents say that the Citizens United decision has hurt business, while only 9 percent view it favorably. Eighty-eight percent of small business owners hold a negative view of the role money plays in politics, and 68 percent view it very negatively. David Levine of the American Sustainable Business Council says: “As we approach the two-year anniversary of the Citizens United case, the verdict is loud and clear: the ruling hurts the small businesses that we need to be strong for economic recovery. Business owners are frustrated because they have to compete with big business bank accounts to be heard, and they are fighting back. More than 1,000 business owners have joined ASBC’s Business for Democracy campaign to fight for a constitutional amendment that overturns this decision” (see November 23, 2010, November 1, 2011, November 18, 2011, and December 20, 2011). Small Business Majority founder and CEO John Arensmeyer says: “America’s entrepreneurs feel corporations have an outsized role and say in politics—to the detriment of the small business community. They’re looking for a level playing field, and as the country’s primary job creators, they should have it.” Melanie Collins, who leads the Maine Small Business Coalition and the Main Street Alliance, says: “Small business owners aren’t stupid. We know who wins when corporate heavy hitters can spend all the money they want, as secretively as they want, to influence our country’s elections—and it’s not us. The Citizens United decision stacked the deck against small businesses. We’ve got to unstack that deck.” [The Main Street Alliance, 1/18/2012 ] Marie Diamond of the liberal news Web site Think Progress agrees, writing: “Small business has been hailed by legislators of both parties as the undisputed engine of economic growth. Fifty-one percent of Americans are employed by small business, and small businesses generate 70 percent of new private sector jobs. But they increasingly find their needs ignored by lawmakers who favor corporate contributors with deeper pockets.” [Think Progress, 1/18/2012]
The Republican presidential primaries are being largely controlled, at least from a financial standpoint, by a very few extraordinarily wealthy individuals, according to research provided by former Treasury Secretary Robert Reich and the news organization ProPublica. In January 2012, the campaign of frontrunner Rick Santorum (R-PA) was almost entirely funded by billionaires William Dore and multi-millionaire Foster Friess (see February 16-17, 2012), who between them supplied over three-quarters of the $2.1 million donated to Santorum’s “super PAC” “Red White and Blue Fund.” Dore is the president of a Louisiana energy corporation and Friess is a fund manager in Wyoming. Of the $11 million raised by the super PAC supporting Newt Gingrich (R-GA), $10 million came from Sheldon Adelson and his wife, Miriam. Adelson runs a casino ownership group in Las Vegas. Most of the rest of Gingrich’s funding came from Texas billionaire Harold Simmons. PayPal co-founder Peter Thiel provided $1.7 million of the $2.4 million raised in January by the super PAC for Ron Paul (R-TX). As for Mitt Romney (R-MA), himself a multi-millionaire, his super PAC “Restore Our Future” raised $6.6 million in January. Almost all of it came from 40 donors, including hedge fund billionaires Bruce Kovner, Julian Robertson (the largest donor at $1.25 million), and David Tepper, hotel owners J.W. Marriott and Richard Marriott, and Hewlett-Packard CEO Meg Whitman. The lobbying firm FreedomWorks (see 1984 and After, May 16, 2008, February 16-17, 2009, February 19, 2009 and After, February 27, 2009, March 13, 2009 and After, April 2009 and After, April 14, 2009, April 15, 2009, June 26, 2009, Late July, 2009, August 5, 2009, August 6, 2009, August 6-7, 2009, August 10, 2009, August 14, 2009, August 19, 2009, August 24, 2010, September 2010, September 12, 2010 and August 17, 2011) has contributed over $1.4 million to various Republican candidates. Reich writes, “Whoever emerges as the GOP standard-bearer will be deeply indebted to a handful of people, each of whom will expect a good return on their investment.” Reich goes on to cite American Crossroads’s “super PAC” Crossroads GPS, founded by Republican political consultant Karl Rove, and its lineup of corporate moguls contributing hundreds of millions of dollars. The lineup of Crossroads supporters includes Charles and David Koch (see 1940 and After, 1977-Present, 1979-1980, 1981-2010, 1984 and After, 1997, Late 2004, Late 2004, October 2008, August 5, 2009, November 2009, July 3-4, 2010, August 30, 2010, September 2010, August 17, 2011, April 2010 and After and October 4, 2011), and Harold Simmons, owner of Contran Corporation, who has contributed $10 million to the organization. Reich says there is no legal way to know exactly how much the Kochs and their fellows have contributed: “The public will never know who or what corporation gave what because, under IRS regulations, such nonprofit ‘social welfare organizations’ aren’t required to disclose the names of those who contributed to them.” The previous limit of $5,000 per year per individual was erased by the 2010 Supreme Court Citizens United v. Federal Election Commission decision, a decision Reich calls “grotesque.” Reich writes: “In a sense, Santorum, Gingrich, Paul, and Romney are the fronts. Dore et al. are the real investors.… Now, the limits are gone. And this comes precisely at a time when an almost unprecedented share of the nation’s income and wealth is accumulating at the top. Never before in the history of our Republic have so few spent so much to influence the votes of so many.” [The Atlantic, 2/2/2012; Salon, 2/21/2012; ProPublica, 2/21/2012] President Obama’s super PAC, “Priorities USA Action,” has received $2 million from Hollywood mogul Jeffrey Katzenberg and another $1 million from the Service Employees International Union’s Committee on Political Education (SEIU COPE). However, Priorities USA has raised relatively paltry sums in comparison to the monies raised by the Republican super PACs, according to a Reuters report. Obama and his re-election campaign had originally distanced themselves from the super PAC operating in their name, in part because they disapprove of the Citizens United decision and the influence of super PACs in electoral politics. Since the Obama campaign officially endorsed the organization, donations have risen. Obama campaign advisor David Axelrod says that Obama “believes that this is an unhealthy development in our political process, but it is a reality of the rules as they stand. This was not a quick decision, but he also feels a responsibility to win this election. There’s a lot hanging on this beyond him.” By the end of January, Priorities USA had raised $4.2 million. In contrast, Romney’s “Restore Our Future” had raised $36.8 million by the end of last month. [Reuters, 2/2012; ProPublica, 2/21/2012] Partly in response to reports of billionaires’ influence on the 2012 elections, comedian Bill Maher will announce his donation of $1 million to the Obama super PAC. Maher will tell an audience that an Obama victory over any of the Republican contenders is “worth a million dollars” and will describe the donation as “the wisest investment I think I could make.” [Los Angeles Times, 2/24/2012] Friess is often described in the press as a “billionaire,” but both Friess and Forbes magazine say that appellation is inaccurate. [Forbes, 2/8/2012]
Entity Tags: Republican Party, Richard Marriott, Rick Santorum, Peter Thiel, Robert Reich, William Dore, Service Employees International Union Committee on Political Education, Newt Gingrich, Willard Mitt Romney, Sheldon Adelson, Ron Paul, Miriam Adelson, ProPublica (.org), Karl C. Rove, Charles Koch, American Crossroads, David Axelrod, American Crossroads GPS, Meg Whitman, Bill Maher, Barack Obama, David Koch, David Tepper, Foster Friess, Julian Robertson, Jeffrey Katzenberg, Bruce Kovner, J. W. (“Bill”) Marriott, FreedomWorks, Harold Simmons
Timeline Tags: Civil Liberties, 2012 Elections
Arizona’s largest public utility, Arizona Public Service (APS), is proposing to charge its customers who install rooftop solar panels $50 to $100 a month, or more, to cover what it says is the cost of maintaining its power grid. The increase would primarily impact new solar consumers, and not those who already have solar arrays installed. Solar energy advocates say the utility’s move will cost thousands of jobs in the solar industry, but APS says the surcharge is justified. Gregory Bernosky, an APS official in charge of the company’s renewable energy policy, says: “Right now the model isn’t sustainable. We love customers to go solar; the energy is a great resource as part of our energy portfolio. But this is about cost shifting and fairness to non-solar customers.” Bernosky says that solar-producing customers are not paying their fair share for the conventional electricity they use, in part because under a policy known as net metering, they can sell the excess energy they generate back to APS for what Bernosky says is too much credit. “We’re not collecting all the costs we need to maintain infrastructure from solar customers, and as time goes on and we have more of them, they put a greater burden on non-solar customers,” he says. This claim has been strongly challenged (see April 5, 2013 and July 31, 2013). Tim Hanna, a Solar City employee who has a rooftop array, says he pays little more than $20 or $30 for electricity even in the summer, because he generates so much solar energy for his own use. He would not be affected by the rate increase, but says many others would, stating, “I think it will put a big damper on things because whenever you talk to people, you tell them they can save a good chunk of money, and now they might not be able to save like they used to.” Arizona’s solar industry employs over 10,000 people now, a number that is expected to rise. But many solar advocates say that APS’s new policy could halt job growth and cost current jobs. Meghan Nutting of Solar City says: “Louisiana and Idaho fought similar proposals. No other state with net metering, which is 43 states, has enacted a tax hike like this. It’s crazy that Arizona, the sunniest state in the nation, might actually consider doing this.” [AZFamily.com, 7/16/2013]
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