As the article stated yesterday---costs for PIP are not going up----there is simply more fraud and corruption lifting the costs as with Medicare and Medicaid.  We are reforming Medicare and Medicaid because the health industry fraud sucked the Trusts dry.  That is what is happening with PIP.  The insurance and health industries are inflation costs by fraud with soaring profits and then claiming PIP needs to be dismantled because it is too costly.....same as Medicare.  So, rather than having the costs of your health care covered with this auto insurance that is required by law---you are now going to be pushed into Medicaid which now mostly covers only preventative health care.  This eliminates yet another outlet for health coverage for the working and middle-class while insurance and health industry profits soar.

Notice the Maryland Assembly is about to end PIP and push Maryland citizens into the most private and profit-driven health system in the nation---Medicaid and preventative care.  The No Fault auto premiums are no small payment---as many times as people use it the total premium amounts paid often covered costs.

Think that at the same time, your rates go higher and higher for simply being in an accident no matter it wasn't your fault.  That is what deregulating the insurance industry looks like.  It gives them the ability to charge anything they want as laws are on the books requiring you to have some kind of insurance.  Deregulating while making insurance mandatory----watch that disposable income disappear with rate hikes.

Tort-based auto insurance means the ambulance-personal injury lawyers that you see on TV will be the only recourse for paying medical bills and we all know these lawyers pocket most of the money won in the lawsuit with the plaintiff often receiving pennies on the dollar.  So, this will cost health care more and that money will go to lawyers and it will come from taxpayer Medicaid.
So, now the insurance, the health care, and lawyers are getting a cut money that always went to actual care for the patient who will be bankrupt and/or left with little access to care.

THESE ARE NEO-LIBERAL AND NEO-CON POLICIES MOVING ALL MONEY TO CORPORATE PROFIT ON THE BACKS OF THE AMERICAN PEOPLE.

All Maryland pols are neo-liberal and neo-cons doing all of the above.

'Rates did go down initially'---before the fraud and corruption sent them soaring.

PIP and No-Fault Auto Insurance Reform

More and more states are abandoning the PIP/No-Fault form of auto insurance in favor of a tort-based set of laws. PIP/No Fault originated in the 1930s as an alternative to the often slow and expensive process of litigating claims. The intent was to speed up the process by shifting the dispute resolution from the courts to the insurance companies. In theory, this was supposed to reduce insurance rates—and rates did go down initially.

By the mid-70s, almost 20 states had some form of no-fault insurance laws. However, over time, rates again rose until "No-Fault" states had higher rates than tort-based states. Beginning in 1980, states started repealing their no-fault laws, and now only nine states (Florida, Hawaii, Kansas, Massachusetts, Missouri, Minnesota, New York, North Dakota and Utah) have mandatory no-fault laws. Eleven states plus the District of Columbia have hybrid laws (Arkansas, Delaware, Kentucky, Maryland, New Jersey, Oregon, South Carolina, South Dakota, Texas and Virginia), which are a combination of no-fault and tort systems.

The pendulum seems to be swinging back to tort-based auto insurance. What does this mean for you as a policyholder?

The Good News

Tort-based systems, in theory, give you more choices for medical payments and could save you substantial amounts of money. As an example, depending on the insurance company and coverages selected, those with Colorado car insurance (the most recent state to revert to a tort-based system) could see savings of 10 percent to 30 percent, according to several recent Denver Post articles.

The Choices

PIP, or Personal Injury Protection, is still available (in most cases), should you wish (or need) to pay for it. If you choose to drop this coverage, or if you are already under a tort-based system and don't have this coverage, you can still purchase it with most policies to cover medical expenses. However, coverage will be limited, with a general ceiling of $50,000. This additional coverage, if purchased, will pay expenses incurred by you and your immediate family for injuries resulting from an at-fault auto accident.

Since many drivers are uninsured or underinsured, it is essential that you understand the ramifications of this and make an informed decision about the "Uninsured/Underinsured Motorists" coverage option.

What if?

What happens if you are at fault? Your auto policy should pay the other person's claims. Companies normally negotiate this with each other. If you have insufficient coverage, you may have to go to court—thus displaying the tort aspect of the law. Either you or your health insurance company will pay medical expenses for you and your family once those expenses exceed your auto policy coverages.

What if you are injured by another driver who is at fault? Generally, the two auto insurance companies will work together to determine fault and pay benefits accordingly. This resolves the problem in most cases. If not, or if the amounts paid are insufficient, it may be necessary to resort back to the court system to recover damages.

What if the other driver is at-fault and has no (or inadequate) insurance? Your insurance company normally covers your medical expenses. This protection is provided under the uninsured/underinsured motorist coverage. If you do not have this coverage, your health insurance usually pays the bills, or you can sue the other party.

Consider the "Deductible Gap"

Generally, under a tort system, medical payments from your own policy are limited. However, in most cases you can choose "additional medical payments" and "Uninsured/Underinsured Motorists" coverage as part of your auto insurance policy.

After years of rising rates, many people may choose to forgo any additional coverages. Adding these coverages creates financial strain if you have high-deductible health insurance, or no health insurance at all. However, there is a potentially huge gap between the amount paid under a tort-based policy and your health insurance deductible. If you have no insurance, the out-of-pocket costs could be staggering. If you are not at fault in the accident, the tort-based system allows you to go to court to receive compensation for these costs, as well as for pain and suffering. But you must do so within a specified time period, and a lot of out-of-pocket expenses may be involved.

What does this mean for health insurance?

As more costs are shifted to the health insurance system, your insurance costs are likely to rise. This also means more people will be without health insurance.

So, what is next?

This is a good time to look at your health insurance to make sure you will have adequate coverage if you drop your PIP/No-Fault coverage. Don't wait until you're in an unpleasant situation to find out if you need more insurance. Be prepared!

_______________________________________________

This is when PIP was working in the interest of citizens and government coffers.  Insurance corporations were earning profits in the millions while the Uninsured auto insurance pool was bursting at the seams with revenue. 

NOW, HOW CAN WE DIVERT THE MONEY PAID INTO THIS FUND FOR HEALTH CARE INTO PROJECTS THAT BENEFIT DEVELOPMENT CORPORATIONS.

This is when a good program was targeted for fraud and corruption just as with the other Federal programs Medicare and Federal Housing Authority.  Working well for citizens, leaving government coffers flush to handle future events, allowing millions in profits to be earned---BUT THAT WAS NOT ENOUGH.  You see the article below was written in 1993----HERE COMES NEO-LIBERAL CLINTON TO DEREGULATE ALL THAT HE CAN SEE......this is the deregulation that sent all of this surplus in the Maryland Automobile Insurance Fund to development corporations like Johns Hopkins in Baltimore.  There's Donald Schaefer funneling money from Transporation Trusts and now MAIF to balance the budget with the public's designated money.  Baltimore Development paraded all kinds of working class and poor out to praise Schaefer who was behind creating Baltimore Development Corporations to funnel all the city's revenue from where it was to go----to where they wanted to send it.

You see the insurance corporations were able to move more and more people into MAIF clearing its rolls of all but the best of drivers.  It went from helping low-income people to subsidizing the costs of these auto insurance corporations.  It was gutted of its funds for pet projects.  I know Ravens fans love their stadium----but most of the fans are the ones no longer affording auto insurance because of the subsidy.  Note that the Uninsured Motorist insurance had high premiums and should have paid all health care costs when needed.

Remember, this was done through fraud and corruption because this money was not to be fungible.  It needs to come back to this government coffer.


I KNOW---LET'S SEND THIS PIP MONEY TO BUILD THE NEW FOOTBALL FIELD.----M AND T STADIUM AND BALANCE THE BUDGET WITH IT.

MAIF's embarrassment of riches

March 04, 1993|
By Frank A. DeFilippo  Baltimore Sun

THE Maryland Automobile Insurance Fund has a big-time problem. It's rich. So rich, in fact, that other state agencies are itching to get their hot little hands on MAIF's $118 million surplus.

MAIF's been approached about financing a new football stadium in Baltimore. Sen. George W. Della Jr. of Baltimore has sponsored a bill that would shift $50 million of MAIF's money to the general fund. And the Schaefer administration is pilfering $5.4 million from MAIF to help balance the budget.

MAIF is Maryland's state-run insurer of last resort. Any Maryland motorist who's turned down by at least two commercial insurers is automatically MAIFed.

MAIF's rates aren't cheap. Depending on how bad a motorist's record is, the driver's age and ZIP code, bare-bones coverage can range from $2,559 to a stick-it-to-'em high of $8,677 a year.

That MAIF should be suffering such an embarrassment of riches during a time of budget cuts and deficits is an embarrassment itself. MAIF's $118 million surplus is larger than the $100 million budget shortfall that's being plugged with keno proceeds and other money.

In theory, at least, MAIF is supposed to be non-profit. It was created in 1973 as an antidote to the no-fault insurance craze at the time, kind of an everybody's-fault approach. It's run by a board of trustees and receives no state funds, nor are its assets part of the state treasury. To settle claims, MAIF has the power to attach salaries and seize property.

Over the years, the commercial insurance companies in Maryland have pumped $137 million into MAIF. In effect, good drivers subsidize the insurance of bad drivers. In 1980, MAIF had 30,000 policies. Today it has 135,000.

Much of MAIF's excess is due to changes in the way it does business as well as some shrewd investments. At the same time MAIF has reduced rates over the past three years, it's also lowered awards. MAIF is also now doing all of its work in-house instead of farming it out to free-lance adjusters and collectors.

So it should come as no surprise that the Schaefer administration's pie-slicers approached MAIF about lending the Maryland Stadium Authority $100 million to help finance a new football stadium if Baltimore wins one of two NFL expansion franchises.

There are serious legal questions about whether the Stadium Authority has a funding mechanism for another stadium if the city is awarded a team. Because of a change in the tax code, the use of tax-free bonds to finance stadiums expired at the end of 1990.

The authority argues, though, that it's confident that it can float tax-free bonds because there have been a number of test cases around the country that might allow it.

Moreover, the authority has a bonding limit of $220 million, of which it has already used $170 million to build the new baseball stadium. The authority will pocket another $30 million over three years from lottery proceeds -- on top of the $50 million in bond money left over from the ballyard -- a total of $74 million. But a new topless football stadium will cost about $130 million. Put a lid on it, and it'll cost millions more.

So here's the catch: If the authority can't float tax-free bonds, it will have to go to market with bonds at a much higher interest rate. But before it can go to market with bonds, the authority will need the General Assembly's approval to increase its bonding capacity. This could hoist the total bond package over the spending affordability limit. Allowing this is action the legislature is reluctant to take.

It's for this reason that Gov. William Donald Schaefer is bypassing the spending affordability limit and proposing the use of transportation bonds to finance improvements to Baltimore's Convention Center. Now he's trying to scoot around the spending limit again just in case there's a football team in the city's future.

So drive carefully. Get MAIFed, and the premiums you pay could wind up helping to finance some government geegaw.

Frank A. DeFilippo writes every other Thursday on Maryland politics.

_______________________________________

Here we are just a handful of years later and what the first article stated was in fact true in Maryland----it was the hybrid model Maryland adopted that sent auto insurance money to lawyers and doctors.

Now, they are working to end hybrid and make it all tort.  People not being able to afford strong health coverage will be preyed upon -----80% of the American people.
Again, another public program that worked fine for the people gutted and dismantled by neo-liberals and neo-cons.  Profit over people every time

Again, we are at the height of Reagan/Clinton's deregulation frenzy.
I wonder if those voters wanting small government wanted to be pushed out of driving because they can no longer afford car insurance? 

Your Public Trusts are being gutted by small government and deregulation.

Why car insurance is so high Law suits: System encourages excessive litigation, raises premiums $130 to $150 a year

.December 23, 1996  Baltimore Sun

WANT TO LOWER your car-insurance premiums? It could happen -- if legislators in Annapolis stop catering to powerful special interests. More than 60 percent of your premium covers liability. Of that amount, 19 percent could be saved if excessive litigation and fraudulent claims were eliminated.Sadly, state legislators yawned at the problem when a gubernatorial commission sought reforms this year. Too many of them want to please trial lawyers and doctors who vigorously fight for the status quo. These special interests know that lower insurance premiums would come out of their pockets.


_________________________________________


I have talked about AIG spinoff HighStar and its connection with the Ivy League schools like Johns Hopkins.  The subprime mortgage fraudulent loans were insured here with the idea that HighStar would break from AIG with the equity and leave taxpayers to pay 100% on the dollar for the fraudulent Credit Default Swaps.   This article does a good job doing this.  Geithner was the NY FED chief that watched as trillions of dollars of fraud ran through the mortgage industry and did nothing about it----he aided and abetted the massive fraud.  What many people may  not know AIG was more a Life Insurance agency with this HighStar hedge fund sucking all its profits into their bank accounts.  Indeed, the taxpayer bailout of AIG saved the shareholders and those insured by CDS-----but it left an AIG still in business and limping along saying it is healthy when indeed it is not.  AIG Life Insurance advertises on Free TV---you know , where you get life insurance with no checkup.  Like you get a house without having a job. 

SAME THING.  THIS IS THE SUBPRIMING OF LIFE INSURANCE.

They are simply selling as many policies as they can and gaining those monthly payments knowing the coming economic collapse will bankrupt them again.

You are guaranteed to get back what you put into this Life Insurance plan-----OH REALLY????  They will spin that Life Insurance money off as they did with HighStar----probably to HighStar just as the economy is ready to crash.  THEN WE WILL HEAR----WE CAN'T PAY YOUR PREMIUMS BACK!

They will keep doing this with every business sector until you and I get rid of the neo-liberals and neo-cons that have allowed this corporate system to be deregulated with no oversight and accountability.

AIG's Collapse: The Part Nobody Likes to Talk About

Hester Peirce JUN 16, 2014 12:00pm ET

  Earlier this month, American International Group announced the departure of Robert Benmosche, the CEO who led the company through most of its recovery from the financial crisis. Now that the company’s postcrisis chapter is underway, it is worth taking a fresh look at AIG’s downfall and rescue and the implications for reform.

The standard AIG story lays all the blame for the company’s problems on AIG Financial Products—an allegedly unregulated, irresponsible, derivatives dealer hiding within an otherwise solid insurance company.

Former Treasury Secretary Timothy Geithner repeats this traditional line in his recent book, where he recounts how an aggressive “hedge fund-like subsidiary called AIG Financial Products” brought the otherwise healthy insurance company to its knees and ultimately drove it into the Fed’s welcoming arms. Former Federal Reserve chairman Ben Bernanke made a similar claim when he told Congress how angry he was about AIG’s Financial Products unit—“a hedge fund attached [to] a large and stable insurance company.” And former Commodity Futures Trading Commission Chairman Gary Gensler, with typical dramatic flair, explained that AIG’s “subsidiary, AIG Financial Products, operating out of London, brought down the company and nearly toppled the U.S. economy.”

This widely repeated narrative ignores or downplays a critical aspect of AIG’s downfall--the insurer’s securities lending program run for the benefit of its regulated life insurance subsidiaries.

An endnote in Geithner’s tome explains that securities lending was one of “AIG’s major liquidity needs” at the time of its rescue. As I describe in a recent working paper, the company got itself into hot water by lending securities from its life insurance companies’ portfolios. AIG took the cash collateral it received for these short-term loans and—in a departure from insurance industry practice—invested much of it in longer term, illiquid residential mortgage-backed securities.

The securities lending program grew from about $10 billion at the end of 2001 to over $80 billion by the end of 2007. When borrowers stopped renewing the loans, returned their securities, and asking for their cash back, AIG was in a bind—the borrowers’ cash was tied up in reinvestments. 

To meet borrowers’ demands, AIG lent more securities and used the cash collateral from new borrowers to return to existing borrowers. This solution only aggravated the problem. When CEO Robert Willumstad took the reins of AIG in June 2008, the cash drain from securities lending worried him more than AIG Financial Products’ liquidity needs.

Losses from the securities lending program threatened the viability of a number of AIG’s regulated life insurance subsidiaries. To save them from falling below minimum capital requirements, AIG pumped billions of dollars into these units.

Government rescue money was critical to this recapitalization effort. Taxpayer funds were also critical in meeting securities borrowers’ demands for cash. Securities lending counterparties received $43.8 billion in the last quarter of 2008, comparable to $49.6 billion in collateral postings and payments to AIG’s derivatives counterparties.

As consequential as it was to AIG in a time of crisis, nobody likes to tell the securities lending part of the story. First, it doesn’t feed as nicely into the vilification of derivatives that laced crisis narratives and fueled calls for an intense derivatives regulatory regime. Second, the fact that heavily regulated insurance companies got into trouble does not support the call for greater reliance on government regulators. Finally, the rescue of a deeply troubled company is less defensible than the rescue of a healthy insurance company with a troubled derivatives subsidiary.

The Fed’s contention that its loan was adequately secured rested on the supposition that apart from the derivatives unit, AIG was sound. The banks that went in to AIG in September 2008 to assess whether it was worth rescuing concluded that it was not.

As one of the private bankers subsequently explained, “The value of the company in its entirety was not necessarily sufficient to cover the liquidity need that the company had.”

Geithner recounts in his book that—looking for confirmation that a loan to AIG would comply with the legal requirement that “the Fed can only lend against reasonably solid collateral”—he asked Warren Buffett “what he thought about the earning power of AIG’s traditional insurance subsidiaries.” Buffett “was pretty positive about their underlying value, which made [Geithner] more confident that [the Fed] could meet the legal test of being secured to [its] satisfaction.” Buffett’s words of assurance to Geithner weren’t matched by a willingness to put his own money on the line; he refused AIG’s overtures to invest during 2008.

AIG was on the verge of filing for bankruptcy when the Fed stepped in with a better deal for shareholders and creditors. The government subsequently re-rescued the company by devoting additional taxpayer funds to it and softening the lending terms. At any of these re-rescue points, the government could instead have let the company go through bankruptcy.

By continuing to prop up AIG, the government shielded the company from the toughest regulator of all—the markets. AIG’s problems were not confined to one unregulated corner; problems also arose in full view of insurance regulators. Rather than assuming the Fed will be better than AIG’s other regulators, we ought to allow the truly superior regulator—the market—to do its job.







_____________________________________________
I spoke yesterday about Life Insurance corporations being the most leveraged and ready to collapse of the insurance industry but guess what is the next in line of threatened insurance corporations-----

THAT'S RIGHT----WORKMAN'S COMP.

They have been allowed to create the same over-leveraged financial status that will have them bankrupt with this coming economic collapse.  No more worker's compensation----

THAT'S HOW YOU GET RID OF THE NEW DEAL SAY NEO-LIBERALS AND NEO-CONS!  BLOW THEM UP AS WE DID THE HOUSING MARKET WITH FRAUD AND CORRUPTION!

Coming after more public wealth and no public justice in place to protect or give us recourse....that is what neo-liberals and neo-cons have been building these few decades-----Clinton and Obama taking the people's party and handing it to Wall Street.  Run and vote for labor and justice in all Democratic Primaries!  WE CAN REVERSE THIS!

Rapidly writing new contracts for worker's comp that they could not afford----sound familiar?

IMPLODING ALL OF THE NEW DEAL PROGRAMS TO PROTECT THE AMERICAN PEOPLE DURING HARD TIMES.

After Tower Group collapse, lingering concerns about industry’s reserve adequacy

By Adam Cancryn and Saurabh Nair, SNL Financial Posted: May 6, 2014

...................................................

Most of the concern centers on long-tailed commercial lines, particularly workers’ compensation. Claims behavior takes longer to develop than in other sectors, making it more difficult to tell how much money should be set aside even years after a policy is written. Misjudging those reserving needs can be disastrous. SeaBright Holdings Inc. sold in 2013 after reserve charges pressured its operations, and Meadowbrook’s stock dropped nearly 35% from 2012 through 2013 amid several quarters of reserve charges. Tower Group served as the highest-profile example of reserving gone wrong, with its shares losing more than 80% in the six months before it hastily agreed to a sale.

Those companies ran into problems with business written during a softer market between 2007 and 2011, when they grew their books rapidly just as the rates being charged for coverage were at their most inadequate. When claim costs far outstripped the rates they originally charged, the insurers had to quickly build up their loss reserves. Analysts now consider the 2010 accident year one of the worst performers of the cycle, attributing the troubles to low prices and more expensive claims driven by high unemployment.

“The troubles they have now is on stuff they wrote years ago,” Keefe Bruyette & Woods analyst Robert Farnam told SNL.

The 10 workers’ comp insurers with the greatest adverse development in 2013 reported an aggregate $702.6 million in charges. SeaBright and Meadowbrook did not make that list. Tower Group was also absent, as it has not yet submitted all of its filings, but it said in February that its U.S.-taxed subsidiaries recorded $269.2 million of 2013 reserve charges.

Despite the issues, the sector continues to steadily release reserves. Companies argue that Meadowbrook and Tower Group in particular are isolated situations, driven just as much by reckless growth as the broader industry conditions. The rest of the industry, they contend, was more prudent in writing business during the soft market, leaving it with less risk and the ability to make up for a few unfavorable accident years with better results from other parts of their books of business. The insurers themselves are also working with much more detailed data than analysts and outside actuaries, they say, allowing them to most accurately evaluate their reserves.

“We look at it on a much more granular basis, and we think we have certainly better information,” W. R. Berkley Corp. Vice President of External Financial Communications Karen Horvath told SNL. Analysts have singled out W.R. Berkley’s reserving position as one of the more concerning in the industry, predicting that its quarterly releases would soon slow. But the company in the first quarter released about $25 million, extending a string of favorable reserve development that dates back to 2007.

Even so, skeptics are not quite willing to accept insurers’ assurances as fact. They worry that companies are already drawing down their reserves for the 2012 and 2013 accident years to supplement earnings or balance out problems in earlier years, without enough data to be sure about how those most recent years will ultimately perform.

“There is just no way a company would know or have the type of certainty under which they would be able to release reserves from some of the most recent business,” said Standard & Poor’s credit analyst Siddhartha Ghosh, who warned that the workers’ comp sector will eventually have to strengthen reserves significantly. “We don’t think that’s a prudent way of addressing reserves.”

He pointed to the previous market cycle, when workers’ comp companies released $12.4 billion of reserves between 1994 and 2000 and then had to scramble to add back $10.6 billion from 2001 to 2005 to make up for their overconfidence.

The sector’s fortunes over the next several years will depend heavily on whether insurers can keep raising prices, analysts said. The workers’ comp business is still not reliably profitable despite recent pricing actions, and low interest rates continue to pressure investment income. If companies can continue to move their prices considerably and consistently higher over the next couple years, the new premium should be enough to cover costs. If the rate hikes falter and claims from recent policies start piling up, though, the reserving actions that insurers used to buoy earnings for so long could stick them with a deficit that will take years to fill.

“It’s a simple equation,” Ghosh said. “The premium coming in has to be higher than the losses going out.”

________________________________________________
This is a pretty good analysis of the coming bond market crash.  Notice it states that the insurance market will be taken out----Life Insurance the first to go.  See why you are seeing all those Life Insurance ads requiring no medical checkup or anything-----

THEY ARE SIMPLY GOING TO POCKET THOSE MONTHLY PREMIUMS.

This was written in 2013 acting as if the crash would come in 2014 but Bernanke allowed the QE bond bubble machine to continue another year and Yellen is now having to address it as the FED is leveraged out.  The crash will come soon......the FED is simply manipulating the inevitable.

'The most vulnerable are those who can least afford to suffer losses: Seniors who are approaching or in retirement, who have shifted large amounts of their money into fixed income investments.

Your tax-free municipal bonds could tank.

Your annuities and other insurance policies could turn to dust.

Your money invested in bank and insurance company stocks could vanish right before your very eyes'.

All of this is pretty important----yet, we do not hear a thing about it from media, labor or justice, our pols---and all of these national leaders know it is coming.  Their policies created this mess and labor and justice leaders are constantly backing neo-liberals.  It is important to have Governors and Mayors that will work through this in the people's interest and not corporate interest.

This article is not
hyperbole---it will happen.I did edit out his marketing ---

The Next Great Bubble about to Collapse

Martin D. Weiss, Ph.D. | Saturday, January 19, 2013 at 7:30 am

130 Senator Orrin Hatch warns that the bubble has the power to “destroy the retirement savings of millions of Americans.”

Famed economist Leonard E. Burman of Syracuse University is warning the U.S. Senate of “disastrous consequences for ourselves and the rest of the world.”

Goldman Sachs … Bank of America … Morgan Stanley … Royal Bank of Scotland … JPMorgan … and Oppenheimer Funds are all warning that it could bankrupt millions of investors.

Congressman Ron Paul says, simply, “this country will be ruined.”

These and many other authorities are talking about the greatest financial bubble in human history:

A bubble that is now more than EIGHT times larger than all the stock exchanges in the United States combined.

A bubble so massive, it is four times larger than the dot-com bubble of the 1990s and the housing bubble of the 2000s combined.

Now that bubble has begun to burst.

As it implodes, it will launch interest rates into the stratosphere … crush the feeble U.S. economy … destroy major U.S. banks and insurance companies … drive your cost of living through the roof, threaten your standard of living and financial security … and push the U.S. government to the very brink of financial collapse.

But the best defense is a strong offense -- and this crisis will also create windfall profit opportunities for a select group of investors who make the right moves now.

Just a few days ago, Weiss Research analyst Tom Essaye hosted a special online summit meeting to explain exactly how, and I’ll give you a transcript of the meeting in a moment.

In our online summit, he was joined by Safe Money editor Mike Larson and Real Wealth editor Larry Edelson. Here’s the transcript…

The Next Great Bubble about to Collapse
with Tom Essaye, Mike Larson and Larry Edelson — abridged transcript

Tom Essaye: If there’s anyone who knows how to capitalize on bursting bubbles, it’s our firm, Weiss Research.



For nearly a year now, I’ve been sounding the alarm again; NOT for the bursting of a bubble in the tech sector or housing sector … but in a market that is many times larger than all the stock exchanges in the United States COMBINED.


Debt is created in the bond market. That’s where the government goes to borrow money. So do states and local governments. Companies, too.

Borrowers sell bonds — or notes and bills — that guarantee investors a certain rate of interest or “yield” over time.

Since the turn of the century, the U.S. bond market has simply exploded in size — adding $20.7 trillion in new debt.

But now, despite massive new initiatives by the U.S. Federal Reserve, the meteoric rise in prices that characterized the debt market since the turn of the century has sputtered, stalled and is now dead in its tracks.

Millions of investors all over the world — including many of the world’s richest central banks — have started to stampede for the bond market’s exit.

And now, we’re beginning to see the first cracks appearing in this massive bubble.

This chart of the PIMCO Total Return Bond Fund is a perfect picture of the bubble in the bond market — and also the beginning of the crash.

On the left side of the chart, you can see the bubble in the bond market being inflated.

On the right-hand side, you can see how prices just plunged well below their support levels.

And just look at this chart of the iShares Municipal Bond ETF: It just fell off the proverbial cliff, giving back every penny it gained since last July!

But this crash has barely begun. The last few Treasury auctions showed that bidding from foreign central banks is plunging to the lowest level in years.

In addition, U.S. investors are starting to turn bearish on Treasuries. A recent report from a top industry watchdog showed that nearly 20% of all Treasury investors have started to cut back their holdings.

Even Fitch — the normally conservative ratings firm — is warning that a massive bubble has been created in the bond market.

This is huge. Bubbles are like an enormous Ponzi scheme: They collapse when the money stops flowing in.

The moment that happens, it’s over. And it’s beginning to happen right now!

As this bubble — the greatest bubble mankind has ever seen — implodes, the consequences will be devastating for millions of unprepared investors, just like the tech bubble was and just like the housing bubble was.

The most vulnerable are those who can least afford to suffer losses: Seniors who are approaching or in retirement, who have shifted large amounts of their money into fixed income investments.

Your tax-free municipal bonds could tank.

Your annuities and other insurance policies could turn to dust.

Your money invested in bank and insurance company stocks could vanish right before your very eyes.

Do you hear your labor and justice leaders shouting out against this?  NO, they are backing the neo-liberals who are embracing Trans Pacific Trade Pact pretending it will create jobs.  Well, you will be working as a third world Chinese sweat shop employee with these neo-liberals.

Below I show the local effect of PERESTROIKA of American citizen's assets by global corporations.  I have spoken before about the goal of privatization of public water.  We see the effect in Detroit, a city gutted with fraud and corruption just as in Baltimore.  The American people have paid loads of taxes over a few decades that would have rebuilt state and city infrastructure if that revenue was not being looted by Baltimore Development Corporation and Hopkins to expand global interests.  Now, they want to raise public water bills over double the amount to pay again for rebuilding infrastructure and guess what----the same Johns Hopkins is there to pocket the profits from this public work as VEOLA ENVIRONMENT.  Remember, these Ivy League universities made their billions in endowment profits from the subprime mortgage fraud and AIG investment firm that was spun to become HighStar.  So, all of that profit was based on fraud.  They used that money made from fraud to by VEOLA ENVIRONMENT from the French global corporation.  These same Ivy League universities like Hopkins are now pushing Baltimore City Hall to privatize public transportation to French Veola and privatize public water and waste to HighStar VEOLA ENVIRONMENT.  So, Harvard, Yale, Princeton, Stanford, Berkeley, et al of the Ivy League are using those endowment funds to privatize public water and waste all over the world.  At the same time they are buying all fertile land and fresh water sources around the world at the same time contaminating US and world aquifers with fracking.....as in Maryland with the Marcellus Aquifer.

I am writing today after coming from the center of fraud and corruption----Baltimore City Hall and the Board of Estimates meeting.  I attended today because they are handing contracts to private corporations for public water service that everyone knows is only steps towards water privatization.  There is Jack Young and Mr. Black for Rawlings-Blake and Comptroller Pratt ready to vote for privatization of Baltimore city public water and waste.  All working for the most neo-conservative institution in the world----Johns Hopkins while running as Democrats.

PRIVATIZING PUBLIC WATER----HOW NEO-CONSERVATIVE OF THEM!!!!!

Jack Young as head of the Board of Estimates has worked hard to make sure public interruptions do not occur during meetings by placing a police officer to escort citizens out if they try to speak.  You know, the public is not allowed to speak about public policy in public in Maryland and especially in Baltimore.  So, instead of speaking during the Board of Estimates meetings on camera for all to see, people like Cindy Walsh must speak to the room before the meeting starts.  Only today, when I explained to all in the room what the goal of this privatization is and how Johns Hopkins is involved-----Jack Young called the police to drag me out BEFORE THE MEETING EVEN STARTED.  He works so hard to make sure no one knows what is happening that he was prepared to throw me out for just speaking in the City Hall room.  I of course reminded him that the meeting had not started and he could not throw me out of the room -----he immediately called the meeting to order.

YOU KNOW WHO LEADS IN PRIVATIZATION OF ALL THAT IS PUBLIC?  O'MALLEY/ANTHONY BROWN.  YOU KNOW WHO BACKED BROWN DURING THE ELECTION FOR GOVERNOR?  LABOR UNION LEADERS.  KNOW WHO WAS THERE TO PROTEST PRIVATIZED WATER----LABOR UNIONS.  ASK FRED MASON OF MARYLAND AFL-CIO WHY HE BACKS NEO-LIBERALS DOING ALL THIS DAMAGE?

We need labor union leaders working for their membership's interests when they support candidates.  You cannot support the neo-liberals installing these policies and then pretend to fight against them.  Union members and labor and justice need to see how VERY, VERY, VERY, VERY BAD THESE PRIVATIZATION POLICIES ARE FOR EVERYONE!

IT TAKES A SOCIOPATH TO PLAN THESE KINDS OF CORPORATE POLICIES AND THE POLS HIRED TO PUSH THESE GOALS INTO PLACE ARE NEO-LIBERALS AND NEO-CONS.
ALL OF MARYLAND POLS ARE NEO-LIBERALS AND NEO-CONS.

Don't privatize Baltimore water
[Letter]June 23, 2014

The presence of the private water industry at this week's United States Conference of Mayors meeting threatens public health and democracy in Baltimore.

Time and time again, experiences in other cities that have privatized their water systems have demonstrated that privatization fails to provide secure and equitable water access to residents. The industry's strategy of placing profits over the human right to water is reprehensible and undermines the democratic system.

As a voter and someone who calls Baltimore my home, I strongly urge Mayor Stephanie Rawlings-Blake to take a stand at the USCM and keep the private water industry out of our city.

Jacob Fishman, Baltimore

_________________________________________


Did you know that it is Johns Hopkins who is a major shareholder in Veola Environment through HighStar Investment firm that is pushing the privatization of public water and waste?  Did you know that Veola Environment and HighStar have Ivy League endowments in the other cities pushing the privatization of public water----like Harvard, Yale, Princeton, Stanford, and Berkeley.  Privatization of public assets to maximize profits for these endowments.

Did you know the goal is to privatize water, end public subsidy of water as water rates rise, use SMART METERS to ration water to what the every growing impoverished public can afford all to maximize profits for Johns Hopkins endowment? 

You must be listening or reading Maryland media -----they make sure you do not know----especially Marc Steiner.

VEOLA ENVIRONMENT is a global corporation bought from the French global corporation VEOLA of transportation fame.  The one known for slave conditions for their workforce all over the world.  VEOLA ENVIRONMENT is working all over the world to privatize the world's public water and waste and in nations having the pleasure of a few decades of their presence water rationing with SMART METERS has been in what followed.  Now, Wall Street and Ivy League endowments want to bring it to America since they are taking the US to third world levels.  That Trans Pacific Trade Pact may not be in place in the US but Maryland and neo-liberals in Congress are preparing for it.


I wonder if an interview with Hopkins staff will let people know what the goal is and who is behind it?

Water Privatization in Baltimore

08/12/14 Marc Steiner
August 11, 2014 –

Segment 3 We turn to the topic of the possibility of water privatization in Baltimore, with: Lauren DeRusha, National Campaign Organizer of Corporate Accountability International; and Dr. Lester Spence, Center for Emerging Media Scholar-in-Residence and Associate Professor of Political Science and Africana Studies at Johns Hopkins University.



The Dangerous Return of Water Privatization

Community waters systems have sustainably provided safe drinking water for generations but corporations are now using local fiscal crises to push for water privatization. By Maude Barlow and Wenonah Hauter, from Sojourners
January/February 2014  Utne


It’s time for an integrated, holistic national water policy, including the establishment of a federal water trust fund. Instead we face the cannibalization of our public utilities by private corporations.

The United States has one of the best public water supply systems in the world. More than 250 million people count on local governments to provide safe drinking water. Over the last 40 years, federal, state, and municipal governments have worked together to improve and protect water resources. The Clean Water Act, the Safe Drinking Water Act, and the Endangered Species Act have kept the U.S. on target for preserving rivers, lakes, watersheds, wetlands, natural aquifers, and other sources of fresh water.

Great strides have been made in managing waste water and storm water. More than 90 percent of community water systems in 2012 met all federal health standards. Public water utilities have been a tremendously successful model for the U.S. and continue to keep drinking water safe, accessible, and affordable for all Americans.

It hasn’t always been this way.

During the 1800s, private companies controlled the water systems of several large U.S. cities—to dire effect. Because the companies were more interested in making a profit than providing good service, many poor residents lacked access to water. As a result, cholera outbreaks were common in poor neighborhoods; water pressure was sometimes too low to stop fires, which destroyed both homes and businesses.


By the turn of the 20th century, city governments, including Baltimore, Boston, New Orleans, and New York City, had taken over drinking water provision from private companies. The goal of government was to improve service, reduce waterborne diseases, and increase water pressure to better fight fires. New York City, for example, assumed control of its drinking water services from the bank and holding company called the Manhattan Company, the predecessor of JPMorgan Chase, after an outbreak of cholera killed 3,500 people and a devastating fire caused extensive property damage.

These cities learned the hard way just how important public water provision is for human and environmental health. The shift to a public utility system, responsive to community needs, allowed local public control of water and sewer services. Public utilities helped local governments manage water resources, growth, and development, and ensured that safe and reliable services were available to all.

Now, just past the turn of the 21st century, our national water framework needs rethinking with climate change and sustainability in mind. It’s time for an integrated, holistic national water policy, including the establishment of a federal water trust fund. Instead we face the cannibalization of our public utilities by private corporations.

Despite our success over the last 100 years, public water utilities face daunting challenges in the days ahead:

1. Water systems nationwide are aging and wearing out. Last summer more than 150,000 residents in the greater Washington, D.C. region faced the specter of being without water for days because of a stuck valve on a major water main. Delayed maintenance on the valve due to funding cuts led to the crisis.
________________________________________________

Ivy League university endowments were heavily invested in the subprime mortgage loans knowing they were fraudulent and would bring down the economy.  They took the profit made from those fraudulent loans and started buying land overseas with the intent of cornering the next market----privatized public works like transportation and water and waste.  They starved governments with massive frauds and corruptions just to pretend we now have to hand all that is public over to the same institutions creating and profiting from the frauds.


I'm picking on Ivy League universities today but there are plenty of other bad guys profiting from these policies.  Look how rich Ben Cardin and Nancy Pelosi are getting from Insider Trading for example!  Those Clinton neo-liberals who voted for global corporations and markets have worked two decades to advance these policies.  IT'S THE REPUBLICANS THEY SAY-----

WELL, MARYLAND IS ONE BIG NEO-LIBERAL STATE SO IT'S BOTH NEO-CONS AND NEO-LIBERALS.



US universities in Africa 'land grab' Institutions including Harvard and Vanderbilt reportedly use hedge funds to buy land in deals that may force farmers out

• John Vidal and Claire Provost
• The Guardian, Wednesday 8 June 2011 15.18 EDT
  
  
• 
  

US universities are reportedly using endowment funds to make deals that may force thousands from their land in Africa. Photograph: Boston Globe via Getty Images Harvard and other major American universities are working through British hedge funds and European financial speculators to buy or lease vast areas of African farmland in deals, some of which may force many thousands of people off their land, according to a new study.

Researchers say foreign investors are profiting from "land grabs" that often fail to deliver the promised benefits of jobs and economic development, and can lead to environmental and social problems in the poorest countries in the world.

The new report on land acquisitions in seven African countries suggests that Harvard, Vanderbilt and many other US colleges with large endowment funds have invested heavily in African land in the past few years. Much of the money is said to be channelled through London-based Emergent asset management, which runs one of Africa's largest land acquisition funds, run by former JP Morgan and Goldman Sachs currency dealers.

Researchers at the California-based Oakland Institute think that Emergent's clients in the US may have invested up to $500m in some of the most fertile land in the expectation of making 25% returns.

Emergent said the deals were handled responsibly. "Yes, university endowment funds and pension funds are long-term investors," a spokesman said. "We are investing in African agriculture and setting up businesses and employing people. We are doing it in a responsible way … The amounts are large. They can be hundreds of millions of dollars. This is not landgrabbing. We want to make the land more valuable. Being big makes an impact, economies of scale can be more productive."

Chinese and Middle Eastern firms have previously been identified as "grabbing" large tracts of land in developing countries to grow cheap food for home populations, but western funds are behind many of the biggest deals, says the Oakland institute, an advocacy research group.

The company that manages Harvard's investment funds declined to comment. "It is Harvard management company policy not to discuss investments or investment strategy and therefore I cannot confirm the report," said a spokesman. Vanderbilt also declined to comment.

Oakland said investors overstated the benefits of the deals for the communities involved. "Companies have been able to create complex layers of companies and subsidiaries to avert the gaze of weak regulatory authorities. Analysis of the contracts reveal that many of the deals will provide few jobs and will force many thousands of people off the land," said Anuradha Mittal, Oakland's director.

In Tanzania, the memorandum of understanding between the local government and US-based farm development corporation AgriSol Energy, which is working with Iowa University, stipulates that the two main locations – Katumba and Mishamo – for their project are refugee settlements holding as many as 162,000 people that will have to be closed before the $700m project can start. The refugees have been farming this land for 40 years.

In Ethiopia, a process of "villagisation" by the government is moving tens of thousands of people from traditional lands into new centres while big land deals are being struck with international companies.

The largest land deal in South Sudan, where as much as 9% of the land is said by Norwegian analysts to have been bought in the last few years, was negotiated between a Texas-based firm, Nile Trading and Development and a local co-operative run by absent chiefs. The 49-year lease of 400,000 hectares of central Equatoria for around $25,000 (£15,000) allows the company to exploit all natural resources including oil and timber. The company, headed by former US Ambassador Howard Eugene Douglas, says it intends to apply for UN-backed carbon credits that could provide it with millions of pounds a year in revenues.

In Mozambique, where up to 7m hectares of land is potentially available for investors, western hedge funds are said in the report to be working with South Africans businesses to buy vast tracts of forest and farmland for investors in Europe and the US. The contracts show the government will waive taxes for up to 25 years, but few jobs will be created.

"No one should believe that these investors are there to feed starving Africans, create jobs or improve food security," said Obang Metho of Solidarity Movement for New Ethiopia. "These agreements – many of which could be in place for 99 years – do not mean progress for local people and will not lead to food in their stomachs. These deals lead only to dollars in the pockets of corrupt leaders and foreign investors."

"The scale of the land deals being struck is shocking", said Mittal. "The conversion of African small farms and forests into a natural-asset-based, high-return investment strategy can drive up food prices and increase the risks of climate change.

Research by the World Bank and others suggests that nearly 60m hectares – an area the size of France – has been bought or leased by foreign companies in Africa in the past three years.

"Most of these deals are characterised by a lack of transparency, despite the profound implications posed by the consolidation of control over global food markets and agricultural resources by financial firms," says the report.

"We have seen cases of speculators taking over agricultural land while small farmers, viewed as squatters, are forcibly removed with no compensation," said Frederic Mousseau, policy director at Oakland, said: "This is creating insecurity in the global food system that could be a much bigger threat to global security than terrorism. More than one billion people around the world are living with hunger. The majority of the world's poor still depend on small farms for their livelihoods, and speculators are taking these away while promising progress that never happens."

______________________________________________



Why is Harper Selling Canada's Fresh Water Supply to French Companies?

Posted: 10/18/2013 12:35 pm EDT Updated: 01/23/2014 6:58 pm EST   Huffington Post


Prime Minister Harper has just signed the Canada-EU Comprehensive Economic and Trade Agreement (CETA), and Canadians who care about our freshwater heritage should be deeply concerned for three reasons.

First, the massive increase in beef and pork exports that have been negotiated will put a terrible strain on our water supplies. Beef producers can now export close to 70,000 tonnes of beef to Europe and an undisclosed but higher amount of pork. Meat production is highly water intensive. It takes over 15 million litres of water to produce one tonne of beef, for example.

Already Alberta's dwindling water supplies are over-taxed by a beef industry that is rapidly expanding and expected to double its water footprint by 2025, according to an assessment done before this deal was signed. Intensive hog operations in Manitoba are killing Lake Winnipeg, their waste creating nutrient overload that covers over half the lake in blue green algae. To protect our precious watersheds, what we need is more sustainable and local food production, not massive new trade deals that will strain our water sources beyond their capacity.

Second, this deal will give French companies Suez and Veolia, the two biggest private water operations in the world, access to run our water services for profit. Under a recent edict, the Harper government has tied federal funding of municipal water infrastructure construction or upgrading to privatization of water services. Cash-strapped municipalities can only access federal funds if they adopt a public-private partnership model, and several cities have recently put their water or wastewater services contracts up for private bids. If Suez or Veolia are successful in bidding for these contracts (and under the new deal, local governments cannot favour local bidders) and a future city council decides it wants to move back to a public system, as municipalities are doing all over the world, these corporations will be able to sue for huge compensation. Private water operators charge far higher rates than public operators and cut corners when it comes to source protection. Privatization of water services violates the essential principle that Canada's water is a public trust.

The same "investor-state" clause contained in the Canada-EU deal poses the third threat to Canada's water. The rules essentially say that if a government introduces new environmental, health or safety rules that were not in place when the foreign corporation made its investment, it has the right to compensation, which a domestic corporation does not have. For instance, an American energy company is suing Canada for $250 million in damages using a similar NAFTA rule because Quebec decided to protect its water by placing a moratorium on fracking. Moreover, transnational corporations are now claiming ownership of the actual water they require in their operations. Another American company successfully sued Ottawa for $130 million for the "water rights"; it left behind when it abandoned its pulp and paper operations in Newfoundland, leaving workers without jobs or pensions. The new deal with Europe will give large European corporations similar rights, further eroding the ability of governments to protect our fragile watersheds and ecosystems.

The Harper government has gutted every regulation and law we had in place to protect our freshwater supplies. Now this deregulation is locked in as corporations from Europe as well as the U.S. can soon claim to have invested in an environment without water protection rules and sue any future government that tries to undo the damage.

On a planet running out of clean accessible water, this is a really stupid way to treat our water.



________________________________________________


The same investment firms pushing to privatize public water and waste are behind these fracking industry expansions.  Exporting natural gas places fracking in the US and around Maryland on steroids as profits rise and that means more and more fresh water sources will disappear.  NO WORRIES.  VEOLA ENVIRONMENT will sell you water from overseas and if you cannot afford the price----they will use SMART METERS to ration what you can pay.

THAT JOHNS HOPKINS----LYING, CHEATING, AND STEALING THEIR WAY TO PROFITS AND THEN USING THEM FOR EVIL-----


Fracking Spreads Worldwide

By Nidaa Bakhsh and Brian Swint November 14, 2013

Bloomberg Financial

The hydraulic fracturing of shale in search of oil and gas has hardly started outside the U.S., but that’s changing. A record 400 shale wells may be drilled beyond U.S. borders in 2014, with most of the activity in China and Russia, according to energy consultants Wood Mackenzie. (In contrast, thousands of shale wells will be drilled in the U.S. next year.) The number of rigs used onshore in Europe and the Asia-Pacific region has increased 10 percent over the past year, data compiled by oil services company Baker Hughes (BHI) show. Most of those rigs are meant for shale. “It’s likely there will be a revolution,” says Maria van der Hoeven, executive director at the Paris-based International Energy Agency. “But not everywhere at the same time. And you just can’t copy the U.S. experience.”

Fracking in the U.K. will start next year, after the government lifted an 18-month moratorium imposed when a fracking company found it had accidentally caused earthquakes. Two utilities—Centrica (CNA:LN) of Britain and GDF Suez (GSZ:FP) of France—have bought stakes in British drilling licenses to help bankroll the drillers and win a cut of any profit.



The shale boom has moved the U.S. closer to energy independence, added jobs, helped revive manufacturing, and lowered gas bills. Yet the conditions that fostered the U.S.’s success don’t exist elsewhere. In some countries, landowners don’t own the oil and gas in the ground: The state retains all mineral rights. Or a country may levy much heavier taxes on oil and gas profits.

Story: U.S. Shale-Oil Boom May Not Last as Fracking Wells Lack Staying Power Once they start drilling and fracking, though, countries such as China, Argentina, and Russia could experience new oil and gas booms. China has the largest shale gas reserves, estimated to be the equivalent of 212 billion barrels of oil. In shale oil, Russia tops the list with about 75 billion barrels, the U.S. Energy Information Administration says. Australia, Poland, and Algeria all have big reserves.

Fracking activity outside the U.S. is likely to be good for the big oil players. Royal Dutch Shell (RDS/A) teamed up with China National Petroleum Corp. this year to explore in Sichuan, the province that accounts for 40 percent of China’s shale reserves. Hess (HES) is exploring with CNPC in the western Xinjiang region. YPF (YPF), the Argentine oil company, has joined with Chevron (CVX) to tap deposits in Argentina’s vast Vaca Muerta formation. Says Edward Morse, head of commodities research at Citigroup (C): “Within three to five years, there should be exponential growth in drilling as there was in the U.S.”

_______________________________________________

As I stated with health care and the deliberate building of a perfect storm for antibiotic resistance and world health epidemics we see the same characters------Wall Street, Ivy League universities like Hopkins, and their neo-liberal and neo-con pols working to break our public health and environmental protections to profit from selling what will become a scarce resource.  Not to mention how large populations unable to obtain fresh water are easily managed when made desperate.

This is what Maryland Assembly and O'Malley/Brown and in Baltimore, Baltimore City Council and Maryland Rawlings-Blake are working toward.  They are neo-liberals and neo-cons who do not care about anything but maximizing corporate profits.

SIMPLY REVERSE ALL OF THIS BY VOTING THESE POLS OUT OF OFFICE AND REBUILD RULE OF LAW AND PUBLIC JUSTICE------AND REBUILD A DOMESTIC ECONOMY WITH SMALL AND REGIONAL BUSINESS WHILE KEEPING GLOBAL CORPORATIONS AT BAY IN MARYLAND.

Contaminated freshwater systems caused by ‘fracking’

Friday, April 4, 2014 13:52

Fracking fluids from oil and gas extraction is contaminating our freshwater systems. http://www.blissful-wisdom.com/contaminated-freshwater-systems-caused-by-fracking.html

A local resident recently wrote about the monetary significance of hydrocarbon extraction and exportation.  What many advocates of the oil-dependence industry seem to ignore completely is the short-sighted and toxic process with which ‘unconventional oil and gas sources’ are being extracted. This process is known as ‘induced hydraulic fracturing’, or ‘fracking’ (for short).

There is growing peer-reviewed scientific evidence of the harmful effects of shale gas development.  ‘Pro-fracking’ opinions focus on the big bucks and ignore the detrimental effects on our limited, freshwater systems.

There are a million well sites in North America which have used fracking.  A horizontal well in a shale formation can use between 7.5 million to 19 million litres of water.  That water used for extraction in gas shale ‘plays’ becomes toxic by the addition of: water‐based fracturing fluids mixed with friction‐reducing additives; biocides to prevent microorganism growth and to reduce biofouling of the fractures; oxygen scavengers and other stabilizers to prevent corrosion of metal pipes; and acids that are used to remove drilling mud.   80 % of this fracking fluid comes back to the surface and 20 % stays in the shale excavation ‘play’. This fracking fluid is highly toxic and contaminates local well-water, rivers, and underground water systems. 

This is the part which outweighs the financial benefits of present ‘fracking’ and non-conventional oil extraction methods. Our North American water reserves are limited.  Toxifying our limited water resources is insanity to say the least.  No amount of remuneration can justify contaminating underground water beds and surface-water courses for coming generations.

As of 2012, 2.5 million hydraulic fracturing jobs have been performed on oil and gas wells worldwide!

Do an internet search on the topic of ‘fracking’ and why it is so controversial. Be wary of industry-backed politicians who would smooth over the environmental collateral damage left from ‘fracking’ practices.

  Water well testing must take place both prior to and after seismic testing operations
If a well-owner does not test and show healthy conditions were present prior to nearby  ‘fracking’, then there is no possibility of claiming damages when contamination does eventually occur.

For the last hundred years, water rights belong to the owner of the land.  Tough luck for  those landowners and city-dwellers downstream, since liability favors industry not local taxpayers.  High cancer rates and damaging side-effects to human and animal life occur where tailing ponds and fracking fluid has escaped into underground and above-ground waterways. 

How can we not seriously demand alternatives to oil/gas addiction and its collateral damage?  There is money to be made and jobs to be had, but it requires focusing on developing those alternatives.  Industry is not going to encourage that shift.  Politicians serve industry and corporate interests, not the long-term health of the nation.  And once again…fresh, drinkable water is becoming threatened by ‘fracking’ practices.

IT'S CALLED SOVEREIGN DEBT/MUNICIPAL BOND FRAUD FOLKS------NEO-LIBERALS SIMPLY FOLLOW WALL STREET'S LEAD NO MATTER WHERE IT ENDS.


I'd like to spend one more day on the bond market and the coming crash.....looking today at the public and private pensions.  Folks, neo-liberals and neo-cons look at pensions as fodder only meant to boost Wall Street profit. 

LOOK AT WHERE YOUR PENSIONS ARE INVESTED BECAUSE MARYLAND IS RUN BY NEO-LIBERALS WORKING FOR WALL STREET PROFIT AND NOT YOU AND ME!

I pointed to Maryland pol Dulaney and his focus on repatriation taxes and bond market for corporations.  The timing of this legislation is no accident----the bond market crash will place this market at the bottom ready to climb to profits just as the 2008 crash made the stock market bottom.  So, Dulaney is not warning his constituents that the bond market crash is coming and will take away most of the value recovered since the last crash-----he is only thinking of what legislation with maximize corporate profit.  THAT'S A NEO-LIBERAL FOR YOU BUT WHY IS HE RUNNING AS A DEMOCRAT????

The second point is that as you can see all of the major news journals are now reporting the crash is coming just as I have written for four years.  What I said was the plan-----and everyone knew it.  Please consider where you get your information-----all neo-liberal media like MSNBC and NPR never mentioned these policy goals-----

I spoke of the public malfeasance behind the public pension losses last crash were politicians moved public pensions from the then safety of the bond market into a collapsing stock market in 2007 just to buoy the Wall Street banks.  THIS WAS ILLEGAL AND PUBLIC MALFEASANCE AND FRAUD. All of the pols in Maryland involved in doing this were simply re-elected and public sector unions simply agreed to cuts rather than take the fraud to court.  The failure to address the last fraud has the same thing coming with this bond crash.....public and private pensions have been used to buoy the coming bond market as investment firms jump ship. 

DO YOU HEAR YOUR POLS SHOUTING ALL OF THIS IS BAD FOR THE PEOPLE WHO ELECTED THEM???????  I DON'T HEAR A THING!

Below is a UK article that speaks to what is coming.  Look how it states the FED is considering making people stay in the bond market to stop a run.  It created the conditions for the crash and now it wants to force people to stay in......punitive exit fees.  Remember, people went to bonds because the stock market is criminal.......they are now being forced back into this criminal market because Wall Street imploded the only safe investment ------bonds.

Can you save your pension from the great bond bubble? Why a bank rate rise could ruin your retirement...

‘Those limits will be set by each individual fund — they may put a cap on how much you can withdraw, or reduce the value by a percentage.’

By Holly Black  Daily Mail Pensions and Retirement

PUBLISHED: 18:34 EST, 17 June 2014 | UPDATED: 03:20 EST, 18 June 2014

About £800billion of savings and investments sitting in bond funds could fall in value if interest rates begin to rise.


An increase in the Bank of England base rate threatens to burst the five-year bond bubble that has seen the value of funds soar by as much as 137 per cent.

It threatens to wipe out a chunk of the life savings of an estimated 500,000 people who have put their money into bond funds, and millions more in company pension schemes.


Bond bubble: When interest rates rise the value of bonds will fall



However, while any rise in rates is likely to cause a fall in bond funds - any increases should be small, giving investors time to react. There are, though, fears that money in bond funds could be locked up.

In the U.S. there are already reports that the Federal Reserve is considering imposing punitive exit fees on anyone trying to take their money out of bond funds to halt a run on the investments.



Brian Dennehy, founder of investment research site Fund Expert, explains: ‘When there is sustained heavy selling there will almost certainly be restrictions, if you’re allowed to sell at all.


‘Those limits will be set by each individual fund — they may put a cap on how much you can withdraw, or reduce the value by a percentage.’


Bonds are essentially IOUs issued by companies and governments. In exchange for your money, they promise to pay you a rate of interest. These are not fixed-rate savings bonds offered by High Street banks and building societies, which keep your capital safe and your interest fixed.


With investment bonds the value can rise and fall, and they were often seen as a safer type of investment, as they don’t change in value very much. But because of poor rates on High Street savings accounts, bonds have become wildly popular and, as a result, prices have surged.


Someone who put £10,000 into the average strategic bond fund five years ago would have £15,500 today. The best fund would have grown to £23,700.


At risk: A substantial chunk of the £770bn of our pensions is invested in bonds



How £800billion could be trapped
Fears of a fall in value of these funds could now lead to a great bond sell-off. A bond-fund plunge has been widely expected since late 2012.


Then, the value of funds had increased by 50 per cent following the Government’s policy of printing money to boost the economy, known as Quantitative Easing. This involved the Bank of England flooding the economy with cash, by buying bonds — which led them to increase in value.


Now that QE has come to an end, and the economy is recovering, interest rates could soon rise. When this happens, the value of these bonds will fall, and the interest they are paying will suddenly seem less attractive.


Unlike with shares, the money in bonds is tied up. It means that investors may not be able to trade their bonds freely to eager buyers, leaving them trapped because no one will want to buy them.


Retail investors who have relied on bonds for the past six years have a massive £126billion of their savings tied up in these funds. But a substantial chunk of the £770billion of our pensions is invested in them, too, because many stock-market-linked company schemes move savers’ money into bonds the closer they get to retirement.


This is done to protect the cash they have built up over the years by transferring it out of supposedly riskier stocks and shares. The strategy is known as life-styling and happens automatically. But it has meant that workers are being unwittingly exposed to any potential fall in the bond market.


Thousands of investors found themselves stuck in property funds in 2008 when there was a run of people withdrawing cash from these investments. A lack of ready cash available in them meant firms were telling their customers they could not have their money.


Many property funds own entire buildings directly so that if they need to raise money they have to sell them, rather than just sell shares, which is a much quicker and easier process. Bond funds face similar problems.

Bonds have a fixed duration and if funds can’t find a willing buyer to dispose of them, they will have to hold onto the investment. That means they can’t raise any money to give back to investors looking to sell their units in the fund.

Should you hang on or try to sell?
Many fund managers are already selling their bonds. Marcus Brookes, head of multi-manager funds at Schroders’, has reduced his bond holdings to just 10 per cent of his assets and he is planning to sell more.

  ‘Returns have been amazing for too long and we’re starting to worry,’ he says. And Mr Dennehy points out that with interest rates likely to rise in ‘baby steps’, investors shouldn’t have to rush out of all of their bonds at once.

‘But you should still ask yourself why you are bothered to invest in bonds,’ he adds. ‘At best, they won’t lose any of your money this year, but I don’t think they will make any either.’


Yet this could leave investors with another dilemma. Ben Gutteridge, head of fund research at wealth management company Brewin Dolphin, explains: ‘If you are taking your money out of bonds, where are you going to put it?


‘The obvious choice is equities. But if all of your investments are equities, that’s incredibly risky.’


Because of this, investors may be forced to accept the risk of staying in bonds in a bid to spread the risk in their portfolio.

Or else they may have to pull out of the stock market completely and bide their time in cash just to make sure that they’re not losing any money.


__________________________________________

Wall Street and their pols knew people would leave the stock market for the safety of the bond market after the 2008 crash so they started immediately to create the conditions to fleece these bond investors.  Congress and Obama created legislation that pushed US bonds to the world market just as they did subprime mortgage loans they knew were fraudulent.  Watching the FED and QE create the ballooning of the bond market just to accommodate Wall Street profit knowing a bond collapse would hit Federal, state, and local governments hard.

IT IS A CRIME AGAINST HUMANITY!!!!  THESE ARE SOCIOPATHS FOLKS!

Public pensions were never too much to handle for states and local governments-----neo-liberals simply never intended to fund them just as corporations were never made to actually fund their contributions as these benefit packages required.  So, there is no pension deficit weighing on governments----it is the fiscal policy schemes that are designed to bring ever more money to Wall Street that are soaking taxpayers.  Below you see just another financial instrument that again placed public wealth in harms way.  Remember, we went through a fiscal boom last decade albeit fueled by corporate fraud so government coffers should be flush.  Rather, billions of dollars were lost to public malfeasance and fraud.  The article below shows states using pension investments that were known to be bad policy-----placing bonds into plans at the wrong time and this is not an accident.  It takes no rocket scientist to know all of these investment strategies were bad for the public.  These neo-liberals did it to hide debt to take on more debt knowing Wall Street would bring in tons of profit.


The story of Oregon is Maryland's story and Martin O'Malley and the Maryland Assembly are the stars of this public abuse.  Now, the same thing was done for private pensions as corporations were allowed to fail to fund and place pensions into ever riskier investments everyone knew would fail.

Just think.......if we all knew years ago that the policies since the 2008 crash would implode the bond market-----do you leave state and local governments exposed to bond leveraging?  OF COURSE NOT UNLESS YOU WANT TO IMPLODE GOVERNMENT BUDGETS.

Pension Obligation Bonds: Risky Gimmick or Smart Investment?

Pension obligation bonds have bankrupted whole cities. Yet some governments are still big players. BY: Eric Schulzke | January 2013



“It’s the dumbest idea I ever heard,” Jon Corzine told Bloomberg.com in 2008 when he was still governor of New Jersey. “It’s speculating the way I would have speculated in my bond position at Goldman Sachs.”

Corzine, who followed up his tenure as governor with a $1.6 billion investment debacle as chairman of MF Global, seemed to know a thing or two about risky ventures. In this case, he was speaking of pension obligation bonds. POBs are a financing maneuver that allows state and local governments to “wipe out” unfunded pension liabilities by borrowing against future tax revenue, then investing the proceeds in equities or other high-yield investments. The idea is that the investments will produce a higher return than the interest rate on the bond, earning money for the pension fund. It’s a gamble, but one that a lot of governments are willing to take when pension portfolio returns plummet, causing unfunded liabilities to run dark and deep.

Almost every fund has faced such liabilities from time to time, though current times have been more treacherous than others. As Paul Cleary, executive director of the Oregon Public Employees Retirement System (PERS) points out, since 1970 his state’s pension fund has suffered annual losses only four times. But three of those losses were in the last decade, and one, in 2008, was a catastrophic 27 percent decline.

Faced with such losses -- and with a dearth of state and local revenue to make up for the shortfalls -- POBs have become a favored tool to fix pension woes. Oregon is a big player in the POB market, along with scores of its cities, counties and school districts. Other major POB issuers include California, Connecticut, Illinois and New Jersey.

The bonds took on some notoriety this past summer when two California cities, Stockton and San Bernardino, went bankrupt. Generous pensions awkwardly propped up with ill-timed POBs contributed to both debacles.

Over the years, returns on POBs have often fallen below the interest rate the state or locality paid to borrow the money, digging the liability hole even deeper. Nonetheless, they remain popular with politicians in a revenue pinch. Politically, it is easier to borrow money to pay for pension costs than it is to squeeze an already-stressed budget. While many economists and policy analysts view them as risky gimmicks and question the high market growth assumptions that make them seem viable, POBs have defenders who believe that with careful timing they can pay off.

When Oakland, Calif., launched the first pension obligation bond in 1985, it appeared to be a reasonable strategy. It qualified as a tax-free bond that could be issued at the lower municipal bond rates. A state or city could then pivot and invest the funds in safe securities -- a corporate bond, for instance -- at a slightly higher rate. “That was classic arbitrage,” Cleary says. “You were locking down the difference between nontaxable bonds and taxable bonds.”

The Tax Reform Act of 1986 ended that strategy by prohibiting state and local governments from reinvesting for profit the money from tax-free bonds. When the concept resurfaced, the strategy called for states or localities to issue a taxable bond and leverage the higher interest rate of that bond against higher return but riskier equity market plays. So long as markets boomed, the new tactic seemed savvy. “Some people call this arbitrage, but it’s not,” Cleary says of post-1986 POBs. “It’s really an investment gamble.”

Arbitrage occurs when prices for the same product differ between two markets, allowing a nimble player to exploit the difference. “Real arbitrage is free money,” says Andrew Biggs, a scholar at the American Enterprise Institute. “But it doesn’t hang around very long.”

Safe bonds and risky equities are not the same product, but public pension accounting currently permits state and localities to treat them as if they were. “They are counting the return on the stocks before the return is there,” Biggs says. “If you borrowed money to invest in the real world, you would factor the current value of the debt with the current real value of the stocks.”

Given the inherent risks and possible rewards, how have POBs fared? In 2010, a research team led by Alicia Munnell, director of the Center for Retirement Research at Boston College, ran some numbers to find out. The team took 2,931 POBs issued by 236 governments through 2009. They used each bond’s repayment schedule to calculate interest and principal, and then clustered them into cohorts based on the year issued. They assumed a 65/35 investment split between equities and bonds and tracked the results with standard indexes. They then produced two composite graphs -- one at the height of the market in 2007 and the second in 2009, after a crash and before recovery.

In general, bonds issued in the early stages of a stock boom performed well prior to the crash. Thus, POBs issued in the early 1990s were healthy, ranging from 2 to 5 percent net growth. Borrowings in 2002 or 2003 also looked good.

Those issued in the latter years of the 1990s or 2000, however, were in negative territory even before the 2008 crash, having suffered serious losses to their principal in the 2001-2002 downturn. After 2008, all POBs were under water -- except those issued in the trough of the collapse, which by 2009 were already pushing 25 percent gains.

Oregon’s numbers mirror Munnell’s findings. Local government POBs issued in 2002 at the depth of that market collapse and managed by Oregon PERS gained an annual average of 8.84 percent through 2012, before principal and interest on the bond. Less lucky were bonds issued in 2005. The Springfield School District’s POB earned just 5.53 percent, for example. Since that bond carried 4.65 percent interest, it likely earned roughly one point annually -- not much, but slightly above neutral. Oregon’s 2007 issuers earned just 2 percent on their investments through 2012, and are upside down today after debt service.

The same fate befell Stockton, Calif., which also came to market in 2007. Similarly, New Jersey issued a $2.8 billion POB in 1997 -- on the wrong side of another stock bubble.

“The whole thing is the timing,” Oregon’s Cleary says. “You are trying to issue them when the market has bottomed out and when interest rates are reasonable, because really what you are doing is making an investment bet. If people thought when they did POBs that they were refinancing a debt or doing a locked-in arbitrage, rather than an investment play, I’m sure they have been very surprised by the results.”

And yet that is exactly how they were sold. When Oregon voted on new POBs in 2009, the voter education pamphlet argument in favor of issuance explicitly framed the choice as a “refinance” and cast the projected returns as money “saved.”

“Just like many homeowners are refinancing their home mortgages,” the pamphlet read, “the State should take advantage of these historically low rates, which can save Oregon more than $1 billion over the next 25 years. The money saved will help reduce cuts and protect services that all Oregonians rely on.”

Because POBs demand headroom between the interest an issuer pays to borrow and the high returns promised on resulting investments, their investment strategies tend to chafe against safer portfolios. Without a hefty “discount rate” -- as the projected annual gain assumed by a pension fund is known -- the pension bonds would not be possible.

In a 2012 paper, Andrew Biggs argues that the aggressive 8 percent discount used by many states overstates likely earnings and understates risks. A fund that required $100 million in 20 years and employed an 8 percent discount rate would be “fully funded” with $21 million, Biggs notes. But if that same fund were to gain only 5 percent annually, it would need $38 million today to be fully funded in 20 years.

Many experts argue that because public pension obligations are legally binding, pension funds should be discounted at close to zero risk on the front end -- at or near the rates offered by government bonds. “While economists are famous for disagreeing with each other on virtually every conceivable issue,” wrote then-Federal Reserve Board Vice Chairman Donald Kohn in 2008, “when it comes to this one there is no professional disagreement: The only appropriate way to calculate the present value of a very-low-risk liability is to use a very-low-risk discount rate.”

In point of fact, the 8 percent discount rate may be on its way out. The Governmental Accounting Standards Board (GASB) is launching a complex hybrid discount standard in 2014, which will affect the assumptions states make with their funds. Some fear the GASB rule will only create more confusion. Bond rater Moody’s is taking a simpler tack in weighing government pension plans, having recently proposed to shift its pension discount rate down to the level of AA taxable bonds, which are now at 5.5 percent. “Currently, discount rates used by state and local governments are all over the place,” says Tim Blake, Moody’s managing director of public finance. “Most are in the range of 7.5 to 8 percent. We need a uniform rate.”

Not surprisingly, 5.5 percent is very close to the rate at which many POBs are sold to investors.

With aggressive 8 percent discount rates now under attack by economists, oversight boards and rating agencies, issuers who counted on rosier outcomes have learned some hard lessons. Five years ago, when Connecticut State Treasurer Denise L. Nappier announced a new $2.28 billion pension bond, she noted that the state had “achieved a favorable borrowing cost of 5.88 percent, which is well below the 8.5 percent assumed long-term return on assets of the Teachers’ Retirement Fund. This will provide significant cash flow savings over the long term and a potential savings to taxpayers of billions of dollars.”

When the bond was issued in April, the Dow Jones average stood just shy of 13,000. By November, the market was in free fall. It bottomed out the following March at just over 6,600. Connecticut’s timing could hardly have been worse. As the market plunged, Pensions & Investments lit into POBs, singling out Connecticut. The editors argued that POBs shove obligations “that should have been paid as earned” onto future generations, along with the risk of the debt.

By 2010, with the market still emerging from the trough, Connecticut’s finances were as messy as ever. But now there was little appetite for more bonds. POBs “are certainly a risky proposition,” Michael J. Cicchetti, chairman of Connecticut’s Post Employment Benefits Commission, told the CT Mirror. “Things are different now than they were then.”

______________________________________________

Wall Street has the nerve to state that public sector pensions are too big of a liability for governments.  After all, Wall Street fraud caused a loss of 1/2 pension value in 2008 and the rating corporations like Moody's was ground zero for the fraud---they should know pensions are limping along!

Indeed, simply taking the assets of the three major rating corporations and pushing them into bankruptcy for their part in the fraud would have made pensions flush with cash.  RULE OF LAW WOULD HAVE SOLVED GOVERNMENT PENSION SHORTFALLS.  No one shouted this!  Did you hear your pols shouting for recovery of pension losses from fraud to make up the shortfall?  They went straight to cutting benefits.  They through pensions into bad investments just to claim they were liabilities that needed to be cut.

THAT'S A NEO-LIBERAL FOR YOU-----WORKING TO MAXIMIZE WALL STREET PROFITS AT PUBLIC EXPENSE!

Now, why should all citizens be concerned about pension fraud ----even those with no pensions? 

THE SAME THING IS HAPPENING WITH SOCIAL SECURITY!  YOUR RETIREMENT PROGRAM IS BEING RAIDED BY THE SAME PEOPLE.  DO NOT THINK IT OK FOR SOME PEOPLE TO LOSE THEIR RETIREMENTS WHEN THE PROBLEM IS CORPORATE FRAUD AND CORRUPTION AND NOT THE BENEFIT!

So while neo-liberals like Dulaney are busy making sure legislation places corporations into positions to earn grand profits-----they are setting you and I to take the losses once again.

The policy of risk-free rating is not a bad thing-----what is bad is that it comes at a time when pensions are waiting for recovery from fraud by Moody's and it comes as the bond market is ready to implode from public sector malfeasance.  Can you imagine how impossible it will be to meet these obligations after an economic crash bigger than 2008? 

THAT'S RIGHT-----THEY DO NOT WANT TO BE ABLE TO MEET THEM!  THAT IS WHY THEY ARE IMPLODING THE BOND MARKET FOR GOODNESS SAKE!

A Maryland neo-liberal running for Governor of Maryland Heather Mizeur actually stated-------if public employees gave up pension benefits we could build all these schools in Baltimore.  That is what neo-liberals do----pit people in the same Democratic base against one another.  It is not an either/or----STOP THE CORPORATE FRAUD AND PROFITEERING!

LABOR AND JUSTICE ARE THE DEMOCRATIC BASE!

Moody’s Playing Dangerous Games With Public Pension Funds

Tuesday, 07 May 2013 09:29 By Dean Baker, Truthout | Op-Ed

The bond-rating agency Moody's made itself famous for giving subprime mortgage backed securities triple-A ratings at the peak of the housing bubble. This made it easy for investment banks like Goldman Sachs and Morgan Stanley to sell these securities all around the world. And it allowed the housing bubble to grow ever bigger and more dangerous. And we know where that has left us.

Well, Moody's is back. They announced plans to change the way they treat pension obligations in assessing state and local government debt.

Instead of accepting projections of pension fund returns based on the assets they hold, Moody's wants to use a risk-free discount rate to assess pension fund liabilities. This will make public pensions seem much worse funded than the current method.

While this might seem like a nerdy and technical point, it has very real consequences. If the Moody's methodology is accepted as the basis for accounting by state and local governments then they will suddenly need large amounts of revenue to make their pensions properly funded. This will directly pit public sector workers, who are counting on the pensions they have earned, against school children, low-income families, and others who count on state supported services.

In other words, this is exactly the sort of politics that the Wall Street and the One Percent types love. No matter which side loses, they win. While public sector workers fight the people dependent on state and local services, they get to walk off with all the money.

Wall Street is expert at these sorts of accounting tricks; it is after all what they do for a living. And this is not the first time that they have played these sorts of games to advance their agenda.

The current crisis of the Postal Service, which is looking at massive layoffs and cutbacks in delivery, is largely the result of accounting gimmicks. In 2006 Congress passed a law requiring an unprecedented level of pre-funding for retiree health care benefits. The Postal Service is not only required to build up a massive level of prefunding, it also is using more pessimistic assumptions about cost growth than any known plan in the private sector.

This requirement is the basis for the horror stories of multi-billion losses that feature prominently in news stories about the Postal Service. The Postal Service would face difficulties adjusting to rapid declines in traditional mail service in any case (it doesn't help that they are prohibited from using their enormous resources to expand into new lines of business), but this accounting maneuver is imposing an impossible burden. The change in pension fund accounting could have a comparable impact on state and local governments.

Moody's change in accounting is not just bad politics, it is horrible policy. The key question is how we should assess the returns that pension funds can anticipate on the assets they hold in the stock market. Moody's and other bond rating agencies did flunk the test horribly in the 1990s and 2000s. They assumed that the stock market would provide the historic rate of return even when price to earnings ratios were more than twice the historic average at the peak of the stock bubble.

While some of us did try to issue warnings at the time (here) and (here) the bond rating agencies were not interested. As a result, when the stock market plunged, many pensions that had previously appeared to be solidly funded, suddenly faced substantial shortfalls.

It is possible to construct a methodology that projects future returns based on current market valuations and projected profit growth that maintain proper funding levels, while minimizing the variation in contributions through time. By contrast, if the pension funds adopted the Moody's methodology as the basis for their contribution schedules, they would find themselves making very large contributions in some years followed by years in which they made little or no contribution.

A state or local government that used the Moody's methodology to guide their contributions would effectively be prefunding their pensions in the same way that it would be prefunding education to build up a huge bank account so that K-12 education was paid from the annual interest. While it would be nice to have the cost of these services fully covered for all time, no one thinks this policy makes sense. We would be hugely overtaxing current workers so that future generations could get a huge tax break.

Even worse, Moody's scoring of pensions may discourage pension managers from holding stock as an asset. They would be held accountable for any losses in bad years, but would not get credit for the higher expected returns on stock. For this reason, risk averse pension managers may decide to hold safe but low yielding bonds.

This would lead to the perverse situation in which collectively invested funds held in pensions only hold safe bonds, even though market timing carries little risk for them. On the other hand individual investors, who are hugely vulnerable to market timing, would be holding stock in their 401(k)s.

That outcome makes no sense. But of course it didn't make sense that subprime mortgage backed securities were Aaa. This is Moody's we're talking about.

THESE ARE SOME OF THE THINGS TO WATCH FOR AND THINK ABOUT THESE NEXT MONTHS AS THE BOND MARKET PREPARES TO COLLAPSE.  I WANT PEOPLE TO KNOW THAT AS WITH THE SUBPRIME MORTGAGE LOAN COLLAPSE YOUR POLS NOT ONLY KNOW IT IS GOING TO HAPPEN----THEY ARE CREATING THE CONDITIONS FOR THE CRASH.  THAT IS BECAUSE THEY WORK FOR GLOBAL CORPORATIONS AND PROFIT.  GET RID OF THEM!



Keep in mind the entire financial system of frauds is based on tricking people, or allowing others to trick people into taking on more debt than they can handle knowing the end result will be a collapse in market that leaves people/government unable to pay the debt. With the subprime mortgage fraud the banks targeted low-income homeowners not only to gain control of real estate in urban areas but to target the Federal Housing Authority and its taxpayer payments of fees and loans.  This coming municipal/sovereign debt fraud collapse targets again government coffers and taxpayers as corrupt neo-liberal politicians load the states and cities with debt knowing this crash in 2015 is a sure thing.  Public officials take an oath to serve and protect the Constitution and citizens and none of this meets this oath.  They are aiding and abetting a crime by knowingly placing the public in harms way.  Remember, we can build Baltimore schools by simply ending the billion in fraud and corruption each year so there is plenty of taxpayer money for these infrastructure projects.  It is the leverage needed to implode the state and city economy.

AGAIN, WE CAN REVERSE THIS----WE SIMPLY NEED TO ELECT POLS THAT REBUILD RULE OF LAW AND OVERSIGHT AND ACCOUNTABILITY.  EASY PEASY.

I want to make sure people understand that all of this was known years ago---below you see in 2011 financial analysts were advising to prepare for the collapse.  During that time think how many credit bond and leveraging deals have been made in Maryland and Baltimore---including the big $1 billion deal to rebuild public schools.  I was shouting and writing to show the public knew this was malfeasance so we are under no obligation when the crash comes to hand everything to investment firms as they plan.  We must have Rule of Law to provide that protection.  This is why these elections are critical these next few election cycles and it is why Maryland was willing to allow systemic election violations for Governor to make sure the right person was in place to protect the fraud when this collapse comes.

Keep in mind the FED controls when this crash occurs to the extend of ending QE and allowing the manufactured  inflation be replaced by real inflation numbers . This will create the environment for mass exodus from the bond market and she has no way to stop this as it has maxed and is now unable to be contained.  She may delay it, but it will come and it appears likely 2015 will be the longest she can delay.  Inflation which is now thought to be 5% or so will jump to some of the highest levels in US history and it is all because of FED policy and Congress and Obama passing laws that made municipal bond markets artificially attractive.  They sold our bond market to the world just as they sold toxic subprime mortgage loans to the world.  They earned trillions and the American people lost everything as will happen this time around.


This article refers to the last time the FED considered ending QE in 2011.... as we know Bernanke decided to extend the death sentence and allow Yellen to handle the collapsing economy. 

SHE WILL HAVE NO CHOICE AS THE FED IS MAXED IN DEBT AND INFLATION IS NOT CONTAINABLE. IT'S ONE BIG PONZI SCHEME.

O'Malley and the Maryland Assembly sold citizens out statewide and Rawlings-Blake and Baltimore City Hall sold citizens out locally as they did during the subprime mortgage loan fraud.

The Coming Bond Market Crash: The Three Moves Every Investor Must Make

• By Martin Hutchinson, Global Investing Specialist, Money Morning  ·   July 1, 2011 
  

Since last November, the U.S. Federal Reserve has been buying U.S. Treasury bonds at a rate of about $75 billion a month. That's part of Fed Chairman Ben S. Bernanke's "QE2" program, under which the central bank was to buy $600 billion of the government bonds.

But QE2 ended yesterday (Thursday), meaning the Fed will no longer be a big buyer of Treasury bonds.

So starting today (Friday), the U.S. Treasury needs to sell twice as many Treasury bonds to end investors as it had been.

But the problem is, who's going to buy them?

Not China, which is diversifying its trillions in assets to get as far away from the U.S. dollar as fast as it can.

Not Japan, which is trying to rebound from its March 11 earthquake, tsunami and nuclear disaster - and is focusing all its spending on reconstruction.

And - as we've seen -neither is the Bernanke-led Fed.

I'm telling you right now: We are headed for an epic bond market crash. If you don't know about it, or don't care, you could get clobbered.

But if you do know, and are willing to take steps now, you can easily protect yourself - and even turn a nice profit in the process.

Let me explain ...

A Timetable for the Coming Crash I'm an old bond-market hand myself - my experience dates back to my days at the British merchant bank Hill Samuel in the 1970s - so I see all the signs of what's to come.

Having the two biggest external customers of U.S. debt largely out of the market is a huge problem. Unfortunately, those aren't the only challenges the market faces. The challenges just get bigger from there - which is why I'm predicting a bond market crash.

Latest Comment^ It is 2013, QE3 is out so maybe his timing is off but with all the printed mon…

Steadily rising inflation is one of the challenges. Inflation is a huge threat to the bond markets, and is almost certain to create a whipping turbulence that will ultimately infect the stocks markets, too.

Many pundits will tell you that if investor demand for bonds declines, and investor fear of inflation increases, bond-market yields could increase in an orderly fashion.

But I can tell you that the bond markets don't work like that. Price declines affect existing bonds as well as new ones, so the value of every investor's bond holdings declines. And with many of those investors heavily leveraged - especially at the major international banks - the sight of year-end bonuses disappearing down the Swanee River as bonds are "marked to market" will cause a panic. That's especially true when end-of-quarter or end-of-year reporting periods loom.

That's why we can expect a bond market crash at some point. If you ask me to make a prediction, I'd say that September or December were the most likely months for such a crash.

A Boxed-In Bernanke One sad - even scary - fact about what I'm predicting is that Fed Chairman Bernanke won't be able to do much about it ... though he'll certain try.

Consumer price inflation is now running at 3.6% year-on-year while producer price inflation is running at 7.2%. In that kind of environment, a 10-year Treasury bond yielding 3% is no longer economically attractive. Since monetary conditions worldwide remain very loose, inflation in the U.S. and worldwide will trend up, not down.

The bottom line: At some point, the "value proposition" offered to Treasury bond investors will become impossibly unattractive. When that happens, expect a rush to the exits.

If Bernanke attempts "QE3" - a third round of "quantitative easing" - he will have a problem. If other investors head for the exits, Bernanke may find that the U.S. central bank is as jammed up as the European Central Bank (ECB) currently is with Greek debt: Both will end up as the suckers that are taking all the rubbish off of everyone else's books.

There's a limit to how much Treasury paper even Bernanke thinks he can buy. And if everyone else is selling, that "limit" won't be high enough to save the bond market.

With Bernanke buying at a rapid rate, the inflationary forces will be even stronger, so every Bureau of Labor Statistics report on monthly price indices will be marked by a massive swoon in the Treasury bond market.

Eventually, there has to be a new head of the Fed - a Paul A. Volcker 2.0 who is truly committed to conquering inflation. Alas, it won't be Volcker himself since, at 84, he is probably too old.

But it might be John B. Taylor, who invented the "Taylor Rule" for Fed policy. The Taylor Rule is actually a pretty soggy guide on running a monetary system. But it has been flashing bright red signals about the current Fed's monetary policy since 2008.

However, since a Fed chairman who is actually serious about fighting inflation would be a huge burden for current U.S. President Barack Obama to bear - and could badly hamper his chances for re-election, any such appointment is unlikely before November 2012.

How to Profit From the Bond Market Crash

Given that reality, it's likely that Bernanke will attack any bond market crash that occurs ahead of the presidential election just by printing more money; there won't be any serious attempt to rectify the fundamental problem, meaning inflation will continue to accelerate.

For you as an investor, this insight leads to two conclusions that you can put to work to your advantage. The scenario I've outlined for you will be:

Very good for gold and other hard assets. Challenging for Treasury bonds; prices will remain weak no matter how vigorously Bernanke attempts to support them.

So what should you do with this knowledge? I have three recommendations.

First and foremost, if Bernanke were not around, I would expect gold prices to fall following a bond market crash. But since he's still at the helm at the Fed, I expect him to do "QE3" in the event of a crash. And that means gold - not Treasury bonds - would become an investor "safe haven."

You can expect gold prices to zoom up, peaking at a much higher level around the time Bernanke is finally replaced. Silver will also follow this trend. So make sure you have substantial holdings of either physical gold and silver or the exchange-traded funds (ETFs) SPDR Gold Trust (NYSE: GLD) and iShares Silver Trust (NYSE: SLV).

Second, if you want to profit more directly from the collapse in Treasury bond prices, you could buy a "put" option on Treasury bond futures (TLT) on the Chicago Board Options Exchange (CBOE). The futures were recently trading around 94, and the January 2013 80 put (CBOE: TLT1319M80-E) was priced around $4.50, which seems an attractive combination of low price and high leverage.

Finally, if you don't already own a house, you should buy one - and do so with a fixed-rate mortgage. A U.S. Treasury bond market crash will send mortgage rates through the roof, so today's rates of about 4.8% will represent very cheap money, indeed. Even if house prices decline by 10%, a 2% rise in mortgage rates would increase the monthly payment (even accounting for a 10% smaller mortgage), by a net 11.8% (the payment on a $100,000 mortgage at 4.8% is $524.67; that on a $90,000 mortgage at 6.8% is $586.73).

Needless to say, the same benefits apply to rental properties financed by fixed-rate mortgages: With lower home ownership and rising inflation, rents are tending to rise significantly.

There's a storm coming in the Treasury bond market. But by recognizing its approach, we can turn the bond market crash to our advantage.

_________________________________________________

HMMMMMM.....reduce reserve funds and raise public debt.....all to augment the billions of dollars lost to the Maryland economy to fraud each year.

The debt takes the form of state leverage for projects and services----they have even leveraged the public pension funds all with no indication that 2015 will bring a major recession/depression.  DIDN'T SEE THAT COMING YOUR NEO-LIBERALS AND NEO-CONS WILL SAY!

All that leverage supposedly balanced the state budget and O'Malley pretended to be saving public sector jobs and pensions all while knowing this economic crash will lead to huge layoffs and end public sector pensions.  Labor union leaders know this dynamic and still go with the neo-liberals doing it!  As we all know each year since this 2010 article the public debt and leverage has increased.  Again, Republicans in other states are doing the same thing so do not listen to Maryland Republicans playing this card---they would do the same.

Maryland Governor’s Budget Cuts Reserve Payments, Boosts Debt

by Patrick Temple-West JAN 20, 2010 8:44pm ET Bond Buyer


WASHINGTON — Maryland Gov. Martin O’Malley yesterday released a proposal for the state’s fiscal 2011 budget that would reduce reserve fund contributions and increase public debt by 7.1% over fiscal 2010.



Below you see what is only the tip of the iceberg with tax credits that commit a level of tax forgiveness for decades that starves our government coffers.  O'Malley cut higher education aid and public transportation funding to pay for just a few of these corporate subsidies all in the name of jobs.  Well, when the bond market crash comes and the jobs are gone because of the recession global corporations will still be receiving tax breaks as they do business/make profits overseas. 

WHO CARES ABOUT LEVERAGE AND STATE DEBT WHEN THE IDEA IS TO MAXIMIZE PROFITS FOR GLOBAL CORPORATIONS.

We'll just cut more services, programs, sell public assets, and let global corporations handle the business of government that now has no revenue.
I'm not going to format since one can just look down very quickly to see all of the development is done with tax credits. They all are supposed to create jobs and help low-income people all of which will be killed by the coming economic crash from the credit leverage in these very policies.  Attracting global corporations to Maryland is the answer to jobs and a strong economy say neo-liberals-----only it does the opposite.  Most of these tax breaks will go to large corporations.

$2 million in tax credits for creating 10 poverty jobs......hmmmmmm.

Maryland Department of Business & Economic Development

economic development and the creation of jobs. MVF targets emerging technology-based businesses including biotechnology, information technology, telecommunications, software development and advanced materials.• Challenge Investment Program – $650,000 to ten start-up firms.• Enterprise Investment Fund – $2.2 million – three new firms and follow-on funding to five companies.Federal IncentivesCommunity Development Block Grant Program – Economic DevelopmentThis program assists local governments in implementing commercial and industrial economic development projects. Approved program funds are disbursed to eligible local jurisdictions as conditional grants and used for public improvements for business start-up or expansion or business loans. Projects must create jobs with the majority targeted to individuals from low to moderate income or eliminate blight conditions that impede commercial and industrial development. Fund uses include acquiring fixed assets, infrastructure and feasibility studies. • CDBG-ED funds of $2.2 million supported seven closed projects to create or retain 185 full-time jobs. Three projects worth $1.3 million were approved, representing 129 new or retained jobs.Maryland Economic Adjustment FundMEAF assists small businesses with upgrading manufacturing operations, developing commercial applications for technology, or entering new economic markets. Eligible businesses include manufacturers, wholesalers, service companies and skilled trades. Funds can be used for working capital, machinery and equipment, building renovations, real estate acquisition and site improvements. •Four Maryland Economic Adjustment Fund projects totaling $703,000 were approved and five transactions totaling $726,500 were closed.Tax Credit ProgramsOne Maryland Tax Credit Program Businesses can qualify for up to $5.5 million in income tax credits under the program when they invest in an economic development project in a “qualified distressed county.” Qualified Distressed Counties currently include: Baltimore City, Allegany, Dorchester, Garrett, Caroline, Somerset and Worcester. The business must create at least 25 new full-time positions at the project within 24 months of the date the project is placed in service. The business must be engaged in an eligible activity and incur eligible project or start-up costs. • FY2009 – 3 final certificates of eligibility issued for businesses that created 219 new jobs.Job Creation Tax CreditEncourages businesses to relocate to or expand in a Maryland Priority Funding Area by providing income tax credits based on new jobs created. Subject to various restrictions and conditions including location, wage levels and number of jobs created the credit may be for 2.5% up to $1,000 per job or 5% of annual wage up to $1,500 per job. • FY2009 – 7 final certificates of eligibility issued for businesses that created 307 new jobs.Enterprise Zone ProgramBusinesses located in a maryland enterprise Zone may receive income and real property tax credits in return for creating jobs. Local governments apply to the Department to designate Enterprise Zones. The ten-year real property tax credit reduces taxes on property improvements for ten years. The income tax credit for creating new jobs is$1,000 per new worker; for hiring economically disadvantage employees, up to $6,000 per new employee (over three years).• As of June 2009, there were 29 Enterprise Zones and two focus areas. • FY2010– 753 businesses will receive property tax credits totaling $26.3 million.– State share to reimburse localities will be $13.1 million, assuming the State’s full obligation is met.– Credits are based on real property investments totaling $1.945 billion.AGENCY MISSION & ACTIVITIES (contintued)
_____________________________________________

Here you see for whom neo-liberals and neo-cons in Maryland work---as they say we do not need to bring money home to pay taxes and  build infrastructure---we have plenty of business overseas thanks to O'Malley's 8 years of sending all of Maryland's revenue to building global structures for development.  We are exporting education and health care businesses none of which grows jobs in Maryland.

This is why neo-liberals are not concerned about the coming economic crash----it will not hurt these global corporations and it will provide excuses to hand more public operations/assets to these global corporations.  Dulaney and neo-liberals are trying as hard as they can to repatriate global tax requirements in schemes to build infrastructure.  Remember, if they paid taxes we would have the money for infrastructure.  Domestic businesses pay taxes so the answer is GET RID OF GLOBAL CORPORATE CONTROL OF YOUR ECONOMY!  Dulaney is a Clinton investment banker who knows banks owe tens of trillions of dollars in fraud but does not seem to want to offer that solution.  Buying Treasury bonds when the bond market is preparing to collapse?  REALLY MR DULANEY?

Raise your hand if you know the answer is to get rid of global corporations from the Maryland economy rather than pretending to need to beg them for their taxes!!!!!  EVERYONE.  Raise your hand if you understand that tax breaks in exchange for bond purchases just when the bond market is ready to collapse will simply allow corporations to enter a bond market at the bottom for tremendous profits just as happened in 2008 with the stock market crash.  THAT'S WHAT THESE POLICIES ARE ALL ABOUT!

Everyone knows as well that the main avenue for recovering those tens of trillions of dollars in corporate fraud is HIGHER CORPORATE TAXES but as this article shows neo-liberals and neo-cons only intend to lower corporate taxes....you know, its all about job creation.

Md. Companies Have Billions in Assets Overseas Business Top News — 28 March 2014 By Fola Akinnibi
Capital News Service

6 WASHINGTON – The president’s budget, released in early March, called for the creation of a national fund to finance repair of the nation’s crumbling roads, bridges and other infrastructure — an idea also proposed by a freshman Maryland congressman.

Rep. John Delaney, D-Potomac, wants to fund infrastructure repair by bringing home billions of dollars in foreign earnings from U.S.-based corporations.  The congressman said he has been long concerned about decaying infrastructure.

Delaney’s Partnership to Build America Act would create a new way to pay for these repairs. Corporations would provide the money by buying bonds in The American Infrastructure Fund.

In exchange, they would be allowed to bring back money locked up overseas without paying the full 35 percent corporate tax rate.

Delaney’s bill could come as a relief to corporations with large foreign operations that have deferred paying U.S. corporate taxes on their overseas earnings indefinitely. For example, 10 Maryland-based multinational corporations, including Columbia-based MICROS Systems Inc. and Baltimore-based Under Armour Inc., are holding a combined $3.5 billion overseas, according to filings with the Securities and Exchange Commission.

While it would mean a major tax savings, none of the 10 publicly held Maryland companies contacted would comment on the proposed legislation.

One expert said there’s little incentive to bring the funds back with so much business opportunity overseas. Instead, it makes sense for U.S. companies to let the overseas funds stay put and postpone a U.S. tax bill.

“It’s better to defer,” said Michael Faulkender, a finance professor at the University of Maryland’s Smith School of Business.

Further, the Delaney proposal is out of sync with many plans to overhaul the U.S. tax code, he said. “Every proposal on the table is for the corporate tax rate to go down, not up.”

Rich Badmington, W.R. Grace & Co.’s vice president of global communications, said most of the Columbia chemical company’s revenue comes from international operations. The company plans to continue investing in those operations.

“We are able to do that without bringing cash back to the U.S. because we are continuing to invest,” Badmington said. “(Research and development) is a function that requires continuing investment and we have quite a lot of that outside the U.S.”

President Barack Obama’s latest budget plan called for the creation of a government-owned entity to finance infrastructure projects. Delaney said the president’s support for something similar to his bill was “great,” and said it shows how much momentum the bill has.

“We’re very optimistic about it, we have strong bipartisan support,” Delaney said.

The bill has 57 co-sponsors in the House and 12 in the Senate, including Sens. Lindsey Graham, R-S.C., and Michael Bennet, D-Colo., head of the Senate Finance Committee’s Taxation and IRS Oversight subcommittee. Hearings have not been scheduled for the bill.

Under the tax code, corporations can avoid paying taxes on foreign earnings as long as the money is being permanently reinvested overseas. When the corporations decide to bring these funds back home, a process called “repatriation,” the money then is subject to U.S. taxes.

Originally, the tax exemption was meant to help U.S. corporations compete overseas, said Mitchell Kane, a tax professor at New York University’s School of Law. Companies claimed paying taxes in two countries would put them at a disadvantage and the government responded with the exemption, he said.

The plan was to have the companies pay foreign taxes, which in many cases are lower than the U.S. tax rate, and then pay U.S. taxes when the money was repatriated. After this process, the company would receive a credit for any foreign taxes paid, Kane said.

Allowing such an exemption has created an incentive for companies to keep their money overseas and defer the U.S. corporate tax, said Jane Gravelle, an economist with the Congressional Research Service. But parking money offshore isn’t a long-term solution for companies, she added.

“They may think they can hold their breath forever and borrow money,” Gravelle said. “How long are they going to be able to do that? Shareholders eventually want dividends.”

This exemption could result in $265.7 billion in lost revenue for the federal government through 2017, according to a 2013 report by Congress’ Joint Committee on Taxation.

For now, however, companies aren’t likely to repatriate without a major tax discount.

W.R. Grace has more than $1.1 billion held overseas and would have to pay $149.7 million in taxes if it was repatriated, according to SEC filings. That money will remain overseas, except in instances where repatriation would result in minimal or no U.S. taxes, the company said in its most recent SEC filing.

MICROS Systems, a Maryland-based computer hardware and software producer, has about 61 percent of its cash and cash equivalents, $385.8 million, held internationally with no plans to repatriate, according to the company’s most recent filings with the SEC.

Maryland-based apparel company Under Armour has $95.2 million, or 27 percent, of its cash and cash equivalents held overseas with no plans to bring it back.

Spokespersons from MICROS and Under Armour could not be reached for comment.

Other companies have begun to repatriate their foreign funds, which Kane said could help cover corporate expenses. McCormick & Company, a spice, herbs and flavoring manufacturer, repatriated $70 million in 2012, according to the company’s most recent SEC filings. Even still, most of the company’s cash is held in foreign subsidiaries, the filings said.

A spokesperson for McCormick and Co. could not be reached for comment.

Some of the largest U.S. corporations make about half of their money internationally, Delaney said. The bill is just a way to get some of it back.

“It creates a way for some of that money to come back, which is good for our economy,” Delaney said. “And it creates this large-scale infrastructure fund, which is good for our country.”

Instead of government funding, the American Infrastructure Fund would raise cash through a $50 billion bond offering. Companies would buy the bonds at a 1 percent fixed interest rate and a 50-year term, in exchange for a chance to repatriate a certain portion of overseas earnings tax-free for every dollar spent on bonds.

A bond to repatriation ratio would be determined by an auction and could result in companies paying an effective 12 percent tax rate, Delaney said. Money raised in the bond sale could then be leveraged and loaned to state and local governments for projects.

The auction process will benefit both the infrastructure fund and the corporations, which will be able to find a price that is right for them, Delaney said.

“We’ve talked to them and they’re very supportive of it,” he said.

The American Business Conference, Associated Equipment Distributors and Terex Corporation are among those supporting the bill.

Tech giants and pharmaceutical corporations have lobbied for a repatriation holiday since the 2004 American Jobs Creation Act allowed them to repatriate at a discounted rate. Because of the intellectually-based capital that these companies thrive on, it is sometimes easier for them to keep assets overseas.

For example, Apple has $124.4 billion held overseas, according to the company’s most recent SEC filing.

The 2004 bill reduced repatriation taxes to 5.25 percent if corporations promised to invest the money at home. The one-year holiday is widely regarded as a failure because it spurred an increase in repatriation, but not an increase in jobs or investments, according to a report by the Congressional Research Service.

“The argument was that it would be a stimulus” to the U.S. economy, Gravelle said. “Most people who studied this found out it was being used to repurchase shares.”

Share repurchases are a common way to boost stock prices.

Corporations used the money to pay stockholders dividends and pay off debts, which doesn’t make for a good stimulus, she continued.  Instead, the holiday created a “moral hazard” and companies have parked money overseas, waiting for the next holiday, Gravelle said.

Delaney’s bill has short-term benefits but doesn’t address the larger problems with the tax code, Faulkender said. Corporations will want to move more and more operations overseas if they can find discounts on U.S. taxes, he added.

“If you signal that firms are going to realize a lower tax rate, even after repatriation, on their foreign operations than on their domestic operations, you’re going to incentivize even more offshoring,” he said.

“I don’t think that’s good for the U.S. economy.”

THE NEXT FEW DAYS I WANT TO TALK ABOUT THE COMING ECONOMIC COLLAPSE IN 2015.  I WILL START BY REMINDING PEOPLE WANT CAUSED THE 2008 CRASH AND SHOW HOW THE TWO ARE TIED TO TRANSFERRING ALL WEALTH TO THE TOP AND USING THE EXCUSE OF GOVERNMENT DEBT TO DISMANTLE OUR DEMOCRATIC STRUCTURES.  NEO-LIBERALS AND NEO-CONS WILL TAKE IT ALL!


I want to encourage people to pay attention to a subject that bores everyone but is the source of the looting of US government coffers and individual's pockets.  The Federal Reserve and Wall Street frauds. We need to know all of this CAN be reversed.  The economy is closer to collapse yet again by the same people playing the same games and all of it illegal.  So, let's review what caused the crash of 2008 to see how it relates to what will bring the economy down in 2015. Remember, these economic policies started when Reagan/Clinton took the Republican and Democratic Parties to neo-liberalism.  The goal back then was to dismantle all of the public structures built for strong 1st world country to create the wealth inequity that goes with empire-building. The same was happening in Europe and the UK.  This is why Maryland has no public justice or oversight and accountability today----all of this boom and bust is no accident----it is all about wealth redistribution to the top.

Clinton deregulated and broke the Glass Steagall to set the stage for this explosive growth of US corporations with no overight and Bush simply allowed for an 'anything goes' environment.  Reagan/Clinton/Bush working with Alan Greenspan and Wall Street.  Greenspan/Geithner allowed open fraud and corruption in the financial markets and Bush made sure the US Justice Department and financial agencies aided and abetted these crime.  The goal was transferring real estate from citizens to the banks through foreclosure so to control development especially in urban centers like Baltimore as well as sending trillions of dollars in government funding for these subprime loans to the banks.  

  'We didn't see that coming' said Greenspan. Meanwhile, neo-liberals at the state and local levels were allowing the subprime mortgage fraud go wild. This same thing happened in Europe as subprime mortgage loans filled their economy as well.  It was Obama's job to make sure the money stayed with those committing the fraud.

The constant portrayal of this Visigoth looting as creating homeownership for low-income people -----knowing a collapse would send people into foreclosure-----shows the social pathology driving Wall Street and neo-liberals and neo-cons.

IT IS NOT LEGAL FOR ANYONE TO ALLOW OPEN FRAUD AND CORRUPTION AND GREENSPAN WAS ALLOWED TO JUST FADE AWAY FOR ONE OF THE GREATEST CRIMES IN HISTORY.

This was no maestro---he simply used people's faith in government and Rule of Law and sold people in investing in a system he knew would blow up making most people losers.  Think what is happening today---media is telling you the market is strong, politicians are throwing pensions into it and we all know it is getting ready to crash....and in 2015 we will hear O'Malley and Rawlings Blake who are loading the state with debt just as they oversaw the subprime mortgage fraud----'I didn't see that coming'!
WELL, WE SEE IT COMING AND IT IS INFUSED WITH PUBLIC MALFEASANCE AND FRAUD.

Alan Greenspan: Public Enemy Number One

By Stephen Lendman Global Research, October 27, 2008

With so many good choices, it’s hard just picking one. But given the gravity of today’s financial crisis, one name stands out above others. The “maestro,” as Bob Woodward called him in his book by that title. The  “Temple of Boom” chairman, according to a New York Times book review. Standing “bestride the Fed like a colossus.” Now defrocked as the “maestro” of misery. Alan Greenspan. From August 11, 1987 to January 31, 2006, as head of the private banking cartel euphemistically called the Federal Reserve. That Ron Paul explains isn’t Federal and has no reserves.

It represents bankers who own it. Big and powerful ones. Not the state or public interest. It prints money. Controls its supply and price. Loans it out for profit and charges the government interest it wouldn’t have to pay if Treasury instead of Federal Reserve notes were issued. People, as a result, pay more in taxes for debt service. The nation is more crisis-prone. Over time they increase in severity. The current one the most serious since the Great Depression. Potentially the greatest ever. The result of Greenspan’s 18 year irresponsible legacy.

He championed deregulation and presided over an earlier version of today’s crisis. The Reagan-era savings and loan fraud. It bankrupted 2200 banks. Cost taxpayers around $200 billion and for many people their savings in S & Ls they thought safe.

In the 1990s, he engineered the largest ever stock market bubble and bust in history through incompetence, subservience to Wall Street, and dereliction of duty. In January 2000, weeks short of the market peak, he claimed that “the American economy was experiencing a once-in-a-century acceleration of innovation, which propelled forward productivity, output, corporate profits, and stock prices at a pace not seen in generations, if ever….Lofty stock prices have reduced the cost of capital. The result has been a veritable explosion of spending on high-tech equipment….And I see nothing to suggest that these opportunities will peter out anytime soon….Indeed many argue that the pace of innovation will continue to quicken….to exploit the still largely untapped potential for e-commerce, especially the business-to-business arena.”

A week later, the Nasdaq peaked at 5048. Lost 78% of its value by October 2002. The S&P 500 49% from its March 2000 high to its October 2002 bottom. Individual investors were left high and dry as a result. For Mr. Greenspan, it was back to engineering multiple bubbles with 1% interest rates and a tsunami of easy money.

He advocated less regulation, not more. Voluntary oversight. The idea that markets work best so let them. Government intervention as the problem, not the solution. In the mid-1990s, he told a congressional committee:

“Risks in financial markets, including derivative markets, are being regulated by private parties. There is nothing involved in federal regulation per se which makes it superior to market regulation.”

On October 23 before the House Government Oversight and Reform committee, he refused to accept blame for the current crisis, but softened his tone and admitted a “flaw” in his ideology. Confessed his faith in deregulation was shaken. Said he was in a “state of shocked disbelief.” Unclear on what went wrong. Not sure “how significant or permanent it is,” and added:

– “We are in the midst of a once-in-a century credit tsunami (requiring) unprecedented measures;”

– “This crisis has turned out to be much broader than anything I could have imagined;”

– “fears of insolvency are now paramount;”

– significant layoffs and unemployment are ahead;

– a “marked retrenchment of consumer spending” as well;

– containing the crisis is conditional on stabilizing home prices;

– at best, it’s “still many months in the future;”

What went wrong with policies that “worked so effectively for nearly four decades,” he asked? Securitizing home mortgages. “Excess demand” for them, and failure to properly price them he answered. Unmentioned was unbridled greed. The greatest ever fraud. No oversight, and a predictable crisis only surprising in its magnitude and how it grew to unmanageable severity.

Greenspan is now softening on regulation but barely enough to matter. Too little, too late by any standard, and only to restore stability after which chastened investors “will be exceptionally cautious.” In the end, in his view, “This crisis will pass, and America will reemerge with a far sounder financial system.” Until another Fed chairman repeats his mistakes. Creates a crisis too big to contain. Destroys unfettered capitalism as we know it. Changes the world irrevocably as a consequence. Unless this time is the big one and does it sooner.

In March 1999, Greenspan was optimistic at the end of a robust decade (that James Petras calls “the golden age of pillage”) with no worries about new millennium meltdowns. He addressed the Futures Industry Association and said it would be “a major mistake” to increase rules on how banks assess risks when they use derivatives. He added: “By far the most significant event in finance during the past decade has been the extraordinary development and expansion of financial derivatives.” By a compounded 20% rate throughout the decade. Around 30% alone by banks in 1998. And, according to Greenspan, “The reason that (derivatives) growth has continued despite adversity, or perhaps because of it, is that these new financial instruments are an increasingly important vehicle for unbundling risk….the value added of derivatives themselves derives from their ability to enhance the process of wealth creation (and) one counterparty’s market loss is the (other’s) gain.”

Overall, they’ve increased the standard of living of people globally, he claimed. In fact, they contributed to global crises in the 1990s. Hot money in, and meltdowns when it exited. The problem is derivatives work well in bull markets, but are disastrous when they’re down. Going up they do nothing for ordinary people, but during downturns receding tides sink all boats and all in them and aren’t the zero sum game Greenspan suggested.

Worst of all are so-called credit default swaps (CDSs). The most widely traded credit derivative. In the tens of trillions of dollars. A $43 trillion market, according to PIMCO’s Bill Gross. The International Swaps and Derivatives Association (ISDA) estimates it at $54.6 trillion. Down from $62 trillion at yearend 2007. Others place it higher, but key is what they are and how they’re used. They resemble insurance (on risky mortgages), but, in fact, are for little more than casino-type gambling. Unregulated with no transparency in the shadow banking system that dwarfs the traditional one in size and risk.

Gross describes it this way. It “craftily dodges the reserve requirements of traditional institutions and promotes a chain letter, pyramid scheme of leverage, based in many cases on no reserve cushion whatsoever.” CDSs are at the center of shadow banking, and Gross and others warn about possible financial Armageddon if things begin collapsing.

A “Cheerleader for Imprudence”

That, according to James Grant, editor of Grant’s Interest Rate Observer. Greenspan’s “biggest mistake was inciting people to do imprudent things.” He called him “marble-mouthed” for his “Greenspeak” and not simply admitting he “was as blind as those (he) pretended to lead. This sense of security that people invested in the idea of perfect control by an all-knowing brain at the top, that idea’s been shattered.”

In July, Grant was outspoken in a Wall Street Journal op-ed titled “Why No Outrage?” He quoted Mary Elizabeth Lease from the Populist era haranguing farmers to “raise less corn and more hell.” He asked why today’s financial victims aren’t protesting Fed policy “of showering dollars on the (monied) people who would seem to (least) need them.” Where are the “uncounted improvident?” Have they “not suffered (enough) at the hands of what used to be called The Interests? Have the stewards of other people’s money not made a hash of high finance? Where is the people’s wrath?” In the wake of the “greatest (ever) failure of ratings and risk management.”

Greenspan’s Fed cut interest rates to 1%. “House prices levitated as mortgage underwriting standards collapsed.” He claimed earlier that property appreciation was a sign of prosperity and a strong economy and “while home prices do on occasion decline, large declines are rare.” Most homeowners experience “a modest but persistent rise in home values that is perceived to be largely permanent.”

Especially, according to Grant, at a time that “credit markets went into speculative orbit, and an idea took hold. Risk….was yesterday’s problem.” It led to “one of the wildest chapters in the history of lending and borrowing.” As a consequence, an $8 trillion home valuation wealth bubble and an unprecedented oversupply of unsold properties. Now in even more  oversupply as owners default. Are foreclosed on or simply walk away from unaffordable underwater assets. They sit empty with no one to buy them except for those able in distressed sales.

The whole episode criminal and avoidable had the Fed used its authority under the 1994 Home Ownership and Equity Protection Act. It authorized the central bank to monitor abuses and intervene, if necessary, to prevent abusive lender practices. It failed to do it.

The result was predictable. People and the economy in crisis. Greenspan orchestrated it. His successor Bernanke did nothing to curb it. Wall Street was on a roll until it crashed. Huey Long once compared JD Rockefeller to “the fat guy who ruins a good barbecue by taking too much.” Wall Street thrives on it. Fed largesse enables it. The problem is their indigestion affects everyone. A stomachache spreading round the world. How bad it’ll get and where it stops nobody knows. Blame it on Greenspan. Our “former clairvoyant,” according to Grant.
___________________________________________


Below you hear the same talk as we did in 2006-2007 as the subprime mortgage market began to implode and again it was the FED policy and the Obama Administration/Congress that fueled this crash just as it was Greenspan and Bush with the subprime mortgage loans.

Where last fraud centered on redistributing real estate to the few----this fraud centers on using credit bond and municipal debt to create the excuse to privatize all that is public and end public sector pensions and benefits.  The 2015 crash will be so deep with no help from the Federal government still holding $17 trillion in debt from the last massive corporate fraud that the US economy will look like Greece and Spain.  It will place the US in the same double-disaster as Europe---subprime loan fraud/sovereign debt fraud.

As the article below states-----hold on to your hats as the market sees a mass exodus from the bond market!!!

Where this article makes it sound that Yellen is being a 'dove'....she has no options....the FED under Bernanke did what the FED under Greenspan did......fed the bond market bubble until there was no return.  Remember, Wall Street wants people back in the stock market and blowing up the once safest place to invest, the bond market, will do that.  Soon, everyone will be fleeing the bond market as it collapses right back to the stock market.  They are making trapped rats of our pension system and giving us no opportunity for a stable economy.


THAT'S A NEO-LIBERAL/NEO-CON FOR YOU!!!!!  GET RID OF THEM!!!

Fed Officials Trying to Warn Bond Markets
July 15th, 2014
in contributors

by EconMatters, EconMatters.com

The Purpose of Complacency Talk

The Fed officials have been coming out in speeches the last couple of weeks with rhetoric about 'complacency' and other such code words for chasing risk ahead of what the Federal Reserve knows is going to be an abrupt change in monetary policy over the next six months.


Follow up:

The Fed is concerned because they know they want an orderly transition in markets and not causing major dislocations in markets by massive selloffs. However, the getting is so good with interest free money that participants are going to push this edge they have in markets right up until the last possible exit minute.

So despite the fact that QE ends in October with no more bond buying by the Fed, the 10-Year is still sitting at 2.50% with participants making money hand over fist with the borrow at 15-25 basis points and investing in yield instruments with massive leverage trades that has been so popular and irresistible by investors looking for 'free money arbitrage' opportunities.



An Orderly Unwind

The problem that the Fed has rightly identified is that they are not going to get an orderly exit at this pace, the unwind is going to be massive, jarring, and definitely not 'orderly'! The Bond markets, take the 10-year yield could literally have a 25 or 35 basis point move over a 24 hour period that would wreak a lot of havoc on fund flows, asset classes and financial markets.

This turmoil in the bond market could really be disastrous because the Fed participants realize the bond market isn't being priced currently where the Fed is moving to in terms of monetary policy. The Fed should be alarmed because the unwind is setting up for a possible 100 basis point move in two months' time frame type of fund dislocation and reallocation of capital, and that is going to be problematic for markets!



But the Fed only has themselves to blame for this predicament as in this case you cannot have your cake and eat it too! Janet Yellen cannot be so dovish at Fed news conferences given her reputation as a dove among doves, and get any respect from market participants; the trade is going to be all-in and one-sided without the slightest regard for the risks associated with being so aggressive.

In short, Janet Yellen has encouraged the one thing that Fed governors should always avoid being so 'transparent' that market participants go full boar on a trade, one-sided, highly levered, unhedged, and nothing could possibly happen with this dovish a Fed Chairperson at the helm trade! In a nutshell they have become too 'complacent' or they have taken her dovishness for granted.

Pigs at the Bond Trough

The pattern has been quite clear in Bond Markets wait until after the 200k plus Employment Report blows the 10-Year up to 2.70%, and come in and buy bonds like there is not tomorrow with huge leverage, until they have to get out of the way of the next CPI, GDP or Employment Report - as this process has repeated itself over the last four months of financial markets. The Levered Yield Trade has been the trade of the year so far in 2014 - the strategy of investing in anything with yield from over-valued utilities, pricey bonds and even stodgy low growth Big Caps with some semblance of a dividend yield!

Janet Yellen cannot have her Dovish Cake, and eat it too in the form of an "Orderly Unwind"!

So the Fed has to realize that sending out the mignons of the Fed isn't going to counteract Janet Yellen's dovishness. If they want markets to start unwinding trades ahead of policy adjustments that are coming and not wait until the last possible minute, then Janet Yellen herself is going to have to send a shot across the monetary bow so to speak!

She is going to have to come out with a hawkish tone to garner some healthy respect for normalization of fed policy by markets. She is dovish we get that, but the Fed is about to change monetary policy, and much sooner than is currently priced into many asset classes, and it is going to take some considerable time if participants started repositioning today to unwind many of these massive positions in markets, any sense or orderliness necessitates a little at a time versus all at once!

Janet Yellen has got to start talking hawkish to get this process started otherwise her worst fear is going to materialize in spades as market participants are all going to wait until the last minute trying to make that last dollar on the yield trade, and cause huge market turbulence when they all try to get out at once!


The Data Indicate 1st QTR 2015 Rate Hike at the Latest!

The Employment numbers, the inflation numbers, and the risky valuations in financial markets all point to the Fed needing to start raising rates sometime in the first quarter of next year. This is much sooner than Janet Yellen's Dovish talk has markets pricing in with their forecast for late in 2015 for the first rate hike.

Market participants are far too levered up, all on the same side, and well behind the monetary normalization curve of when the first rate hike is actually going to occur. This is a recipe for disaster, and that seminal light bulb moment in financial markets when everybody realizes, that moment in Margin Call where the analyst drops the ear-buds out saying internally holy shit, that they need to liquidate everything right now. In other words, the entire market all hits the sell button at the same time!

_______________
Wall Street and the FED thinks the steps towards stabilizing the economy have been a success and they are ready for the coming crash.  What's not to like---the American people lose all their wealth as the richest wealth soars.

Below you see an article that shows the progression of the plan.  Goldman Sachs was key to the financial frauds in the US but were key in bringing down the European social society.  They targeted especially Greece and Spain with fraudulent financial instruments loading these nations with huge sovereign debt having the goal of imploding the economies forcing the dismantling of social society.  Why this is important to Americans today? It is these same tactics are now coming to the US.  We experienced the subprime mortgage fraud in the US as they did in Europe but Europe was brought down harder because a second fraud----sovereign/municipal debt fraud ----completely emptied their government coffers.  This is why Europe is in deeper distress than the US.  Well, the time is now for the sovereign debt fraud in the US and it looks like levered municipal bond debt, mortgaged tax debt, and state and local money tied to development that cannot be afforded. 

THIS MASSIVE DEBT BUILDUP ON THE BACKS OF OUR GOVERNMENT IS WHAT CREATED IN EUROPE THE DEEPEST OF RECESSIONS.

This happened in Europe between 2001 and 2007 and now it is being done here in the US between 2008 and 2015.  The subprime mortgage fraud was about taking the American people's wealth-----this coming municipal bond leverage fraud is about taking the government wealth as happened in Europe.

Goldman Sachs and DeutscheBank both created fraudulent financial instruments that allowed government officials to hide their national debt so more debt could be taken.  None of this is legal and Goldman Sachs knew it was breaking the law.  So Greece and Spain were made to look like the government budgets were balanced when they were ever deeper in debt.  Making these governments look like they were AAA mirrored making subprime mortgage loans look AAA.  These government officials in Greece and Spain took more and more credit and distributed money to friends and off-shored it until these economies imploded from debt.  Europe's TROIKA then came in to make the Greek and Spanish people pay for the fraud just as is happening in the US with the subprime mortgage and other financial frauds.  You see Europe's Draghi and his connection to Goldman Sachs overseeing the crisis just as Tim Geithner did in the US.

THE KEY WORDS HERE ARE HIDING SOVEREIGN DEBT TO LOAD MORE DEBT TO MAKE THE IMPLOSION SO DEEP AS TO FORCE THE DISMANTLING OF GOVERNMENT ASSETS.

That is what happened in Europe.  Subprime mortgage fraud and sovereign debt fraud.  Today, the US economy is ready to implode from sovereign/municipal bond debt.  Maryland is ground zero for this.  O'Malley and Maryland Assembly and Baltimore City Hall has loaded the state and city with so much leverage in credit bonds and tax deals that when the crash comes in 2015 the public will be stuck with debt so large----just as Greece and Spain---that the recession will be deep and the debt too large, forcing the privatization of all that is public. 

THIS IS A PLAN---NOT SIMPLY GREED OR BAD POLICY.  'MARYLAND HAS A 'AAA' RATING FROM MOODY'S YOU SAY'-----you mean the same Moody's that gave subprime mortgage loans the same AAA? 

Maryland's economy is one great big shell game.  This is not a Democrat vs Republican issue because Republicans are doing the same in their states.  It is a complete breakdown of Rule of Law and a rush to take what you can.  The article below is long but please glance through to see how Goldman Sachs worked to implode Greece's economy and think about what is happening in Maryland!
Another long article but please glance through.

EU Ignores Falsification of Greek Public Finance Data
Posted on 18 December 2011 by admin by Guest Author ECB Watch

This is a companion to another article to be published Draghi Nomination Based on Deception.  Here, we address the broader issue of the falsification of Greece’s public finance data.   We will look into Eurostat audits (Walter Radermacher), the ECB’s willful hindrance against the release of records (Jean Claude Trichet), Goldman Sachs’ communication (Gerald Corrigan), and the actions of the European parliament (Sharon Bowles), the Commission (Olli Rehn) and the European Securities and Markets Authority (Verena Ross). Click on cartoon for larger image.

Summary

Eurostat ran a series of audits of Greece’s public finances from 2009 to 2010, including for the swap transactions contracted with Goldman Sachs in 2001. These were used to misrepresent, by a few % relative to GDP, the extent of debt and deficits. Eurostat says it only became aware of it in early 2010: this calls for an explanation because news of the contentious transactions broke in 2003. According to the final audit, in 2010, the window dressing scheme initiated in 2001 was significantly restructured in August 2005. Soon after, Goldman Sachs sold its position for cash to the National Bank of Greece. This 2005 modification of the 2001 contract resulted in a 81% increase in the amount of concealed debt, in the accounts of 2006, relative to the initial amount. According to the same audit, Greece willfully misled Eurostat in 2008, when the contracts were still in effect (in fact, they will be until 2037). The national accounts of Greece were regularized by Eurostat in November 2010.

Spokesman for the bank Gerald Corrigan testified before the British parliament in February 2010. He personally vouched that the letter of the law was obeyed in the 2001 deal, suggesting that it was EU’s fault for allowing a loophole in its regulations. To minimize the perception of wrongdoing he reminded the audience that similar practices were age-old and common in the industry. Yet he stonewalled the questions of whether specific countries, Portugal and the UK, respectively, were clients that fell under this category. His leaving out the 2005 restructuring in his testimonial is an odd oversight.

He [Gerald Corrigan] personally vouched that the letter of the law was obeyed in the 2001 deal, suggesting that it was EU’s fault for allowing a loophole in its regulations. In April 2010, former prime minister of Belgium Guy Verhofstadt spearheaded a hearing, Greece : the moment of truth. It was held by the Economic and Monetary Affairs Committee of the EU Parliament under Sharon Bowles’ chairmanship. There appears to be a disconnect between the objective and what Sharon Bowles delivered, as we argue further down in relation to ESMA, but another indication of it is that the deposition of the spokesman for Goldman Sachs, Gerald Corrigan, bears no relation to the stated topic (the word Greece is not to be found).  This is perhaps an indication of a disconnect between the objective and what Sharon Bowles delivered. We will argue it further below in relation to ESMA. In November 2010, Jean Claude Trichet obstructed the release, requested by Bloomberg, of ECB documents detailing the swap transactions. In May 2011, he went as far as vetoing a legal claim, made by Bloomberg, to reopen these archives. Was his justification, preventing acute market risks, satisfactory?

In August 2011, the Commissioner for Economic and Monetary Affairs, Olli Rehn, to appease the concern of an MEP about the possible connection of Mario Draghi to the falsification of Greek public finance data, misrepresented the evidence contained in a November 2010 Eurostat audit report as to this connection. Recall that Mario Draghi’s hearing in June, just before a vote by the European parliament on his nomination, was, and remains to this day, controversial due to discrepancies between his defense on this issue and verified facts.

The legislative branch, in the U.S., has gone to great length to learn from the mistakes of the financial crisis.  In addition it came with evidence based recommendations to pursue criminal investigations that were or have been carried out by federal agencies and the department of justice.  In fairness, this process has been stymied by powerful interest groups.  Even so, Europe’s response, in comparison, for the case studied here, which is a significant chapter of the Greek debt crisis, looks unfavorable. The hearing Greece : the hour of truth may well have been a pretense, as hinted at. We now argue it further. The Commission and the European parliament would have had the authority to commission ESMA to investigate the matter.  Neither Olli Rehn nor Sharon Bowles, it seems, has taken this step.  Had it been the case, ESMA would have had the authority, if the conclusion of the investigation called for it, to bring a legal case against any alleged perpetrator of fraud, or delegate that task to national authorities.  Instead, ESMA’s stated priorities, under the leadership of its new Executive Director, Verena Ross, are the single rule book, production and analysis of data, and supervising credit rating agencies…

Note : we now use the EU institutions’ convention that ECON stands for Economic and Monetary Affairs.

Eurostat audits

Eurostat is the statistical office the EU Commission, whose current Director General is Walter Radermacher. In Eurostat parlance, a methodological visit is an audit that is undertaken in cases where the Eurostat identifies substantial risks or potential problems with the quality of the data.   There were a series of methodological visits to Greece. They began in 2009 and continued through 2010. Three major reports were produced, one on 29 October 2009, the second on 8 January 2010 and the third in November 2010.  According to the last one, a series of failings in the institutional arrangements and practical compilation of Greek public finance data. We skimmed through the January report and read the November 2010 report.  Only the latter addresses the contentious Greek swaps transaction.  It concluded as follows: Taking into account the work carried out [i.e. corrections to misreported data], as described in this report, the latest debt and deficit data for Greece now gives, in Eurostat’s view, an essentially reliable picture, [including for] fiscal data for the years 2006-2009. It is, therefore, an important report as it represents Eurostat’s final opinion on the issue of the Greek swaps contracted with Goldman Sachs.

Greece patently misled it in 2008, claiming that it neither engaged in FOREX swaps, nor in off market swaps. Eurostat’s summary of its dealings with Greece as pertaining to these swaps would be hard to reconcile, prima facie, with the blithely reported claim that the transactions were legal.  First, Eurostat says that At the beginning of the year 2010, it became known that Greece had entered in 2001 into currency off-market swap agreements with Goldman Sachs, using an exchange rate different from the spot prevailing one. This is strange, however, because the scheme was reported in 2003 by Risk.net.  Perhaps not coincidentally, notes the article, Greece’s credit rating by one of the three major credit rating agencies was raised, that year, from A to A+.  Second, Eurostat says that Greece patently misled it in 2008, claiming that it neither engaged in FOREX swaps, nor in off market swaps. These are exactly the type of transactions agreed between Greece and Goldman Sachs in 2001 and, as we see next, were actively managed thereafter. Eurostat’s audit says that in August 2005 a significant restructuring of the swap contract took place. The maturity of the swap was extended from 2019 to 2037.   This, together with other modifications, resulted in an increase in the amount of undisclosed Greek debt data, for the portion that is imputable to the deal, from 2.830 bn euros in 2001 [1] to 5.125 bn euros in 2006. It’s a 81% increase. Eurostat adds that [a]lmost at the same time, GS sold its rights and obligations to the National Bank of Greece (NBG, a bank completely privatised in November 2004). As a side note, Mario Draghi was appointed head of Bank Italy in 2006, ending his employment at Goldman Sachs. The latter had begun in 2002, when Goldman Sachs was reportedly the lead manager of Greece’s debt underwriting. His denial of any connection to the deal in a hearing before the ECON Committee in June 2001 remains controversial to this day.

There is no question that the 81% increase in the debt hiding scheme, in 2006, is imputable to the August 2005 modification: the restructuring operations implemented in 2005 and 2008 were in fact the explicit recognition of an increase of the liability (principal amount of the loan) to be recorded as debt of Greece. To complete our coverage of the swap transactions, let us quote Eurostat: [t]he swap was marginally restructured again in late 2008 [and was] securitised in February 2009 via a Special Purpose Vehicle (Titlos) that paid EUR 5.5 billion to the NBG. There is no question that the 81% increase in the debt hiding scheme, in 2006, is imputable to the August 2005 modification : the restructuring operations implemented in 2005 and 2008 were in fact the explicit recognition of an increase of the liability (principal amount of the loan) to be recorded as debt of Greece. The corresponding amount, 5.125 bn euros, persisted until 2007. The 2008 modification pushed it to 5.4 bn euros, and 2009 saw a decrease to 5.281 bn euros. We think the decrease is the result of an amortization scheme kicking in after a grace period of two years mentioned in the report. In 2010, Eurostat assigned these amounts as additions to government debt for the years 2006—2009. Goldman Sachs’ communication

Goldman Sachs Managing Director Gerald Corrigan testified before the House of Commons on February 22, 2010. This came to our attention in an article by Finfacts Ireland, and the transcript is contained in the document Too important too fail, too important to ignore (March 2010).  In question 295, for short Q295, he is asked [H]ave banks like Goldman’s not accentuated sovereign risk in countries like Greece by arranging loans for securitisation against future revenue streams that do not appear on the books or currency swaps that have not been calculated at normal exchange rates? To which, Corrigan personally vouches that the transactions were legal : [It] is very clear to me, based on the investigation that I have done over the past few days, that those transactions were very much consistent and comparable with the standards of behaviour and measurement used by the European Community.  There was nothing inappropriate. They were in conformity with existing rules and procedures when they were entered into. To back it up, he cites a consultation with Eurostat: When those transactions were entered into personnel from Goldman Sachs consulted with the appropriate authorities at Eurostat, as did, as I understand it, the Government of Greece and, again, there was no indication whatsoever that those transactions were not in line with existing practices, policies and guidelines.

Goldman Sachs identified a flaw in EU rules, in 2001, and exploited it—opportunity.  He [Corrigan] has not explicitly answered the question i.e. whether it increased sovereign risk —harm— but, absent his denial, it was implicitly conceded. Finally, he shifts blame on the EU not having stringent enough rules:  I should also say that those guidelines and standards were modified in 2007 which suggests that perhaps they were more liberal than they should have been back in 2001. In other words, Goldman Sachs identified a flaw in EU rules, in 2001, and exploited it—opportunity.  He has not explicitly answered the question i.e. whether it increased sovereign risk —harm— but, absent his denial, it was implicitly conceded.  The rest of his answer is laced with the mitigating factors that these practices have been around for decades, if not centuries and not limited to Goldman Sachs and Greece—rationalization.   However, when asked to confirm whether a similar deal was contracted with Portugal (Q296) and Great Britain (Q297), he dodged and could not confirm, respectively, reiterating the above rationalization in each case. The white elephant in the room, in this hearing, is the August 2005 significant restructuring of the swap contract.”  That’s keeping in mind that Greece is alleged by Eurostat to have misled it in 2008 about the existence of such transactions.  Although Goldman Sachs was no longer the counter party in 2008, it suggests that this modification has gone under the radar from August 2005 until Eurostat looked into the matter in 2010.

Let’s review some traits in Corrigan’s answers. He hinted at what we labeled an opportunity and had recourse to the same rationalization multiple times. These are two of the three factors that fall under the definition of the Fraud Triangle.   This is merely superficial but, unfortunately, there is a significant legal precedent attesting of unethical business practices at this company:   Goldman Sachs paid half a billion dollars to settle SEC charges that it misled investors in a subprime mortgage product (ABACUS) just as the U.S. housing market was starting to collapse.  The third factor is a motive.  The transaction generated hundreds of millions of dollars for the firm according to a press release by Bloomberg, EU seeks Greek swaps disclosure after ministry probe.  The ratio of the upper estimate of the fees (200 millions euros) to the amount of Greek debt masked under the 2001 deal (2.830 bn euros) is 7.1%. The key deal maker, Antigone Loudiadis, made a substantial fortune from the deal in just one year, reported the Wall Street Journal in 2010, and enjoyed a career boost thereafter.  Incidentally, she made controversial headlines again, reported Bloomberg in May 2011, as CEO of Rothesay Life, as regards to death derivatives.

He [Corrigan] hinted at what we labeled an opportunity and had recourse to the same rationalization multiple times.  These are two of the three factors that fall under the definition of the Fraud Triangle. Zero Hedge reported that, on the same day as Corrigan’s testimonial, the bank issued a communique. It essentially summarizes his arguments, with a few more figures but, again, makes no mention of the 2005 restructuring. Finally, Gerald Corrigan’s written statement does not address any of the above. Obstruction by Jean Claude Trichet

First, Bloomberg filed a request with the ECB in November 2010 to have access to ECB internal documents detailing the contentious transactions.  It was denied.   Second, Bloomberg contested the decision at the EU’s General Court in Luxembourg in December 2010.   Third, the ECB asked the General Court to dismiss the lawsuit, in May 2011, just one month before Mario Draghi’s nomination, apparently using a veto prerogative.  That’s one month before the nomination of the next ECB President whose possible role in the falsification of Greek debt as Goldman Sachs VP from 2002 to 2005 was raised by Simon Johnson as early as February 2010. Fourth, Bloomberg reacted in June 2011 with these words : The European Central Bank allowed itself to be deceived by a default in the making and now refuses to share with the taxpaying citizens it represents the details of the deception.  Secret and opaque financing got Europe into a mess that can only be resolved by the transparency of full disclosure.


The European parliament

As a member of the UK’s Liberal Democratic Party, Sharon Bowles is also affiliated with the Alliance of Liberals and Democrats of Europe, in short ALDE.   In March 2010, the former prime minister of Belgium and group leader of ALDE, Guy Verhofstadt, made a proposal to to promptly convene a public hearing of all those implicated in the falsification of Greek public accounts. He followed up with a declaration on 14 April 2010, reported in a press release known as Greece: the moment of truth, for Sharon Bowles to ask Director General of Eurostat to explain how accounts could have been legally modified and what measures were taken in the aftermath to prevent such actions. This was supposed to be discussed in a hearing, the same day, titled The fiscal crisis in the European Union – lessons from Greece.  According to the ECON Committee’s final draft programme, its participants were Sharon Bowles (moderator), Olli Rehn, Walter Radermacher, Gerald Corrigan, and a representative from a financial derivatives organization (ISDA), Richard Metcalfe.  We did not find the transcript of the hearing at EU Parliament’s portal, which is unfortunate, but we did find the deposition of Gerald Corrigan.  It contains insights on two subjects and nothing more.  The first is perspective on government debt management, such as the benefits of issuing debt through primary dealers.  The second is facilitating derivatives market surveillance, which recounts the initiatives of the financial industry policy group chaired by Corrigan, the Counterparty Risk Managment Policy Group (CRMPG).  This hardly addresses Guy Verhofstadt’s injunction, quoted in the press release Greece: the moment of truth : The chairman of Goldman Sachs in the US in particular should justify his bank’s speculation against Greek sovereign debt and the motivation of the investment bank which did not seem to be entirely based on economic considerations.

“widespread misreporting of deficit and debt data by the Greek authorities during in November 2004, [...] and on five occasions between 2005 and 2009.“  Eurostat audit January 2010 The topic reemerged in a parliamentary debate about Quality of statistical data in the Union and enhanced auditing powers by the Commission, on 15 June 2010. To frame it, we suppose, Sharon Bowles posted on 4 June 2010 the question of “whether any [Member States] have submitted falsifications or false data or statistics either intentionally or by neglect?”  The January 2010 audit had already answered that question for Greece: widespread misreporting of deficit and debt data by the Greek authorities during in November 2004, [...] and on five occasions between 2005 and 2009.” “In short, there is circumstantial evidence that the chair of the ECON Committee, Sharon Bowles, around 2010, was lagging behind Eurostat’s methodological visits to Greece. To conclude this section, former PM of Belgium Guy Verhofstadt’s high hopes, Greece : the moment of truth, in April 2010, may have fallen flat; that is, the EU parliament failed to deliver an account of who did what?


The Commission

In ECON Commissioner Olli Rehn‘s words spoken during the aforementioned 15 June 2010 debate, the closest match to Sharon Bowles’ question was As is well known, the Commission has undertaken in-depth work on Greek statistics over several years. The amended regulation should, in future, better mitigate the risk of fraud or manipulation of statistics, or of any other kind of irregularity.  Yesterday, there was a new development concerning Greece.  You will know that Moody’s decided to downgrade Greek bonds yesterday. On 21 July 2011, a parliamentary question was addressed to him, on the subject of Appointment of Mario Draghi as President of the European Central Bank.  This question was : Does the Commission have information on Mario Draghi’s involvement, whilst he was Goldman Sachs’ European vice-chair, in the dealings between the bank and the Greek Government over the concealment of accountancy fiddles? Olli Rehn’s answer, on 22 August 2011, was that transactions in derivatives between the Greek debt agency and Goldman Sachs dated back to 2001, implying that the President of the ECB had no connection to them. This is one of the two arguments presented by Mario Draghi before the ECON Committee in June, just before the vote on his nomination, that were found to be unsatisfactory.  Olli Rehn backs up his claim by citing the November 2010 Eurostat audit.  This is perplexing because the audit reveals that the terms of the contract between Goldman Sachs and the Greek Ministry of Finance were modified in August 2005.   This modification resulted in an 81% increase in the amount of debt concealed through this type of scheme.  Presumably, Mario Draghi still worked at Goldman Sachs at the time, since his term of office at the Central Bank of Italy started in January 2006.

In short, in August 2011, the Commissioner for ECON either misled the MEP (Willy Meyer) having some concern about Mario Draghi’s past at Goldman Sachs, or had superficial knowledge of the Eurostat audit he cited as evidence in defense of Mario Draghi’s reputation.

Has justice run its normal course?

Let’s try to understand by looking at a comparable case, the United States, where the financial lobby is nonetheless powerful. The above mentioned settlement with the SEC in July 2011 marked the end of a civil lawsuit that had begun in April 2010.  On 30 April 2011, Reuters reported that federal prosecutors in New York had begun a criminal investigation into other transactions, upon referral by the SEC.  In parallel, the Senate Permanent Subcommittee on Investigations, for short PSI, was investigating the financial crisis. It’s outcome, a bipartisan report, known as the Levin-Coburn report, was released in April 2011.  According to the Wall Street Journal, it asked for bank regulators to examine mortgage-related securities to identify any possible legal violations and use Goldman Sachs as a case study in implementing conflict prohibitions. October 2011, the aforementioned federal investigation, in New York, reportedly materialized with $1bn lawsuit against the bank, using evidence of investment bank abuses from the Levin-Coburn Report: Timberwolf was cited in a scathing U.S. Senate panel report in April that faulted Goldman, Deutsche Bank AG and others for hawking debt they expected to perform poorly..

Is the system of government fundamentally different in Europe, in this respect?  Of course not.  The equivalent of the SEC, in the EU, is the European Securities Markets Authority, for short ESMA, formerly the CESR.   It has only recently been granted enforcement authority known as level 4 of its governing procedure. Yet, it can issue a recommendation to a national authority[to carry out legal action].  To do so, ESMA must first carry out an investigation.  According to the same provision (level 4), the European parliament (Sharon Bowles), or the Commission (Olli Rehn) can request ESMA to get it under way.

The falsification of Greek debt, based on what was said thus far, and the fact that Goldman Sachs did not disclose it (See February 2010 Bloomberg article),  presumably constitutes a fairly obvious breach of their fiduciary duty as a primary dealer—a privileged position in the market.  Is anyone aware of Sharon Bowles or Olli Rehn launching an investigation into this scheme?  Let’s try to find out.

But in view of what precedes, there is reason to suspect that authorities have turned a blind eye to the problem. [referring to the falsification of Greek debt] In October 2011, a new Executive Director of ESMA, Verena Ross, was nominated, with the ECON Committee’s approval.  She gave a keynote speech to that effect in October 2011, in which she laid out her vision of the future focus of the work [of ESMA]. A lot has to do with harmonizing rules and processes across member states [2].  None of it addresses the glaring priority of bringing to justice the suspected perpetrators of financial crime.  If Verena Ross’ speech is to be taken at its word, the future focus of ESMA has a negative connotation:  turn the page and pretend that financial crime never happened.  In fairness, there were reports of a possible probe into this bank’s activities by the UK’s FSA and Bafin in Germany in the first half of 2010, but nothing specific about the falsification of Greek debt that we are aware of.  There was, however, a specific reference to that effect, in the US, by Fed Chairman Bernanke in the same period.   We can’t be certain that these investigations have stalled, or were put to rest.  But in view of what precedes, there is reason to suspect that authorities have turned a blind eye to the problem. Some financial experts allege a broader cynical scheme undertaken by the bank, that is reminiscent of its practices in the subprime crisis.  Essentially, these are hedging and speculative bets using insider knowledge of Greek public finances.   Let’s briefly review the literature.  In February 2010, two authors, Marshal Auerback and L. Randall Wray alleged that From 2001 through November 2009 [...] not only did Goldman and other financial firms help and encourage Greece to take on more debt, they also brokered credit default swaps on Greece’s debt—making income on bets that Greece would default.  No doubt they also took positions as the financial conditions deteriorated—betting on default and driving up CDS spreads. Corroborating evidence and analysis can be found in the following articles, listed in in chronological order : What about Greece and Goldman Sachs (Diplomatic World, Spring 2010), Clearing the air: Goldman Sachs and Greece (Hellenesonline, January 2011) and Goldman bet against entire European nations —who were clients— the same way it bet against its subprime mortgage clients (Washington’s blog, July 2011).



Notes

[1] The masking scheme is the combination of two sets of swaps. In the first set, a currency swap neutralizes Greece’s currency risk resulting from preexisting foreign denominated debt:  In 2001 a series of off-market cross-currency swaps were effectively linked to underlying debt instruments issued on foreign markets. This would have been standard practice, except for this clause:  the contracts were not based on the prevailing spot market rates of exchange [such that] the Greek government debt was de facto [immediately] reduced by EUR 2.4 billion by the conversion process. The second contains off-market interest swaps that are equivalent to a promise by Greece to make a stream of payments to Goldman Sachs.  This second set was designed to offset the gain for Greece resulting from the first set, such that its impact on debt and deficit, we must assume, would be gradual and slow.

I like to refresh people's memory every now and then as to what I mean when I repeat -------recover corporate fraud of tens of trillions of dollars from last decade.  Many people do not know the US Treasury was literally fleeced by US corporations and especially the banks in massive fraud and this is what caused the economic collapse of 2008 and the national debt of $17 trillion now. 

SIMPLY REINSTATING RULE OF LAW AND RECOVERING THIS FRAUD WOULD PAY OFF THE NATIONAL DEBT AND MAKE GOVERNMENT COFFERS AT ALL LEVELS FLUSH WITH MONEY.

The citizens of America and our government are not impoverished----we've been looted and we have politicians in office protecting that stolen money.  That is what neo-liberals and neo-cons do----they work for corporate profit and wealth at the expense of labor and justice.  Do you hear your incumbent or candidate shouting---RECOVER TENS OF TRILLIONS OF DOLLARS IN CORPORATE FRAUD?  NOT A PEEP IN MARYLAND.

ALL CANDIDATES FOR GOVERNOR OF MARYLAND ARE NEO-LIBERALS AND NEO-CONS EXCEPT CINDY WALSH FOR GOVERNOR.

I am not even touching the surface with these posts as fraud hits every industry in the US.  My mention of the subprime loan fraud and the banking industry does not even mention the tens of trillions of dollars in all kinds of other financial frauds this past decade-----THE NUMBERS ARE HUGE.

Remember, all your pols know these frauds happened.....they know recovery is not that hard......and they know the people charged with justice----the Maryland Attorney General Gansler and Governor O'Malley for just two-----are aiding and abetting these crimes.  YET THEY GET THE STAGE AT ELECTION FORUMS AND DEMOCRATIC EVENTS!

OH, THAT'S WHY CINDY WALSH FOR GOVERNOR OF MARYLAND IS NOT ALLOWED IN ANY OF THE REINDEER GAMES!

HEALTH INDUSTRY FRAUDS IN THE TRILLIONS OF DOLLARS LAST DECADE

Let's take a look at what both government watchdogs and public policy organizations calculate to be a conservative look at how much money was stolen and from which agencies.  Since I just spoke of health care and corporate universities, below you see the health care fraud for the health industry at $200-400 billion each year.....that is billions of dollars stolen from Medicare and Medicaid in Maryland each year.  Which hospitals handled most of these patients?  Johns Hopkins and UMMS in Baltimore.  It does not take a rocket scientist to know the institutions handling most of the poor and seniors is where these frauds occur.  Padding fee for service is rampant and happening all over Maryland but it is not fee for service that is the problem as much as the fact that there is absolutely no oversight and accountability in these Federal programs.  They are being allowed to be gutted with fraud.

So, as your neo-liberal in Congress, the Maryland Assembly, or Baltimore City Hall pretend they have to gut social services, public services, public employees and their pensions and wages.......WE ALL KNOW IT IS THE FRAUD AND CORRUPTION.  THIS IS WHY CINDY WALSH FOR GOVERNOR OF MARYLAND IS NOT MENTIONED AT ALL IN THIS PRIMARY!  All the other candidates are involved in this system and will keep the status quo and that is why they have the place in the media.


Below you see a well-researched paper on health fraud.  Notice that the amount of fraud back in 1998 was $250 billion a year.....THAT WAS BEFORE CORPORATE FRAUD WENT ON STEROIDS IN THE 2000s


'It is clear to see why Americans consider this the biggest cause, when health care fraud was estimated to cost approximately $100 billion to $250 billion per year in 1998, or 10 percent to 25 percent of total health care spending'

An Undergraduate Honors Thesis by
Emily Fisher

April 2008

ABSTRACT
Health care fraud is an important and visible factor associated with increasing health care costs in the United States. Medicare and Medicaid contribute to a vast majority of those cost sand therefore must be heavily scrutinized. This thesis will investigate the types of fraud, who commits them, and why the health care system is more susceptible to fraud. More specifically, the problems and complications of current fraud investigation for Medicare and Medicaid are examined. This thesis will then evaluate how successful these initiatives were in reducing health care fraud and explore new suggestions for preventing health care fraud in the future.

________________________________________________
The amount of fraud in the subprime mortgage fraud was in the trillions and we have received a few hundreds of billions in settlement----I should say the US Justice Department settled for that much and much of the money was sent right back to those committing these frauds and not those defrauded.  The point was at the time of this first settlement that $25 billion was a postage stamp of a settlement meant only to try to keep the public from continuing legal recourse for the rest of the fraud.  Maryland was ground zero for this fraud as we are still seeing the repercussions across Maryland and the major tool for the fraud, MERS operated right here in the Washington suburbs of Maryland and Virginia.  It was a Maryland court that ruled MERS did not break law when EVERYONE KNOWS MERS BROKE LAW.  This ruling simply needs to be appealed to ever higher courts to negate that corrupt ruling.

The thing to remember is those developing this massive scheme targeted low-income specifically for the availability of taxpayer-backed FHA loans that had taxpayers paying all kinds of attorney fees, title fees, down payments----the whole nine yards on loans everyone knew would fail.  At each stage fraud and corruption was involved no matter how much they tell you it cannot be proven or an individual cannot be found----THE EVIDENCE IS ALREADY COLLECTED AND INDIVIDUALS HAVE BEEN FOUND.  THE POLS ARE LYING TO YOU AND ME.

Maryland is a mess because this fraud was allowed to go wild even as 50 states attorney general shouting this mortgage system was full of fraud back in 2005.  All that had to be done is for government officials to educate and warn people to stay away----instead the marketing increased.  This was O'Malley working for Baltimore Development and Johns Hopkins in Baltimore as these frauds had a second goal----clearing out the urban center of working and middle-class homeowners so big developers could own all real estate----which is what is happening now. 

TRILLIONS OF DOLLARS IN SUBPRIME MORTGAGE FRAUD HAS YET TO BE RECOVERED AND THAT IS BILLIONS OF DOLLARS FOR MARYLAND ALONE.

New Fraud Evidence Shows Trillions Of Dollars In Mortgages Have No Owner

By Alan Pyke on August 13, 2013 at 2:57 pm

902Share This 343Tweet This "New Fraud Evidence Shows Trillions Of Dollars In Mortgages Have No Owner"

Share:

Share on email Thanks to forged documents, banks can’t prove that they own trillions of dollars in mortgages, according to recently unsealed court documents relating to a lawsuit the government decided to settle out of court for $95 million in 2012. The evidence gathered by Lynn Szymoniak, a Florida resident who fought off a wrongful foreclosure after three years of legal wrangling, could invalidate ownership claims to the homes in question. Yet foreclosures based on these documents continue to be approved.

The unsealed documents indicate Szymoniak, whose career as an insurance fraud investigator may have helped her piece together the complex web of documentary evidence, found invalid documentation underlying at least $1.4 trillion in mortgage-backed securities. The “robosigning” form of mortgage fraud – where banks forged documents that are legally required to transfer the ownership of a given mortgage – was ostensibly settled in the 2012 National Mortgage Settlement. Szymoniak received $18 million for her role as an expert whistleblower who helped build the pool of evidence used to achieve settlements over robosigning and retained the ability to press ahead to a trial with the banks that weren’t party to the government’s settlement, which she plans to do.

Other evidence of widespread mortgage fraud has recently surfaced. Researchers looked at just one mortgage lender that was a major player in the subprime bubble. They found fraudulent misrepresentations of 9 percent of all loans sold off to financial firms seeking to package up loans into mortgage-backed securities, and in 93 percent of those misrepresentations, the lender knew it was lying about the nature of mortgages it was passing along. The researchers stress that the actual fraud rate is likely higher, as they only searched for two specific forms of misrepresentation.

Despite the growing mountain of evidence of fraud in both mortgage securitization and foreclosures, the federal government’s response has been feeble. The 2012 settlement has failed to stop bank abuses. A much-touted program to provide relief to homeowners failed to serve nearly as many as intended, and half of the mortgages modified under it are back in default. And over the weekend, the Justice Department admitted it had dramatically inflated its successes in a yearlong task force targeting mortgage abuses.

______________________________________________

The entire online college business is one big fiasco meant to undermine the US higher education system that is ranked #1 in the world but is failing because of defunding and privatization schemes like this one.  Maryland is ground zero for these online colleges that simply have as a goal of forcing 80% of Americans into a substandard system of higher education that is cheap and poor quality.......which is why most students drop out!

If you listen to Maryland's data it will no doubt say these online courses are thriving because-----all data in Maryland is skewed.


Harvard, MIT Online Courses Dropped by 95% of Registrants

www.bloomberg.com

About 95 percent of students enrolled in free, online courses from Harvard University and the Massachusetts Institute of Technology dropped them before getting a completion...

The amount of for-profit education fraud is also in the trillions and it is infused with millions of student loans that are now subjecting these students to predatory education loan collection.  These students were lured to these programs and government officials knew they were bogus and allowed trillions of education dollars be funneled into these fraudulent programs and now they say-----there's no money for higher education funding for financial aid and grants for the working and middle-class students.....BECAUSE TRILLIONS OF DOLLARS IN FOR-PROFIT EDUCATION FRAUD HAS NOT BEEN RECOVERED!  Our students are being held captive to fraudulent loans and Obama has the US Department of Education run by Wall Street collection contractors.

I want to emphasize that none of what Obama and neo-liberals in Congress said would happen in accountability happened.  In Maryland all of these for-profits listed in this article are still filling the Maryland airwaves with advertisements and have facilities operating and no accountability has happened.  Instead, Maryland citizens are straddled with this fraudulent student debt and our government revenue stolen in the trillions of dollars!

The article below is long but please glance through!


'The for-profit predatory colleges, in their mad dash to suck up as much as they can in Title IV funds, Pell grants, and other government subsidies, thus enriching their investors at the expense of students, prey on and then wolf down the most disadvantaged students they can find'.

Neoliberalism and the For-Profit, Predatory Educational Industry: You Can't Regulate a Criminal Enterprise

Thursday, 23 September 2010 11:55 By Danny Weil,

t r u t h o u t | Report | name.


You might have been following Secretary of Education Arne Duncan and his department's attempts to reign in the for-profit universities and colleges for their criminal activities. Perhaps you recognize some of these for-profit universities and colleges, for they are well known due to their marketing and are heavily traded on the stock market - DeVry (ticker: DV), Grand Canyon Education (LOPE), as Apollo Group (APOL), ITT Educational Services (ESI), Kaplan (WOP) and Strayer Education (STRA). There are literally thousands of these schools in existence and most are online schools with office fronts that act as administration centers for the whole for-profit syndicate.

The Department of Education (DOE), after a 2010 Government Accounting Office (GAO) sting operation that unveiled the vile tactics of 15 of these predatory institutions, says it wants to adopt new regulations that would rein in the for-profit educational industry. Yet, this is not the first time the "industry" has been caught with its pants down and its fists full of dirty money. Earlier, in 2009, another GAO investigation was launched and similar acts of criminality were found (United States Government Accountability Office, Proprietary Schools: Stronger Department of Education Oversight needed to help ensure only eligible students receive financial aid, August 2009,).

Under Title IV of the Higher Education Act, any school can receive federal taxpayer funds in the form of student aid if it offers courses of study such as certificates, associate degrees, bachelor degrees, graduate degrees or professional degree programs. Proprietary schools offer a small percentage of bachelor degrees, but a substantial percentage of certificate degrees. Overall, the proprietary sector receives the smallest percentage of Title IV funds, 19 percent, as compared with the public and nonprofit, which is 48 percent and 33 percent, respectively. Although the majority of enrollees in these colleges are in four-year programs, the two-year proprietary schools account for a significant percentage of the proprietary customer base.



The Crime Scene

Before we discuss the proposed new regulations due to take effect on November 1, 2010, it is important to understand the for-profit college and university venture industry as a virtual crime scene. For that is what it is. When one begins to think about the for-profit educational industry as a larcenous crime scene then it becomes ludicrous to even consider regulations of what are criminal acts; at the same time, it also becomes apparent how the for-profits work, and the human lives they decimate and destroy in the name of education when their sole motive is profit.

Any "cop on the beat" knows that when a crime scene is found, the first thing that is necessary is to put yellow tape around the area so that no evidence is tampered with and the crime scene can remain "clean and intact" for purposes of critical investigative scrutiny. Imagine yourself a detective arriving on the for-profit crime scene. The yellow tape is all around the "industry" carnage and now you must bend down and get yourself under the yellow tape and enter into the crime zone in an attempt to gather and bag evidence, obtain information and collect any clues as to how the perpetrators operate and who they might be. Looking around inside the circumference of yellow tape, one sees the following evidence of larceny, fraud, misrepresentation and theft:

• Federal aid to students at for-profit colleges jumped from $4.6 billion in 2000 to $26.5 billion in 2009. Publicly traded, higher education companies derive three-fourths of their revenue from federal funds, with Phoenix University at 86 percent, up from just 48 percent in 2001 and approaching the 90 percent limit set by federal law. And the fact of the matter is that, although the default rate is climbing through the roof (see: "Predatory for-profit colleges and universities: the escalating default rate for student loans," July 13, 2010), the predator colleges continue to enroll more and more students knowing they cannot and will never be able to pay their loans.

• What is being sold as education for "debt" are such phony degrees as Homeland Security degrees - cost $80,000 a year for a bachelors degree; or try $30,000 to get a "Surgical Technical" degree at Kaplan University that is itself fraudulent. Culinary and arts "education" is being peddled for more than $50,000! A whole swath of surveillance and criminal justice "degrees" are being auctioned off for as much, if not more ("Drive-by predatory colleges put students into debt purgatory and deficits into the stratosphere," April 11, 2010, Weil, Danny).
• Kaplan, the for-profit predatory college whose name keeps popping up when one looks at fraud, misrepresentation, larceny of Title IV funds, theft of student funds, recruitment practices that parallel the military and many other issues such as poor professors, pre-packaged curriculum and failing colleges, has tried to privatize part of the Community College System in California.
• Kaplan College in Pembroke Pines suspended enrollment following the federal investigation covered in the 2010 GAO report referenced above. They stopped enrolling new students after federal investigators uncovered incidents of high pressure and potentially fraudulent and misleading sales tactics.
• A second Kaplan campus in Riverside, California, did the same thing. They also put new admissions on hold pending the results of an internal investigation ("Kaplan College suspends admissions at Pembroke Pines campus following federal investigation, Scott Travis," Sun Sentinel, August 5, 2010).
• Students were enrolled in the CHI/Kaplan Surgical Technology Program year after year, but they were purposefully not being told by Kaplan and their personnel that, in all likelihood, externship sites, required for the SurgTech program would not be available. If verified from further investigations, the practices amount to concealment fraud, overt misrepresentation and possible theft of Title IV funds. CHI/Kaplan upper management, well aware of the lack of externship sites needed to permit students to complete their program, continued for years to recruit and enroll students in a program whose tuition costs approached nearly $24,000 a year. When the fraud was detected, the college then engaged in illegal practices designed to reduce the number of enrollees by forcing students out on technicalities. Hundreds of students were unable to finish their programs and had their personal lives and credit history ruined ("Whistleblower Exposes How Kaplan University Cheats Low-income Minority students and The Washington Post Benefits," April 18, 2010).
• Kaplan is hardly alone in its hyperbolic predation. Corinthian College and the notorious Phoenix University have paid millions in whistle blower fines under Qui tam suits brought against the colleges.
• The Apollo Group Inc., the company that owns the University of Phoenix, fraudulently misled investors in 2004 about student recruitment policies. The panel ordered the company to pay shareholders about $280 million (January 17, 2008, The New York Times, "Fraud by University Owner Is Found").
• Jurors said Apollo officials "knowingly and recklessly" made false statements in a news release, a filing with the Securities and Exchange Commission and four conference calls with market analysts. By doing so, jurors said, Apollo violated federal securities laws (ibid).

The Washington Monthly found that in late 2009:

"The students who are flocking to these schools are mostly poor and working class and they rely heavily on student loans to cover tuition. According to a College Board analysis of Department of Education data, 60 percent of bachelor's degree recipients at for-profit colleges graduate with $30,000 or more in student loans - one and a half times the percentage of those at traditional private colleges and three times more than those at four-year public colleges and universities. Similarly, those who earn two-year degrees from proprietary schools rack up nearly three times as much debt as those at community colleges, which serve a similar student population. Proprietary school students are also much more likely to take on private student loans, which, unlike their federal counterparts, are not guaranteed by the federal government, offer scant consumer protections, and tend to charge astronomical interest - in some cases as high as 20 percent" ["The subprime student loan racket," Washington Monthly, Stephen Burd].

The criminal activity is not simply constrained to for-profit universities and colleges, as they like to refer to themselves. In December of 2009, the owners of the Business Computer Training Institute, or BCTI in Oregon, agreed to pay $3.2 million to settle six lawsuits by former students who attended its two Oregon campuses.

The lawsuits accused BCTI of fraud and unfair business practices, saying it lured students with inflated job-placement claims, but failed to provide the education it promised. The school closed in March 2005 under regulatory pressure ("Settlement with ex-students in Oregon," The Oregonian, Brent Hunsberger).

Then, there is ITT Educational Services, which reported in 2009 that new student enrollment increased 27.2 percent to 27,738 in its third quarter. With private sector lending still in decline, the for-profit educator is increasingly funding growth through an internal loan program not much different than a payday loan center. As a result, growth metrics looked impressive for ITT at the quarter that ended September 30, 2009:

• Total revenue per student increased 4.5 percent to $4,852 per student, helped by a five percent hike in tuition fees implemented in March 2009. Looking to 2010, management expects to raise tuition another 4 to 5 percent.
•  The third-quarter operating margin improved 437 basis points to 36.1 percent, or $122.7 million, helped by lower advertising rates and more effective lead conversion rates (into enrolled students). ("Lessons not learned at ITT Educational Services," November 8, 2009, David Phillips, BNET online.)

As BNET online noted back in 2009, the notion of ITT lending money to students who then pay them back the money with interest through an internal loan program is shylocking:

"With a 10 percent unemployment rate in this country, the for-profit education industry is a playground for those in need of dreams. Do not be mislead by ITT's numbers, as the trail of money starts and ends back at ITT itself. Federal loan programs are falling short, so the company is dipping into its own coffers to help students cover this widening tuition gap. Up to 65 percent of its students need private lending, and analysts estimate that $100 million to $120 million in loans and scholarship assistance will need to come from ITT's internal lending program." [ibid]

Student Victims as Prey

The for-profit predatory colleges, in their mad dash to suck up as much as they can in Title IV funds, Pell grants, and other government subsidies, thus enriching their investors at the expense of students, prey on and then wolf down the most disadvantaged students they can find.

The for-profit predatory colleges sign up as many "borrowers" as they can - even pounding on homeless shelters to recruit bodies, looking for drug addicts they can enroll from recovery programs and all of this with debilitating consequences for borrowers who miss payments and borrowers' families. They set up at welfare offices, hang out at laundromats in low-income neighborhoods, recruit at public housing units, and their "recruiters" patrol the streets of distressed neighborhoods in automobiles or on foot looking for vulnerable working class bodies they can register for government cash.

As I noted at Dailycensored.com back in July of this year:

"You see, such disadvantaged students are desirable for the for-profit colleges because they qualify for federal grants and loans, which are largely responsible for the prosperity of the predators, the more bodies the colleges can 'ranch' the more money they make. When the students default and go back to alcoholism, drugs abuse, lock-down programs, mental institutions, prisons or the streets, you the taxpayer pay the government 97 percent of the loan, for you are covering the bet the students will graduate and pay their loan obligations, a bet not even Las Vegas would touch" ("For-profit predatory colleges and universities prey on the homeless while hedge fund operators get busy shorting the sector's stock: the next big economic bubble").

Many of the student-victims see the ads these syndicates run perpetually on TV hawking the educational degrees and the consumer life they promise to deliver. They promise the student this degree or that degree will bring them out of poverty or help them gain some of the material wealth they see on TV and in ads throughout their young lives. ("Stimulus Wreckage," Matt Smith, September 30, 2009 www.sfweekly.com.) They advertise themselves as conveyor belts to successful jobs in the middle of the Second Great Depression, spending as much as 50 percent of their revenue on marketing alone.

Many of the schools exclusively prey on low-income people and many candidates find out information about proprietary schools from presentations given or brochures left at food stamp offices, welfare offices or at low income housing projects. Cars with large signs on the doors have also been known to drive through housing projects slowly, like ice cream trucks (United States Government Accountability Office, "Proprietary Schools: Stronger Department of Education Oversight needed to help ensure only eligible students receive financial aid," August 2009).

The schools employ recruiters, who also attend staged or legitimate "job fairs," in an attempt to attract the unemployed, who they can then cannibalize at the fair itself. One young woman I recently talked to at the Phoenix University told me she was recruited this way. At a job fair, she was approached by an "academic counselor," who aggressively got her to the school's "financial aid counselor" the same day. These are drive-by schools, "disaster schools" without a doubt, and their tactics are ruthless, their owners are without conscience and their profits sheets are bulging.

The Public as Victims

According to Mark Kantrowitz, publisher of FinAid.org and FastWeb.com:

"Americans owe some $826.5 billion in revolving credit, according to June 2010 figures from the Federal Reserve. (Most of revolving credit is credit-card debt.) Student loans outstanding today - both federal and private - total some $829.785 billion.

"The growth in education debt outstanding is like cooking a lobster. The increase in total student debt occurs slowly but steadily, so by the time you notice that the water is boiling, you're already cooked. (August 9, 2010, Mary Pilon, "Student-Loan Debt Surpasses Credit Cards").

By Kantrowitz's estimations there is $605.6 billion in federal student loans outstanding and $167.8 billion in private student loans outstanding. His tabulations show that $300 billion in federal student loan debts have been incurred in the last four years; this, while Americans were asleep and the corporate media purposely concealed the story (ibid). The bad news: none of the debt is dischargeable in bankruptcy and, therefore, will be paid by the general taxpayer.

According to The Chronicle of Higher Education, "one in every five government loans that entered repayment in 1995 has gone into default. The default rate is higher for loans made to students from two-year colleges, and higher still, reaching 40 percent, for those who attended for-profit institutions." ("Government vastly undercounts defaults," Field, K., July 11, 2010.)

Corinthian Colleges, another large, publicly traded player in the predatory, subprime, education market, announced in July 2010 that more than half of the loans it makes to its students will go bad. No problem, the college still makes profits for its investors and CEO's. Like most of the predatory institutions, it gets its money from government Pell grants and Title IV funds ("The Chronicle of Higher Education, Why do you think they're called for-profit," July 30, 2010).

The Phoenix University (the Apollo Group) is saddled up this year alone to receive $1 billion dollars from Pell Grants, not to mention the other $4 billion it will get from Title IV funds (ibid).

This means that government taxpayers will be on the line to cough up the money already siphoned off by the for-profit predatory schools as defaults spiral out of control and bankruptcy eludes students as an option.

The Community and State Colleges as Victims

The community colleges of the state of California, reeling from debt, entered into a memorandum of understanding this year which would have allowed students to take courses at Kaplan University, the private, online school. When the manure began to ripen, and it was discovered that the "units" would not be transferable to UC or Cal State campuses, the deal was canceled. (Larry Gordon, "Community colleges cancel deal with online Kaplan University," Los Angeles Times, August 26, 2010)

The plan, basically contracting out education for profit, was intended in part to offer students at the state's 112 community colleges a way to take courses that might have been canceled or overcrowded because of state budget cuts. But some faculty, concerned about getting entangled with a proprietary school, especially one like the notorious disaster college Kaplan, revolted. Kaplan, in its efforts to commodify education, planned to charge students a whopping $646 for a three-credit class, compared with $78 at a community college. Why? This is part of their business plan and how they take Title IV money (90 percent of their money comes from Title IV government monies).

Walmart recently announced a deal with the for-profit American Public University System (hardly public, the stock is traded daily on the New York Stock Exchange and is the brainchild of Jim Etter ("The Chronicle of Higher Education, Why do you think they're called for-profit," July 30, 2010). The "university" is better known as the American Military University, which has developed into a publicly traded, for-profit behemoth that now sucks in veterans, either those in active duty or retuning from war. The university is also the home of Larry Forness, the "professor," who lectured students on the best means of using torture, such as injecting Muslims with pig blood ("Does the American Military University (AMU) teach torture to its students or has it taught torture in the past?" WikiLeaks, March 29, 2010). Now, with the veteran market cornered, the American Public University seeks to train nine-dollar-an-hour employees for Walmart under the auspices of higher education, using government funds and especially Title IV monies.

With the current economic devastation sweeping the nation like locusts, more and more students, through visible high-level marketing, are being seduced to attend for-profit colleges. The words to the song are always the same: you need an education; we offer the best-buy in online degrees; you can do the work at your home; times are tough; to get ahead, additional and high-paying work skills are needed to thwart off individual economic collapse; and on and on. The message is very clear; there is no systemic economic problem under the current economic regime that cannot be staunched with a good, for-profit education. Insipid individualism and the commodification of education itself are now joined in a fervent embrace. All of this creates the opening for the predatory, proprietary college system, while it leaves in its wake an economic devastation for public institutions and student lives.

November 19, 2009, California Community Colleges Chancellor Jack Scott (who forged the failed deal with Kaplan) delivered the keynote speech at the opening session of the Community Colleges League of California Annual Convention and Partnership Conference in Burlingame, California.

Chancellor Scott's speech, Living in Difficult Times, addressed the issue of the growing numbers of students crowding into community colleges and how, in these lean financial times, college leaders must find creative ways to do more with less funding. Focusing on the irony of the situation, Scott noted, "At the same time our funds have been reduced, our enrollments have surged."

This fall, statewide enrollment increased at California community colleges by more than 3 percent while the funding was cut by eight percent. Colleges reported, at the time of fall registration, 95 percent of course sections were completely filled, with many students on waiting lists and some turned away with no classes available.

As Peter Phillips from Project Censored reported late last year:

"Higher education has been cut in twenty-eight states in the 2009-10 school year and further, even more drastic cuts, are likely in the years ahead. California State University (CSU) system is planning to reduce enrollments by 40,000 students in the fall of 2010. The CSU Trustees have imposed steep tuition hikes and forced faculty and staff to take non-paid furlough days equal to 10 percent of salaries. Our current budget crisis in California and the rest of the country has been artificially created by cutting taxes on the wealthiest people and corporations. The corporate elites in the US, the top 1 percent, who own close to half the wealth, are the beneficiaries of massive tax cuts over the past few decades. While at the same time working people are paying more through increased sales and use taxes and higher public college tuition." ["The Higher Education Fiscal Crisis Protects the Wealthy," November 22, 2009.]

Countless numbers of Californians are flocking to the community colleges for job-retraining after losing their jobs in the economic downturn. Community colleges are also becoming increasingly popular because the California State University and University of California campuses are full and far too expensive; more veterans are utilizing the GI Bill benefits, and the economy is forcing many to look for affordable higher education options. (Paige Marlatt Dorr, director of communications
California Community Colleges)

When public social institutions like colleges and universities collapse and when veterans return with GI Bills and no public institutions to attend, this is all good news for the predatory colleges, their owners and shareholders. For, as public colleges turn away students in droves due to financial collapse, it means more and more students will flock to the for-profit college centers in hopes of receiving an education and this, of course, means that like vampires, the schools can get their hands on more public monies - the GI Bill funds, Pell Grants, Title IV funds - all this while public institutions starve.

Ah, the beauty of privatization, the free market. But it's hardly free as stated earlier, not with the large default rates in the billions that are shouldered by hard-working Americans who are forced to pay them. The only thing that is free is the public funds transferred to private coffers of these predatory institutions that see only an exchange value in education. The proprietary schools are now like privatized pike in a public lake.

Creating the Material Conditions for the Private Ownership of the Means of Educational Production: The Role of the Neoliberal State

Acting as a collection agency, the federal government collects taxes from ordinary citizens and then distributes the money to proprietary colleges through a middle man, usually Wells Fargo or Sallie Mae. A student must enroll and be accepted at one of the proprietary schools before they can receive Title IV funds in the form of grants, loans or campus-based aid through Sally Mae, Wells Fargo, or any other third party. The schools themselves must also be "approved" by the DOE in order to participate in receiving the Title IV funds. This means the schools must be licensed or otherwise legally authorized to provide higher education in the state they are located in; they must be accredited by an agency recognized for this purpose by the secretary of the US Department of Education and they must be deemed eligible and certified to participate in the federal student aid programs by the Department of US Education (United States Government Accountability Office, "Proprietary Schools: Stronger Department of Education Oversight needed to help ensure only eligible students receive financial aid," August 2009).

This is what is referred to in government parlance as the "triad" - the threshold colleges must meet for government funding. It is the DOE, now under the tutelage of Duncan, that must oversee this entire process and ensure that only eligible students receive Title IV monies in accordance with the triad mandates. The DOE, FSA, manages and administers student financial aid assistance under the Higher Education Act passed in 1965, also known as Title IV. The programs include: William D. Ford Federal Direct Student Loan Program (Direct Loan Program), the Federal Family Education Loan Program (FFELP), the Federal Pell Grant Project (Pell Grant), the Campus Based Aid Program or the Federal supplemental Educational Opportunity Grant (FSEOG), Federal Work Study (FWS) and the Federal Perkins Loan Program (administered directly by the Financial Aid office at each school). In 2008 alone, Title IV funds provided more than $85 billion dollars in student aid of which roughly 16 percent went to the proprietary schools and colleges. That's a lions share by any estimates, especially if you look at the 64 percent default rate, which is and will eventually be paid by taxpayers.

Currently, there is what is called a "90/10 rule" which applies only to proprietary schools. What this means is that at least 10 percent of student tuition must come from means other than student-loan funds. And then there was the "50 percent rule," which required a proprietary school to offer no more than 50 percent of its courses online. These rules were enacted to address rampant fraud among proprietary schools in the 1970s and 1980s. However, in February of 2006, the 50/50 rule was repealed in a reconciliation act passed by Congress. The bill, SB1932 passed the house by a slim margin, 216 to 214, but it then went on to slide through the senate. Now, the schools can offer all their classes online and this means no need for brick and mortar. Most are now "ghost schools," or disaster colleges that reside in office buildings and hardly offer any campus life other than vending machines and computers.

As to the 90/10 rule, which simply mandated that ten cents of every dollar the proprietary school took in had to be from another source other than the federal government, it, too, has been drastically eroded if not vitiated. In July of 2008, long before the $787 billion stimulus, the federal government increased its guaranteed educational loan limits by $2,000 per student. Why? According to Business Week, they were worried that privately funded lending would dry up in the recession, but one of the shocking implications of this move directly benefited the proprietary colleges. Now, with the federal government increasing its guaranteed educational loan limits by $2,000 per student under the new Obama rules, these monies are "counted" as part of the 10 percent by the proprietary schools, creating an accounting mish mash - a paper shuffling accounting system with no transparency and where no one can actually really trace the percentages.

Borrowers must begin repayment after dropping below half-time enrollment, according to the rules of Title IV. Usually, the default rate can be seen after nine months, or 270 days, when the borrower, in this case the student, has not obtained cessation of the debt through myriad and complicated processes, or, in the case of some students referred to deferment or forbearance due to hardship or disability (United States Government Accountability Office, "Proprietary Schools: Stronger Department of Education Oversight needed to help ensure only eligible students receive financial aid," August 2009).

The social policies of the neoliberal capitalist state are responsible for laying the groundwork for creating the material conditions for the private ownership of the means of educational production. This is no surprise. Take the current "stimulus" passed by the Obama administration.

According to an article in Business Week, a web site that covers the rapidly declining state of public education:

 "Career-oriented schools such as the University of Phoenix, a unit of publicly traded Apollo Group (APOL), have been benefiting from lean times as adults scramble for credentials they hope will help them find work. The stimulus enacted last month will accelerate this trend by providing an additional $15 billion in Pell Grants for students over the next two years. Apollo, which received more than three-quarters of its $3.1 billion in revenue from federal student aid in the fiscal year that ended Aug. 31, is well positioned to take advantage of the stimulus. Its Phoenix unit already is the biggest recipient of government student aid. In its most recent quarter, which ended Nov. 30, Phoenix boosted ad spending by 24 percent, to $88 million. Its enrollment rose in the quarter by 18 percent, to 385,000 students, who study at campuses in 39 states as well as online." ["For-Profit Colleges: Scooping Up the Stimulus," March 12, 2009, by Ben Elgin and Jessica Silver Greenberg.].

In a letter dated November 19, 2008, to Henry Paulson, then secretary of the US Department of Treasury, the American Association of Collegiate Registrars and Admission Offices along with the American Association of State Colleges and Universities, the Consumers Union, The National Consumer Law Center, the Project on Student Debt, the National Association for the College Admission Counseling, US Public Interest Research and the United States Students Association all wrote to urge Paulson to reconsider his plan to unleash the Bush stimulus monies for private student loans. They implored Paulson in the letter, noting that:

"Most students and families do not use private student loans to pay for college, nor should they." [Letter to Paulson, November 19, 2008, by the American Association of Collegiate Registrars and Admission Offices along with the American Association of State Colleges and Universities, the Consumers Union, The National Consumer Law Center, the Project on Student Debt, the National Association for the College Admission Counseling, US Public Interest Research and the United States Students Association]

The correspondence to Paulson indicated that only 8 percent of students currently use standard bank loans to attend university. This changed now that the banks are flush with money and looking for profitable investment strategies and new investment "opportunities." What could be better than to offer subprime loans to desperate young people looking for an education and a way to maintain civilian life? Yet, the fact is private loans are risky and expensive and lack the protections, oversight and regulations of safer federal loans. Furthermore, providers of private student loans already receive special treatment in bankruptcy at the borrower's expense. But the students don't; their loans are nondischargeable in bankruptcy.

The letter to Paulson went even further, noting the signing groups, unlike federal loans, have no real protections for borrowers and co-signers. And there is no limit to how high the interest rate can climb. The letter notes that private student loans are like subprime mortgages where the lowest income borrower is saddled with the highest interest rates and the worst terms. Not only this, but the letter goes on to point out that in cases of unemployment, disability or periods of no income - even death, their families have few options for relief (ibid).

The loans are impossible to discharge in bankruptcy courts, unlike other forms of consumer debt such as credit cards. As the associations indicated in their letter to Paulson, someone who racks up thousands of dollars buying skis on a credit card can get relief through bankruptcy. Yet, in the case of, say, a teacher saddled with private loans from the proprietary schools who can't work due to disability - she has no way out. The use of bailout monies now put the lenders' investments, or usury, in a privileged category at the expense of students and consumers.

It is criminal that billions of taxpayer dollars are allowed to be spent enabling lenders to continue to make these high risk loans, which then become defaults picked up by taxpayers. But, unfortunately, this is precisely what is going on; for Paulson, of course, didn't listen to the various gate-keeping organizations intent on protecting the public interest, nor did he care; he was more focused on bailing out his friends, not public citizens who have to work for a living. He doled out federal monies despite fervent warnings to major banks, for private student loans, just as he bailed out AIG and Goldman Sachs. The Fed bailed out the lenders of these student loans by allowing them to use subprime student loan assets as collateral for accessing federal funds. Now, the proprietary schools have another venue for slopping up funds headed for debt - thanks again to the actions of the federal government. This is legal crime committed during broad daylight hours, but, of course, no mention of it was reported in the corporate press.

But the story begins long before the stimulus bailout and Obama even thought about entering government. The DOE under George W. Bush and Rod Paige used government deregulation in an effort to help create a system of debt peonage for students, while offering larger and very profitable business opportunities to their friends, the proprietary colleges. Today, we see the chickens have come home to roost as Wall Street continues to find ways to bilk the American people and the corporate media continues to hide the crime scene. Kaplan College, for example, is owned by The Washington Post, a blood bank providing more than 62 percent of the paper's revenue ("Kaplan University: Blood Bank for the Washington Post," July 27, 2010). You can hardly count on them to run a story on the private ownership of the means of educational production.

As Sam Dillon, reporter for The New York Times, reported as early as March 2006:

"The power of the for-profits has grown tremendously," said Representative Michael N. Castle, Republican of Delaware, a member of the House Education and Workforce Committee who has expressed concerns about continuing reports of fraud. "They have a full-blown lobbying effort and give lots of money to campaigns. In 10 years, the power of this interest group has spiked as much as any you'll find."

Sally L. Stroup, the assistant secretary of education who is the top regulator overseeing higher education, is a former lobbyist for the University of Phoenix, the nation's largest for-profit college, with some 300,000 students.

Two of the industry's closest allies in Congress are Representative John A. Boehner of Ohio, who just became House majority leader, and Representative Howard P. McKeon, Republican of California, who is replacing Mr. Boehner as chairman of the House education committee.

And the industry has hired well-connected lobbyists like A. Bradford Card, the brother of the White House chief of staff, Andrew H. Card Jr.

The elimination of the restriction on online education, included in a $39.5 billion budget-cutting package, is a case study in the new climate. Known as the 50 percent rule, the restriction was one of several enacted by Congress in 1992 after investigations showed that some for-profit trade schools were little more than diploma mills intended to harvest federal student loans.

Since then the industry has grown enormously, with enrollment at such colleges outpacing that at traditional ones. In 2003, the last year for which statistics were available, 703,000 of the 16.9 million students at all degree-granting institutions were attending for-profit colleges. (March 1, 2006, New York Times, "Online Colleges Receive a Boost From Congress," Sam Dillon.)

Regulating the Criminal Enterprise

With the deficit growing astronomically due to two illegal wars, the bloated defense budget, bailouts to Wall Street and the costs of subsidizing the for-profit predatory colleges and universities, there was little the neoliberal state could do in light of the criminal activities of the private educational complex, but attempt to regulate the industry.

The new proposed rules by the DOE, due to be passed sometime in November 2010, would supposedly grant the DOE stronger authority to stop these for-profit "colleges" and schools from making false or misleading statements about financial charges. They do this regularly as the GAO report reveals and as the whole sordid history of the industry has shown. They also lie about the expected employability of their graduates, many claiming they can place students in gainful employment when, in fact, they cannot. The DOE also wants the predatory for-profit colleges, universities and schools to be barred from paying recruiters based on how many students they brought in. That's the practice now, and you can read about the whole recruitment corralling of students in an article I wrote back in 2009 entitled: "Private Predatory Colleges: How the neoliberal Alchemists Turn Debt into Profit and Citizens into Fools".

However, the most important and currently onerous "regulation" proposed for the for-profit educational industry would cut off federal aid to for-profit programs that repeatedly saddle students with debt that is defined as unaffordable under a new formula that takes earnings into account. This is the "gainful employment" rule that will drive a stake through the heart of many for-profit colleges and universities if it is passed in November of this year. The rule is all about assuring that the for-profits are offering an educational service that will prepare graduates for gainful employment. The problem - there is no employment.

It has long been believed by politicians and corporations that education is little more than a training ground for capitalist labor to eventually be exploited. Simmering education down to gainful employment is not a novel idea when one is laboring under these assumptions. Rather than see the entire enterprise of for-profit colleges as criminal, which it is, the government now seeks to rein in some of the "abuses" they see in the system they helped create. Regulating the material conditions for private ownership of the means of educational production can only come from starving the insidious institutions that fail to comply by withholding government subsidies. While certainly a start, the whole notion is problematic, for it leaves the predatory industry intact when anyone who has studied the crime scene can see that this criminal enterprise cannot be regulated; it must stopped. However, even this small bit of "rhetorical" regulatory posture has the billion dollar, for-profit industry on the offensive.

Corporations Fight the Neoliberal State Regulations With Faux, AstroTurf Groups

The for-profit, cybernetic educational industry has come forth on record, calling the illegal practices uncovered by the GAO a case of "bad apples." Kaplan officials said they found the disclosures "sickening." In a joint statement from Donald E. Graham, chairman and chief executive of The Washington Post Co., and Andrew S. Rosen, chairman and chief executive of Kaplan Inc.:

"They violate in every way the principles on which Kaplan is run. We will do everything in our power to eliminate such conduct from Kaplan's education institutions."

Similar to the movie "Casablanca," Graham, like the actor Claude Rains, seems surprised "gambling" is going on at Rick's Place. Yet, while the government is getting ready to step in and put into place policies that will allow the industry to continue its ownership of the educational means of production, albeit regulated, the for-profits are now busy building a faux revolution, akin to Dick Army's Freedom Works; or the fake coalitions put to together by the Koch brothers to fight any regulation of the coal industry; or the "Parent Revolution" out of Los Angeles controlled by Green Dot, a charter school CMO, which recruits parents to work for charter school legislation by disassembling public education. What these groups have in common is that they are heavily supported by legions of right-wing cash.

The New York Times of September 7, 2010, noted that:

"For-profit colleges have increased their lobbying against proposed Education Department rules to cut off federal financial aid to programs whose students take on too much debt for training that provides little likelihood of leading to a well-paying job" [For-profit colleges step up lobbying against new rules, New York Times, September 7, 2010.]

In addition to making personal visits to Capitol Hill, executives for many of the colleges have recently provided their employees with "personalized," standardized, form letters urging them to send them to Washington to fight the new regulations. They have also started a campaign to get their students to speak out against the new "gainful employment" regulation. Sound like the phony health care groups set out to battle Obama's health care reform? You betcha!

So far, The New York Times has found that the DOE has received about 45,000 letters on the proposed "gainful employment" rule within the last month.

John Sperling, the born-again Christian fundamentalist and founder of the nation's largest for-profit college, the University of Phoenix, emailed every member of Congress, seeking help opposing the regulations, and attached a sample letter to be sent to Education Secretary Duncan, asking him to withdraw them. He has conveniently married his new-found, fundamentalist religion with market fundamentalism.

Graham, the chairman and chief executive of The Washington Post Company, which receives 62 percent of its revenue from its various Kaplan educational businesses, visited Sen. Tom Harkin, Democrat of Iowa, whose Health, Education, Labor and Pensions Committee is holding hearings on the for-profit education industry. His goal: stop the regulations.

But the heavy, billion dollar players have done more than just urge employees and students to come out for their for-profit cause. The Education Management Corporation, the second-largest, for-profit company in the industry, hired DCI Group, a public relations firm, to contact its employees for information that could be used to create a "personalized" letter, which would then be delivered back to the employee for signature, along with a stamped, addressed envelope aimed straight at the DOE. ("Astroturf U: Goldman's For-Profit College Battles Obama Crackdown," Mother Jones, Andy Kroll, September 2, 2010.)

The AstroTurf group also drafted and is offering pre-crafted letters that students can use to send to their Congressmen. Mother Jones reported that:

"Some of the letters show little familiarity with the proposed regulations. For example, an Education Department official said, students at a particular school sent in dozens of hand-written letters asking for continued aid to for-profit colleges, but never mentioning the regulations. He said he called a letter-writer to ask whether the letter was intended as a comment on the regulations, and was told, 'This is what the school asked us to write.' He would not identify the school." [ibid]

This is not unusual and echoes the practices of many of these predatory colleges who have their professors write student papers so students can remain enrolled and thus beneficiaries of the federal dollars that end up in the coffers of the blood banks.

EDMC also has a web site, the Higher Education Action Center, guiding students or employees to oppose the regulations, offering their own "pre-crafted" letters. Argosy, a unit of EDMC, said last month in an email soliciting more comments that more than 2,000 people had used the site in the previous week.

The Real Problem Is the Private Ownership of the Means of Educational Production

Beginning in the Bush years, or actually before, the neoliberal state worked diligently to provide the material conditions allowing for the enormous growth of education for profit. In doing so, it has now created its own Frankenstein of debt and default that seeks refuge in the pockets of ordinary taxpayers. The for-profit industry, armed with billions of dollars and working off the disaster economics that has left the public sector unable to keep libraries open, let alone provide a decent opportunity for students to gain universal access to education, is now enabled with lobbyists and private firms to fight Washington tooth and nail against their proposed regulations. But this is hardly the point. For the regulations promise to leave intact a criminal enterprise that is not just a collection of bad apples, but is a rotten barrel of despair, financial ruin for students and moral outrage, not to mention the source of costs that will be thrown on the backs of ordinary Americans as students find there is no "gainful" employment under the economic policies of market fundamentalism and Wall Street crimes, and the defaults quicken. What all this means is that taxpayers may be on the hook for close to one trillion dollars or more.

Summary

I spoke to a young man of about 30 years old in my last sojourn at the Phoenix Institute in Oakland. When I asked him how his classes were going, he told me that they were going well, but he was living in his car with no job. However, he indicated, a bit animated, with the federal monies for school he received not only does he have the use of the computers and a warm place to go, but he can clean up in the office bathroom. This is privatized homelessness under Title IV that is parading as privatized education.

The free-market policies ruthlessly pursued through the calamitous corporatization over the last 30 or more years have imposed crushing and profound changes onto the lives of children and working adults. On National Public Radio, November 23, 2009, a student at one of these proprietary colleges was interviewed. She reported that she now pays $300 dollars per month to service her federal loans and that her parents had to take second jobs just to help her pay for her proprietary education. Currently, she cannot find a job, so her answer: she will borrow more money now to go on to graduate school, for in this way, she will not default on her loans, meaning wage garnishment, withheld social security and an inability to rent or buy a home. Debt peonage and a lack of public and civic life are forcing her and her family into the brutal margins of society (NPR, "All things considered," November 23, 2009).

Each and every day I receive letters and emails from students asking me what they can do to stop the predation. These are students whose lives are now ruined; they cannot get credit, they cannot involve themselves in any financial life and they cannot rent apartments or go to school.

Whistleblowers, known as Former Disgruntled Employees (FDE's) have written me telling me of the ghastly policies they have witnessed and/or participated in, but they dare not use their names or they will find that the power and authority of these for-profit dungeons of despair will literally blackball them from the industry overnight. I have spoken with countless lawyers who have told me they have no resources to fight the billion dollar industry attorneys.

There is no "college experience" at these proprietary schools; there are not even libraries at most of these schools or facilities where students can meet. At many of the proprietary schools that offer a "campus," one finds the colleges really languish in grimy storefronts in large office buildings along side other businesses, like insurance companies, mortgage outfits and financial institutions that share the office building rent. Usually the administration office of the "campus" is comprised of simply a desk and rows of computers; the food services are vending machines dominated by Pepsi and Coca Cola and the class rooms are rented to corporations when not in use by the proprietary school. At the Phoenix Institute's "campus" in Pasadena, California, the college sits in a large office building that shares tenancy with the Rand Corporation, harbored on the upper level floor. The college also makes $25,000 - $30,000 per month just renting out the classrooms when they are not in use (interview with former Phoenix employee).

As I chronicled back in 2009, for-profit predatory colleges for years marketed to the disenfranchised, the down and out, the sub prime students and, thus, they make up the "fringe economy" of other such predators like cash loans, payday loans, title loans for cars, check-cashing scams and the like. These "operations of higher predation" have been caught recruiting students at housing projects, welfare office, unemployment offices, laundermats in poverty stricken areas and, now, yes, the true down and out - the homeless and often drug addicted segments of our population, mostly minority. They actually enter homeless shelters where they rabidly prey and feed on the underclass of America ("For-profit predatory colleges and universities prey on the homeless while hedge fund operators get busy shorting the sector's stock: the next big economic bubble," July 19, 2010, dailycensored.com).

As any crime fighter knows, you cannot regulate larceny. What needs to be done is to build a sustainable economy that can provide a quality, public school experience for our nation's children. However, as long as education is boiled down to training for a capitalist society in ruins, this can hardly expect to take place. As the public sector diminishes due to the disaster capitalism of the last 30 years, we can only hope to see a few changes in the form of regulations. Until then, look for this storm to pass, as once regulations are passed, paying to get around them becomes part of the business plan as it always has been. In the interim, look for the for-profit educational scam that was and has been allowed to exist thanks to the partnership between business and the neoliberal state to be the next big financial bubble just waiting to burst.


____________________________________________
Below is a long article but please glance through it.  I am posting articles from the 2000s because it is then we know Reagan/Clinton started dismantling oversight and accountability in the name of smaller government.  Republican voters were sold on small government because they were told social programs would be axed-----but what global corporate pols had in mind was small government as a way to unleash unlimited fraud and corruption====just as exists overseas in developing worlds.  These US corporations steal much of overseas development money and now they are doing it here in America thanks to neo-liberals and neo-cons suspending Rule of Law.
 The actual amounts of defense industry fraud is in the trillions of dollars and the Wikileak documents exposing the defense industry expenditures that mainstream journalists will not investigate but international investigative journalists are show the absolute looting of our US Treasury by defense industry contractors just as happened in health care, the financial industry, the for-profit education industry, and the housing industry.  At each step your politicians knew it was happening and could have shouted loudly and strongly but you do not hear a word beyond a few soundbites at the time of an exposure.  MARYLAND IS KING OF THE FLEECING OF TAXPAYER MONEY FROM ALL LEVELS OF GOVERNMENT and this is why the poor are being made third world in poverty and the working and middle-class are seeing their taxes climb and fees and fines galore.


Obama is continuing to make it 'easier for contractors' and Trans Pacific Trade Pact simply tries to make all of this ignoring of US law legitimate by re-writing the Constitution without all that bothersome Citizens as Legislators,  Equal Protection, and Rule of Law stuff



"According to some estimates we cannot track $2.3 trillion in transactions," Rumsfeld admitted.  $2.3 trillion — that's $8,000 for every man, woman and child in America. To understand how the Pentagon can lose track of trillions, consider the case of one military accountant who tried to find out what happened to a mere $300 million.


'The Clinton-Gore Administration

From its beginning, the Clinton-Gore Administration has pushed for changes to make things easier for contractors through its Acquisition Reform program in the Defense Department. The initiative was the culmination of a long process of working closer with industry and its campaign contributors undertaken by the Democratic Party when it began targeting corporate campaign contributions more aggressively in the 1980s.

The defense industry succeeded beyond its wildest dreams in winning endorsement of its proposals after the 1992 presidential election. Their plans proved to be in the right place at the right time when Vice President Gore was looking for new changes to make through his Reinventing Government initiative. Industry wishes were compiled by a Congressionally-created committee known informally as the "Section 800 panel," which was industry-dominated. 19 The panel's report was completed soon after the Clinton-Gore Administration took office. Its recommendations helped shape the Reinventing Government plan, which was put together under a tight deadline and needed new proposals quickly'.



Defense Waste & Fraud Camouflaged As Reinventing Government
September 1, 1999 Table Of Contents

Executive Summary
Introduction
The Problem: Pentagon Waste Returns
Why We Need Oversight - 618% Overpricing
Acquisition Reform 101
A Detailed Study: Getting Good Prices Without Acquisition Reform
Acquisition Reform's Claims: Confusing What the Government Buys With How It Buys
The Cause: Why and How Is This Happening?
Today's "Acquisition Reform:" Rolling Back Yesterday's Reforms
Important Procurement Reforms of the 1980s and Their Current Status
Counterattack in the 1990s
The Clinton-Gore Administration
The Congress
Acquisition Reform - Not Really Adopting the Free Market
Monkeying with Oversight: Hear No Evil, See No Evil, Speak No Evil
Penny Wise, Pound Foolish
Acquisition Reform: "Streamlining" Dollars from Our Pockets
Paying for Luxury Hotels Again
Accepting Data That Need Not Be "Current, Accurate, and Complete"
The $435 Hammer That Won't Go Away
The Solution: How to Stop De-Inventing the Wheel
Appendix
Endnotes



Executive Summary

Overpriced spare parts horror stories from the 1980s taught us how to prevent fraud, and led to useful reforms. By the 1990s, however, defense industry interests dovetailed with Vice President Gore's Reinventing Government campaign, and new policies bypassed some of the earlier reforms.

In the name of adopting "commercial" practices, the Administration's defense Acquisition Reform effort has gone beyond cutting red tape into throwing out important protections against contractor abuse that are needed even in a more commercial environment. For example, a new greatly expanded definition for a "commercial" product has exempted many more purchases from normal oversight.

The problem has predictably begun to appear in the form of more overpriced parts stories:

• AlliedSignal corporation was found to have overcharged the government for spare parts by as much as 618%. The government overpaid on the overall contract with AlliedSignal by 54.5%.

• Prices were inflated by more than 1,000 percent on a variety of spare parts. For example, the Boeing price for a commercially-available $24.72 "spoiler actuator sleeve" was $403.39 - a markup of 1,532 percent. Another contractor charged $714 for an electric bell worth $46.68.

The cause - Acquisition Reform's new policies, including drastic staff cuts to oversight agencies:

• The AlliedSignal cases provide examples of the government paying more for spare parts under the new "commercial" rules than it paid under the earlier reforms. As the Defense Department's Office of the Inspector General has noted, the loose definition of commercial items "qualifies most items that DoD procures as commercial items" [Emphasis added].

• A Defense Department Inspector General's report indicates how adopting commercial practices has come to mean subservience to contractors and blind acceptance of their claimed costs and prices: "contracting officers shall require information ... when necessary to determine price reasonableness for commercial items, but there is a strong DoD [Department of Defense] preference not to use that mechanism and the Government has not asserted its right to have the data." [Emphasis added.]

• Despite highly favorable dollar returns on taxpayer investment in oversight agencies, many of them have been gutted by personnel cuts. For example, the Defense Contract Audit Agency saves almost $10 for each dollar invested, but staff positions have been cut by 19% from Fiscal Year (FY) 1993 to FY 1997. As of 1998 the Administration scheduled it to suffer a total loss of more than 3,000 staffers - a 44% cut - over the period FY 1990 to FY 2002.

• The Administration has pushed defense corporate mergers, at a time when Acquisition Reform has failed to create adequate competition, a key requirement for the government to benefit from commercial markets. As a Department of Defense Inspector General noted, "If anything, the risks may be greater today because there is such market dominance by a few very large suppliers. In this environment, getting cost information and maintaining audit rights is a prudent business practice. Failure to do so will be very costly for the Department and ultimately the taxpayer." [Emphasis added.]

The solution lies in making use of what we have already learned about preventing contractor abuse:

• Restore meaning to the definition of "commercial."

1) Restore the definition of commercial as actual sale of items to the general public, not just to the government.

2) Restore the definition of commercial to mean substantial sales in a large free market.

3) Restore the definition of "competitive bidding" to be at least two bidders.

• Clarify that the government can and should still negotiate actively for some commercial items.
  
  
• Restore the use of cost or pricing data where prices are not set by a true free market.
  
  
• Preserve funding for the auditors, investigators, and independent rule-setting Boards like the Cost Accounting Standards Board.
  
  
• Defend the False Claims Act against industry assaults.
  
  
• Improve price-based contracting by increasing competition and reversing the trend of mergers leading to fewer competing contractors.

Following Pentagon acknowledgment of "readiness" problems, and after the war in Kosovo, defense budgets - and procurement spending - are being increased sharply. For this reason it is especially imperative for us not to forget what we already know about good acquisition reform - there is no need to re-invent the wheel. If we do forget, the budget surpluses the Defense Department is enjoying will quickly be frittered away on overpriced weapons and parts, and the taxpayers' money will, once again, be wasted.

Introduction In the 1980s, as military spending boomed, numerous stories of waste in weapon buying surfaced in the media. The Project on Military Procurement, as the Project On Government Oversight was then known, along with others, brought to light $7,600 coffee makers, $435 hammers, and $640 toilet seats billed by unscrupulous defense contractors. The cases were disturbing because they implied that if such prices were being paid for simple items whose prices citizens understood, the total overcharging for complex weapons as a whole was enormous.

As a result of these revelations, measures were taken to tighten up oversight of defense contractors. Then, in the 1990s, the defense industry counterattacked, arguing that these reforms had gone too far. By 1994, with a Congress hostile to government regulation, and an Administration adopting a particularly accommodating relationship with business, the rhetoric of acquisition "reform" and "reinventing government" was used to justify moving beyond cutting red tape into bypassing key earlier reforms. For example, a new greatly expanded definition for a "commercial" product has exempted many purchases from normal oversight.

The results of these changes have already begun to show, with cases of gross overcharging for spare parts surfacing once again. The cause is an "Acquisition Reform" effort conducted by the Department of Defense (DOD) and supported by some in Congress. Acquisition Reform unabashedly seeks to reduce oversight of contractors and replace it with "trust," and has dovetailed with Vice President Gore's "Reinventing Government" campaign. The problem is that by going so far in reducing oversight, the reforms have thrown the baby out with the bathwater, resulting in cases of 618% overpricing again.

We already know how to protect against defense contractor abuses. We have been through many previous rounds of hyped reform initiatives that blew a lot of hot air but did not do much. But pushing the new "Acquisition Reform" too far and bypassing proven checks and balances now could actually make the situation worse - it is leading to de-inventing the wheel, not re-inventing it.

This report first looks at recent cases of defense contractor overcharging. It then examines the elements of Acquisition Reform that have caused the problem in more detail. The report concludes with suggestions for remedies.



The Problem: Pentagon Waste Returns Why We Need Oversight - 618% Overpricing Evidence of the results of loosening oversight is beginning to surface. A Department of Defense January 1999 report reveals that defense money is again being wasted on spare parts, as it was in the 1980s. In the report by the DOD Inspector General (IG), AlliedSignal corporation was found to have overcharged the government for spare parts by as much as 618%. The government overpaid on the overall contract with AlliedSignal by 54.5%. The irony is that these parts were bought under the new, much-touted "commercial" price system promoted by the Administration and Congress. According to the January 1999 investigation by the Inspector General: 1

The government "paid Allied prices that were higher than fair and reasonable in FYs [Fiscal Years] 1996 and 1997 when compared to the noncommercial prices paid to Allied in previous years." The parts included items such as gearshafts, wheels, nuts, bearings, seals, filters, and valves.

The Defense Department "paid a 54.5 percent premium for commercial parts from Allied" - in other words, were overcharged by more than 50%.

For parts that AlliedSignal did not even make itself, but merely bought from original manufacturers or dealers and then sold to the government, some items were variously marked up by as much as 294%, 325%, and 618%.

The Defense Department paid an even higher average markup in Fiscal Year (FY) 1997 (60.1%) than it did in FY 1996 (45.8%). It appears that in this case an Acquisition Reform "learning curve" is not being realized.

Defenders of the acquisition system argue that the government paid higher prices because the prices included more stocking services - but the Defense Department failed to use the services.

The Defense Department report blacks out the names of specific spare parts that were grossly overpriced. (See p.12 of Appendix A) Although contractors routinely claim such information is "proprietary," the real effect is that the public cannot easily find out how much they are overpaying for items they might recognize.

The Inspector General report on AlliedSignal followed 1998 IG reports of overcharging under "commercial" contracts with Boeing and Sundstrand corporations. The earlier reports (see "Acquisition Deform: A Study in Hasty Deregulation," Project On Government Oversight Alert, October 1997) found that:

Prices were inflated by more than 1,000 percent on a variety of spare parts. For example, the Boeing price for a commercially-available $24.72 "spoiler actuator sleeve" was $403.39 - a markup of 1,532 percent. 2

Sundstrand billed the government $6.1 million for parts that were worth only $1.6 million. 3 

Boeing charged $5 million for parts that were worth $3.2 million in the competitive market. 4

A contractor charged $76 for 57¢ screws. 5

Another contractor charged $714 for an electric bell worth $46.68. 6

The Inspector General found that higher prices were paid for "commercial" items than had been paid earlier because: 7

• although Acquisition Reform allowed the Sundstrand items to be purchased under loose "commercial" item rules, in fact "there was no competitive commercial market to ensure the reasonableness of the prices";
  
  
• Sundstrand "refused to provide DLA [Defense Logistics Agency] contracting officers with 'uncertified' cost or pricing data for commercial catalog items";
  
  
• items were defined as commercial as long as they were merely "offered for sale, lease, or license to the general public" (emphasis added); and
  
  
• in the Boeing case, "contracting officers accepted Boeing commercial catalog prices as fair and reasonable without adequate support for price reasonableness, even when DoD was the 'primary' customer procuring significantly larger quantities than other commercial customers and there was no competitive commercial market to ensure the price integrity. The contracting officers made no attempt to exert the leverage that a major customer ought to be able to exert to negotiate significant discounts, as is common commercial practice." 8

The DOD IG notes that the loose definition of commercial items "qualifies most items that DoD procures as commercial items" (emphasis added), with the result that:

"This opens up a major loophole for sole-source vendors to charge prices that cannot readily be evaluated for reasonableness. This concern will continue to grow as more companies merge and the aerospace industry becomes more of a sole-source environment." 9

Similarly, items under the loose definition can be merely "of a type" sold to the public, rather than a product that actually is sold to the public.

Acquisition Reform 101 The widely-promoted "Acquisition Reform" initiative emphasizes buying more products for the government on a "commercial" basis. "Commercial item" purchases bypass many of the protections and oversight put in place to prevent the infamous overcharging by defense contractors that occurred during the defense spending increases of the 1980s. The 1980s reforms included tougher Truth in Negotiations Act enforcement, re-establishment of the Cost Accounting Standards Board, strengthening of the False Claims Act, and passage of the Competition in Contracting Act.

The report on AlliedSignal provides examples of the government paying more for spare parts under the new "commercial" rules than it paid under the old rules. This is the opposite of what Acquisition Reform is intended to achieve. According to the Inspector General, the government "paid higher prices for commercial spare parts on the Allied corporate contract when compared to previous noncommercial prices for the same items."10

Astoundingly, government officials have been sent to training courses on commercial item acquisition run by the defense industry and taught by executives from AlliedSignal and Sundstrand! (See Appendix B)

Hinting that Acquisition Reform may have gone too far, the Inspector General report noted that if the government could not make commercial buying work as intended in the contract with AlliedSignal, it "will need to revert back to the previous buying practice of negotiating better prices for the spare parts ...."11

A Detailed Study: Getting Good Prices Without Acquisition Reform The government offices designing Acquisition Reforms have done precious little analysis of the actual effect of Acquisition Reform so far. Fortunately, a military officer undertaking an academic study has completed one of the few in-depth analyses to date comparing prices paid by commercial firms and by the government.

This study by Major Joseph Besselman examined a large number of DOD electronic, engine, and software commodity purchases. (See Appendix C) In contrast to the conventional wisdom that "commercial" prices are lower than what the government has obtained in the past, the report found that when the government is allowed to negotiate prices, and when the government has access to the manufacturer's cost data, it performs better than the commercial sector - obtaining even lower prices than commercial firms making similar purchases:

"Overall, weighted price difference analysis reveals the DoD outperformed the average commercial sector organization using commercial wholesale prices by 41.5 percent." 12

This key finding even held up when the government's costs of employing extra oversight and contracting people to gather cost data and negotiate prices is included:

"This research's case studies provide evidence that cost and pricing data enhances the DoD's buying position in high dollar value procurements, even when the costs of collecting that data are considered."13

The study sums up with guidance for how Acquisition Reform can avoid oversimplifying the real world in its enthusiasm for reducing oversight:

"The DoD's leadership needs to more realistically evaluate its push towards 'one size shoe fits all' public policy decisions as it tries to commercialize its operation to a greater degree. This research suggests that buying commercial items off commercial price lists will cost the taxpayer more money. Uniformly eliminating in-plant oversight personnel that collect cost and pricing data will adversely affect the DoD's purchasing power. Cost and pricing data is a valuable commercial sector tool the DoD buyer should exploit under the appropriate circumstances." 14

Government procurement practices are not all bad, and can successfully use commercial practices without necessarily abandoning other protections that have proven effective in preventing overpricing.

Acquisition Reform's Claims: Confusing What the Government Buys With How It Buys Reduced to its substance, Acquisition Reform is about changing the way the government buys goods and services, not changing what the Government buys. Acquisition Reform proponents argue that by changing how the Government buys, a lot of money can be saved. Yet, they produce little evidence to bolster their arguments - such as examples of prices lowered because of savings. In some of the instances where they do present "evidence," it is apparent that they have actually changed "what" they were buying instead of "how." In other words, it is an apples-and-oranges comparison.

For example, Steven Kelman, the Administration's former chief "point person" on acquisition reform as head of the Office of Federal Procurement Policy from 1993-97, tells stories of how the Government saved large sums by allegedly changing the way it purchased shipboard telephones. According to Kelman, under Acquisition Reform the Navy was able to reduce shipboard telephone costs from $400 to $20 per unit. When asked how the Navy did this, Kelman answered that they went from using custom telephone specifications (or "mil specs") to buying regular commercial phones. While this might be laudable if the phones really did not need to have special capabilities for a naval combat environment, it really has nothing to do with the "how" part of the buying process. Instead, what was changed was the "what" part - it was decided that commercial phones were capable of the job. It is like saying you reduced the price of a car from $40,000 to $20,000, but omitting the fact that you stopped buying Cadillacs and started buying Chevrolets.

Another instance comes from one of the most famous Acquisition Reform stories - the image of Vice President Gore smashing an allegedly overpriced ashtray on the David Letterman Show. The story was that by purchasing commercial ashtrays instead of using lengthy and almost unintelligible custom government specifications for these ashtrays, a lot of money could be saved. The Vice President pointed out to the television audience that ashtrays were only one example of Government custom specifications run amuck. But, what he failed to explain was that this was not a "how" to buy issue, it was a "what" to buy issue. Of course, it probably made no sense to continue purchasing custom made ashtrays (or chocolate chip cookies or t-shirts). But, it wasn't a procurement or contracting procedure change that made for all of the allegedly big cost savings. It was a decision to buy cheaper, standardized ashtrays, instead of the custom models.

According to Acquisition Reformers, the Government can save a lot of money if it changes the "how" part of the buying process. But, most of what the contractors (and their supporters in Congress and the Administration) want changed are exactly the parts of the "how" to buy process that ensure fair and reasonable contract pricing and value to taxpayers.


The Cause: Why and How Is This Happening? Today's "Acquisition Reform:" Rolling Back Yesterday's Reforms In the 1990s, the defense industry has taken up the offensive against what it saw as overbearing procurement reforms of the 1980s. Most of these reforms, however, were useful protections for the taxpayer against contractors that had already taken advantage of us in the 1980s. The reforms, including 35 procurement reform initiatives ordered by the Secretary of Defense in 1983, have had positive results: a DOD Inspector General report notes that "Implementation of the Competition in Contracting Act, enacted in 1984, and the 35 spare parts procurement initiatives resulted in dramatic increases in reported competitive procurements and savings from 1985 to 1988."15

Former DOD Inspector General Eleanor Hill noted the dangers of rolling back these reforms:

"We remain concerned about suggestions to limit or repeal controls that have been proven effective over time, such as the False Claims Act, the Truth in Negotiations Act, the Cost Accounting Standards, the statute that prohibits contractors from charging unallowable costs, and the Defense Contract Audit Agency. We believe that these controls have been critical to maintaining the Government's ability to adequately protect its interests in the acquisition area."16

Some of the key reforms targeted by the defense industry and their current status are described in the table.



 Important Procurement Reforms of the 1980s and Their Current Status Reform Purpose Status Today False Claims Act Strengthened 1986: The False Claims Act was originally Civil War-era legislation intended to halt war profiteering. Amendments to the Act in 1986 increased the penalties for fraud and encouraged whistleblowers to come forward when they were aware of defrauding of the government. The law has been under heavy assault by the defense industry. Industry claims that "innocent disagreements" are being prosecuted as fraud. The Defense Department has flirted with pushing changes to the Act, and has worked with industry to gather information to support weakening the law. DOD and the industry have repeated the theme that companies are deterred from doing business with the government for fear of alleged excessive vulnerability to fraud lawsuits. The Department of Justice, however, has strongly rebutted claims that the False Claims Act is burdensome and needs amending. Justice noted in a response to the claims of the Defense Policy Advisory Committee on Trade (DPACT), an industry group that, for example, "DPACT provides no support beyond mere assertion for the proposition that False Claims Act liability has any substantial effect on defense industry profits or on the industry's relationship with DOD. Moreover, analysis of the data available to us shows no such effect 17

So far, strong resistance from Congressional supporters of the False Claims Act such as Senator Charles Grassley (R-IA) and from the Department of Justice - bolstered by the fact that billions of dollars have been recovered for the taxpayers - have kept efforts to weaken the law at bay, but industry attempts to overturn the strengthened law continue.

Truth in Negotiations Emphasis 1980s: The Truth in Negotiations Act (TINA) requires that contractor data submitted to the government to be current, accurate, and complete. Enforcement and emphasis on TINA were boosted in the 1980s. Congress kept a close eye on the issue, and the General Accounting Office (GAO) did many reports that emphasized the importance of TINA. The Federal Acquisition Streamlining Act and the Federal Acquisition Reform Act (Clinger-Cohen Act) exempted so-called commercial item contracts from TINA. Using false and misleading logic, Acquisition Reform proponents have tried to link application of TINA and application of Cost Accounting Standards, suggesting that anywhere TINA does not apply, neither should the Cost Accounting Standards. Procurement Integrity Statute Created

1988: Amendments to the Office of Federal Procurement Policy (OFPP) Act attempted to prevent the types of corruption that were exposed by Operation Ill Wind. The scandal revealed that contracting officials were selling source selection information - the strengths and weaknesses of competing bids based on the proposals under review - so that their associates could strengthen their own proposals when they went into negotiations. The Amendments pulled together a variety of laws that prohibited revealing information to contractors and required that officials and contractor employees sign statements saying they were aware of the integrity laws.

In response to industry criticism that the legislation merely duplicated other laws, and was unnecessarily burdensome, the paperwork was simplified in the 1990s.

Cost Accounting Standards Board Reestablished

1988: The OFPP Act Amendments also re-established the Cost Accounting Standards (CAS) Board. The CAS Board sets accounting rules designed to achieve uniformity and consistency in the accounting practices contractors must follow when pricing contracts or submitting bills to the government. The original CAS Board was terminated in 1980 when Congress failed to continue its funding (after heavy defense industry lobbying to abolish the Board).

After a steady drumbeat of industry pressure, by 1999 the Board has been "demoted" as an organization within the Office of Management and Budget, Board Members and staff are largely being bypassed, a government-industry review panel has proposed dramatically raising the dollar thresholds for applying the Standards among other limitations on the Board's rules, and DOD-inspired legislation has been submitted to allow exemptions from the rules for any contract or any contractor.

Competition in Contracting Act Passed

1984: Several factors were behind the important Competition in Contracting Act. First, an influential GAO report concluded that only a small share of contracts were being competed, and noted that competed contracts brought down prices sharply. Also, scandals involving spare parts overcharging were caused in part by markups as prime contractors supplied parts to the government that were actually produced by subcontractors. Finally, the small business community lobbied to be able to sell more to the government directly.

The Act opened up competition by requiring contracts to be "fully and openly competed." The Defense Department's ability to choose whomever it wanted for a contract was narrowed.

The Act has been weakened. Technically, full and open competition is still in place, but now only to the extent that it is "consistent with efficiency." In many cases, the competition requirement is now just for a "reasonable opportunity to be considered" for a contract.

The rules have been bypassed in part by expanding another form of contracts, those in which specific deliverable products are not specified exactly in the contract, but the contractor is available to perform services or produce products if called upon. Major weapon contracts are not usually of this form. The new form of contracts - which are more like "supplier agreements" or "licenses to sell to the government" - were exempted by the Federal Acquisition Streamlining Act of 1994, so that requirements for full competition are much less robust.

Penalties Increased for Disallowed Costs

1985: The 1985 DOD Authorization Act increased the penalties for costs submitted for reimbursement by contractors that the government determines are not valid claims.

The statutes are currently still on the books, but are under industry criticism, since the industry feels the statute excessively "criminalizes" what they see as "civil" violations.


Counterattack in the 1990s Industry has lobbied hard to reverse or bypass many of the reforms of the 1980s. In the climate of cutting back government of the 1990s, both Congress and the Administration have pushed for loosening of oversight over defense contractors.

Part of the rationale for the reforms developed out of the overpriced spare parts scandals of the 1980s. The scandals were often the result of line items in "cost-plus" contracts - the type of contracts in which the government pays all of a contractor's permitted costs in executing a contract, plus an amount of profit on top. (Often the profit was set as a percentage of the total costs, creating an even stronger incentive to the contractor to push the direct costs as high as possible.)

The bad name that these cost-based contracts gave to defense procurement helped lead to official enthusiasm for price-based contracts - contracts based on a fixed price, agreed beforehand. The commercial world usually operates with price-based contracts. For example, a person contracting with a builder to construct a house would have to be pretty crazy or very rich to use a cost-based contract that allowed the builder to spend whatever he or she wanted, with a guaranteed profit on top. Instead, in the commercial world, a contractor has to keep down costs, or the expected profits will drop, or even disappear.

The new enthusiasm for price-based contracting had perfect timing to mesh with the new buzzwords of adopting best commercial practices and privatization popularized by the Clinton-Gore Administration and the Congress in the 1990s. Unfortunately, though, what Acquisition Reform began pushing was price-based commercial contracting without the normal constraints, appropriate incentives, and oversight. Price-based contracting does not work if it just means accepting whatever price a contractor asks.

Acquisition Reform has interfered with keys to getting good price-based contracts - the government's ability to bargain hard, to get the information it needs from a contractor to verify that prices are fair, and to analyze costs to make sure they are based on what things should cost, not what they did cost before, which may have been illegitimate itself. This is nothing new - the procurement system was documented suppressing government access to contractor cost data at least three decades ago. (see Appendix D) But now the effort to blind the government is much broader and has progressed much farther.

Above all, good price-based commercial contracting relies on a healthy level of competition. Yet many of the overpricing problems that have come to light under the new "commercial" Acquisition Reform rules involve inadequate competition. Much of the savings obtained in the 1980s were attributable to strengthened competition, including techniques such as "breaking out" the purchase of component parts from the prime contractor, who often does not make the parts, but purchases them from subcontractors and adds a large markup. Acquisition Reform's failure to promote adequate competition has been sorely compounded by the Clinton Administration's zealous promotion and subsidy of mergers in the defense industry, 18 which has drastically reduced the number of competitors in each sector of the industry.

It is only the lavish, unquestioning kind of price-based contracting that industry wants. But if Acquisition Reform is to work for the taxpayer and not solely for private contractors, it will have to adopt the normal kind of commercial price-based contracting, the kind that is not subservient to industry, but rather corroborates industry claims in a non-adversarial but informed fashion.

The Clinton-Gore Administration From its beginning, the Clinton-Gore Administration has pushed for changes to make things easier for contractors through its Acquisition Reform program in the Defense Department. The initiative was the culmination of a long process of working closer with industry and its campaign contributors undertaken by the Democratic Party when it began targeting corporate campaign contributions more aggressively in the 1980s.

The defense industry succeeded beyond its wildest dreams in winning endorsement of its proposals after the 1992 presidential election. Their plans proved to be in the right place at the right time when Vice President Gore was looking for new changes to make through his Reinventing Government initiative. Industry wishes were compiled by a Congressionally-created committee known informally as the "Section 800 panel," which was industry-dominated. 19 The panel's report was completed soon after the Clinton-Gore Administration took office. Its recommendations helped shape the Reinventing Government plan, which was put together under a tight deadline and needed new proposals quickly.

The approach of the Reinventing Government initiative was to blame the very procedures that were put in place to prevent waste and fraud, saying they were actually adding to the problem. As the first "National Performance Review" in September 1993 stated:

"In recent years, our national leaders responded to the growing crisis with traditional medicine. They blamed the bureaucrats. They railed against "fraud, waste, and abuse." And they slapped ever more controls on the bureaucracy to prevent it.

But the cure has become indistinguishable from the disease. The problem is not lazy or incompetent people; it is red tape and regulation so suffocating that they stifle every ounce of creativity." 20

Cutting out red tape is an undeniably worthy goal, and the National Performance Review identified many areas for improvement. The original report acknowledged that protections were usually put in place for good reason, but argues they got out of control:

"But not one inch of [government] red tape appears by accident. In fact, the government creates it all with the best of intentions ....

Because we don't want employees or private companies profiteering from federal contracts, we create procurement processes that require endless signatures and long months to buy almost anything."21

The difficulty in cutting red tape comes in deciding what really is red tape, and what are vital protections to prevent waste. Unfortunately, the defense industry took the wisdom of the Reinventing Government campaign and pushed it much too far, persuading its allies in Congress and the Administration to apply it where it benefits them alone. The industry has pushed to apply liberalized rules for "commercial" products to non-commercial products too - for example in attacking the Cost Accounting Standards, which apply only to non-commercial products.

If there is a common element to the various defense "Acquisition Reform" initiatives, it might be a reliance on trusting contractors to do the right thing, rather than keeping an eye on them with close oversight. The evidence is beginning to mount that -- as might be expected with reforms that weaken the government's ability to discover, correct, and deter contractor abuses -- these elements of Acquisition Reform are backfiring.

Receiving industry's views is necessary, as long as the relationship does not become too close, and government does not start working for private industry's interests rather than the public's interest. Just one example of how closely industry is involved in developing policy for the Clinton Administration is provided by a case of having industry representatives on the distribution list "for your review and coordination" of a government internal policy review. (See Appendix E)

In building their case for reducing oversight, contractors have claimed that the rules are excessively burdensome, and the Defense Department argues that, as a result, a lot of companies do not want to contract with the government. But the Department's claim about deterred companies is not very persuasive: leading the lobbying charge of contractors against these sensible rules are the largest existing defense companies, who have shown little reluctance to bid for government contracts - including Lockheed Martin, Northrop Grumman, Raytheon, Boeing, and associations that represent the major defense contractors, such as the Aerospace Industries Association. If the changes were really to benefit up-and-coming new competitors in the defense industry, why would the existing contractors push the changes so hard? The Defense Department has mentioned few companies that are refusing to do business with the government.

Furthermore, the defense industry has been highly profitable recently compared to other industries, raising questions about the claims that defense work is so burdensome, unprofitable, and unappealing that companies are deterred from doing it. According to a PaineWebber report, "Profit margins in the defense industry are at the highest levels in history; operating margins have increased from 6% in 1990 to over 12% in 1997." 22

The Administration has touted billions of dollars of savings from Reinventing Government and Acquisition Reform, saying they overshadow the new stories of overpriced spare parts. But even those claims have been challenged in a recently-released General Accounting Office (GAO) report, which points out substantial unsupported and double-counted "savings" in its examination of some of the claims. The GAO's conclusion regarding the claims of the National Performance Review (NPR), as the Reinventing Government effort is also known, was: "NPR claimed savings from agency-specific recommendations that could not be fully attributed to its efforts. OMB generally did not distinguish NPR's contributions from other initiatives or factors that influenced budget reductions at the agencies we reviewed." 23

The Congress The Administration's efforts got a boost when anti-regulation sentiment swept the Congress after the 1994 election. Congress expanded the Administration's initiatives with the Federal Acquisition Streamlining Act of 1994 and the Federal Acquisition Reform Act of 1996 (known as the Clinger-Cohen Act - one of its sponsors, Senator William Cohen, soon became Secretary of Defense.) (See Appendix F for a summary of legislative changes.)

The new laws made it easier for the government to buy "commercial" items, but they ended up making it too easy, by defining "commercial" too broadly. The original idea was to ease the government's ability to buy "off-the-shelf" items whose prices could be trusted because they were set by a free market. But the definitions are so broad that "sole-source" items bought from just one company, or items bought by the government alone, can count as commercial items and avoid normal rules. Items such as the C-130J military transport aircraft - a far cry from simple items like ashtrays, bolts, and hammers - have been declared "commercial" purchases.

In practice, contractors can claim a wide variety of products are "commercial" in order to stop government contracting officials challenging them on their high prices. A DOD Inspector General investigation found in one case that, "the contractor has declined to offer prices or provide cost data. The contractor is now claiming all the spare parts are commercial items, thus making it difficult, if not impossible, for DLA [Defense Logistics Agency] to negotiate fair and reasonable prices for the sole-source spare parts." 24

The laws allow contractors to sell "commercial" items without having to provide or certify cost and price data to prove that their prices are fair. The problem is that there is not always a single true "commercial price" to rely on if cost data is denied. In particular, so-called "catalog prices" or "list prices" sometimes are not the best commercial prices available. Discounts are usually available for large orders, for example, and the government often makes very large orders yet cannot use its purchasing power under the new system.

Acquisition Reform - Not Really Adopting the Free Market Acquisition Reform is drastically reducing access to cost data, reducing the number of government oversight personnel, and discouraging proactive price negotiating. Acquisition Reform proponents apparently believe that declaring something "commercial" creates market forces out of thin air - so that oversight is no longer needed and all the old rules and procedures can be thrown out.

An element of Acquisition Reform is that it is being used to discourage contracting officers from aggressively negotiating for discounts below "list" and "catalog" prices. There are various reasons why discounts from list prices may be justified, but the most basic is simply a discount for large purchase volumes. Again, this practice is not only a common large commercial firm practice, but also something almost every consumer shopper is familiar with - if you buy in bulk, you pay a lower price.

A simple analogy from our daily lives also illustrates that "commercial" prices are not set in stone. As most car buyers know, you do not necessarily have to pay whatever price the dealer puts on the sticker. Consumers trying to save money find out the "dealer invoice" price - that is, the seller's cost data - and can use that to bring down the exorbitant sticker price. Acquisition Reform, however, pretends that consumers and companies in the commercial marketplace do not gather cost data, and so it limits the government's ability to get the best out of commercial markets.

A June 1999 General Accounting Office study has found that under the new policies and procedures, government contracting officials were not challenging contractors' prices sufficiently:

"The price analysis performed by contracting personnel were often too limited to ensure that prices were fair and reasonable. For example, some contracting personnel believed that when the offered price was the same as the catalog or list price, it could be considered a fair and reasonable price. In several cases, contracting personnel did not use pertinent historical pricing information contained in contract files that should have raised questions about the reasonableness of offered prices. ... Finally, many contracting officers were not documenting in the contract file how they determined that a price previously paid for an item was fair and reasonable and, therefore, could be relied on in evaluating the currently offered price." 25

The legislation and the Administration's policy have blinded contracting officials: when the officials are not buying "off the shelf" items where prices are truly set in the commercial marketplace, they are effectively restricted (and subtly discouraged) from negotiating down from so-called "commercial" prices offered by defense contractors. 26At the same time, contractors no longer have to provide certified cost information to prove that their prices are fair, even when the items are being acquired on a sole-source basis. A DOD IG investigation found that:

"Acquisition reform legislation and the FAR [Federal Acquisition Regulation] still provide that contracting officers shall require information other than cost or pricing data which includes uncertified cost or pricing data when necessary to determine price reasonableness for commercial items, but there is a strong DoD preference not to use that mechanism and the Government has not asserted its right to have the data." 27[Emphasis added.]

Acquisition Reform defenders seem to pick and choose which parts of "commercial practices" to adopt. In particular, they have discouraged gathering cost data from suppliers, even though it is a practice often followed by large commercial companies. Large companies that buy from small companies have the leverage and the "market power" to get the smaller company to prove that its prices are reasonable. So should the government.

In addition to changing the rules, Acquisition Reform has used a variety of bureaucratic changes to reduce monitoring of the defense industry. The following sections look in more detail at how the Administration has made large-scale cutbacks in government personnel who negotiate, monitor, and oversee defense contracts.

Monkeying with Oversight: Hear No Evil, See No Evil, Speak No Evil A deep reduction in the number of auditors, investigators, and other government personnel who oversee defense contractors is underway. Congress has cut budgets of oversight agencies, and in 1994 ordered the elimination of 272,900 positions throughout the government over several years.28 The likely cost of this reduced oversight will be more fraud and higher prices for the government. Until contractors improve their performance record and eliminate fraud, oversight remains crucial for protecting the public purse. DOD Inspector General Eleanor Hill noted in 1998, "As personnel reductions in the acquisition workforce have occurred, we have also seen reduction in programs for fraud prevention, detection, and reporting." 29

The problem with simply trusting defense corporations - "contractor self-oversight" and "contractor self-governance," as it has been called - is that the contractors have not yet earned that trust. As the DOD IG says:

"While we understand the many benefits of the new emphasis on Government/industry teamwork, the Department should not assume that procurement fraud no longer occurs. To the contrary, our criminal investigators report that their proactive undercover efforts regularly reveal significant fraudulent activity. ... Many advocates of drastic changes in Government acquisition practices are unaware of, or choose to ignore, the fact that procurement fraud remains a threat to the DoD and the U.S. taxpayer." 30(Emphasis added.)

A report by the Project On Government Oversight found that the defense industry returned more than $850 million to the government just to settle fraud cases under the False Claims Act from 1994 to 1996. 31

Penny Wise, Pound Foolish Investment in oversight performed by agencies such as the Defense Contract Audit Agency, the Defense Contract Management Command, the DOD Inspector General's office, and the General Accounting Office produces a highly favorable return for the taxpayer. But large reductions in the DOD acquisition workforce and in these agencies in particular have already taken place, and more are planned. For example:

Defense Contract Audit Agency (DCAA) - Conducts audits of Department of Defense contracts.

"We used to get hundreds of [criminal case] referrals from DCAA. Now I think I can count them on one hand." - William Dupree, head of the Defense Criminal Investigative Service. 32

Saves almost $10 for each dollar invested. 33 Produced documented savings of $3.7 billion and an additional $2 billion in unallowable costs that contractors would otherwise have charged in 1997. 34

Staff positions cut by 19% from FY 1993 to FY 1997. 35 Scheduled to suffer an additional loss of more than 3,000 staffers, a 44% cut, from FY 1990 to FY 2002. 36

Defense Criminal Investigative Service (DCIS) - Part of the DOD Inspector General's office, detects, investigates and prevents fraud, waste, abuse, and other improper acts in the Defense Department.

"... there aren't any inspectors anymore. Because we're 'working with industry.' ... That's part of the problem: where will it unfold and how will it unfold if you've got the government almost in concert with the contractor?" - William Dupree, Defense Criminal Investigative Service 37

Recovered $466 million in FY 1996-97 fraud investigations. 38

Overall DOD Inspector General staff, which includes Defense Criminal Investigative Service, cut 21% from FY 1994 to FY 1997. 39 Planned cuts of 35% from FY 1995 to FY 2001, including a 37% cut in auditors and 26% in investigators. 40

Defense Contract Management Command (DCMC) - Manages defense contracts, including analysis, review, fraud investigation, and quality assurance assessments of contracts.

"Instead of workforce adjustments being a logical consequence of business process reengineering, the personnel reductions appear to have become a reform goal in and of themselves." - Eleanor Hill, Department of Defense Inspector General 41

Referrals of fraud cases by the Defense Logistics Agency, which includes the Defense Contract Management Command, have dropped by 47% since 1995. 42

80% cut in personnel at the Defense Logistics Agency's Office of General Counsel responsible for pursuing fraud cases.43 Total DCMC personnel cut 27% from FY 1993 to FY 1997. 44 Quality assurance staff at DCMC cut 54% from FY 1990 to FY 1996. 45

General Accounting Office (GAO) - Audits, investigates, and assesses defense and other government programs.

GAO's work "contributes to many legislative and executive branch actions that result in significant financial savings and other improvements in government operations." - GAO's 1999 "Status of Open Recommendations" report

Examples of GAO savings: "six GAO products on concurrency [buying designs while still testing them] and risk in the F-22 program were important influences on DOD actions to decrease concurrency, which included reducing the number of initial production aircraft from eight to six annually resulting in measurable savings of about $1.7 billion." Similarly, "the House and Senate Committees on Appropriations conferees reduced DOD's fiscal year 1998 operations and maintenance request by $199.3 million, based on funds we identified to be in excess of requirements." 46

GAO has been chopped a third in size from FY 1992 to FY 1996, losing almost 2,000 staffers. 47

Cost Accounting Standards Board (CAS Board) - Sets basic accounting rules for contractors covering $125 billion per year in noncommercial contracts - about $90 billion in defense.

"If anything, the risks may be greater today because there is such market dominance by a few very large suppliers. In this environment, getting cost information and maintaining audit rights is a prudent business practice. Failure to do so will be very costly for the Department and ultimately the taxpayer." - Eleanor Hill, Department of Defense Inspector General 48

Estimated to save the government over $6 billion a year. 49

The Office of Management and Budget (OMB) has made a variety of bureaucratic changes to weaken the Board and its small staff, and legislation to make further changes is under consideration in Congress. 50 At Congressional direction, a Panel has reviewed the Board. (See Appendices G and H.) The Panel suffered from blatant conflict of interest - half of its members were from industry, including Northrop Grumman, which has paid $3.3 million in recent years to settle fraud claims against it under the False Claims Act, 51 and AlliedSignal, which was recently found by a Defense Department Inspector General investigation to have grossly overcharged the government for spare parts. Not surprisingly, the Panel recommended weakening of the Board's Standards. (See Appendix I)

It does not normally make sense to cut back on highly profitable activities. Drastically cutting oversight personnel blinds the government in its oversight of tens of billions of dollars of contracts each year. This serves only to make the government and the taxpayer highly vulnerable to exploitation by an industry with a blemished track record. There can be non-monetary costs, too: in August 1999 a draft GAO report found that the Defense Security Service, which conducts background checks for security clearances, had a backlog of half-a-million cases. Officials cited as one cause the Administration's Reinventing Government personnel cutbacks at the agency - since 1989 the staff was slashed from 4,080 employees to 2,466. 52

Unfortunately, Vice President Gore's National Performance Review regards oversight personnel as part of the problem:

"As we pare down the systems of overcontrol and micromanagement in government, we must also pare down the structures that go with them: the oversized headquarters, multiple layers of supervisors and auditors, and offices specializing in the arcane rules of budgeting, personnel, procurement, and finance. We cannot entirely do without headquarters, supervisors, auditors, or specialists, but these structures have grown twice as large as they should be." 53

But auditors, investigators, and other oversight personnel - who produce large net savings for the taxpayer - should not necessarily be lumped together with general management personnel. Again, Reinventing Government plans took steps in the right direction, but then were pushed too far.

The ideological goal of reducing oversight to work more "in concert" with the defense industry may explain the rush to cut staffs without doing sufficient monitoring and assessment of whether more oversight can be done with less personnel. The situation is made all the more dire by the increasing demands being put on oversight agencies. In the next few years they will have to deal with:

• A planned increase in the amount of spending on procurement contracts.

• New requirements to balance the federal government's accounting books.

• A newly-mandated outsourcing of work formerly performed by the government, which will increase the number of contracts, and hence management and oversight requirements.

• A hampering of competition by the recent wave of defense mega-mergers. Competition used to be a silent ally in keeping contractors from playing games with the rules.

Acquisition Reform: "Streamlining" Dollars from Our Pockets Another illustration of how Acquisition Reform has gone off track is the Administration's proposals to start "streamlining" other contracting rules called the contract cost principles. 54 The initiative demonstrates the inconsistency of Acquisition Reform in claiming that it is merely trying to adopt commercial practices, but actually is asking for an even sweeter deal for industry.

Paying for Luxury Hotels Again The cost principles are used, for example, to determine which costs that a contractor wants to bill to the government under a contract are "allowable," or payable (e.g., salaries, material), and which are "unallowable" (e.g., costs of alcoholic beverages, club memberships).

Publicly, this streamlining is supposed to be about "Civil-Military Integration" - the merger of defense and commercial industries - which is supposed to bring technical and cost benefits. However, this latest initiative merely removes long-standing ceilings placed on defense contractor travel and relocation costs billed to the government. These ceilings - which ironically are based on commercial indices - limit contractors to the same reimbursements that Federal employees can receive for hotels, meals, and moving expenses.

Since the amounts that Federal employees may be reimbursed are set at standard commercial rates, however, contractors are already limited to operating as the commercial world does. The new initiative, however, wants to eliminate any constraints, and let contractors charge even more than commercial standards. The ceilings were originally put in place to curb abuses such as claims for luxury hotel suites and excessive meal costs while performing government contracts. (See Appendix J)

If the cost principles are weakened, horror stories about luxurious executive lifestyles at taxpayer expense are likely to come up once again. A recent GAO report notes how contractors charging travel rates much higher than the Federal standards contributed to excessive Department of Energy travel expenditures. Acquisition Reform should not be about making it easier for corporate officials to bill the taxpayer for $300-a-night hotel rooms. 55

Accepting Data That Need Not Be "Current, Accurate, and Complete" A final example of the heedless attitude prevalent in the Acquisition Reform era is that the Federal Acquisition Streamlining Act and the Clinger-Cohen Act now allow use of cost or pricing data that oftentimes is not required to be "certified." Such uncertified contractor cost or pricing data is that which "need not be current, accurate, and complete," and is therefore far less useful for determining whether prices charged to the government are fair or not.

Accuracy of cost information is not a trivial matter: yet another investigation by the DOD Inspector General, this time a not-yet-released study, was reported in June 1999 to have found millions of dollars worth of overcharging by AlliedSignal - and attributed them to the flawed, inaccurate, and outdated pricing information provided by the company. The IG reportedly concluded that at least $53 million could be saved through the year 2005 with better data. 56

In an Orwellian attempt to confuse the situation, uncertified cost data is now referred to in the government as "information other than cost or pricing data" and certified data is referred to as "cost or pricing data." Since uncertified data apparently cannot be relied upon, when submitting cost data, contractors should be required to certify the data.

The $435 Hammer That Won't Go Away Rocked by the spare parts horror stories of the 1980s, the Pentagon searched for some cover. They found it in the theories of a Harvard professor, Steven Kelman. Professor Kelman's theory was that the spare parts horror stories were a myth, and were caused by an accounting procedure called the "equal allocation of overhead." At the time, however, the equal allocation claim was exposed as bearing no relationship to reality.

Now, more than a decade later, Acquisition Reform advocates are turning to the same hoax, and astonishingly, Professor Kelman shows up as a major architect of Acquisition Reform - he was head of OMB's Office of Federal Procurement Policy during the early Clinton Administration. A December 1998 National Journal article quoting Kelman led with the alleged revelation that a famous defense scandal story from the Reagan years - the $435 hammer - was a "myth." By implication, all the other horror stories of overpricing were myths too. (See Appendix K)

According to this hoax, the outrageous overcharging of the day had a simple and innocuous accounting explanation: simple items like hammers had an amount of company "overhead" expenses allocated to them equal to the amount allocated to much more complex and expensive items. Allocating large amounts of overhead "equally," rather than in proportion to actual value, would naturally lead to bizarre outcomes like $435 hammers.

Unfortunately this convenient explanation was simply not backed up by the facts: contractors did not use such bizarre procedures - in fact they would not be permitted by Cost Accounting Standards. In the 1980s the Project On Government Oversight (then known as the Project on Military Procurement) worked extensively on Defense Department overcharging scandals and rebutted the equal allocation hoax when it first appeared. Simple examination of the data showed that allocation of the alleged equal amount of overhead as Kelman claimed would mean that many cheaper items found on contract price lists would actually have a negative price once the "overhead" was taken away. (See Appendix L) The Project On Government Oversight pointed out that the proponents of the hoax actually never produced cases of the "equal allocation of overhead," and in fact the Air Force was forced to admit there were no cases. (See Appendices M and N)

Pentagon whistleblower Ernest Fitzgerald traces the history of the "equal allocation" hoax in his 1989 book The Pentagonists. Fitzgerald presciently foretells that, "Doubtless in the future other writers as gullible as George Will and Professor Kelman will front for the Pentagon again." Who would have known that the original author of this hoax would return in the White House more than a decade later?

The Solution: How to Stop De-Inventing the Wheel Acquisition Reform is not necessarily what it sounds like - it is not reform in the old sense of tightening protections against contractor overcharging. To the contrary, it has focused on weakening or bypassing controls - and claiming that the free market will protect the government. But the real world is more complicated, and policies should be revised to take into account the complexities of the free market, and the necessary and desirable contracting and accounting procedures that aid the government in negotiating with large and powerful defense contractors. The following proposals, including suggestions for legislative changes, could help ensure that the new reforms do not come at the cost of crippling previous reforms:

Restore meaning to the definition of "commercial." Commercial status should only apply to items that are bought and sold widely in true free market. This would require:

1. Restore the definition of commercial as actual sale of specific items to the general public, rather than the loosened definition of a commercial item as one not necessarily sold to the public, but merely "offered for sale."
2. Also, restore the definition of commercial to mean a large free market -- one that has a substantial level of sales. The Federal Acquisition Reform Act (Clinger-Cohen Act) watered down standards defining a substantial level of commercial sales, and if there is not a large market with numerous buyers and sellers, the "prices" set by contractors should not necessarily be relied upon for government purchases.
3. Finally, restore the definition of "competitive bidding" to require at least two bidders. The current alternative says that there is competition even if there is only one bid, as long as others could have bid. The phrase "sole-source commercial" is also an oxymoron - commercial exemptions should not apply when the supplier has a monopoly.

Clarify that the government can and should still negotiate actively for some commercial items. Make clear that government contracting officers have full authority to pursue the best commercial price by negotiating down from "list" prices. Commercial prices are sometimes negotiable to other companies and individuals, so there is no need or rationale to prevent the government from negotiating in such cases too. Make clear that the "commercial price" is not necessarily whatever a contractor chooses to claim or list in its catalog, but rather the price that the government or a company could negotiate, based particularly on the normal commercial practice of bulk discounting.

Restore the use of cost or pricing data where prices are not set by a true free market. Since commercial firms large enough to have "buying power" collect cost data from their suppliers, allowing the government to do so also is merely following best commercial practice. The data obtained should be "certified" data.

Preserve funding for the auditors, investigators, and rule-setting Boards like the Cost Accounting Standards Board. Many of the oversight officials save us far more than they cost. To keep cutting back on their numbers is to throw away money.

Defend the False Claims Act against industry assaults. The False Claims Act provides increased protections against fraud. It continues to be a target for industry lobbying. It, and the other reforms put in place to prevent abuses, should be strengthened and not weakened.

Improve price-based contracting by increasing competition and reversing the trend of mergers leading to fewer competing contractors. Ensure that adequate competition exists wherever possible, and where it cannot, negotiate vigorously based on cost analysis of what products should cost now, not extrapolations of what was paid (or overpaid) in the past.

If the Administration and Congress are serious about using Acquisition Reform to adopt best commercial practices, they need to focus more on the most basic ones - such as testing and developing products fully before buying them - and to give government officials the ability to make use of all best commercial practices, even when it means that defense contractors do not get everything they want.

Following Pentagon acknowledgment of "readiness" problems and after the war in Kosovo, defense budgets - and procurement spending - are being increased sharply. For this reason it is especially imperative for us not to forget what we already know about good acquisition reform - there is no need to re-invent the wheel. If we do forget, the budget surpluses the Defense Department is enjoying will quickly be frittered away on overpriced weapons and parts, and the taxpayers' money will, once again, be wasted.

IF YOU WANT TO KNOW WHY CRIME AND VIOLENCE IS SO HIGH IN BALTIMORE-----LOOK BELOW AT HOW BAD PUBLIC POLICY IMPOVERISHES JUST TO ENRICH A FEW!

ALL OF OUR PUBLIC ASSETS ARE BEING HANDED TO RICH DEVELOPERS FOR NEXT TO NOTHING IN AREAS SLATED TO HAVE HIGH PROPERTY VALUE.  IF KEPT PUBLIC PROPERTY------THAT WOULD BE PUBLIC WEALTH.  EVERYONE SHOULD BE CONCERNED BECAUSE THIS IS NOT ONLY ABOUT GETTING THE WORKING CLASS OUT OF CITY CENTERS....

WOMEN AND CHILDREN ARE THE VICTIMS.

IT IS ABOUT TAKING PUBLIC LAND AND ASSETS THAT MIDDLE-CLASS TAXPAYERS BUILT.

The Obama Administration is privatizing all that is public faster than Bush and that includes the Housing Urban Development agency  HUD.  Federal policy sends all kinds of taxpayer money to dismantle public housing and projects with the idea that these are bad for the poor and communities.  This is likely true------concentrated poverty in these projects is not a good idea.  The problem is that there is no intention of providing any other opportunity and in fact, the policies are leaving even more people homeless and impoverished AND THE MONEY IS BEING FUNNELED INTO THESE CORPORATE DEVELOPMENT PROJECTS.

Below is a good article giving a long view of public housing policy. I include just the Obama years because we need to look at again, a neo-liberal saying they are going to do something progressive and not doing it.  So, with public housing like with fraud,......supposedly we cannot easily seek justice because the definitions are left vague.  OBAMA HAS LEFT PUBLIC HOUSING DISCRIMINATION VAGUE AS HE HAS IGNORED FRAUD. 

What I want to emphasize is that tons of Federal money is coming for public housing and being funneled into projects that are making the rich richer and doing nothing for the people paying the taxes.  Here in Baltimore, consolidation of real estate into the hands of a few is indeed aided by these funds and it is all illegal.  So, the low-income lose and the taxpayers lose. 

ALL GOES TO THE PEOPLE AT THE TOP.  WE NEED THAT MONEY BACK.  IT IS THE PUBLIC'S MONEY.

Living Apart: How the Government Betrayed a
Landmark Civil Rights Law
 
 
by Nikole Hannah-Jones
ProPublica,  Oct. 28,
2012, 11 p.m.




A 2009 internal HUD study found that many communities were not even bothering to complete the required fair housing paperwork when they applied for block grants.
In a sample of 70 applicants, 35 had not provided an "analysis of impediments" to fair housing, prompting HUD to conclude that they were "apparently not performed at all." Nearly all of the reports received were considered substandard, the review found.  A year later, investigators from the Government Accountability Office confirmed what civil rights advocates had long known: HUD's system for ensuring compliance with the fair housing law was a sham.
GAO officials reviewed documents filed by 441 recipients of
block grants, a step HUD officials do not routinely take.


They found that about one-third of the fair housing materials were out of date. More than one in 10 hadn't been updated since the '90s. Communities in the Midwest and Northeast — the most-segregated regions of the country — performed
the worst.

The GAO dismissed the analyses of impediments to fair housing that some communities provided as worthless because of their "brevity and lack of content." Most did not offer time frames for when the communities would
eliminate barriers to integration or include the required signatures of the relevant elected officials.


Investigators noted that 25 recipients of block grants had filed no analysis, "raising questions about whether some jurisdictions may be receiving federal funds without preparing the documents required to demonstrate that they have taken steps to affirmatively further fair housing."


According to the GAO, HUD staffers in seven regions had read the key documents for just 17 of 275 block grant recipients. Efforts to ensure "the integrity of the AI process...were not common," the report said.

The GAO made a number of recommendations. But HUD didn't even adopt the simplest one: to require that grantees submit their analysis of impediments for HUD to review.
In interviews, many HUD officials acknowledged they have no idea how to enforce the provision for affirmatively furthering fair housing. Already overstretched, they focus on what is clear: the disability accommodations provision of the Fair Housing Act. It's simple, they say, to check off whether
an apartment door is wide enough for a wheelchair or if a parking lot has enough handicapped spots.


But compliance officers stumble when it comes to race and segregation.  One said she received little training on how to apply the 1968 act to block grant recipients. "The one week of training I was sent to, you focus on the civil rights law as a whole," she said. "You're not focused per se on
segregation." The official said she did not review broader issues such as the impact of discriminatory zoning "because I don't even know what they are."


Rolando Alvarado supervised fair housing enforcement for HUD in New Jersey for more than a decade. When asked to define "affirmatively furthering fair housing," he exhaled and then paused. Ten seconds passed.  "That is tricky. There is no exact regulation, it's a gray area," said Alvarado, who retired in 2009. "I've never seen anything that clearly defines
that in my time at HUD."


Alvarado said he relied on his staff to ensure enforcement of the mandate. But how could his subordinates enforce something he himself could not explain?
"You are right. I don't know," he said. "It was reliance on if staff had conducted enough investigations and compliance reviews they would have an inkling of what to look for."


Alvarado said he could not recall a single instance in which he challenged a community's assertions about its efforts to further fair housing. When it comes to these issues, he said, "You are basically taking them at their word."  After the Westchester settlement, in which the judge criticized the
department for failing to enforce the law, the word came down from HUD leaders that there should not be a recurrence. Officials say that directive was not accompanied by any training, additional staff or instructions on what practices
should be examined.


"The message is that we need to be more aggressive but absent the new rule, there is very little guidance as to what would constitute a failure to affirmatively further fair housing," said a senior fair housing official. "There's a car here and nobody knows how to drive it."


Trasvina promised Congress in January 2010 that by the end of the year the agency would release a rule requiring communities that receive money from the
agency to "promote integration." More than two years later, those regulations have not been issued. HUD has declined to say when they might appear or give a reason for the delay.


The focus of HUD's civil rights work appears to have veered away from race.  In March, the department issued a rule banning discrimination against gay and transgender people in HUD-assisted housing and by lenders receiving guarantees
from the Federal Housing Authority.

Asked what they are doing to fulfill the Fair Housing Act's mandates, HUD officials pointed to Joliet, Ill., where HUD has withheld block grant funds over the city's attempt to demolish a mostly black federally subsidized apartment complex. HUD also has withheld block grant money from Westchester County, which the Justice Department says has failed to live up to the terms of its settlement agreement.


Brian Sullivan, a spokesman for the housing agency, said in an email that HUD "very nearly" cut off block grant money for Galveston, Texas, and threatened to do so in Delaware's Sussex County.  But other communities with serious questions about fair housing continue to receive federal housing dollars, and fair housing officials say the agency still
brushes civil rights concerns aside. One senior housing official pointed to New Orleans, which hasn't lost its block grant despite the Department of Justice lawsuit. "If that's not enough to reject a grantees' funding," he said. "Any finding from the fair housing office will not ever be sufficient."


Another example is Waukesha County, Wisc. HUD launched an investigation of the 90 percent-white county last year following a complaint from a fair housing group. The group accused the county of allowing its nearly all-white communities to block rental housing to keep out African Americans and Latinos from neighboring Milwaukee. African Americans and Latinos account for 57 percent of
the city's population.  Yet the agency treats Waukesha County no differently from racially integrated Montgomery County, which has a 30-year track record of placing affordable
housing in its most prosperous neighborhoods. Waukesha still receives its automatic influx of HUD dollars.


"It is fair to say, it is accurate to say, that the only situation in which HUD is doing anything effectively to affirmatively further fair housing are situations where there has been litigation," said Florence Wagman Roisman, a law professor at Indiana University. "Then it does as little as possible, as
grudgingly as possible."

Prospects for substantial change appear dim.


Obama administration officials say that if the president is re-elected, they will complete work on the long-delayed rules defining what it means to "affirmatively further fair housing."


At a private fundraising event in Florida in April, Mitt Romney said he would consider closing down HUD if he wins the election."I'm going to take a lot of departments in Washington, and agencies, and combine them," he said. "Things like Housing and Urban Development, which my dad
was head of, that might not be around later."


Have you experienced discrimination under the Fair Housing Act?
Share your story with us.


ProPublica's Kirsten Berg contributed to this story.



_________________________________________-

NEO-LIBERALS HATE ALL WAR ON POVERTY AND NEW DEAL POLICY AS MUCH AS REPUBLICANS.  SO LABOR AND JUSTICE ARE BEING ATTACKED BY NEO-LIBERALS.  DO NOT BELIEVE THE TOKEN PROGRESSIVE BONES BEING THROWN.

What to do with public housing and the people they support.  Well, logic has it that you can demolish the high-rises with the Federal money and invest in low-income housing within all Enterprise Zones.  That is what should be happening.  All of those public housing are on property in the city centers that will become valuable as development continues so keeping them public.......a park, public community/recreation centers, etc are what public interest requires.  Yet, in Baltimore, all of this public land is going to developers.....again in large parcels to control all of how the community will be developed. MARKET-RATE IS THE THEME!!!


Below you see exactly what they intend to do in Baltimore and Maryland-----what this does is eliminate any future use of that property for the public AND IT KEEPS THE PRIVATE CORPORATION FROM PAYING PROPERTY TAXES ON THIS DEVELOPMENT.  In Baltimore, they will even get deferment on all other taxes and they will get tax breaks for remodeling the building.  It's like placing public garages under private buildings to have public subsidized private parking.  Remember, all of this public housing property will become high-end as development continues saving tons of money in property taxes.

EVEN IF YOU WANT TO BE RID OF LOW-INCOME PUBLIC HOUSING....THINK OF THE PUBLIC LAND INVESTMENT AND WHERE THESE PEOPLE GO----IT ALL CREATES THE ENVIRONMENT OF CRIME AND VIOLENCE AS PEOPLE LOSE JOBS AND HOMES.


New York Public Housing Land To Be Leased For Pricey Apartments

By MEGHAN BARR and JENNIFER PELTZ 
03/08/13 03:17 AM ET EST                                        
 
NEW YORK -- New Yorkers pay dearly for the privilege of living in one of the world's great cities. But would they shell out top dollar for an apartment on the grounds of a public housing project?


That scenario could play out across Manhattan under an unprecedented proposal by the city housing authority to lease out public housing land and allow developers to build market-rate apartment buildings – intended for much wealthier residents – on areas currently occupied by basketball courts, parking lots and outdoor plazas.



City Council Moves to Stall Land Leases at Public Housing
By  MIREYA
NAVARRO
Published: October 10, 2013    
 
    
The New York City Council and a group of tenants sued
the Bloomberg administration on Thursday over plans
to lease land in public housing developments for the creation of market-rate apartments.     
 
The lawsuit, filed in State Supreme Court in
Manhattan, stems from a long-running controversy over the New York City Housing Authority’s proposal to
raise revenue for repairs and capital projects by allowing private developers to build on the grounds of eight public housing projects in Manhattan.       


Housing officials have given developers a Nov. 18
deadline for proposing ideas — so-called expressions of interest — but it was unclear whether they would be able to select construction projects before the change in administration that will follow the November mayoral election.        

Lawyers for the plaintiffs say the lawsuit is intended
to forestall any deals with developers before Mayor Michael R. Bloomberg’s term is over. “The city has the ability to designate a developer and tie the hands of the incoming administration,” said Steven Banks, attorney-in-chief of the Legal Aid Society, which is representing the tenants. “The new administration would be without remedy.”       


Democrat Bill de Blasio, the leading candidate for
mayor, has not ruled out developing land owned by the housing authority, but he has said he favors building affordable housing, not market-rate units. The public housing system has more than 400,000 residents and $6 billion in unmet capital needs.       


The Council objected to being left out of the
decision-making regarding the plan to build on public housing grounds. In their lawsuit, the plaintiffs seek to have the city rescind the request for expressions of interest. They argue that under state law, housing officials have no authority to lease public housing land for high-income residents and that
they must submit their plan to the Council for approval.       

“There’s still a need for more low- and middle-income
housing, and that should be the city’s priority,” said Rosie Mendez, who heads the Council’s committee on public housing.       


In response to the lawsuit, the housing authority
issued a statement saying that it “has heard significant interest from developers and looks forward to receiving their proposals next month.”        

“It’s unfortunate that the City Council is attempting
to block a proposal that would generate significant revenue for the New York City Housing Authority — money that would go directly into developments and repairs for residents,” the statement said.



FEDERAL MONEY YET AGAIN FUNNELED TO THE SAME INVESTMENT FIRMS/DEVELOPERS GETTING TAX BREAKS FOR DEVELOPING IN UNDERSERVED COMMUNITIES AND ALL THE PEOPLE LIVING IN THESE COMMUNITIES WILL BE DISPLACED.


What Rawlings-Blake and O'Malley with City Hall
are doing is privatizing all that is public.  Public employee unions are busted and pay is lowered to poverty.  This is what happened as MTA is privatized with VEOLA and it is what is being tried with longshoreman unions at the Port of Baltimore.  It is all union-busting and impoverishing of labor.  So, why are unions backing all of Maryland's neo-liberals every election rather than running labor and justice?


 The US Constitution protects equal opportunity and access in housing and education.  What Baltimore is doing is illegal because they not only ignore equal access, they try to pass laws that say 'we will accept Federal funding for development but not honor equal access and opportunity laws'.  They pretend they can do this and they cannot.  It is public malfeasance.

Below is  a good analysis of Baltimore's situation.  It is too long to copy but check it out.  I would just like to emphasize throughout is the disregard of real data and deliberate disregard to Rule of Law and adherence to Federal requirements.  This is important in getting the public's wealth back and hopefully helping those displaced with justice.  Breaking these laws is not only public malfeasance but fraud on the part of the developers knowingly failing to meet terms of Federal and State contracts.


September
2007
Volume 20, Number 4


What we think about, and what we’d like you to think
about

THE ABELL REPORT
Published as a community service by The Abell Foundation


Erroneous reporting leads to a
lack of public concern


“Baltimore Housing currently serves
over 40,000 residents in more than
14,000 housing units.” This statement
appears (as this study is being written) on
the city’s public housing website. HUD
also reports a similar number — 14,446.
But the true numbers of public housing
units being used in Baltimore are far
lower and can be found in the Housing
Authority’s most recent annual plan, as well
as City Hall’s Citistat Reports.
Nevertheless, the Housing Authority and
HUD continued to use these outdated
numbers in 2007. The HUD official
who oversees Baltimore’s housing
authority appeared unaware that as of
spring 2007, Baltimore only had 10,748
available units in its inventory (with
1,123 of them vacant).
The absence of accurate and consistent
reporting and the lack of analysis of
the loss of public housing has served as
a convenience in a political climate
where even a suggestion of building a
small number of public housing units
can cause a neighborhood uproar.

A lack of public
participation


Housing advocates have complained
of a lack of public input in the demolition
plans, despite federal law requiring
a housing authority to “conduct reasonable
outreach activities to encourage
broad public participation” in its annual
public housing plan.  At a sparsely
attended April 17, 2007 hearing on the
future of Baltimore’s public housing,
several advocates protested that they
found no public notice of the event, and
questioned why it wasn’t posted on the
agency’s website.

Housing officials said sufficient
notice was given when they advertised
in The Baltimore Sun and the Afro-
American in March and at the Enoch
Pratt Free Library. The Baltimore Sun
notice, however, was a tiny, one inch by
three- and three-quarter-inch ad buried
in the classified ads that ran for three
days, a month before the hearing.  During
the hearing, no copies of the 100-
page plan were available (though an
electronic copy was on HABC’s website),
and housing officials gave no
overview or public explanation for their
decision to demolish projects.  One
advocate accused housing officials of
trying to “circle its wagons” against
public participation and called the plan
“a roadmap for the continued decline of
public housing.”  Each of the eight
people testifying was given two minutes to speak. The hearing was over in a half hour.

__________________________________________



 Equally important for citizens of Baltimore is the
fact that Baltimore HUD is probably the most corrupt of all corrupt agencies in Baltimore and as such all kinds of red flags will go up with these public properties.  Keeping this property in city central that will become valuable as
development occurs is the only thing to do in public interest.  We could build multi-income housing, parks, public community centers with this public
land.  Since Baltimore HUD is corrupt, they will hand it off undeveloped for cheap to a connected investor who will make tons of money on this property when development of this area is finished.  See why it is public malfeasance.

The second part to this is the workers who represent a
dying middle-class in Baltimore with the attack of middle-class jobs and leaving Baltimore families desperate and poor.  Extended families depend on these strong
jobs and it is this policy of killing Living Wage jobs that give us Baltimore's high crime and violence culture as people turn to drug dealing et al to survive. All for no good reason.

The City of Baltimore loses billions of dollars
to fraud and corruption and rebuilding public justice in the city would fill the  city's coffers and allow for a healthy public sector.  Handing all that is public to private ownership or public private partnerships is what fuels all the fraud and corruption.  We will need to investigate these sales to assure this is not yet another example of public malfeasance.  You see, these residents know the history of these promises to the underserved....the Federal money is used but none of the requirements to help the low-income are carried through.

Workers nervous about layoffs as Baltimore Housing Authority sells off  buildings Residents say they want protections from private developers in writing

Below you see the other side of what this privatization brings-----more public sector jobs
lost with the prospect of private jobs paying nothing.

The Lakeview Towers
  on Druid Park Lake Drive are among the first of 22 housing complexes to be 
offered for sale under a plan by the housing authority.   

                       
(Kim  Hairston, Baltimore Sun / August 10, 2005)            
                                                               
 
Union officials warned Thursday that as many as 200 maintenance workers and  building monitors at Baltimore's public housing properties could lose  their jobs under a plan intended to infuse the buildings with private money.


Employees such as maintenance mechanic Lucky Crosby Sr., who has worked for  the Housing  Authority of Baltimore City for a decade, say they took the jobs with the  understanding that the pay was relatively low, but the work was secure.


"By working for the Housing Authority, we joined the credit union so we could buy homes that we have to finance," said Crosby, 46, of Sandtown-Winchester.  "We  bought cars that we have to finance."


Housing Commissioner Paul T. Graziano acknowledged that some jobs might be  lost as 22 of the agency's 28 properties are sold to developers over the next 
two years. He said the Housing Authority is keeping some positions vacant and  filling others with temporary workers to reduce the potential number of 
layoffs.  Graziano said the agency is encouraging the developers to hire some of the  workers, and to keep them apprised of the latest information as soon as it's 
available.


"This is a very large change, a massive change in the way we're doing  business, and I understand change does create anxiety," Graziano said. "We're  trying to provide whatever assurances we can."  The Housing Authority has identified 11 developers to buy the buildings.  Several of them declined to comment Thursday.


The federal government is offering tax credits to developers who buy and renovate public housing.
Officials say the effort is intended to improve the lives of low-income  Americans. But in the case of the maintenance workers, Anthony Coates said, it's 
doing just the opposite.


Coates, president of AFSCME Local  647, said members who lose their jobs could lose their homes.


"We're the working poor," he said. The maintenance workers, who earn between about $15 and $20 an hour under  their most recent contract, want the Housing Authority to tell them how many  workers face layoffs, Coates said.

He said knowing the scope of the layoffs is especially important for the  older maintenance workers on staff, who may find it harder to get new jobs.

Coates accused the agency of stalling contract negotiations. Senior housing 
officials rejected the accusation, and said a meeting is scheduled for next  week. They said inclement weather forced them to postpone some meetings.


Anthony Scott, executive director of the Housing Authority, said the federal 
program has unfolded rapidly. The Housing Authority began preparing its 
application to the U.S.  Department of Housing and Urban Development over the summer, submitted it in  October and found out it had been approved in
December.

"We informed our employees as quickly as we could," Scott said. Graziano said the agency already has a "significant number of vacancies," but declined to say how many.

It's "a moving target," he said.

On top of that, he said, at least 10 percent turnover is expected each  year.  He said Housing Authority workers would be attractive employees for the 
developers
______________________________________________
 Neo-liberals are working for control of all real estate by a few.  The good news is that most of the wealth lost to the middle-class is through fraud and needs to come back.  Think of the tens of millions of homes caught in the subprime loan fraud and foreclosed....many families need these homes replaced.  So, the middle-class is still the middle-class.....just waiting for justice!

If you notice the list below include the same financial and investment firms that created and profited from the massive subprime mortgage frauds and indeed, they all still owe trillions in total fraud.  We can rebuild all public housing by simply recovering the fraud.  Yet, the plan was to steal the homes through fraud and then hand all the city center property to those same people and that is what these Enterprise Zone and Public Housing deals do......with taxpayer subsidy as the cherry on top!

THE LOW-INCOME LOSE, THE TAXPAYERS LOSE, AND THE MIDDLE/WORKING CLASS LOSE ALL TO NEO-LIBERALS WORKING FOR WEALTH AND PROFIT.


10 Largest Private Equity Real Estate Firms               
         by Andy
Macalaster • February
21, 2010    
 

The PERE 30 (from Private Equity Real Estate Magazine) revealed that the top 30 real estate private equity firms raised $211.9 billion over the past five years, up from $190 billion as calculated by last year’s ranking. Listed are the
top 10 largest real estate private equity firms.


As a note: the top two largest firms raised $25.6 billion and $20.15 billion respectively in dedicated real estate funds between January 2004 and April,
2009. Together the pair raised a fifth of all the direct-investment capital secured by the world’s 30 largest real estate private equity firms.


10. Westbrook Capital Partners
Westbrook has raised and invested $10 billion of equity in over $35 billion of real estate transactions in major markets throughout the world. Westbrook’s investment equity is
committed by a broad base of institutional investors, which includes public and private pension funds, endowments, foundations, and financial institutions.


9. The Carlyle Group
The Carlyle Group is one of the world’s largest private equity firms, with more than $87.9 billion under management with funds across four investment disciplines (buyouts, growth
capital, real estate and leveraged finance). Carlyle has committed more than $3.6 billion of its own capital to its funds.

8. Tishman Speyer
Tishman Speyer has acquired, developed and operated over 325 projects totaling over approximately 116 million square feet and more than 92,000 residential units,
and a property portfolio of US$50.2 billion internationally.


7. LaSalle Investment Management
LaSalle Investment manages approximately $39.9 billion (as at Q3 2009) of private and public property equity investments. Their client base includes public and private
pension funds, insurance companies, governments, endowments and private individuals from across the globe.


6. Lehman Brothers Real Estate Partners
Lehman Brothers Real Estate Partners has raised over $10 billion in capital over the last five years with a total of $44 billion in transactions among 1,150 properties.


5. Beacon Capital Partners
Since its inception in 1998, Beacon Capital Partners has sponsored six investment vehicles representing over
$8.5 billion aggregate equity capital from various endowments, foundations and pension funds. Beacon Capital Partners was established after the predecessor public company, Beacon Properties Corporation (a New York Stock Exchange listed
company), merged with Equity Office Properties Trust in a transaction valued at $4 billion.


4. Colony Capital
Colony Capital is a private, international investment firm based in Los Angeles, California. The company focuses on real estate opportunities around the world either on its own, through funds run by the company, or in joint ventures. The company is run by billionaire Tom Barrack.


3. Goldman Sachs Real Estate Principal Investment Area

The Real Estate Principal Investment Area (REPIA) manages a series of global opportunistic real estate funds, known as the Whitehall Funds, and other niche products. REPIA, through the Whitehall Funds, offers Goldman clients the opportunity to co-invest in real estate and real estate related assets
worldwide.


2. Morgan Stanley Real Estate Investing
Morgan Stanley Real Estate has the longest uninterrupted real estate industry presence of any Wall Street firm. MSREI has raised over $20 billion in capital in the last five years and has completed over $58 billion in transactions.


1. The Blackstone Group
Blackstone’s real estate fee earning assets under management totaled $23.7 billion as of September 30, 2009.
Assets include office, hotel, healthcare, retail and multi-family properties around the world.  Blackstone has the world’s leading hotel portfolio, as well as one of the largest portfolios of office buildings in the United States.
Blackstone’s real estate group currently has over $12 billion of equity capital available for investment, the largest pool of capital for real estate investments available today.


For a full list of the top 30 real estate private equity firms with an executive summary click here.

_________________________________________

Below you see reverse mortgages as a tool to make sure homeownership does not go beyond this generation for most of the middle/working class.  Land ownership is for the gentry you know!  Reverse mortgages are not always bad.  We had our mother's retirement supplemented by reverse mortgage.  The problem these least several years is that people are not having the money for retirement because it was stolen and not because they did not save.  These are the people being forced into reverse mortgage now. 

THESE HOMES SHOULD NOT BE LOST TO FAMILIES AS FRAUD AND DAMAGES HAVE NOT BEEN RECOVERED TO THE PUBLIC. 

Remember as well, Obama's Administration is deliberately allowing a manipulated inflation rate of near zero lower all of the public's COLAs by hundreds of dollars.  So seniors and vets owning homes are losing hundreds of dollars in monthly payments because of what is a 'manipulated' inflation rate.  Never in the history of public programs has the COLAs not been 3-5% as inflation never has been lower.  Please look at my blogs on faulty inflation data if you cannot see that what you are buying at the store is costing much more.

Low-income people are being hit from every direction in fraud and corruption making sure they do not have what they need for retirement and neo-liberals are in office to see this happens.  It is not only republicans.....it is neo-liberals running as democrats!


Sun Aug 18, 2013 at 06:45 PM PDT


Reverse mortgages: The final blow killing middle class
wealth
byEgberto WilliesFollow forDaily Kos


 Many fellow Americans that have worked their entire lives, weathered several
recessions and depressions, put their children through school, helped many in
need, and faithfully paid their mortgages for decades are now being taken advantage of once again. Most have followed all the rules necessary to be considered fiscally responsible, yet because of "legal fraud" by the financial sector and policies effected by purchased politicians, their years in retirement
will be compromised.


The Plutocracy, the one percent has walked away with a large percentage of their 401Ks, their SEPs, and to some extent their financial security. Because of stagnant or falling real wages, much of the working middle class have maxed out on their credit in the attempt to maintain their standard of living. For a Plutocracy that feeds on perpetual growth, from where will it feed now? An old and well-crafted financial instrument known as the reverse mortgage is being marketed on steroids to a baby boomer population.


Before any reader of this article that may have already taken out a reverse mortgage gets upset, please note that it is understood that for many this is the
only option left. That said, every American should be fighting for a system that allows all the ability to build a nest egg that can be transferred to the next generation.

 Back in 2010, Sen. Fred Thompson was a spokesman for AAG and was pushing their government back reverse mortgages. I was writing my book when the
commercial came on and I wrote the following in a chapter right then.
While taking a short coffee break from writing this book I saw former Republican Senator Fred Thompson, an AAG spokesman hawking reverse mortgages. He
says:
“Hi folks, I am Fred Thompson. Now like me you probably heard a lot about
reverse mortgages but weren’t quite sure how they worked or whether they would
be the right financial solution for you. Well take my word for it and hundreds
of thousands of other Americans who have used the Government Insured reverse
mortgage as a safe effective financial tool. If you are 62 year or older and own
your own home, give AAG a call and find out how a reverse mortgage can help you.
I am extremely proud to be associated with AAG, a national reverse mortgage
lender that is helping seniors overcome their financial worries and live the
lives they’ve dreamed. Why don’t you find out more by calling AAG today? Find
out how much call you may qualify for today.”


My first thought was how could a former Senator, a senior, a person who likes to tout morality be so callous to entice the elderly to splurge their wealth away. Most Americans have a large portion of their wealth in their homes. Having
some wealth to transfer to one’s offspring helps the next generation to the next financial level.


Unfortunately, yet another financial instrument designed to use the ignorance of the average American citizen’s knowledge of our economic system to donate
their money up the wealth tree to the rich. At the end of the reverse mortgage’s term, the elderly is left without an asset to transfer to their offspring at the time of their death.


Ironically as this piece is being written Fred Thompson is back on with the 2013 version of his "working middle class pilfering" commercial.  The most deceptive part of the ad is stating that the owner of the house retains ownership of the home. You cannot own something that you cannot give to
someone free and clear. Even more ironic is that Thompson, a professed small government conservative, is pushing a product that depends on the good faith and
capital of the United States government.


Most Americans amass most of their wealth within their homes. Each generation in a responsible family is better off when the previous generation wills their assets forward. Reverse mortgages are yet another financial instrument that
stunts the growth of the middle class by encouraging home owners to extract the capital out of their homes and use it as a supplement to their retirement or to simply splurge. Inasmuch as most reverse mortgages are federally regulated, their upfront costs are very high. These costs amount to free cash for the bank and mortgage insurance companies, your money transferred to them for a marginal service.


The big dirty secret is that reverse mortgages, like student loans pre-Obama, are nothing but a no-risk gift to the bankers, a wealth transfer engine from the masses to a select few. When the "owner" of the home dies, the government pays
the bank any difference between the amount owed (interest plus principal) less the sale price of the home. If the heirs want to keep the home, they must pay the loan off in full. If the amount owed is more than the value of the home, the
heirs must pay 95 percent of what is owed to the bank with the government paying
the rest. What is the reason for the bank being in the transaction? It is there simply to extract from the government and the homeowner. They have absolutely nothing at risk for the profits they make.

Reverse mortgages mask a systemic problem that affects the American worker, a backward and inhumane retirement system. Every American worker makes a vibrant
economy possible by providing 40, 50 or more years of work, taxes, and spending. It is appalling that a worker is incapable of having Social Security capable of providing a decent living. No one should have to deplete all of their assets to
survive.


The trajectory in this country has been that the wealth and income of the very few at the top grows faster than the growth of the economy as a whole. This means that some of that growth is directly coming out of the pockets of the
working middle class in the form of lower wages, extractions from the government (tax dollars, interest payments, etc.), reverse mortgages, higher tuitions as states lower taxes, commercial student loans, etc. This is an unsustainable path
and it is leading to a country where the vast majority of citizens will have no assets. They will be functionally indentured servants. They will be nothing but a commodity, a unit of work and service.


Wake up America. Taking this country back from the Plutocracy will require education, resolve and action. Taking this country back will entail taking back what was stolen through well designed redistribution mechanism that foments a vibrant working middle class.

I WANT TO EMPHASIZE TO THE CURRENT MIDDLE-CLASS WHO HAVE THE VOICE AND POWER TO CHANGE THIS MORE-SO THAN THE WORKING CLASS AND POOR-----THIS SOCIAL REFORM THAT TAKES US BACK TO MEDIEVAL SERFDOM DOES NOT END WELL FOR ANYONE BUT THOSE NOW THE RICHEST.  YOU NEED TO SHAKE THESE NEO-LIBERAL BUGS OUT OF THE RUG OR YOU WILL BE LIVING IN MEDIEVAL EUROPE.

MLK WOULD SAY NAKED CAPITALISM HAS TO GO!!!!


Regarding MLK day and The Lines Between Us:

I attended a justice gathering this week that had people telling stories of abuse in the City of Baltimore. It paints the ongoing War Against the Poor in the city. Now, if you are middle-class and think gentrification of the city needs to follow the path being taken by sociopaths at the top of the income scale....you need to reflect as to where your family will be if these sociopaths are allowed to carry through their plans to eliminate WE THE PEOPLE and THE BILL OF RIGHTS with TPP----living under suspended Rule of Law brings everyone down! That was MLK's message in the 1960s and it is 10 times more relevant now that Clinton and Obama have created global corporate rule and now move towards ending US sovereignty giving all rights to rule to the heads of a few global corporations. Don't worry, it is all illegal and a COUP against the American people and will be NULL AND VOID.....but most will see their personal wealth disappear before we turn this around!

I was speaking to a wonderful lady shouting loudly against injustice in the city who tells me of long lines around the NORTH AVE social services office waiting to process information for FOOD STAMPS. She told me how people were made to wait for hours in these lines in the freezing cold and if they made it inside the process failed to complete registration. Given phone numbers to follow up they found no answer to these phone calls.
PEOPLE NEEDING FOOD STAMPS ARE BEING GIVEN THE RUN AROUND SO THEY BECOME DESPERATE AND GIVE UP IN BALTIMORE.

I explained that this was deliberate and taken from the Texas plan used now for a decade of moving social services to phone and online where, just as a consumer trying to get through with a product complaint and cannot speak to a real person.....this is happening in social services. So, Baltimore closed 2 major social services hubs and left this one facility open to process all the people while being understaffed. THIS IS A SIGN OF ENDING PUBLIC ASSISTANCE IN THE STATE. She told me how Mikulski and Cummings told her they were fighting for Food Stamps and extended unemployment and I shouted to those gathered that these pols are lying because they know these services are being dismantled in Maryland as they pretend to fight for them! Remember, Maryland amazingly fell below the limit for extended unemployment just as it is being pushed in Congress.....6.4% all without any sustained job growth. No one believes that figure and it is skewed to play the requirements. Just an aside, the same is happening with health care. No one using dental insurance because they are being abused and exploited by dental chains. Another situation of passing progressive laws and not enforcing them. Texas is now equivalent to a third world nation with all of its social restructuring and suspension of Rule of Law and Maryland is using Texas as a model for their structural changes.....neo-liberals and neo-cons......WHAT IS THE DIFFERENCE....THERE IS NONE. ALL OF YOUR INCUMBENT POLITICIANS KNOW THIS IS HAPPENING.

RUN AND VOTE FOR LABOR AND JUSTICE IN ALL PRIMARIES TO SHAKE THE NEO-LIBERAL BUGS FROM THE RUG.

So, what happens when public policy deliberately makes sure you cannot be employed, then you cannot get social services, and all of the wealth you accumulated is lost to corporate fraud, and police brutality and abuse has you in jail working for prison contractors making profits paying you $2 an hour? Baltimore has over 160,000 people of which 60% are at or below poverty most victims of O'Malley's zero tolerance criminal record.

THIS IS BALTIMORE'S MLK LEGACY AND IT IS A REALLY SAD STATE OF AFFAIRS. ALL OF THE TIME AND MONEY THAT GOES WITH MAKING SURE PEOPLE CANNOT THRIVE COSTS SOCIETY MORE AND LABELS THAT SOCIETY IMMORAL AND CORRUPT.

This MLK march will be about a revolution that will not be stopped by social programs meant to quell social unrest. It is growing, it is broad, and it will be sustained. When Rule of Law returns, we know that Statutes of Limitation is suspended when a government suspends Rule of Law.

Below you see where the conservative approach to ending welfare and social services because it 'makes people lazy' went.....and this includes closing brick and mortar buildings for social services and directing people to call and then ignoring them as is happening in Baltimore today! 

Remember, this is only about the richest getting richer.....it is not about sound public policy.  Clinton took a thriving and strong society with middle-class wealth, strong integrity and oversight over business and government, strong social safety nets and ended all of that just so a few at the top could become extremely rich.  THAT IS ALL.  It wasn't enough to be millionaires.....  Obama and neo-liberals today are trying to seal the deal by suspending all Rule of Law and public justice as we all get fleeced.

Welfare Reform in Texas Has Not Worked, According to University of Texas at Austin Researchers

Jan. 29, 2008  University of Texas, Austin

AUSTIN, Texas — Most Texas families who leave welfare remain in or near poverty and many are likely to return to the welfare rolls in the future, say University of Texas at Austin researchers.

For a new book, "Life After Welfare: Reform and the Persistence of Poverty," Laura Lein and Deanna Schexnayder followed 179 families who left welfare after the welfare reform act of 1996 was signed into law.

"We examine the ways in which the effort to 'end welfare as we know it' has played out in the lives of impoverished families in Texas who draw on welfare support," said Lein, a professor in the School of Social Work and Department of Anthropology. President Bill Clinton signed a welfare law in 1996, and President George W. Bush reauthorized the bill with more stringent requirements for welfare recipients in 2006.

Lein and Schexnayder, a research scientist and associate director of the Ray Marshall Center in the Lyndon B. Johnson School of Public Affairs, found the families experienced barriers to employment, confronted poverty even when employed and faced a failing safety net of basic human services as they attempted to sustain low-wage jobs.

"Have these reforms—ending entitlements and moving towards time limits and work requirement—lifted Texas families once living on welfare out of poverty or merely stricken their names from the administrative rolls?" they ask.

"If the goal of welfare reform was to reduce the welfare rolls, it was undeniably successful—at least in the short term," the authors said. "But if the goal was to reduce poverty and increase the well-being and stability of families previously on welfare, the results are far more complicated and disturbing."

Texas, with its early experiments with welfare reform and a relatively limited welfare program to begin with, is an important arena in which to study the aftermath of welfare reform, said Lein and Schexnayder, adding that federal lawmakers later increased the severity of welfare reform even more.

"Through the experiences of Texas welfare leavers, we can examine the potential outcomes of similar policy initiatives in other states as budgetary constraints continue to affect welfare policies," the researchers said.

University of Texas Press published the book. Daniel Schroeder, also of the LBJ School, and Karen Douglas of Sam Houston State University, contributed to the research.


______________________________________________



Next, I spoke with a group fighting for Expanded and Improved Medicare for All in Maryland.......A GREAT ISSUE!  What citizens in Maryland do not know is that Baltimore and Maryland have/are dismantling all of public health and with that the structures for entitlements like Medicare.  If you are fighting for universal care that is not Medicaid for All......the ACA idea of health care for all.....then you need to be shouting against the privatization of all of public health!  It is on steroids here in Baltimore and was the primary goal of City Health Commissioner Barbot and State Health Executive Sharfstein.......SEE WHY THEY DIDN'T HAVE TIME TO SEE THE HEALTH SYSTEM ROLLOUT WORKED!  Handing all of public health to private corporate non-profits is a big job!!!!

One of the people attending told a story of abuse in Baltimore's health system and foster care program that makes one think of Charles Dicken's London.  When a health system moves from public health to private and profit-driven you get a level of deregulation and unaccountability as makes Wall Street what it is today.....predatory and fleecing everything a person has under any means.  Now, imagine a global medical corporation like Hopkins who famously allowed impoverished people in Baltimore so little access to health care as to have them with life spans 30 years less than the upper class all while getting tons of Medicare and Medicare funding for these majority of poor.  We know the poor were given research projects to join for health care access and that is why the poor in Baltimore shout that they are being used as experiments.....because, in a way they are.  What is the level of abuse?  Well, dismantling public health in Baltimore has a private corporation like Hopkins shielded from most public scrutiny and the opting out of Federal Medicare oversight that has allowed Maryland to dismantle much of those public oversight systems tells us THERE IS A LOT OF VERY, VERY, VERY BAD STUFF HAPPENING IN MARYLAND HEALTH CARE.

Just recently we read where Hopkins was found to be providing faulty data for a black lung class-action lawsuit that worked against the victims and we know that victims of health abuse in Baltimore have absolutely no recourse for the most part as public justice does not exist and these MALPRACTICE LAWYERS only look for sure things that can easily win.  Now, we see Hopkins connected to organ laundering and new laws passing now surrounding tissue banking make EVERYONE LEARY ABOUT WHAT HAPPENS WHEN PEOPLE DIE IN THE HOSPITAL.  It is third world stuff to be thinking an institution operating in the US would be out to get us-------LITERALLY.  Since there is no oversight and since all of these practices bring big money especially to the MEDICAL TOURISM GROUP........  Hopkins took billions of taxpayer money to build its global campus in Baltimore.....IT IS SAFER TO ASSUME THIS IS ALL HAPPENING THAN NOT!

THIS IS NEO-LIBERALISM AND NAKED CAPITALISM FOR YOU AND IT IS EXACTLY WHAT CLINTON HAD IN MIND WHEN HE TOOK THE DEMOCRATIC PARTY AND HANDED IT TO CORPORATIONS.  REMEMBER, ALL OF MARYLAND'S POLS ARE NEO-LIBERALS, THEY ARE NOT DEMOCRATS!

Below we see just one of many examples of how this organ stealing will grow and the public is deliberately left out of the loop in accountability...

THIS GENERATES DISTRUST!!!!

Israeli organ trafficker pleads guilty


Mon Oct 31, 2011 8:23AM3 0

 Levy Itzhak Rosenbaum (L) led by his attorneys Ronald Kleinberg (C) and Richard A. Finkel (R) An Israeli rabbi who was in involved in organ trafficking to the US pleaded guilty for breaking law.

Levy Izhak Rosenbaum, 60, pleaded guilty to three counts of organ trafficking and one count of conspiracy in federal court in Trenton, New Jersey.

Rosenbaum brokered black-market sales of human kidneys in the US and arranged transplant surgeries at well known medical centers, including Johns Hopkins Hospital in Baltimore.

“The transplant surgeries occurred in prestigious American hospitals and were performed by experienced and expert kidney transplant surgeons,” attorneys Richard Finkel and Ronald Kleinberg said in a statement.

He reportedly was paid $410,000 to arrange the sales of kidneys from healthy donors in Israel to three people in New Jersey.

Rosenbaum admitted in court papers that he “would assist the donor and the recipient to coordinate a cover story to mislead hospital personnel into believing that the donation of the kidney was a purely voluntary act and not a commercial transaction.”

Rosenbaum may face up to five years imprisonment on each count of the four-count information, and $250,000 in fines when he is sentenced in February

Following Rosenbaum's arrest, US authorities detained some 44 others, including rabbis and mayors in New Jersey, who were prosecuted for money laundering and human organs trade.

A month before his arrest, a report published in the Swedish newspaper Aftonbladet, accused Israeli soldiers of kidnapping Palestinians in the occupied West Bank and the Gaza Strip for their organs, indicating a possible link between the Israeli military and the mafia of human organs detected in the US.

SJM/MMA


___________________________________________

The Master Plan for Baltimore's development has the working class and poor out of the city center and off to the periphery of the Baltimore City line.  So, all low-income housing is being destroyed and not replaced and all Enterprise Zones using taxpayer money requiring low-income housing is ignored.  Even the parking ticket of subprime mortgage fraud has almost none of the money going to low-income housing or the victims.  We are seeing such a high level of corruption and fraud in these Enterprise Zones it takes your breathe away as tax credits given with almost free houses to connected people and bundled by the thousands to Wall Street investment banks.  Now residents of Remington and Old Goucher/Barclay are watching with alarm as all of the property around them are bought with cash and left to sit or are so badly rehabbed as to make them little better than before.  THIS IS WALL STREET AS LANDLORD AS RENTS GO SKY-HIGH FOR PROPERTY NOT MUCH BETTER THAN BEFORE THESE PROPERTY OWNERS WERE GIVEN THE PROPERTY FOR NOTHING WITH TAX BREAKS TO BOOT.  So, working class people who live in these neighborhoods know what is in store and they have no recourse and the COMMUNITY GROUPS that should be their voice are stocked with Hopkins development people who simply adopt whatever Baltimore Development says.  Now the development that poor and black citizens have felt are coming to the lower income white population and they are not liking it either.  We are organizing both groups of people along with the middle-class to fight what is THUGGERY GENTRIFICATION that guts a city's assets for the few and leaves control of city center's real estate to a few VISIGOTHS and that is not good social planning.

I let everyone know that Hopkins' plan of moving all low-income housing and poverty resources to the city line has to do with the plan to downsize the city's limits where the boundary will be moved closer to City Center leaving all the poor and working class outside Baltimore City limits.  Hopkins is diligently studying transporting the poor as the plan will be to stop public transportation out to these areas and limit it to shorter routes leaving those stuck at the border with few transportation opportunities.  What Hopkins has to do is think about how to move people to and from work without allowing them movement for personal reasons.  They are well on their way by making the MTA in Baltimore so bad in service, cutting routes and leaving people standing at bus stops for hours as to make it impossible to use.  Next, the subsidized bus fares will be built like school children's bus passes in that they will be valid in only moving during work hours.

Tying people moved out to the city boundaries to businesses right next to their living quarters sounds a lot like feudalism doesn't it! 

WELL, THAT'S MEDIEVALISM FOR YOU AND THAT IS THE NEW ECONOMY TO NEO-LIBERALS!

If people look at what housing looked like for the Chinese brought to an industrial city in China it has workers impoverished with wages tied to housing right there at the company for which they worked and they were literally trapped in these working situations.

SOUND LIKE PLANTATION COMPANY STORE STUFF??????  EXACTLY.

This is what Obama's HUD reform looks to do in cities being gentrified.  Now, do we as a society really want to go there because the few of the richest want to be super-rich and have fiefdom living?  REALLY?  Wouldn't we rather go back to first world standards and make the poverty programs work better?


Obama's housing reform panel angers affordable-housing advocates

John Taylor of the National Community Reinvestment Coalition says there should be more community representation on the panel. (Melissa Golden/bloomberg News) 

By Zachary A. Goldfarb Washington Post Staff Writer
Friday, August 13, 2010

Affordable-housing advocates raised concerns Thursday that the Obama administration is excluding consumer and community groups from playing prominent roles in a government-sponsored conference next week that will kick off efforts to overhaul national housing policy.

After the administration announced the 12 panelists for Tuesday's conference, the nonprofit National Community Reinvestment Coalition said consumer and community groups had been "muscled out" by financial companies, economists and academics without a sense of how housing policy plays out in communities.

"Apparently being a community organizer qualifies you to be president, but it's not good enough to be part of HUD and Treasury's think tank on housing," said NCRC chief executive John Taylor, whose group works with hundreds of community organizations to promote access to financial services for low- and middle-income people.

The criticism by affordable-housing advocates was notable because the Obama administration has so far paid much more attention to their concerns than previous administrations have. Advocates, for instance, had credited the administration with listening to community groups that argued that the government must do more to embrace rental housing for those who cannot afford to buy a home.

Panels and players


Almost everyone agrees that the government's role in providing financing for home loans -- now standing behind nine in 10 new loans -- is too big and must be replaced by private capital. But an emerging flash point in the debate is how much the government may compel private companies to spend on ensuring that low- and middle-income people have access to housing -- either by renting or buying.

Tuesday's conference will feature two panels on housing reform -- one led by Treasury Secretary Timothy F. Geithner and focused on financial markets, and another led by Housing and Urban Development Secretary Shaun Donovan and focused on broader housing policy goals. Six executives, five academics and a representative of a civil rights group will participate as panelists. After the panel discussions, breakout sessions will take up topics such as securitization and rental housing.

"Across the spectrum, stakeholders agree that our current system of housing finance requires fundamental reform," said Jeffrey A. Goldstein, undersecretary of the Treasury for domestic finance. "This conference is an opportunity for us to broaden our perspectives on a number of key issues in a transparent way to make certain that all of the best ideas are on the table."

The panelists include Bill Gross, Pimco's chief investment officer, who has been a large buyer of securities backed by home loans; Moody's economist Mark Zandi, who has advised politicians on economic policy; and Lewis Ranieri, who helped pioneer mortgage securitization.

The heads of Bank of America and Wells Fargo's mortgage units will be panelists, as well as former bank regulator Ellen Seidman.

Seidman, who now runs a community-oriented bank in Chicago, and Marc Morial, a former New Orleans mayor who is now president of the National Urban League, are likely to be among affordable-housing advocates' biggest allies at the conference.

Still, "it's really not much diversity or real community perspective from folks that represent the end user of mortgages," said Janis Bowdler, deputy director of the wealth-building program at the National Council of La Raza. "I am concerned that the process will be heavily influenced and informed by major industry players and economists."

But Andrew Williams, a Treasury spokesman, said consumer advocates will have a voice. "A number of consumer advocates will participate in the conference to ensure that a broad range of stakeholders have input into the reform discussion," he said.

White House's approach


Some say that, regardless of who is being invited to speak, the topics the administration is addressing are important ones.

"While I think it's important that the right people are at the table, the agenda really points to them trying to get the issues that the housing finance system has left behind -- like multifamily housing and affordability," said Linda Couch, deputy director of the National Low Income Housing Coalition.

The Obama administration has taken an incremental approach to reforming housing. It faces a January deadline, imposed by the new financial regulatory reform law, to come up with a plan for overhauling housing finance.

But officials say they fear that any specific proposal could rattle the fragile housing and mortgage markets, which are now supported to a great extent by government programs.

In April, the Treasury and HUD released seven broad questions to guide thinking on how to reshape housing finance. They received more than 300 comments.

OBAMA'S POLICIES HAVE DELIBERATELY CREATED THE ENVIRONMENT TO HAND ALL REAL ESTATE TO THE WEALTHY.  IT WAS PLANNED AND IT IS ALL ILLEGAL.  FOR THOSE MIDDLE-CLASS ABLE TO KEEP YOURS---WHAT HAPPENS WHEN RULE OF LAW IS IGNORED?

IT GOES AFTER EVERYONE!  DO YOU KNOW THAT MORE WOMEN/SENIORS AND CHILDREN SUFFER FROM THIS FRAUD AND ITS LACK OF JUSTICE THAN ANYTHING IN RECENT HISTORY?

THE MARYLAND ATTORNEY GENERAL IGNORING ALL OF THIS -----DOUG GANSLER -----IS NOW RUNNING FOR GOVERNOR.  AIDING AND ABETTING CRIME AND STILL RUNNING FOR PUBLIC OFFICE!

Have you noticed the market on housing has been climbing these few years with the FED's  QE  mortgage bond buying moving interest rates to zero?  Did you know that all that buying is a result of bundled foreclosures bought by the investment firms enriched by creating the massive subprime mortgage fraud?  Did you know the other group buying are foreign and wealthy?  Did you know that these same investment banks/firms have yet to lend to small businesses and individuals so none of the people impoverished by these frauds has been able to buy homes at these lowest interest rates ever?

What has happened during Obama's term besides the massive frauds remaining in the hands of the fraudsters is that a massive movement of investment wealth created from those stolen funds has caused wealth at the top to sky-rocket. 

OBAMA SAYS HE IS GOING TO START TO WORK FOR THE MIDDLE-CLASS NOW!

More importantly for middle/working class America is that all of the US housing and real estate has been transferred to those 1% and now we have POTTERSVILLE landlords as rental houses.  All this happened with suspended Rule of Law.  Those investment firms should not have had the money to do this and the FED should never have been allowed to use crony and corrupt policy to expand this wealth.....AND THAT IS ALL THIS IS!

WE CAN REVERSE THIS BY SIMPLY REINSTATING RULE OF LAW AND CLAIMING ALL THESE HOUSING INVESTMENTS AS RECOVERY OF FRAUD!  WE MUST DO THIS OR MOST PEOPLE WILL BE CRUSHED BY RISING RENTALS!

This housing bubble for the rich is of course far more dark than this!  We know that the subprime loan fraud targeted the poor and working class and the middle-class was drawn into it with the extended stagnation.  But cities all across the country and Baltimore especially are working to force people into foreclosure and handing over property to the city often by illegal means.  It is incredible to think a US government would openly commit fraud to get hold of people's property, but that is what is happening in Baltimore.  It is all part of this drive to hand control of all real estate to these few people at the top and that is especially so in urban areas like Baltimore.  The city is creating wide bundles of real estate taking much of low-income communities and handing them to these investors that then rehab and rent at huge profit and control who lives in an area by rent prices.  Keep in mind that the people victimized by these frauds have gotten little or nothing and often are homeless because no justice came!



Dec. 20, 2013, 12:49 p.m. EST

All-cash home sales reach new high Why the Fed tapering may help drive more all-cash buyers

  By Quentin Fottrell, MarketWatch

More Americans are buying homes in all-cash deals, according to a new report. But real-estate experts say this increase may not be a good sign for the health of the housing market, which may also be impacted by the Federal Reserve’s decision to pull back on its bond-buying program.


Bloomberg All-cash purchases accounted for 42% of all sales of residential property in November 2013, up from 39% during the previous month, according to data from real-estate data firm RealtyTrac released Friday. “This is still a very cash- and investor-driven market,” says Daren Blomquist, vice president at RealtyTrac.

The cities with the biggest month-over-month jumps in the number of all-cash sales, according to RealtyTrac, included Florida (63%), Georgia and Nevada (both 51%), South Carolina (50%) and Michigan (49%). This helped boost overall sales of U.S. residential properties, which sold at an annualized pace of 5.1 million in November 2013, a 1% increase from the previous month and a rise of 10% from a year ago.

The decision by the Federal Reserve Wednesday to reduce its bond-buying program to $75 billion per month starting in January, from $85 billion per month currently, may also encourage more cash-purchases — at least for those who can afford it, Blomquist says. “They’re going to do everything they can to keep interest rates low, which may be tough to do,” he says. To reduce cash buyers, he says there will need to be low interest rates and a cooling off in home price appreciation. “Otherwise, you’ll see the market skew even further toward cash buyers,” Blomquist says.

When interest rates went up slightly in June, there was a notable increase in cash sales, Daren Blomquist says. “Some markets are more interest-rate sensitive than others based on affordability,” he says. “Just a slight increase makes homes a lot less affordable.” In fact, another report by Goldman Sachs in August was even more strongly in the cash-is-king camp, estimating that cash sales now account for 57% of all residential home sales versus 19% in 2005. Walt Molony, a spokesman for the National Association of Realtors, says that the association’s estimate of the share of the market made up by all-cash buyers is lower than others’, at 31% in July, but that it’s still at an all-time high.

Molony says that investors make up 32% of all-cash buyers (70% of all investors pay cash), up from 31% in October and 30% in November 2012, while retirees who’ve built up equity in their homes or paid off their mortgages account for around 12%. The rest include vacation-home buyers and foreign buyers.

While cash buys help explain the surge in home sales over the past year, some experts say it’s an unsustainable trend — and one that should be greeted with caution. “The rise in cash sales is not a good long-term trend for the housing market,” Blomquist says. Although RealtyTrac doesn’t identify who has cash-in-hand, experts say wealthy Americans and downsizing retirees account for some of these all-cash deals. Investors who are keen to make a profit by buying low and renting those properties — or flipping them — also drive up the number of all-cash deals, he says. None of these three groups — flippers, retirees and the wealthy — are big enough to sustain the market in the long run, he says. If it remains dominant in the long run, cash buying “will have a chilling effect on home sales and prices,” Blomquist says.


If tapering does lead to higher mortgage rates, some home buyers might buy with cash rather than a mortgage, says Jed Kolko, chief economist for real-estate firm Trulia. However, many cash buyers are investors, and now that prices have risen, investor activity is also starting to decline, he says. (House prices in 20 American cities rose more than 13% in the 12 months leading up to September, according to the S&P/Case-Shiller index of property values, the biggest rise since February 2006.) “On balance, the all-cash share of purchases will probably decline next year, as fading investor activity outweighs the impact of higher rates.”

Another challenge for the housing market in 2014: The pool of potential buyers is being limited thanks to a combination of tight lending standards and rising interest rates, experts say. “Cash is king in hot markets where getting the sale done now matters and where investors are driving price recovery,” says Susan M. Wachter, professor of real estate and finance at The Wharton School at the University of Pennsylvania. Cash’s dominance is a sign of the fact that it’s more costly and hard to get financing, she says, “that’s a bad thing.” On the upside, interest rates are still historically low, she says. “Now is a time to lock in if you are a buyer.”


_____________________________________________

Now, if you followed this debacle you would know it is no accident that bills from hundreds to thousands went out to city residents and when people complained about the faulty bills they were ignored.  This was huge and it was devastating to low-income people who were not able to pay and then fight.  They were thrown from their houses for what was the city's faulty billing. 

The reason I say it is deliberate is that I became involved with a few of these and found the Water Department openly acting deceitfully in trying to retain the money they knew was overbilling.  I also know it had to do with development because the people losing their homes were heavily found in Enterprise development zones.

THE CITY OF BALTIMORE ACTUALLY COMMITTED FRAUD TO GET PEOPLE OUT OF THEIR HOUSES AND THEN GAVE THOSE HOUSES TO DEVELOPERS FOR PENNIES ON THE DOLLAR.

None of this is legal and it can be reversed by simply reinstating Rule of Law!

Moratorium Proposed On Water Bill-Based Property Liens Baltimore City Council President Cites Audit Uncovering Billing System Flaws UPDATED 9:15 AM EST Mar 06, 2012 Baltimore Sun

• 
  

BALTIMORE —Baltimore City Council President Jack Young took what he called a "bold step" Monday in response to an audit that uncovered flaws in the city's water billing system.

Young introduced a resolution requiring a moratorium on placing liens against properties based solely on unpaid water and sewer bills.

The audit revealed that more than 38,000 customers were overbilled, totaling $4.3 million, while some customers weren't billed at all.

Young said he wants the moratorium in place for two years or until a "viable and fair" billing system is created.

__________________________________________
Now, the problem with Baltimore City water billing is that most of the public workers have been dismissed and they are using what they call averaging....never knowing what people actually use.  THE PROBLEM IS STAFFING YET THEY ARE TELLING US THE SOLUTION IS SMART METERS.  Now, those who follow me know the problem with Smart Meters but what can be said simply is that the same corporations defrauding us right and left are behind Smart Meters!

All this has to do with the article above that says the housing market is climbing and cash payments are fueling it.  These homes go into foreclosure because they cannot pay thousands of dollars for water and then the rich come in and pay cash for these stressed homes.  If you think this is all accident-----THEN WHY ARE THESE CASES NOT FIXED IMMEDIATELY?  This is not simply a case of dishonest water department employees-----this is from City Hall!


Unpaid Water Bills Leading to Foreclosed Homes

Nov. 12, 2012 By MARK GREENBLATT, GERRY WAGSCHAL, and LAUREN PEARLE Mark Greenblatt

Actor and musician Richard Burton is facing foreclosure on his Baltimore home, but not because he didn't pay his mortgage on time. In his case, he says it all began with an overdue $1,037.42 water bill.

Burton lost his job playing "Shamrock" McGinty on HBO's "The Wire" when the show went off the air. He couldn't afford the bill and claims it was incorrectly inflated to begin with.

However, the cash-strapped city of Baltimore turned to a controversial way to collect. The city sold his unpaid debt to a private company that also inherited a lien on Burton's home. Then, the company tacked on 18 percent interest and more than $2,000 in legal charges.

"You have no choice but to pay or you lose your home, that can't be right," Burton said.


A Colorado Springs-based company called LienLogic is trying to foreclose on Burton's home if he doesn't pay.

The National Consumer Law Center (NCLC) says thousands of homeowners all over the U.S. are threatened with foreclosure every year because of unpaid utility bills.

"Someone could actually lose their home for the failure to pay a $200 or $300 water bill or sewer bill," said John Rao, an attorney with the NCLC.

The NCLC released a report this year citing a Rhode Island senior citizen who fell behind on a $474 sewer bill. A private company took possession of the home she had lived in for 40 years, only to turn around and sell it for $85,000.

Back in Baltimore, Vicki Valentine lost her home over a partially paid water bill. Her family had the home for 33 years. She took possession after her father passed away. Valentine sank into a serious depression following that death and paid the wrong amount on her bill. When she tried to make payments to catch up, they were not enough, and the city sold her debt off as well.

Eventually, Valentine lost the home and says she ended up on the streets.

"And that's not a fun place to be," she said.

LienLogic, the company that bought Richard Burton's debt, makes $100 million a year from its lien business, which it operates in multiple states.

The company initially declined an interview with ABC News, forwarding us to the National Tax Lien Association for comment. The executive director of that organization agreed to an interview, and then backed out.

So ABC News flew to Colorado and tracked down one of LienLogic's co-founders, Erik Carlson. When approached by an ABC News reporter, Carlson would only say: "Like I said, I declined the interview."

ABC News followed up, but Carlson declined to answer our questions about people his company tries to take homes from following the non-payment of small water or sewer bills.

Not all cities sell unpaid debts to private companies. In Houston if you don't pay your water bill, the city will shut your water off and try to get you help. Officials there would never give someone the potential right to take your home away if you don't pay.

*****************************************************************


Edgemere Man Receives $15,000 Water Bill

WBFF News

A Baltimore man is stunned by a $15,000 water bill that he says he does not owe. Otto Hart received a delinquent notice Monday morning at his home in Edgemere saying he owes over $15,000. Hart says his water bills average about $25-$30 a quarter but in June he was mistakenly billed $96. After speaking with the Department of Public Works about the mistake, he got a bill for $0 in September after an adjustment. Now, three months later, a delinquent notice for $15,000. But this time when he contacted Public Works, he was told that the matter would be forwarded to another department to be investigating and someone would contact him in 4-6 weeks. "Well, if you owe money, within 4 to 6 weeks, a lot can happen. I mean, you could basically end up having a lien put on your house or your credit could go right down the tubes and there's nothing you can do about it," Hart said. A spokesman with the Baltimore City Department of Public Works says the billing department is reviewing the matter.


_________________________________________

Below you see residents donating their homes for the cost of a few hundred in taxes and property bills.  These homeowners have no chance in selling homes without the city's investment in their communities and the subprime loan fraud settlement should have done that.  Rather than rehab and sell cheaply to low-income people having lost their homes....the only choice for the existing homeowners in blighted communities is to hand over these houses for nothing to be handed to rich developers.

IT IS THE SAME PEOPLE WHO CREATED THIS SUBPRIME MORTGAGE FRAUD AND WAS ENRICHED BY IT THAT ARE COMING IN AND BUYING ALL THIS CITY REAL ESTATE AND CITY HALL USES THESE WATER BILL SCHEMES TO GET EVEN MORE!

All of this can be reversed by simply reinstating Rule of Law.  All these homes in these blocks of real estate should go to those losing their homes to fraud!

Woman’s Home Confiscated Over Small Water Bill
The Other Foreclosure Menace

By Fred Schulte, Ben Protess and Lagan Sebert

May 21, 2010 "Huffington Post Investigative Fund" --  One raw day in early February, Vicki Valentine stood by helplessly as real estate investors snatched her West Baltimore home over what began with an unpaid city water bill of $362.As snow threatened to fall, she watched a work crew hired by the new owners punch out the lock on her front door. A sheriff's deputy was on the scene while Valentine and her teenage son piled whatever they could into a borrowed car.

Running out of time, Valentine scrambled to pack up clothing and mementos. The home had been her family's for nearly three decades, and her father had paid off the mortgage in 1984. "It's hard to say goodbye to this house," she said. "It's like someone forcing you out of something that belongs to you. I don't get it."

Valentine lost the two-story brick row home after the city sold her debt to investors through a contentious and byzantine legal process called a "tax sale." This little-known type of foreclosure can enrich investors as growing numbers of property owners struggle to pay their bills.

WATCH Vicki Valentine's Eviction Day:


 These foreclosed homeowners are not the families making headlines for taking on mortgages they could ill afford. Families ensnared in the tax sale sometimes are unable to overcome relatively small debts owed to local tax collectors.

Rather than collect the overdue money they are owed, many local governments are selling tax liens. Buyers range from behemoths such as JPMorgan Chase & Co, and some regional banks and law firms, to small-fry investors lured by late-night television commercials promising quick riches. Investors generally bid in an auction for the right to collect delinquent taxes and other municipal debts on property owners, sometimes by paying only a few hundred dollars. When owners can't pay, investors can pick up property at bargain prices

It can be a good deal for everyone except the property owner. Selling the debts to investors can help governments efficiently ease budget woes without having the added expenses of debt collection, foreclosing and being a landlord.

Investors, meanwhile, can rake in hefty profits. That's because they can tack on fees and steep interest rates, which can amount to 18 percent annually in Baltimore.

In Valentine's case, legal fees and other charges climbed past $3,600 - nearly 10 times her original bill.

Investors purchased an estimated $30 billion of real estate tax debt held by governments across the country in 2009, double the amount a year earlier, according to the Florida-based National Tax Lien Association. Altogether, 29 states and the District of Columbia can sell tax lien debt to investors.

Lien sales in Baltimore have nearly doubled since the housing bubble of 2006. On Monday, the city sold 12,689 liens - a probable record. Properties ranged from boarded-up shells and vacant lots to row homes in gentrified neighborhoods and some commercial buildings.


Last February, Vicki Valentine was evicted when she couldn't pay $3,603.41 to rescue her Baltimore home. Valentine's wasn't a typical foreclosure -- the mortgage was paid off. But when she failed to pay a $362.28 water bill, the city auctioned her debt off in a tax lien sale. An investor now owns her home. City records show that one in five of these liens on properties is for unpaid taxes or other municipal bills amounting to $1,000 or less. If Baltimore's 2009 tax sale is any indication, hundreds will stem from delinquent water bills; there were 666 such liens last year.

Although the brisk tax lien trade thrives beneath the radar, largely unnoticed, it has occasionally drawn scrutiny from law enforcement authorities.

Some of Maryland's most prominent tax sale investors have been swept up in a criminal investigation into bid rigging at the sales. Federal prosecutors allege that those investors agreed in advance which properties to bid at some auctions, improperly reducing the money earned by municipalities.

So far, Justice Department prosecutors have secured three convictions in the ongoing investigation. At a May 4 sentencing hearing for two of the defendants, a witness for the government was lawyer John Reiff, part-owner of the company that currently owns Valentine's lien. He was not charged in the case.

Investing in liens can be risky, with profit on a particular property anything but certain. Investors generally compensate for such uncertainty by buying in large volumes, sometimes at a clip of thousands of liens each year.

Two of the investors who pleaded guilty in the bid rigging case made at least $10 million from fees and other costs collected from owners of some 6,000 property liens they bought over six years, according to federal prosecutors.

Prosecutors said in court filings they suspect bid-rigging occurs in other areas of the country. A JPMorgan subsidiary called Xspand and at least two other companies received grand jury subpoenas last year as part of a Justice Department anti-trust investigation in New Jersey, according to Bloomberg.

'Unintended Consequences'

Some state lawmakers have questioned the fairness of the tax sale foreclosure process, which often sticks homeowners with thousands of dollars in legal fees and other costs. But cities and counties in Maryland earlier this year fended off an effort to keep water bills out of the tax sale, arguing that without the threat of losing homes many people would fail to pay their bills.

Revenue collectors defend their tax sales as a necessary, if sometimes distasteful, means for feeding the public treasury. In aging cities such as Baltimore, there's also hope that new owners will rehab decaying or abandoned properties, restoring them to the tax rolls.

Investors say they aren't the bad guys - they're providing a service that helps plug holes in municipal budgets. Homeowners should face consequences for failing to pay their bills, they argue, noting that people faced with losing property have many opportunities to redeem it. The mounting fees, they say, reflect the costs involved in navigating complex legal requirements, tracking down property owners and taking them to court to enforce the liens. In Valentine's case, they noted, a judge approved the fees.

"We are essentially the city's bill collector," said lawyer and tax lien investor Reiff.

Critics of tax sales question the morality of government tax collectors acting to enrich private investors at the expense of property owners with low incomes or facing hard times. They ask whether it's the best way to compel people to honor their debts -- especially involving relatively paltry public utility bills.

After all, when water bills go unpaid, some cities and counties simply shut off service. In Baltimore, officials often leave it on. Another alternative would be to have private collection agencies track down debtors.

"This is a case where good intentions have led to severe unintended consequences," said Debra Gardner, of the Public Justice Center in Baltimore, a non-profit advocacy group for minorities and the poor.

Asked about Valentine's story, David Vladeck, director the Federal Trade Commission's Bureau of Consumer Protection in Washington, said it was "just horrifying to me."

While noting that his comments did not reflect agency policy, Vladeck said he believed more recession-wracked homeowners across the country could face a similar plight. "It's beyond tragic that this poor woman lost her home."

Pleas - and More Fees

Valentine was incredulous when the price to keep her property shot past $3,600. Jobless and lacking the savings to pay, she said she could do little to stave off the day of reckoning.

That day arrived on February 3, when a Baltimore City Sheriff's Department deputy served her with a court-issued "writ of possession" stripping her claim to the home.

Valentine, a former mental health counselor and rehab specialist with four children, said she moved back to her childhood home about a decade ago to care for her ailing father, Charles L. Turner. A retired brewery worker, he had Alzheimer's disease.

As his condition worsened, he tended to hide bills from the family. (City records confirm that Turner often fell behind in meeting his obligations during the final years of his life and nearly wound up in the tax sale as early as 2000 over unpaid water bills and property taxes.)

When her father died in 2003, Valentine took over the home and stayed there with her son, Dimitrian, now 17. She said she fell into a serious depression in the wake of her father's deteriorating health and death, and was unable to work or pay her bills on time. She has worked only sporadically since his death. Though she made partial payments on the water and sewer account in 2006, she acknowledges her failure to pay a bill of $462.28 in full. She went down to city hall and paid $100, but never took care of the balance.

When the deadline passed for paying up, the city added 2005-2006 property taxes of $287.92, interest and city tax-sale processing charges. That brought the total she owed to $710.57, according to city records.

The City of Baltimore washed its hands of Valentine's debt in May 2006 when it sold the lien to Sunrise Atlantic LLC, an arm of the BankAtlantic in Fort Lauderdale. The Florida bank has bid on tax liens in a range of states, from Florida to Illinois, though it has largely sold off its Maryland lien portfolio and is not implicated in the bid-rigging case. BankAtlantic did not return phone calls seeking comment.

Unlike mortgage foreclosures initiated by banks, there's no appealing a tax sale debt once it is sold off; a property owner has no option other than to abide by the investors' terms and pay the fees. The lien holders also have little incentive to be flexible about repayment terms.

Maryland law gives property owners six months to redeem a tax lien with only minimal added costs. But if they don't pay by then, lien holders can sue to seize the property and stick the homeowner with a slew of fees, including legal bills incurred in taking the matter to court. Sunrise Atlantic filed such a case on Valentine's home in Baltimore City Circuit Court in December 2006, records show.

More than a year later, the court awarded the property to Sunrise Atlantic.

At that point, Valentine sent a handwritten letter to the court, begging for mercy and more time to repay.

In the letter, dated Feb. 9, 2008, Valentine described being unable to work because of depression and other problems. "For now, this is the roof over my son and my head. I am trying to get the money together to catch up on my delinquent bills." She added: "Please allow more time to pay all bills connected with the foreclosure of said property."

But the longer she waited and the more she protested, the more legal fees and other charges she incurred.

In 2008, Baltimore attorney Anthony De Laurentis, who represented Sunrise Atlantic, submitted itemized charges to the court: $305.91 in interest on the lien; a $1,500 bill for responding to Valentine's requests to cut the fees and other legal work; more than $1,000 in assorted expenses, including $325 for a title search of the property and $79 for photocopies, according to court records.

The price list passed muster with a judge, who on Sept. 19, 2008 ordered that Valentine pay $3,603.41 - or forfeit her property.

She asked for another hearing, which delayed the process for more than a year.

While the case dragged on, the Florida bank started divesting its tax lien certificates from Maryland, eventually transferring the lien on Valentine's home to a firm called Montego Bay Properties. Part of the firm is owned by a trust set up to benefit members of the family of lawyer De Laurentis. Reiff, one of De Laurentis' law partners, also owns part of the firm.

In an interview in their Baltimore office, De Laurentis and Reiff said 90 percent or more of property owners eventually pay whatever is necessary to keep their homes.

They said most of the properties they take over are vacant and thus nobody is displaced. They also said they had repeatedly tried to settle the matter with Valentine and showed Investigative Fund reporters a thick file of court papers and other records as well as notes of more than a dozen contacts with her to make arrangements to clear the debt.

"We bent over backwards for her," Reiff said, adding that his staff had tried for more than two years to "work something out" to no avail.

Feds Say Bids Rigged

Though Valentine had no way of knowing it, some investors rigged the 2006 Baltimore tax sale auction that led to her eviction, federal prosecutors alleged in court.

The roots of that conspiracy run deep, prosecutors said. For years, a handful of Baltimore real estate lawyers and their investment partners quietly dominated Maryland tax sale auctions, with few questions asked about their bidding tactics or collection policies.

That changed after The Baltimore Sun used city records and court filings to report in March 2007 that hundreds of mainly low-income city residents had been kicked out of their homes over small unpaid bills, ranging from water and sewer charges to minor environmental citations. Some people were driven from family property because they couldn't afford to pay thousands of dollars demanded by lien holders.

The Baltimore newspaper also documented for the first time that while dozens of parties bid in Baltimore tax auctions in 2006 and 2007, just three investment groups had won about two-thirds of the liens.

Prosecutors went on to charge three men with conspiring to rig bids at 21 auctions in Baltimore and four other jurisdictions, including Montgomery and Prince George's counties in the suburbs of Washington D.C. between 2002 and 2007. All three have since pleaded guilty. No other charges have been filed.

Another investment group involved in the conspiracy was DRT Fund, according to court filings by federal prosecutors. DRT is owned in part by De Laurentis and Reiff. DRT participated in a dozen of the 21 fixed auctions, though not the Baltimore City auction in 2006 in which Valentine's lien was sold, according to court filings.

The Justice Department filed no charges against DRT, which came forward in the fall of 2007 and "fully and truthfully reported their own wrongdoing and that of their co-conspirators and terminated their part in the conspiracy," prosecutors wrote in court papers filed last month.

DRT went on to sign an amnesty agreement with the Justice Department that commits it to "pay restitution to any person or entity injured as a result of the bid-rigging activity being reported in which it was a participant," court records state.

Neither De Laurentis nor Reiff would discuss DRT's settlement with the Justice Department.

Water Bill Woes

Some lawmakers have tried for years, with modest success, to rein in the tax-sale fees that can steamroll low-income homeowners. Maryland legislators passed a bill in 2008 that raised the minimum lien sold from $100 to $250. But a bill to prohibit cities and counties from selling delinquent water bills to investors failed in the state Senate earlier this year by a single vote.

Legislators also rejected a bill that would have prevented the sale of any lien of less than $750, as happens in some other locales outside of the state.

Both bills failed, lawmakers said, largely due to fierce opposition from tax collectors and officials in Baltimore, which conducts the largest tax sale in the state.

Andrea Mansfield, of the Maryland Association of Counties, testified that the tax sale process provides "a much-needed device to ensure that property owners remit payment for their fair share of taxes and charges connected to public services."

Eliminating water bills from the tax sales would result in more "deficient accounts," and lead to "increased rates on citizens who properly pay," she wrote.

Sen. James Brochin, a Democrat from Baltimore County who co-sponsored the legislation that would have banned the sale of delinquent water bills to investors, vehemently disagrees. "It's just disgusting. It's highway robbery. It's dead wrong. It's immoral," he said.

While city officials publicly defend the practice, he said, in reality "they're humiliated and embarrassed by it. Deep down they know how immoral it is."

Baltimore's mayor, Stephanie Rawlings-Blake, declined requests for an interview on the topic with the Investigative Fund.

City officials were more talkative earlier this year when they sought to block lawmakers from banning the sale of water bill liens. Mary Pat Fannon, a lobbyist for the mayor's office, said in prepared testimony for a February 5 hearing that the city had begun offering repayment plans for water bills to help homeowners avoid tax sale.

She said that the 666 water bill liens sold by Baltimore City in 2009 was way down from the 1,129 sold to investors the previous year and credited the repayment plans for the reduction.

And she went further, testifying that nobody had lost a home due to an unpaid water bill from either sale in 2008 or 2009. What Fannon neglected to mention: Because of the lengthy transfer process in the courts, it was too early for those groups of property owners to begin losing their homes. Most tax sale lawsuits have taken longer than two years to resolve through the courts.

Fannon also said that without the tax sale, the city would need to file debt collection lawsuits against each delinquent property owner, which she said "would be very expensive, time consuming and flood the courts."

Two days before Fannon's testimony at the state capital, Valentine stood watching as her belongings piled up on the sidewalk in Baltimore.

A Neighborhood's Decline

More than three years after Valentine's small debt drew her into the tax sale, neither the city nor the investors seem to have won much.

The property is unlikely to be fixed up any time soon. Instead, it adds to a sense of decay that permeates some parts of urban Baltimore. On Valentine's old block in the Sandtown neighborhood, all but a handful of houses, abandoned long ago, are boarded up.

Such decline has summoned other ills. "Drugs moved in and replaced the good with the bad," said Valentine, who is living temporarily with her mother. Many of her possessions are in storage.

De Laurentis and Reiff now hold a "writ of possession" for a property that's in need of substantial repair. Though the home is assessed at $46,000, in such dilapidated condition the investors said they probably would have trouble selling it for more than $16,000.

In addition, investors could be on the hook for a $7,000 water bill of their own. Just how that happened is unclear; there may have been an undetected leak in Valentine's home. Last month, the city finally turned off the water.

If the investors take the final step to secure a deed to the property, they would have to pay the city roughly $6,300, which the city is then supposed to turn over to Valentine. The law entitles original property owners to receive at least some compensation.

De Laurentis and Reiff say they're still willing to work with Valentine to resolve the matter. Reiff said he gave her a key to the new lock so she could have more time to remove her belongings as a good faith gesture.

"We'll definitely work something out with her," Reiff said.