WE NEED EVERYONE SHOUTING OUT ON THESE ISSUES BELOW. SOME ARE PARTICULAR TO MARYLAND BUT THE SAME IS HAPPENING IN YOUR NECK OF THE WOODS!!!
1) WE MUST RUN AND ELECT ATTORNEY GENERALS AT THE STATE LEVEL WHO WILL ENFORCE RULE OF LAW. IF A CANDIDATE HAS BEEN SILENT ON THIS ISSUE, AS FROSH IN MARYLAND HE DOES NOT INTEND TO ENFORCE RULE OF LAW WHEN IN OFFICE!!!!! BELOW YOU HAVE GREENBERGER, A UNIVERSITY OF MARYLAND LAW PROFESSOR WHO SENT HIS ENTIRE CAREER SHOUTING OUT THAT LAWS HAVE BEEN BROKEN........ELECT GREENBERGER FOR ATTORNEY GENERAL!!!! WRITE AND CALL HIM TO SAY 'WE WANT YOU TO RUN FOR AG!!
2) WE KNOW THESE THIRD WAY CORPORATE POLS INTEND TO BALANCE THIS NATIONAL DEBT ON THE BACKS OF THE PEOPLE JUST FROM HOW THEY FAILED TO RAISE REVENUE FROM THE RICH AND BECAUSE THEY CONTINUE TO GIVE CORPORATE TAX CUTS. WE MUST CALL AND WRITE THEM TO KNOW WE WILL VOTE THEM OUT OF OFFICE AND WE WILL RECOVER THESE TENS OF TRILLIONS IN CORPORATE FRAUD! WE CAN REVERSE THIS!
3) FOR MARYLANDERS SOLD OUT TO CORPORATE INTERESTS OVER AND AGAIN BY O'MALLEY THIS BGE/EXELON RATE INCREASE MUST NOT STAND. IF OUR PEOPLE'S COUNSEL BROUGHT ALL OF THE ISSUESFOUND IN THE ARTICLES BELOW TO THE MEDIA AND MARYLAND ASSEMBLY ATTENTION-----THE POLS AND EXELON WOULD NOT BE ABLE TO MOVE THIS FORWARD......IT IS THE SILENCE OF YOUR THIRD WAY CORPORATE POL AND THE MEDIA THAT ALLOWS THIS ISSUE TO ADVANCE!! SHOUT LOUDLY TO THE MARYLAND PUBLIC SERVICE COMMISSION, YOUR INCUMBENT, AND THE MEDIA THAT WE WILL NOT ACCEPT THIS RATE INCREASE!!!!
We must accept Obama's reinstatement of Eric Holder and know that corporate fraud will be protected again this next term, but we must look to our state and local levels to elect people who are not working to protect fraudsters.........we do have leaders that are speaking and they should be encouraged to run. In Maryland we want Greenberger running as Attorney General or Governor.
Greenberger faulted the Obama administration for regarding these practices as “immoral, unethical, and reckless,” but won’t go so far as to say they were criminal. No one has been indicted as happened during the Savings and Loan crisis, he says, when 400 were.
Greed, Lack of Transparency Caused Financial Crisis, Says Greenberger
Bad mortgage loans, obscured through complex and unregulated investment instruments, cost taxpayers billions By Gary Feuerberg
Epoch Times Staff Created: November 6, 2012 Last Updated: November 16, 2012
Michael Greenberger, professor at the University of Maryland School of Law, served as director of the Division of Trading and Markets at the Commodity Futures Trading Commission, 1997-1999. Greenberger was the guest at the Center for National Policy on Nov. 1, 2012. (Gary Feuerberg/ The Epoch Times)
WASHINGTON—The U.S. economy is slowly making a recovering from a near-collapse and the worst recession since the Great Depression.
But what brought on the subprime mortgage crisis that led to huge financial losses, a decline in wealth for much of the country, a GDP drop of 5 percent for the period from Dec. 2007 to June 2009, and an official unemployment rate that peaked at 10.0 percent in Oct. 2009?
“Very few people understand [what happened],” said University of Maryland Professor Michael Greenberger at the Center for National Policy on Nov. 1. “I firmly believe that the president of the United States doesn’t understand. They don’t understand what went wrong.”
In layman’s terms, Greenberger attempted to explain the essence of how the near collapse of our financial system came about. It’s a story involving new complex financial creations that mask the risks that investors take. The story is also about the role of the federal government—that is, the taxpayers—in rescuing the banks, and the story is ultimately about “criminal” behavior that has eluded prosecution, says Greenberger.
Since 2001, Greenberger has been a professor of the Maryland School of Law. He has frequently been asked to testify before Congressional committees related to financial markets and complex and unregulated financial derivatives. He was director of the Division of Trading and Markets at the Commodity Futures Trading Commission (CFTC), where he served under Chairperson Brooksley Born.
Greenberger was Born’s chief of staff in the late 1990s when they encountered fierce opposition to regulating the multi-trillion-dollar over-the-counter (OTC) derivatives markets whose crash later would be a major factor in bringing on the financial crisis. They wanted these derivatives traded transparently with adequate capital reserves and overseen by a regulator to prevent fraud and manipulation. Bill Clinton’s senior economic policy advisers—Treasury Secretary Robert Rubin, his deputy Lawrence Summers, Fed Chairman Alan Greenspan, and Security Exchange Commission Chairman Arthur Levitt offered vitriolic criticism of Born and the CFTC. Also, the titans in the financial industry and many in Congress were adamantly opposed. Born and Greenberger lost that battle but after the financial meltdown in 2008, the need for regulation and transparency of the derivatives market could not be denied.
$12,000 annual income, $729,000 mortgage Greenberger began with an illustration which anyone could understand, taken from Michael Lewis’ book, “The Big Short,” about a cherry picker, with an annual salary of $12,000, who actually signed up for a $729,000 mortgage. How could such a thing happen?
There was lots of fraud, robo-signed contracts, and “lying loans,” Greenberger said. Then these mortgages were pooled together as mortgage backed securities.
“[The banks] made these loans that are ridiculous loans—‘liar loans’—and immediately they get them off their books and sell them off to another bunch of investors to buy a share in these mortgage backed securities. But it was too easy for those investors to see that they were buying a share in something that said that a cherry picker earning $12,000 a year would pay back a $729,000 mortgage,” said Greenberger.
“So on a nationwide basis they took many more of these mortgage backed securities and packaged them into something called collateralized debt obligation (CDO).” It was made nationwide to give an investor the impression of less risk similar to when one diversifies one’s portfolio.The idea is that the housing market might collapse, say, in Michigan but it was deemed safe that it would continue to rise in Florida or Nevada where it was booming. Of course, that assumption turned out wrong and the entire U.S. housing market bubble burst and collapsed virtually everywhere.
Then the creators of these investments devices divided the investment into pieces, called tranches, which are different levels of risk and interest rates. One can think of the instrument as analogous to investing in various floors of a beach house. The basement which has the greatest likelihood of flooding would be dubbed the high risk investment and would pay out the most in interest. The other extreme would be the “top floor” which was the safest from flooding and would pay less interest.
Economist Mark Zandi wrote about CDOs in his book “Financial Shock,” “First and foremost, the risks inherent in mortgage lending became so widely dispersed that no one was forced to worry about the quality of any single loan.” Zandi adds, “As shaky mortgages were combined, diluting any problems into a larger pool, the incentive for responsibility was undermined.”
Next, the people who devised these CDOs went to the credit rating agencies, and paid them to rate the various tranches. The “basement” might get BB- rating while the “top floor” would receive a AAA rating on the theory that the top floor will never be flooded.
“So now you have masked the mortgage to a mortgaged backed security into a collateralized debt obligation, and then you got the further mask of the credit agencies Standard and Poor’s and Moody’s are telling us that these are triple A ratings,” said Greenberger, who is convinced that the rating agencies were paid off.
At the time this happened there were only seven public corporations in the United States that had AAA rating, but there were thousands of these tranches that got AAA rated, Greenberger noted. And nobody is investigating what’s behind these AAA ratings, and that behind them is an investment of whether a cherry picker can pay a $729,000 mortgage.
The plot thickens then when Hank Paulson, CEO of Goldman Sachs (and later Treasury Secretary), who made CDOs a big part of the firm’s business, could see that these investments were going to fail, said Greenberger. He wasn’t alone; others could see the same thing. Just by looking at the percent of mortgage defaults, one could see that the beach house was flooded.
Paulson then asked to buy insurance on some of the tranches that looked like bad bets. Wanting to make a profit on these investments, they devised what are called synthetic CDOs, to bet that the investments would lose value. So, without even owning the tranches, Paulson and many others like him paid one and half to two cents on the dollar as a premium, while the givers of insurance risked 100 cents on the dollar, he says.
Because the law didn’t require the givers of insurance to set aside a capital reserve to cover the debts, we, the taxpayers, ended up paying for the collapse of this market. For example, AIG, a multinational insurance corporation, needed a $185 billion bailout.
“When you generous taxpayers bought AIG, you weren’t really helping the people of AIG, you were really helping the people who bet with AIG,” Greenberger said.
Ethics The leading firm who collected on the bets was Goldman Sachs, said Greenberger, who believes they collected $7 billion on this matter.
To compound matters, betting on the tranches was not just a matter of paying the debt once. Greenberger said that the Financial Crisis Inquiry Commission investigations found that certain tranches were bet on nine times to fail.
“That means every time someone didn’t pay their mortgage, the consequences in the real economy were multiplied nine times. If you didn’t have the gambling refusal to pay, you would only had the real losses which would have been dramatically less than the betting losses, and the subprime meltdown would have been much, much less, and probably much easier to rebound from.”
Greenberger faulted the Obama administration for regarding these practices as “immoral, unethical, and reckless,” but won’t go so far as to say they were criminal. No one has been indicted as happened during the Savings and Loan crisis, he says, when 400 were.
At the bottom of these practices is one of ethical conduct.
Greg Smith worked at Goldman Sachs. In March he wrote an Op-Ed in the New York Times that said that the company was “ripping their clients off.” His new book, “Why I Left Goldman Sachs: A Wall Street Story,” was recently released.
He wrote in the Op-Ed, “I attend derivatives sales meetings where not one single minute is spent asking questions about how we can help clients. It’s purely about how we can make the most possible money off of them. If you were an alien from Mars and sat in on one of these meetings, you would believe that a client’s success or progress was not part of the thought process at all.”
MAKE NO MISTAKE, OBAMA AND THIRD WAY CORPORATE DEMOCRATIC CONGRESS INTEND ON MAKING YOU AND I THE ONES WHO PAY THE ENTIRE NATIONAL DEBT JUST AS THEY ARE DOING IN EUROPE. THEY THROUGH US UNDER THE TRAIN WITH THE DEBT CEILING DEAL ALLOWING ALMOST NO REVENUE FROM THE TOP EARNERS AND ARE STILL SENDING COPIOUS CORPORATE TAX BREAKS TOTALING NOW $4 TRILLION SINCE OBAMA TOOK OFFICE.
WE MUST SHOUT OUT THAT WE WILL REPLACE ALL INCUMBENTS NEXT ELECTIONS.......LET THEM KNOW THIS WILL BE REVERSED!!!!!
Will Exaggerated Deficit Talks Lead to an "Obama Recession?" We Must Still Ask These Questions
Wednesday, 30 January 2013 10:31 By Kevin Zeese and Margaret Flowers , Truthout | News Analysis \
President Barack Obama speaks about immigration reform in Las Vegas, January 29, 2013. (Photo: Stephen Crowley / The New York Times)
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Austerity is the absolute wrong answer for what ails the US economy - or even for reducing the deficit, argue Zeese and Flowers. There are real solutions.
In the last year of his life, the Rev. Dr. Martin Luther King Jr. shifted his focus to the American economy, poverty, full employment and how these issues related to militarism. In his 1967 speech, "Where do we go from here: chaos or community?" he urged the country to ask some tough questions and advocated for full employment or a guaranteed national income. He said:
. . . as we talk about 'Where do we go from here,' that we honestly face the fact that the movement must address itself to the question of restructuring the whole of American society. There are 40 million poor people here. And one day we must ask the question, 'Why are there 40 million poor people in America?' And when you begin to ask that question, you are raising questions about the economic system, about a broader distribution of wealth. When you ask that question, you begin to question the capitalistic economy.... One day we must come to see that an edifice which produces beggars needs restructuring. It means that questions must be raised. You see, my friends, when you deal with this, you begin to ask the question, 'Who owns the oil?' You begin to ask the question, 'Who owns the iron ore?' You begin to ask the question, 'Why is it that people have to pay water bills in a world that is two-thirds water?'
Cheri Honkala, a poverty and housing activist who founded the Poor People's Economic Human Rights Campaign, and who ran for vice president with the Green Party in 2012, sees her work following the path of Dr. King. She says, "There will be over one million families who will lose their homes to foreclosure or eviction in the upcoming year. I live on a block in Philadelphia where there are about 23 kids and we know that at least one week of each month many of these families will have inadequate food."
Decades after Dr. King's anti-poverty campaign, poverty and homelessness remain growing problems in the US economy and we must still ask the question: How do we restructure the economy so it works for people?
The Washington Consensus: A Bipartisan Call for Austerity
The Washington consensus on economic policy has been used to inflict neoliberalism, privatization and massive cuts to basic services on developing countries. When this is instituted in Europe, it is called austerity. In both Europe and Latin America, austerity resulted in large protests. In the United States, this is known as "bipartisanship on the deficit" and results in cuts to social programs. No matter what it is called, the end is the same: People's basic necessities are not met; the economy shrinks and the wealth divide expands.
The consensus, driven by big banks and concentrated wealth through compliant politicians, has been trying to cut the meager social safety net in the United States and loot the economy. Over and over, President Obama has tried to makes cuts to Social Security and Medicare; thus far he has failed because people revolted. Now Obama says he wants to seek "common ground" with the Republicans on Medicare and there is agreement on a 3 percent cut to Social Security - a new Washington consensus.
The call for cuts ignores important facts about the economic reality many Americans face. The wealth divide continues to get starker. Corporate profits have increased 171 percent under Obama, the fastest profit growth since 1900, while America's poorest lost 91 percent of their wealth.
At the same time, one in three working families cannot make ends meet, 50 million Americans live in poverty, seniors have higher credit card debt than youth in large part due to health costs, and one-third of Americans are likely to live in poverty during retirement. Students are graduating heavily in debt into a lousy job market. And housing problems are so severe that when housing vouchers were being given away in Michigan, thousands showed up - single moms, homeless and veterans - resulting in the event being cancelled.
The urgent economic problems the US and world face are lack of employment and an extreme wealth divide. Economist Joseph Stiglitz wrote that it is the wealth divide that is preventing economic recovery. Indeed, the wealth divide is so extreme that the annual income of the world's 100 richest people could end global poverty four times over.
The Deficit Is Not as Serious as They Want You to Think
The bipartisan consensus in Washington does not face important facts: There is no serious immediate deficit problem. Actually, the US deficit is shrinking at the fastest pace since World War II, shrinking from 10.1 percent to 7 percent of the gross domestic product (GDP) during Obama's first term. Economists are pleading with incoming Treasury Secretary Jacob Lew to acknowledge this. The truth is that the deficit problem, which is being used to justify cuts to Social Security, Medicare, Medicaid and other social programs, is well within control.
Even if it wasn't in control, cuts are unnecessary. One of the few advantages of being an empire economy and holding the world's dominant currency is that we could maintain a high debt-to-GDP ratio. Great Britain, when it was an empire, for more than a century had a debt to GDP ratio of more than 100 percent, sometimes over 200 percent. The US is not Greece. The American Empire does not have to starve people at home in order to enrich transnational corporations and oligarchs around the world. When our economy contracts, the government can create money to fill the gaps and when the economy grows, it can reduce the stimulus spending. In fact, the government could mint its own money and cut out the costs of the middlemen - the Federal Reserve and banks. Of course, an even better path for the American Empire would be to bring the troops home and invest in our domestic economy. This would create a more stable economy and strengthen our position as the world's reserve currency.
Military Spending Can Be Cut
In his "Where do we go from here?" speech, Dr. King contrasted human needs with military spending:
John Kenneth Galbraith said that a guaranteed annual income could be done for about twenty billion dollars a year. And I say to you today, that if our nation can spend thirty-five billion dollars a year to fight an unjust, evil war in Vietnam, and twenty billion dollars to put a man on the moon, it can spend billions of dollars to put God's children on their own two feet right here on earth.
Robert Pollin, co-director of the Political Economy Research Institute (PERI) and author of Back to Full Employment, points out that military spending has nearly doubled, now standing at 5 percent of GDP, compared to 3 percent in 2000. His research also shows the military is a very expensive way to create jobs; $1 billion in spending on the military creates about 11,200 jobs. That same $1 billion invested domestically would create 16,800 jobs through clean energy infrastructure, 17,200 jobs within the healthcare sector or 26,700 jobs in education. In other words, investments in clean energy, healthcare and education will produce between 50 percent and 140 percent more jobs than if the same money were spent by the Pentagon.
Unfortunately the Iraq and Afghanistan wars have been very expensive. Even if both wars were to end today, we would have billions in ongoing residual costs to pay for the expenses of treating veterans' mental and physical wounds. Joseph Stiglitz and Linda Bilmes write: "The eventual costs of caring for veterans of the Afghanistan war will exceed $1 trillion. To put these numbers into perspective, the debate surrounding the fiscal cliff has centered on expenditure cuts over 10 years of $1 trillion to $2 trillion."
But even with these expected costs, there is room to cut military spending. The Pentagon's "base budget," excluding the costs of the Iraq and Afghanistan wars, has grown by 40 percent over the past decade. There are multiple conservative military cost-cutting plans that would save $50 billion to $100 billion annually. The 1,100 US military outposts cost $170 billion annually. Billions could be saved by closing bases built in wars that are now over. Stopping cost overruns and the manufacturing of unnecessary weapons could save billions more. A Government Accountability Office (GAO) study of 96 weapons programs found that almost two-thirds suffered major cost overruns - 40 percent above contract prices, overall - totaling close to $300 billion. Cost overruns are equal to the amount of President Clinton's last full military budget request a decade ago.
Cutting Spending Now Will Cause an "Obama Recession." Full Employment Will Solve the Deficit
In the midst of this ongoing economic crisis the bipartisan view in Washington ignores these facts and insists on more cuts to social programs. Taking the approach of the bipartisan consensus will almost assuredly lead to an "Obama Recession," just as FDR's anti-deficit consensus, which cut New Deal spending in 1936, led to the "Roosevelt Recession" in 1937-38. The lesson of history is obvious, but the prescription of the bipartisan consensus does not operate on facts or evidence. It will bleed the patient even though the hoax of austerity is economic malpractice.
A more recent example of austerity measures causing the economy to worsen is happening in the UK right now. The last four years have produced the worst economic performance in a non-post-war period since records started being collected in the 1830s. Britain could be at the beginning of a triple-dip recession, their economy shrank 0.3 percent in the final quarter and manufacturers suffered their worst year since the financial crisis of 2008. David Cameron delivered on his campaign promise of austerity and the result has been a prolonged recession. Let's hope that US policymakers learn from the mistakes of Great Britain and don't repeat them.
Economists who are fact-based rather than purely ideological are telling policy-makers that public investment in jobs will restore growth of the economy and resolve the deficit. Stiglitz prescribes a comprehensive response that should include, at the least, significant investments in education, a more progressive tax system and a tax on financial speculation. Economist Robert Pollin urges a goal of full employment by 2016 and reducing poverty from 15 percent to 11 percent, the level in 2000, which he shows are achievable goals. RoseAnn DeMoro of National Nurses United urges a poverty program that begins with stopping cuts to Social Security and expanding improved Medicare to all. As Robert Reich says, Medicare isn't the problem it's the solution.
Indeed, decades of history show that the national deficit parallels unemployment. In other words, the lower the unemployment rate, the lower the deficit will be in relation to the GDP. This chart shows the deficit as a percentage of GDP (red line) vs. the unemployment rate (blue line) and indicates the only way to solve the deficit problem is to solve the employment problem first.
Of course, creating a full employment economy also ameliorates poverty and homelessness. And it will not make the wealthier poorer. On the contrary, putting Americans to work to meet the many needs of the nation for infrastructure, health care, education and green energy will create more opportunities for businesses to profit. It will also allow the United States to have the resources to create the clean energy, sustainable economy that is urgently needed as part of a Green New Deal.
Let Us Be Dissatisfied
In Washington, DC, the two corporate parties that each ran billion-dollar presidential campaigns do not hear these calls and are immune to the facts on which they are based. Life in the United States continues to get harder for the vast majority. In 1988, the US ranked first in the world as the country to live in; today we have dropped to 16th.
How do we stop the madness in Washington? We organize and mobilize against austerity and for prosperity, for a new clean energy economy and a democratic economy that empowers the people fairly. We have the power, we must exercise it.
Dr. King concluded his 1967 speech urging people to go out with "divine dissatisfaction." He pointed to many problems Americans still face today: poverty, homelessness, the wealth divide and mass spending on war. Despite our dissatisfaction, King urged, "We must walk on in the days ahead with an audacious faith in the future."
You can hear our interview with Cheri Honkala and Robert Pollin on Martin Luther King, the Poor People's Campaign and Green Jobs on Clearing the FOG Radio.
This is Part I in a series on the deficit and real solutions. Next week we examine how Social Security and Medicare are the solutions, not the problems, and need to be expanded not contracted.
Below you will see my official statement against the Exelon rate increase. I spoke with the People's Counsel the day of the public hearing in Baltimore and enumerated all of these concerns. This rate increase should not even be coming in front of this commission!
The point I made on the rate increase is this: Before the merger between BGE and Exelon, all public officials and indeed the print newspapers assured the public there would be no rate increase with the merger. THEY PUBLICLY STATED NO RATE INCREASE WITH THE EXELON MERGER. It is malfeasance to deliberately misinform the public towards policy that is against public interest....which this is. Secondly, I brought up the billion dollar settlement from rate payer fraud by Constellation several years ago that should have transferred to Exelon with the merger. Nothing has been said of this billion dollar settlement throughout the merger deal and I told the People's Counsel the people need to know the status and why it is not tapped for these funds rather than another rate increase..
Then there is the fact that we have the public money attached to the privatization of the public utility itself accessed at billions. That too has been left unmentioned in all of these dealings.
I WANT TO REINTRODUCE THE HISTORY OF MARYLAND CITIZENS BEING PREYED UPON BY AN UNREGULATED PRIVATE ENERGY COMPANY. THEY LITERALLY OWE THE RATEPAYERS BILLIONS OF DOLLARS PER SETTLEMENTS AND AGREEMENTS THAT HAVE NEVER BEEN MET. EACH TIME A GOVERNOR SIGNS A DEAL MOVING THE COMPANY FURTHER INTO THE HANDS OF EVER LARGER CORPORATIONS, THE RATEPAYER IS TOLD WE WILL GET $100 REBATE OR $200 REBATE. WE ARE OWED A TREMENDOUS AMOUNT OF MONEY AND WE WANT IT NOW!!!! FORGET THE RATE INCREASE!!!
Deregulation deck stacked against ratepayers
March 15, 2006|By JAY HANCOCK | JAY HANCOCK,SUN COLUMNIST
Don't blame deregulation for the 72 percent pop in electricity bills that Baltimore Gas and Electric customers will see after July 1, says BGE.
"It is not deregulation that has failed," BGE spokesman Rob Gould said on WYPR radio last week. "The real cause for the price increase is the world energy market."
But for all of BGE's and parent Constellation Energy's portrayals of themselves as victims of high energy costs, the facts show not only that regulation would have softened this kind of rate shock but that deregulation was fixed from the start in their favor.
For one thing, deregulation was what exposed BGE ratepayers to the world energy market by cutting them off from the low-cost coal and nuclear generators BGE used to own.
On Sunday, I wrote that electricity bills in Michigan are a third less than what BGE's will be because regulators stopped deregulation short and forced Detroit Edison to keep its coal and nuclear plants, passing the low cost to households.
This column revisits the heart of deregulation - the 2000 sweetheart deal that shifted BGE's generators to parent Constellation and that is now being re-examined by the General Assembly.
The transaction - basically a paper shuffle - morphed what should have been benefits for households into profits for Constellation and bonuses for its bosses.
The generation plants changed hands on another fateful July 1 - July 1, 2000. One day they were owned by the heavily regulated BGE. The next day they were owned by Constellation, which could then peddle their megawatts to anybody and eventually force BGE and ratepayers to bid for juice in the open market.
Of course, you're saying, Constellation must have paid BGE ratepayers a fair price for those valuable facilities.
When Potomac Electric Power Co. sold its generation plants to Mirant Corp. in 2000, the resulting $424 million capital gain paid for, among other things, basically seven weeks of free electricity for Pepco customers in Maryland.
BGE customers, alas, got no such gain. For some reason Constellation got to take over BGE's plants at book value. No cash changed hands. No premium was paid. No gains flowed back to customers.
In fact, it was just the opposite. You, the electricity customers, paid Constellation to take the valuable plants off BGE's hands!
Like other power companies, Constellation argued that the plants would become uncompetitive after deregulation and that electricity customers should compensate them, essentially helping to pay the facilities' mortgages.
The result was the "stranded-cost" charge, added to every bill you paid for the last six years. The charge, which disappears after June, has put an extra half-billion dollars in Constellation's pocket.
Of course the plants didn't become uncompetitive. They soared in value like Google stock. As rising gas and oil prices have driven up the market price for megawatts, efficient coal and nuclear plants have become gold mines.
The most striking example is the Calvert Cliffs nuclear generation plant, which Constellation put on its books in 2000 for $1 billion. Last fall Calvert Cliffs was worth between $2.6 billion and $4.3 billion, according to consultant Global Energy Decisions, which calculates "blue book" values for generation assets.
And don't forget that most of the half-billion-dollar stranded-cost bailout that Constellation collected was linked to Calvert Cliffs, so its cost basis for the plant is actually even lower than $1 billion.
That's a ton of money ratepayers left on the table.
No wonder Constellation's profit went up 45 percent last quarter. No wonder Constellation bosses are seeing millions of dollars in stock option gains.
To be fair, there are several things to be said on Constellation's behalf.
Along with the 2000 transfer of the generation plants came a 6.5 percent rate cut for BGE customers, which lasts until July 1. Even so, Pepco customers in Maryland got the same rate cut - plus free kilowatts from the sale of Pepco's generation plants. The 6.5 percent rate cut should have been just a start.
Another valid point Constellation will make is that capital investment by current shareholders and management-driven efficiencies are key reasons for the huge jump in its plants' value.
Across the country, new operators "have really turned around what had been relatively mediocre performance among nuclear plants in the past," says Gary Hunt, president of Global Energy Advisors, a Global Energy Decisions affiliate.
No doubt. But that doesn't explain all of the gains made by Constellation. And it doesn't change the fact that ratepayers got a deal that amounted to having to pay down the mortgage but not being able to benefit when the property doubled or quadrupled in value.
Stranded cost? I call it a stranded rate cut for BGE customers.
Come on, Constellation. Give back the half-billion - as legislators have begun discussing - to soften the 72 percent rate shock. And admit that deregulation has worked a lot better for you guys than us.
YOU SEE BELOW THAT THERE WAS A SETTLEMENT THAT HAD CONSTELLATION PAYING A REBATE TO RATEPAYERS OVER 10 YEARS STARTING IN 2007. THAT MEANS WE WOULD RECEIVE IT UNTIL 2017. WE INSTEAD RECEIVED $100
FROM THE MERGER WITH EXELON AND THAT WAS TERMED A PERK OF THE MERGER......IT WAS SIMPLY THEM PAYING A BILL OWED BY CONSTELLATION.
THE PEOPLE ARE TOLD O'MALLEY WON $100 FOR US AS A RESULT OF THE MERGER.......IT WAS MONEY ALREADY OWED.
Mar 3, 2008, 8:11pm EST Constellation Energy files suit against state over $386M in rebates
Staff Baltimore Business Journal
Baltimore-based Constellation Energy Group filed a federal lawsuit late Monday to recoup about $386 million in ratepayer rebates the company alleges were illegal.
Filed in Baltimore's U.S. District Court, the lawsuit seeks to stop the state from continuing to give $38.6 million a year for 10 years to customers of Baltimore Gas & Electric Co., the Constellation-owned utility, designed to offset a proposed 72 percent rate hike.
Lawmakers approved the rebates in 2006, which ratepayers began receiving January 2007. They also capped the rate increase at 15 percent from July 2006 through July 2007.
The lawsuit also asks the court to uphold a 1999 deregulation agreement between Constellation, BGE and the state. Constellation officials said two Maryland court rulings have already upheld the 1999 decision by lawmakers on electric restructuring.
"A contract is a contract, and the state must abide by the rule of law," said Mayo Shattuck III, CEO of Constellation Energy Group (NYSE: CEG) in a statement released Monday. "We take this action reluctantly and only after pursuing alternative approaches to resolving these disputes."
The Maryland Public Service Commission is holding hearings on the impact of the state's decision in 1999 to deregulate the power industry. Constellation and BGE executives and PSC officials have argued over a report the PSC released alleging that BGE overcharged ratepayers by about $1 billion following deregulation. In a Feb. 6 hearing, BGE officials refuted the report and told regulators that ratepayers received a benefit of about $2 billion.
The state of Maryland stepped in Feb. 29 with its own federal lawsuit filed in Baltimore City Circuit Court in an effort to safeguard the rebates and keep Constellation from going to court to get them back.
THE 1999 AGREEMENT TO DEREGULATE WAS A CATASTROPHE FOR THE PUBLIC ALL ACROSS THE COUNTRY AS ALL OF THESE UTILITIES IMMEDIATELY STARTED PREYING UPON PEOPLE. THE AGREEMENT TIED $2.7 BILLION TO CALVERT CLIFFS NUCLEAR PLANTS FOR UPGRADES TO BE SPENT BY 2010...THAT'S 10 YEARS. WHEN A DEAL WAS CUT TO GIVE THESE NUCLEAR PLANTS TO CONSTELLATION THE REQUIREMENT TO PAY FOR THOSE UPGRADES DISAPPEARED AND SUDDENLY THE RATEPAYER WAS PAYING SO MUCH IN EACH BILL FOR THESE UPGRADES. THEN WE FIND OUT THAT THE AMOUNT WE ARE PAYING WILL PROVIDE A SUPER-SIZED PROFIT OVER THE COSTS CONSTELLATION WILL INCUR FOR ANY UPGRADE IF THEY EVER HAPPEN. THE LAST I'VE HEARD IS THAT EXELON IS LOOKING TO BE RID OF THESE PLANTS AND HAS YET TO START ANY UPGRADES.
SO BILLIONS OF DOLLARS ARE OWED THE RATEPAYERS ONE WAY OR ANOTHER AND THESE POLITICIANS WITH O'MALLEY THE LAST TO HAVE HIS HAND ON IT HAVE THE AGREEMENTS SO CONVOLUTED AS TO MAKE IT IMPOSSIBLE TO FOLLOW. YET, O'MALLEY DOESN'T HESITATE TO CALL FOR THE RATE INCREASE EXELON IS DEMANDING!!
ELECTRICITY Panel Questions Cost Of Nuclear Shutdown
The Pubic Service Commission says that electric customers are being overcharged $1.4 billion for the decommissioning of the Calvert Cliffs Nuclear Power Plant.
(By James A. Parcell -- The Washington Post)
By Lisa Rein Washington Post Staff Writer
Wednesday, February 27, 2008
Constellation Energy Group will likely receive a $1.4 billion windfall because the company is charging customers more than it will eventually need to decommission the Calvert Cliffs nuclear plant, Maryland utility regulators said yesterday.
The overpayment estimate came as Public Service Commission members grilled attorneys for the Baltimore-based energy giant on the terms of the 1999 deal to open Maryland's regulated electricity market to competition. Residential electric bills have soared since rate caps began to come off four years ago. The commission and lawmakers are searching for relief for customers.
Attorneys for Constellation said at yesterday's hearing in Baltimore that it is too early to determine how inflation and investment returns will affect the cost of dismantling Calvert Cliffs. But they said electricity customers gambled when the deregulation deal was signed that the money they would pay would cover the costs, exceed them or fall short.
"It could be a windfall, but that's how a hedge works," said Michael Naeve, a Constellation attorney.
The deregulation law now under review allowed Pepco and Baltimore Gas and Electric to sell their power plants to unregulated companies. In BGE's case, the plants, including Calvert Cliffs in Lusby, went to the utility's parent company, Constellation. BGE is Maryland's largest utility, serving 1.1 million electric customers in the Baltimore area, Prince George's, Howard, Anne Arundel and Montgomery counties.
Constellation took over the nuclear plant, but did not assume the federally mandated costs to dismantle it -- an expensive, lengthy process scheduled for one reactor in 2034 and the other in 2036. State regulators are raising questions now about how much is appropriate for customers to pay and whether the agreed-upon sum, which comes to about $18 million a year, will be enough to get the job done or put too much in the company's pocket.
"I assume you didn't intend to profit from this aspect of the  settlement," Commission Chairman Steven B. Larsen told lawyers for Constellation at the hearing. If customers continue to contribute decommissioning payments in their monthly bills, "It appears they will be potentially hugely overpaying by $1.4 billion," Larsen said. "There's potentially a vast difference between the actual ratepayer liability and the costs that may be incurred by Calvert Cliffs."
Larsen said after the hearing that the commission will recommend to the General Assembly whether some of the money can be recovered.
Constellation executives declined to appear at a similar hearing on decommissioning costs three weeks ago, and regulators were unable to get many of the answers they were seeking from attorneys for BGE, which remains a regulated company. But Constellation agreed to appear yesterday, quieting a war of rhetoric that had erupted between the company and Gov. Martin O'Malley (D) over disputed terms of the deregulation deal.
The company has accused the commission of creating a hostile regulatory climate by trying to undo parts of the deal.
Much of yesterday's hearing focused on how Constellation is calculating the costs to dismantle Calvert Cliffs, a process that will require the cleanup of radioactively contaminated plants and equipment and the removal of radioactive fuel.
Constellation has scaled down the estimated costs in reports to the Nuclear Regulatory Commission since 2003. Naeve told commissioners that last year the difference from previous calculations came to about 4 percent. "Time will bear out" the real price, he said.
But Larsen said customers were on the hook for more payments when the company received permission from federal regulators in 2000 to extend the life of the plant, which originally was scheduled to close sometime between 2014 and 2016. "They signed onto a potentially never-ending liability," he said.
Regulators also said yesterday that about $160 million of the money customers already have paid for decommissioning is being held by an unregulated affiliate of Constellation, and questioned whether it is being put aside for the nuclear plant.
Naeve said the money is being used for "general corporate purposes" but would be allocated for decommissioning when it is needed.
HERE WE HAVE THE SAME CORPORATION COMMITTING YET ANOTHER CRIME AGAINST RATEPAYERS, THIS TIME IN NATURAL GAS....AND THE FINES ARE SO SMALL THAT THIS COMPANY WILL DO IT AGAIN AND AGAIN.
FERC warns power, natural gas traders on manipulation
iBy Scott DiSavino and Eileen O'Grady
NEW YORK/HOUSTON | Thu Mar 15, 2012 6:43pm EDT
(Reuters) - The top U.S. energy regulator on Thursday warned power and natural gas traders that the agency has beefed up enforcement activity to discourage market manipulation, citing last week's record fine against Constellation Energy.
That's the message Federal Energy Regulatory Commission (FERC) Chairman Jon Wellinghoff told Reuters the agency is sending with a record $245 million fine against Baltimore-based Constellation Energy.
"The penalty amount will send the signal that you will not profit from market manipulation," Wellinghoff said. "It will cost you dearly. There is no profit to be made in manipulating the market; it will be a huge net loss for you."
Constellation agreed to pay a $135 million civil penalty and to disgorge unjust profits of $110 million. It was the largest penalty FERC has imposed since Congress expanded its enforcement authority in 2005 to prevent another electricity crisis like the one that hit California in 2000 and 2001.
Before the Constellation settlement FERC had only issued $172 million in fines since 2007.
FERC's enforcement staff determined Constellation engaged in manipulation in New York from September 2007 to December 2008, resulting in economic losses to market participants who bought and sold energy in the New York and New England power grids.
Specifics of the trading violations outlined in FERC's agreement with Constellation should also be viewed by industry as a message, commissioner Cheryl LaFleur told Reuters.
"The details of the settlement agreement which sets out what the alleged market manipulation was as well as the compliance that we are expecting from the companies going forward - whether intended as a message or not - it is a good message for people who are market participants to learn from," LaFleur said.
"It's good reading," she said.
More than 10 years after the collapse of Enron and the California energy crisis, which was exacerbated by illegal trading activity and cost companies billions of dollars, the need for constant market oversight remains, Wellinghoff said.
"It will always be necessary to have oversight and enforcement of these markets," Wellinghoff told Reuters. "You have to make sure people are trading and operating fairly and openly. There are going to be some people to test the limits and others who will go beyond the limits and actually engage in fraud, manipulation and abuse."
FERC has been building its enforcement office in the years since the California crisis.
"We're now maturing to a full robust office that has the capability to ensure these markets operate fairly for consumers," Wellinghoff said.
BEEFING UP ENFORCEMENT
Adding staff with analytical skills and energy market experience will allow the enforcement division "to dive deeper into the data and be able to bring cases where they are appropriate," he said.
Wellinghoff credited former New Mexico U.S. Attorney Norman Bay, named to lead the FERC enforcement office in 2009, for prosecutorial and energy market expertise.
As part of the Constellation settlement, FERC plans to grant $1 million to six regional transmission grid operators (RTOs), including New York and New England, to enable them to better analyze trading and price data.
"The RTOs are in a good position to identify discrepancies," FERC Commissioner John Norris told Reuters. "They deal with the power markets every day. We're trying to enhance our capacity to watch the market by enhancing the RTOs ability."
"My hope is people will realize there are serious repercussions for manipulation. We have a very strong investigations team, beefed up with a new division of analysis and surveillance. So the end goal is we have less to investigate," Norris said.
CONSTELLATION DENIES WRONGDOING
Constellation CEO Mayo Shattuck said the company did not admit to any wrongdoing but agreed to settle the case to avoid litigation and pave the way for its $7.9 billion merger with Chicago-based energy company Exelon Corp.
But Wellinghoff said in a statement that FERC would hold senior managers of "all companies" accountable for monitoring compliance. He said companies would be expected to refrain from making uneconomical trades on one position in order to lift the value of a different position.
FERC's enforcement unit said Constellation's inappropriate activity involved losing money in the New York physical power market to favorably influence payments it received under a separate financial market.
In a statement, Wellinghoff said companies would be expected to respond truthfully to questions about their trading, and also to realize that FERC "will be vigorous in using its anti-manipulation authority to protect consumers."
In addition to the civil penalty and profit disgorgement, Constellation had to remove the employees involved in the questionable trading activities from any position related to wholesale energy trading.
Shattuck said last week that Constellation believed its trading practices "were lawful portfolio risk management transactions." Wellinghoff's statement said "clearly that is not the case."
"The Stipulation and Consent Agreement sets forth a detailed description of the transactions that I believe Constellation knowingly and willfully engaged in that form the basis of enforcement staff's conclusion that Constellation engaged in market manipulation, fraud, and misrepresentation," Wellinghoff said.
DO YOU THINK THAT HANDING MARYLAND RATEPAYERS TO THIS BEHEMOTH WAS IN THE PUBLIC INTEREST? DO YOU THINK THE DIVESTMENT BELOW REALLY PROTECTS RATEPAYERS? DOES A DOUBLING OF RATES MAKE THAT CASE?
Justice Department Requires Divestiture in $7.9 Billion Merger of Exelon Corporation and Constellation Energy GroupDivestiture of Three Electricity Generating Plants Will Preserve Competition for Customers Throughout Mid-Atlantic Region
WASHINGTON — The Department of Justice announced that it will require Exelon Corporation and Constellation Energy Group Inc. to divest three electricity generating plants in Maryland in order to proceed with their $7.9 billion merger. The department said that the transaction, as originally proposed, would substantially lessen competition for wholesale electricity, ultimately increasing electricity prices for millions of consumers in the mid-Atlantic region.
The department’s Antitrust Division filed a civil lawsuit today in U.S. District Court in Washington, D.C., to block the proposed transaction. At the same time, the department filed a proposed settlement that, if approved by the court, would resolve the department’s competitive concerns and the lawsuit.
“Competition in wholesale electricity markets is vital to the economic well-being of consumers and businesses,” said Sharis A. Pozen, Acting Assistant Attorney General for the Antitrust Division. “These divestitures will preserve that critical competition for the benefit of electricity customers throughout the mid-Atlantic.”
According to the complaint, the merger would create one of the largest electricity companies in the United States with total assets of $72 billion and annual revenues of $33 billion, and would combine the assets of two large competitors in the mid-Atlantic region. Together, the companies would own between 22 and 28 percent of the generating capacity in the densely populated mid-Atlantic area encompassing Delaware, the District of Columbia, New Jersey, eastern Pennsylvania, and parts of Maryland and Virginia. The department said that the combination of the assets would enhance the incentive and ability of the merged firm to raise wholesale electricity prices and reduce output.
Under the terms of the proposed settlement, the merged firm must divest three electricity plants, which in total provide more than 2,600 megawatts of generating capacity. The plants to be divested are Brandon Shores and H.A. Wagner in Anne Arundel County, Md., and C.P. Crane in Baltimore County, Md.
Exelon is incorporated in Pennsylvania and has its headquarters in Chicago. Exelon owns the PECO utility of Philadelphia and the Commonwealth Edison utility of Chicago. Exelon had $18.6 billion of revenues in 2010.
Constellation is incorporated in Maryland and has its headquarters in Baltimore. Constellation owns the BG&E utility of Baltimore. Constellation had $14.3 billion of revenues in 2010.
As required by the Tunney Act, the proposed settlement and the department’s competitive impact statement will be published in the Federal Register. Any person may submit written comments concerning the proposed settlement during a 60-day comment period to William H. Stallings, Chief, Transportation, Energy and Agriculture Section, Antitrust Division, U.S. Department of Justice, 450 Fifth St. N.W., Suite 8000, Washington, D.C. 20530, 202-514-9323. At the conclusion of the 60-day comment period, the U.S. District Court for the District of Columbia may enter the proposed settlement upon finding that it is in the public interest.