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Shortcuts: After a Tragedy, Calculating the Best Ways That People Can Help

May 31, 2013 by Leave a Comment

And a few months later, news reports pop up. The funds aren’t being disbursed properly. Charities are competing to collect. The money isn’t going to the right people or it’s not being handed out quickly enough. And the milk of human kindness sours a little.

I, like many others, have become perplexed. Where should I give — or even should I give?

Donating to help people recover from a disaster, natural or otherwise, is nothing new. Newspaper reports of the Johnstown Flood of 1889, which killed more than 2,000 people, so touched people that they sent money, blankets, clothing, food, lumber and medical supplies.

In fact, it was the first major disaster served by the Red Cross, then recently created.

Of course with television and Web videos, the immediacy of such catastrophes is that much more intense. And the Internet has allowed giving to be done more quickly and more directly.

Funds set up to aid victims “have become standard practice,” said Ken Berger, president of Charity Navigator, a nonprofit that evaluates charities.

Not all such funds are the same. The $7 billion September 11 Victim Compensation Fund was established by an act of Congress. The $20 billion compensation fund after the 2010 BP oil spill was set up by the oil company. Both were tied to agreements by the recipients not to sue.

On the other hand, funds set up after other calamities — like the Oklahoma City bombing in 1995 all the way through to the Boston Marathon bombings — consist only of charitable donations and given without strings attached.

Few have operated without controversy.

“The results of these funds have been very mixed,” Mr. Berger said. “There is an ongoing tension between moving the money quickly and vetting who gets it.”

People have often been frustrated with traditional charities, he said, not trusting — sometimes with good reason — that the money is going to the right people and not being used, say, for lavish salaries. And fraudulent charities have popped up after many of these tragedies.

In response to such concerns, a group of 70 parents and families affected by the dismal litany of shootings — from Columbine High School in Colorado to the Oak Creek Sikh Temple in Wisconsin to the Newtown, Conn., elementary school — want to set up what they call a National Compassion Fund to aid victims of human-made disasters, as opposed to natural ones, on the theory that the Red Cross is already managing those.

The idea would be that the next time — and it will happen — a mass shooting or bombing or some other crime occurs people can donate to the national fund and a specific protocol will swing into place to collect the money and get it directly to the victims.

“Every single time one of these tragedies occurs, the same thing happens,” said Mai Fernandez, executive director of a nonprofit, the National Center for Victims of Crime, which is considering overseeing the National Compassion Fund. “People say, ‘Oh my God, I want to do something, someone collects — a United Way or a community foundation — and there’s no protocol to give the money. It’s time to get our act together.’ ”

In Newtown, for example, the bulk of the money was donated to the United Way of Western Connecticut, which then created a new foundation to give out the funds. There are, however, disputes about the role of the various charities involved in distributing the more than $20 million collected and how the money should be spent.

The National Compassion Fund, still in the planning stages, would be endorsed by a state or local official immediately after a tragedy occurs that is fatal or causes life-changing injuries to at least five people in a public place.

It would have tax-exempt status and money would be distributed within six months, Ms. Fernandez said, with “every dime to go to the victims,” as a nontaxable gift.

A lot still needs to be worked out — like finding donors who will pick up the administrative costs and a partner to collect and distribute the money — but the One Fund in Boston is a good example of the right way to do things, Ms. Fernandez said.

The fund has raised almost $40 million and checks will go out to victims and families starting July 1, said Camille Biros, deputy administrator of the One Fund.

It sounds good. But is it?

“People are so touched by these tragedies that they want to reach out,” said Stacy Palmer, editor of The Chronicle of Philanthropy. And the desire is that the money goes out instantly.

But that may not serve the real needs of the victims or community, she said, noting that, “with the Oklahoma City bombing, they’re still dealing with severe mental health care needs.”

Charities need to do better to educate people about the continuing needs of the community, she said.

“Maybe give 20 percent now but hold back 80 percent,” she said. “It may be a harder sell, but I think it’s more responsible.”

Also, perhaps people should think more deeply about why they are donating. We are moved by grief-stricken families and maimed bodies. But is sending money to help them the best way to help?

E-mail: shortcuts@nytimes.com

Article source: http://www.nytimes.com/2013/06/01/your-money/contemplating-effective-relief-actions-when-tragedies-occur.html?partner=rss&emc=rss

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Wealth Matters: Loans From a Bank Supported by the Family Tree

May 31, 2013 by Leave a Comment

But a subset of parents, many quite wealthy, is responding not with handouts but with loans that children apply for and that require approval by parents, relatives, or even people outside the family, as they would at a bank.

These families are working to support their children’s interests without robbing them of motivation, causing rifts among their siblings or even running afoul of the Internal Revenue Service, which may wonder whether these loans are really gifts.

“My advice is to start early and small and allow it to grow,” said Warner King Babcock, chairman and chief executive of AM Private Enterprises, a registered investment adviser in New Canaan, Conn.

Mr. Babcock, a chemist by training, knows whereof he speaks. When he was in his early 20s and working for his father’s engineering and construction materials company in Greenwich, Conn., he got an idea for a type of waterproofing that would work in extreme conditions. His father backed the idea financially, and Mr. Babcock patented and began selling the coating.

The company sold its high-performance coatings to clients like zoos and nuclear power plants. But seven years into the venture, Mr. Babcock told his father that he was leaving, even though the company was doing well.

Today, he chooses his words carefully so as not to offend his siblings.

“I felt early on that I had a lot of freedom and I was empowered to grow the firm,” he said. “As time went on, I felt that there was more involvement in the key decisions, and it got to a point where that caused friction. If there was an outside board that could have acted as a buffer, that would have helped.”

That experience informed his later work as an investment adviser to large, wealthy families.

Mr. Babcock is trying to share the benefits and perils of what is often called the family bank with a wider audience. In this, he is part of a small group of advisers that sees formal lending in a family as a way to invest in ideas from younger generations, provide financing when real banks may be hesitant and teach lessons about stewardship and responsibility.

Here’s some of what families of more modest means can learn.

HOW TO DO IT RIGHT Parents hardly need to be told that their children are having trouble supporting themselves after finishing school. But a recent report from Junior Achievement and the Allstate Foundation said that the number of high school students expecting to be financially dependent on their parents into their late 20s had more than doubled in the last two years, to 25 percent from 12 percent.

According to the report, parents have also resigned themselves to offering some level of financial assistance through those years. The parents cited the poor job market and economy, and changing societal norms.

This is where loans in a family may be a way of supporting a child’s idea without making it seem like a handout.

Whether a family is making a $10,000 or a $1 million loan, the most successful lay out criteria for lending. They could say that loans will be made for business ventures, investments or a mortgage on a house, but not for living expenses or travel. They could require everyone to submit a business plan.

“If you have a family bank set up where there is a system or a process for asking the family for loans, it cuts out all the issues of people asking for money and saying you like my sister better,” said Mindy Rosenthal, president of the Institute for Private Investors, an organization that recently hosted a seminar on the Web about family banks. “All the processes and procedures cut out all this family dynamics.”

From there, the loan should include language explaining that it must be repaid and what will happen if the endeavor fails.

Mr. Babcock said he knows of one family that requires collateral before making a loan. Others, he said, require periodic updates on the business and reserve the right to offer advice or renegotiate loan terms if the business is struggling. If the loan can’t be repaid, Mr. Babcock said a family that had documented it could write it off the way a bank would.

HOW IT GOES WRONG As with anything in a family, there are many ways that lending money to relatives can end badly.

Article source: http://www.nytimes.com/2013/06/01/your-money/a-building-and-loan-built-on-the-family-tree.html?partner=rss&emc=rss

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Off the Charts: Shades of Prerecession Borrowing

May 31, 2013 by Leave a Comment

The amount owed on loans secured by investments rose to $384 billion at the end of April, according to data compiled by Finra, the Financial Industry Regulatory Authority. It was the first time the total had surpassed the 2007 peak of $381 billion, a peak that was followed by the Great Recession and credit crisis.

The accompanying charts show the level of outstanding margin debt since 1960, both in dollars and as a percentage of gross domestic product. The latest total of borrowing amounts to about 2.4 percent of G.D.P., a level that in the past was a danger signal.

Rising margin debt was once seen as a primary indicator of financial speculation, and the Federal Reserve controlled the amount that could be borrowed by each investor as a way to damp excess enthusiasm when markets grew frothy. But the last time the Fed adjusted the margin rules was in 1974, when it reduced the down payment required for stocks to 50 percent of the purchase price, from 65 percent. That came during a severe bear market.

Since then, the Fed has been on the sidelines. The view there, and among professional investors, has been that far greater leverage was available through options and futures, not to mention more exotic derivatives, so changing the rule would have little effect on levels of speculation.

Nonetheless, margin loans have remained popular among many individual investors, who tend to raise their borrowings during times of market optimism and to reduce them when markets are falling. Thus the margin debt levels now may provide an indication of popular enthusiasm for investments.

The first time in recent decades that total margin debt exceeded 2.25 percent of G.D.P. came at the end of 1999, amid the technology stock bubble. Margin debt fell after that bubble burst, but began to rise again during the housing boom — when anecdotal evidence said some investors were using their investments to secure loans that went for down payments on homes. That boom in margin loans also ended badly.

The charts show the changes in the Standard Poor’s index of 500 stocks during the 12 months before the margin debt level reached 2.25 percent of G.D.P., while it stayed at that level, and during the 12 months after the debt level fell below that figure. The figures are indexed to zero at the end of the first month that margin debt reached 2.25 percent of G.D.P.

In each case, there were double-digit increases in share prices during the year before margin debt got to that level. In the first two, the stock market decline began while margin debt was at the high level, and accelerated as debt levels fell — presumably because investors were liquidating securities that were losing money.

If that pattern repeats, it could indicate that the stock market rally, which carried the S. P. 500 to record levels in May, will not last much longer.

Perhaps offering some hope that pattern will not repeat is the fact share prices are lower now — at least relative to the size of the economy — than they were at the prior peaks. As it happens, the S. P. 500 was a little below 1,500 in 1999, and again in 2007, and again this past January, when margin debt rose to 2.25 percent of G.D.P. But corporate profits now are more than double what they were in 1999, according to government estimates.

Floyd Norris comments on finance and the economy at nytimes.com/economix.

Article source: http://www.nytimes.com/2013/06/01/business/economy/shades-of-prerecession-borrowing.html?partner=rss&emc=rss

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Economix Blog: Kissing Away the Corporate Tax

May 31, 2013 by Leave a Comment

My column on Wednesday startled some readers. Was I proposing to do away with corporate taxes simply because globalization is making it easier for multinational companies to avoid them? Should we really just roll over and accept defeat?

Well, other advanced nations seem on their way to doing exactly that.

They have found a way of reducing corporate tax rates that improves economic efficiency, lowers the cost of capital for their companies and may even increase the progressivity of their tax system: offsetting those lower corporate rates with higher tax rates on the income that companies provide to their shareholders.

Since 2000, the top corporate tax rate in Britain has fallen to 23 percent, from 30 percent; in France it has receded to 34.4 percent, from 37.8 percent, and in Denmark it has declined to 25 percent, from 32 percent, according to data from the Organization for Economic Cooperation and Development.

Source: Organization for Economic Cooperation and Development

Many of these countries have compensated for lowering the corporate rates by taxing dividends more. Over the same period, the dividend tax rate rose to 30.6 percent in Britain, from 25 percent; in France, it went to 44 percent from 40.8 percent, and in Denmark it rose to 42 percent from 40 percent. Most industrial countries have also eliminated exemptions to prevent double taxation of dividends.

The United States has rowed in the opposite direction. Companies complain, rightly, that the corporate tax rate in the United States is too high compared to those of its peers: 39.1 percent, combining federal and state taxes – virtually the same as it was 13 years ago. But they rarely mention that the tax on profits flowing to shareholders has fallen drastically.

Even after the New Year’s budget deal raised taxes on the highest earners, the 20 percent top rate for dividends and long-term capital gains remains much lower than in the 1990s — when the top capital gains tax was 28 percent, and dividends were taxed as ordinary income.

A paper published a couple of years ago by Rosanne Altshuler of Rutgers, Benjamin H. Harris of the Brookings Institution and Eric Toder of the Tax Policy Center suggested that the American mix is particularly inefficient.

Because American corporate tax mostly falls on domestic profits (foreign profits retained abroad pay no tax), it raises the cost of domestic investment and encourages companies to invest abroad. It also encourages them to seek out low-tax havens around the world to park their profits. And it encourages companies to shed their corporate status to avoid the tax altogether.

The Altshuler-Harris-Toder paper suggests that reducing the corporate tax rate and increasing taxes on dividends and capital gains would be a much more efficient way to raise money.

Their calculation — which is only rough because it assumes no change in the behavior of companies or their shareholders — suggests that raising the top tax on long-term capital gains to 28 percent and taxing dividends as ordinary income (which faced a top rate of 35 percent at the time of the study) would raise enough money to pay for a cut in the federal corporate tax rate from 35 to 26 percent.

But the most interesting bit of the study is their finding that these changes would make the tax structure more progressive – increasing the tax burden on Americans with the highest incomes. That’s because the rich would bear the brunt of the increase in the dividend and capital gains tax.

Even assuming that shareholders bear the entire burden of corporate taxation — an assumption that is being questioned in the economic literature — the change suggested by the economists would lower the average federal tax rate of everybody except the top 1 percent of Americans, who would suffer a tax increase of 1 percent.

Under a different assumption — that corporate taxes are mostly paid by workers because of the impact of the tax on investment, jobs and wages — the progressivity would be steeper. In particular, those in the top percentile of income would see their taxes rise by 1.8 percent.

So getting rid of corporate taxes — or at least reducing them substantially — may not be such a bad idea. The tax burden would just have to be shifted from the companies to their owners.

Article source: http://economix.blogs.nytimes.com/2013/05/31/kissing-away-the-corporate-tax/?partner=rss&emc=rss

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OPEC Leaves Production Targets Unchanged

May 31, 2013 by Leave a Comment

LONDON — With the price of oil relatively strong, OPEC decided on Friday to maintain its current target for oil production at 30 million barrels per day, a move that was expected by the markets.

The price of Brent crude oil, the European benchmark, has recently hovered around $100 a barrel, a level that met with the approval of most members of the Organization of the Petroleum Exporting Countries, meeting in Vienna.

“There is no compelling reason to rock the boat,” wrote Bhushan Bahree, an analyst at market research firm IHS Cera, in a research note.

At a news conference following the meeting, the OPEC secretary general, Abdalla S. el-Badri, waved off a suggestion that the $100-per-barrel level was acting as a drag on the world economy, arguing that much of the eventual price at the pump was due to taxes, not the crude oil itself.

“If the government wants to do something for their economy, they should reduce taxes so people can buy more gasoline,” he said.

Despite today’s prices, OPEC is losing market share to countries outside of the cartel, especially the United States and Canada.

Saudi Arabia, by far the largest producer, has cut production by about 600,000 barrels a day from a year ago, to 9.3 million, according to IHS Cera. In the same period, Iranian production dropped by 400,000 barrels a day as American sanctions took a toll on the country’s industry.

For years, oil prices rose with equity prices, but recently oil has “fallen even as the S.P. has made record highs,” wrote Seth M. Kleinman, an analyst at Citi, in a research note, referring to the Standard Poor’s 500-stock index. Mr. Kleinman also noted that there has been “significant liquidation” by speculators in the futures markets over the last three months.

From an OPEC perspective, the outlook for the next year is not rosy. Many analysts forecast that global demand will increase modestly this year and that most or all of the increase will be supplied by non-OPEC producers, led by the United States. If so, that would leave little room for OPEC output to grow and may force the organization to either make further cuts or allow global inventories to build.

“The second half of the year could see a further easing in fundamentals,” OPEC said Friday in a statement.

OPEC’s current quotas have been in place since 2011.

Article source: http://www.nytimes.com/2013/06/01/business/global/opec-leaves-production-targets-unchanged.html?partner=rss&emc=rss

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Unemployment Hits Record High in Euro Zone

May 31, 2013 by Leave a Comment

LONDON — Unemployment in the euro zone continued its relentless march higher in April, according to official data published Friday, hitting yet another record amid a prolonged recession and the lack of a coordinated response by policy makers.

The jobless rate for the 17 countries that use the common currency rose to 12.2 percent, from 12.1 percent a month earlier, with 19.4 million people out of work, according to Eurostat, the E.U. statistics agency. Nearly a quarter of job-seekers under age 25 were unemployed. Some analysts said the jobless rate could hit 20 million by the end of the year.

Despite the rise, most analysts do not expect the European Central Bank to cut interest rates or take other action to stimulate growth when its policy-making council meets in the coming week. Separate data from Eurostat showed that inflation in the euro zone rose to 1.4 percent from 1.2 percent, which could prompt the E.C.B. to wait for clearer signs that there is no risk of higher prices.

Analysts said the continued rise in youth unemployment was particularly alarming. It reached 62.5 percent in Greece and 56.4 percent in Spain in April, Eurostat said, threatening to become a long-term drag on growth as young people are unable to start their careers.

“Youth joblessness at these levels risks permanently entrenched unemployment, lowering the rate of sustainable growth in the future,” Tom Rogers, an economist who advises the consulting firm Ernst Young, said in an e-mail message.

A decision by E.U. leaders to allow distressed countries more time to cut their government budgets will help, he said, as would a cut in the benchmark interest rate by the E.C.B. last month. But Mr. Rogers added, “Much more remains to be done to stimulate a recovery.”

For the moment, though, there is little prospect of major additional stimulus from governments or the E.C.B. The central bank remains reluctant to undertake more radical measures like those used by the U.S. Federal Reserve or the Bank of England. The E.C.B. benchmark interest rate is already at a record low of 0.5 percent, and it is unlikely that a further cut would do much to relieve a credit crunch in countries like Italy.

The E.C.B. aims for inflation of about 2 percent, and still has room for additional measures without violating its mandate to maintain price stability. But the uptick in inflation reported Friday, caused primarily by a rise in prices for food, alcohol and tobacco, could quiet those who have argued that the euro zone is in danger of sinking into deflation, a sustained decline in prices that can be even more destructive than inflation because it is so hard to reverse.

In one bit of good news, unemployment in Ireland fell to 13.5 percent, from 13.7 percent, and down from 14.9 percent a year earlier. The improvement is a sign that Ireland is slowly recovering from the banking and debt crisis that began in 2008.

Article source: http://www.nytimes.com/2013/06/01/business/global/euro-zone-economic-data.html?partner=rss&emc=rss

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Japan and South Korea Bar U.S. Wheat Imports

May 31, 2013 by Leave a Comment

Japan and South Korea suspended some imports of American wheat, and the European Union urged its 27 nations to increase testing, after the United States government disclosed this week that a strain of genetically engineered wheat that was never approved for sale was found growing in an Oregon field.

Although none of the wheat, developed by Monsanto Company, was found in any grain shipments — and the Department of Agriculture said there would be no health risk if any was shipped — governments in Asia and Europe acted quickly to limit their risk.

South Korea, which last year purchased roughly half of its total wheat imports of five million tons from the United States, said Friday it would suspend purchases until tests were performed on arriving shipments. Results of the tests, by the Ministry of Food and Drug Safety, were expected in the first week of June, according to local media.

Seoul also raised quarantine measures on wheat for livestock feed, while Thailand put ports on alert.

The European Union, which has a “zero tolerance” approach to genetically modified crops, said through its consumer protection office Friday that if any shipments tested positive, they would not be sold.

It also said it was seeking “further information and reassurance” from Washington and had asked Monsanto for help in developing a reliable test for the genetically modified strain.

The United States is the world’s biggest exporter of wheat. While genetically engineered corn and soybeans are routinely grown, they are largely consumed by animals, while wheat is consumed directly by people and has faced more consumer resistance.

The strain of wheat was developed by Monsanto to resist its Roundup herbicide, but the company ended its field trials in 2004. How it came to be growing in Oregon was not clear.

Japan and Mexico are among the biggest importers of American wheat. The European Union imports more than one million tons each year, mostly to Spain.

Reuters and The Associated Press contributed to this report.

Article source: http://www.nytimes.com/2013/06/01/business/global/japan-and-south-korea-bar-us-wheat-imports.html?partner=rss&emc=rss

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DealBook: Dell Begins Campaign to Support Leveraged Buyout

May 31, 2013 by Leave a Comment

Dell on Friday filed its definitive proxy materials with the Securities and Exchange Commission.Paul Sakuma/Associated PressDell on Friday filed its definitive proxy materials with the Securities and Exchange Commission.

Dell Inc. on Friday began its official campaign to support a proposed $24.4 billion sale of itself to Michael S. Dell and the investment firm Silver Lake, amid continued opposition to the deal.

The computer company filed its definitive proxy materials after receiving final approval from the Securities and Exchange Commission. And it set July 18 as the date for a shareholder vote on the transaction.

In a letter to shareholders, the company stressed that its special committee had carefully reviewed all possible alternatives to the $13.65-a-share offer by Mr. Dell and Silver Lake and fought hard to get to that price.

“Our analysis led us to conclude unanimously that a sale to the Michael Dell/Silver Lake group for $13.65 per share is the best alternative available — in a challenging business environment it offers certainty and a very material premium over pre-announcement trading prices,” the company wrote.

Dell also argued that a full sale eliminates shareholders’ risk of the company’s fortunes tumbling further, something that would not be possible if it pursued a huge stock buyback and dividend plan. That runs counter to what two of its biggest investors, Southeastern Asset Management and the billionaire Carl C. Icahn, have demanded.

Article source: http://dealbook.nytimes.com/2013/05/31/dell-begins-campaign-to-support-leveraged-buyout/?partner=rss&emc=rss

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Economix Blog: Jeffrey Selingo on Curing the College Dropout Syndrome

May 31, 2013 by Leave a Comment
Book Chat

Talking with authors about their work.

Jeffrey Selingo, the former editor of The Chronicle of Higher Education and currently an editor at large there, is the author of a new book, “College (Un)Bound.” In it, he argues that the higher-education system is both vital to the American economy and “broken.” My exchange with him, edited slightly, follows.

You start your book by telling the story of a young woman named Samantha Dietz and describing the widespread phenomenon of enrolling in college without graduating. You write: “Only slightly more than 50 percent of American students who enter college leave with a bachelor’s degree. Among wealthy countries, only Italy ranks lower.” Why does the United States do a worse job of getting people through college than enrolling them in it?

Jeffrey Selingo, author of “College (Un)Bound.”Jay Premack Photography Jeffrey Selingo, author of “College (Un)Bound.”

College is one of the biggest financial investments we make in our lifetime, yet many families largely make their decision based on emotion. Prospective students start touring colleges in high school, well before they know how much a particular school might actually cost them. They are distracted by the bells and whistles on campus tours, fall in love with a campus and fail to ask the right questions. (Tools like collegerealitycheck.com and the Obama administration’s College Scorecard can help.)

So many students end up poorly matching to their campus. That’s why a third of students now transfer before earning a degree, and many unfortunately simply drop out.

At the same time, we have this fascination with the bachelor’s degree in the United States, and we think everyone needs to earn one at the same point in their lifetime, enrolling at 18 years old. The economy demands that more students have an education after high school, but not everyone is ready for college at 18. Many of them end up in college because we have few maturing alternatives after high school, whether it’s national service, apprenticeships or structured “gap year” experiences.

Finally, campus culture and money play a role. If you go to a college with a low graduation rate, your peers have an impact on your thinking: if no one else is graduating in four years, why should I? Others drop out because their financial situation changes while they are there and they can no longer afford it.

There is an economic reason we have a fascination with the bachelor’s degree, isn’t there? It brings a huge economic return. The jobless rate for four-year college grads is less than 4 percent, and the wage premium is very large — much larger than it once was. As you write, “By almost every measure, college graduates lead healthier and longer lives, have better working conditions, have healthier children who perform better in school, have more interest in art and reading, speak and write more clearly, have a greater acceptance of differences in people and are more civically active.”

How would you respond to the argument that everyone should aspire to a bachelor’s degree? Not everyone will make it. Many would need to start at a community college or with remedial work. But I can’t help but notice that most of the people arguing that “college isn’t for everyone” insist that their own kids go.

I’m not arguing that you shouldn’t aspire to a bachelor’s degree because, as you note, it does bring great economic returns. But why does it need to happen for everyone at 18?

Jacket design by Archie Ferguson; jacket art by Alessandroiryna/iStock photon

For some, a two-year degree might be more appropriate at 18. And recent studies of wage data of college graduates in Virginia, Tennessee and a few other states show that the wage returns of technical two-year degrees are greater than many bachelor’s degrees in the first year after college.

Someone who isn’t ready for a four-year college at 18 and ends up dropping out is in some ways worse off than a high-school graduate who never went to college at all. Sure, college dropouts have some credits, but still no degree, and it’s likely that they have debt.

Let’s think of extending the period for a bachelor’s to be sure more students succeed in getting one. We don’t need alternatives to the bachelor’s degree, just more constructive detours on the pathway to college for those who are not ready at 18.

That’s a fascinating way of thinking about it: different paths, more than a different destination. (And whatever that study of Tennessee and Virginia shows about the first year after college, I have yet to see evidence that any alternative beats the long-term returns of a bachelor’s degree.)

Given how problematic it is for people to have college debt without a college degree — as many people unfortunately do — what do you think federal and state policy makers should do to change colleges with low graduation rates?

Well, the first thing federal and state policy makers can do is come up with a better way to measure graduation rates. The current rate counts only first-time students who enroll in the fall and complete degrees in “150 percent of normal time” – six years, for students seeking bachelor’s degrees. It doesn’t include students who transfer to other colleges and then graduate or those who transfer in and graduate. By one estimate, it excludes up to 50 percent of enrolled students.

A national student record database would allow policy makers to track students as they move among colleges. Once we have a better measure, then colleges that do well in actually graduating students should be rewarded, especially for those students who are not expected to complete college. For example, colleges that graduate Pell Grant recipients above the national average or students who are first in their family to go to college should get access to more federal aid for those students.

And all colleges need more skin in the student-loan game. Students are being saddled with higher amounts of debt, and the schools have little responsibility as they encourage more and more families to take on more debt. Right now, the only punishment is that colleges with high default rates are thrown out of the federal program. But that rarely happens. Colleges need to put some of their own dollars at risk if they are asking students and their parents to take on loans above certain amounts.

The last major section of your book is called “The Future.” So let me ask you to look ahead and predict one significant way in which a typical campus experience at a four-year college will be significantly different in 2023 than it is in 2013.

The biggest difference will be the injection of technology into the curriculum, with more courses taught in hybrid format, meaning a mix of face to face and online. That will allow for a more personalized experience for students so they can learn at their own pace and break the traditional idea of the academic calendar where everyone needs to start in September and end in May.

Article source: http://economix.blogs.nytimes.com/2013/05/31/how-to-cure-the-college-dropout-syndrome/?partner=rss&emc=rss

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Vatican Bank Looks to Shed Its Image as an Offshore Haven

May 30, 2013 by Leave a Comment

“Our mission is to serve and shine,” the bank’s president, Ernst von Freyberg, said with a smile. “Our first pillar is transparency.” He spoke from an office in the medieval tower that houses the bank inside the Vatican, beneath a painting depicting the Gospel lesson, “Render under Caesar, what is Caesar’s, and to God, what is God’s.”

Appointed in February by Pope Benedict XVI in one of his last acts before retiring, Mr. von Freyberg, 54, a German aristocrat, industrialist and Roman Catholic with a friendly manner and a subtle sense of self-irony, will have a lot of shining to do.

After the ouster of the previous president of the Vatican Bank, Ettore Gotti Tedeschi, in a boardroom coup last year, Mr. von Freyberg was brought in with the help of an outside headhunting firm — revolutionary by the standards of the insular Vatican — and is the bank’s first non-Italian president since its founding in 1942.

In recent years, the Vatican Bank has been under increasing pressure from European officials and the Bank of Italy to shed its reputation as an offshore haven and bring its practices in line with European norms to curb money-laundering and terrorist-financing as a condition for using the euro. Until it is deemed fully compliant, the Vatican will face higher costs and difficulties in finding banks to do business with it.

In an hourlong interview, his first since assuming his post, Mr. von Freyberg said he intended to make the bank more transparent by setting up a Web site, issuing an annual report and having more contact with the news media.

Because of the Vatican Bank’s reluctance to reveal its client list to outside scrutiny, rumors have long swirled about whether it was holding slush funds for Italian politicians or money linked to organized crime.

Mr. von Freyberg said that the Vatican Bank had developed a bad reputation over the years, partly out of its own lack of communication with the outside world and partly out of what he called “slander” in the news media and an Italian tendency to look for conspiracy theories.

“I can’t comment on single clients,” he said, “but I can tell you that I have taken all the names I have found in the newspapers and looked them up myself. I didn’t find a single one of these names. This Mafia boss, this politician, Osama bin Laden. None of them have accounts here, nor are they delegates to accounts.”

“Perception and reality are not identical here,” he said. “However, the reality is that the perception is what it is, so we need to address that.”

Mr. von Freyberg said the bank had stepped up its reporting of suspicious transactions, and flagged six last year — not a huge number, but a jump from just two since it set up an internal watchdog in 2010. Of the six, two were sent to Vatican prosecutors for further investigation.

“This year we are discussing seven,” he said, and that is only through May. He declined to discuss details, saying only that the bank was “systematically suspicious of cash movements of a certain size and of recipients of funds, of individuals.”

Last July, a report by Moneyval, a monitoring agency under the Council of Europe, said that the Vatican had made progress but still lagged in meeting international compliance standards. Mr. von Freyberg said he had not met internal resistance in his efforts to scrutinize the books. “I cannot speak of any resistance whatsoever,” he said.

Some veteran Vatican watchers wonder if the Vatican Bank’s newfound openness is more about public relations than actual change. “In my view, up to now it’s just a facade,” said Carlo Marroni, a Vatican expert with the Italian financial daily Il Sole 24 Ore.

Article source: http://www.nytimes.com/2013/05/31/world/europe/vatican-bank-looks-to-shed-its-image-as-an-offshore-haven.html?partner=rss&emc=rss

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