lawmakers

Lawmakers Trade Blame as Congressional Deficit Talks Crumble

November 21, 2011 by NewsMaker Leave a Comment

The stalemate was the latest sign of partisan deadlock in Washington, which members of both parties do not expect to lift until the 2012 election has clarified which party has the upper hand.

Barring an unexpected turnaround before Monday’s deadline, the failure of the special Congressional deficit committee will be the third high-profile effort to fall short of a deal in the last 12 months, including a bipartisan deficit commission and talks last summer between President Obama and Speaker John A. Boehner.

By law, the special Congressional committee’s inability to reach an agreement will trigger $1.2 trillion in automatic spending cuts over 10 years to the military and domestic programs, to start in 2013.

As time wound down to a Monday night deadline for an agreement, Capitol Hill lacked the frenzied negotiation typical of a Congressional race to beat the clock. Instead, many members — well aware that Congressional approval ratings are near historic lows in polls — seemed resigned to the fact that Democrats and Republicans remained far apart on major budget issues, especially tax increases on the affluent, which Democrats insist must be part of any deficit solution and which Republicans oppose.

The White House called on the 12 members of the special committee to finish their work, but with no expectation of a breakthrough, the leaders of the committee planned to issue a statement on Monday acknowledging that they had failed to reach an agreement. And lawmakers on the panel, which is evenly divided between the two parties, blamed one another for the failure.

Many outside Washington, including on Wall Street, had low expectations for the committee, and some analysts predicted that the breakdown might not have a major effect on financial markets. But the developments added to the air of uncertainty at a time when the world economy is coping with Europe’s debt problems and a sluggish recovery from the 2008 financial crisis. Some members of Congress were vowing to pass legislation to repeal the automatic cuts, locked in by the law that raised the debt ceiling in August.

Once they return from their Thanksgiving recess, members of Congress face another set of decisions with the potential to hamstring the economy. A temporary payroll-tax cut for nearly all households and jobless benefits for many long-term unemployed are scheduled to expire at year’s end, and many economists predict that growth and hiring will slow further if such measures are not renewed.

On Sunday, in the halls of the Capitol and on television talk shows, Democrats and Republicans offered strikingly different post-mortems for the process.

Democrats blamed the Republicans for their unwillingness to yield on a no-new-taxes pact they signed at the request of a conservative antitax group, arguing that the American public realizes that no grand deal could be reached without a combination of spending cuts and new tax revenue.

“As long as we have some Republican lawmakers who feel more enthralled with a pledge they took to a Republican lobbyist than they do to a pledge to the country to solve the problems, this is going to be hard to do,” Senator Patty Murray, Democrat of Washington and the committee’s co-chairwoman, said on CNN’s “State of the Union.”

But Representative Jeb Hensarling, Republican of Texas, the co-chairman, said it was the Democrats’ inflexibility that had caused the impasse, particularly when it came to agreeing to major money-saving changes in social programs like Medicare and Social Security.

“Unfortunately, what we haven’t seen in these talks from the other side is any Democrats willing to put a proposal on the table that actually solves the problems,” Mr. Hensarling said on “Fox News Sunday.”

At the White House, officials made a final effort to spur the committee on to a solution. “Avoiding accountability and kicking the can down the road is how Washington got into this deficit problem in the first place,” a White House spokeswoman, Amy Brundage, said in a statement. “So Congress needs to do its job here and make the kind of tough choices to live within its means that American families make every day.”

The panel’s apparent failure has already become a topic in the 2012 presidential campaign. Mitt Romney, speaking in New Hampshire on Sunday, blamed President Obama, saying he should have been more involved in pushing for a deal.

“He hasn’t had any role. He’s done nothing,” Mr. Romney said. “This is another example of failed leadership.”

But another committee member, Senator John Kerry, Democrat of Massachusetts, said on “Meet the Press” that President Obama and White House budget officials “were asked to be hands off.”

Jackie Calmes, Robert Pear and Jennifer Steinhauer contributed reporting.

Article source: http://feeds.nytimes.com/click.phdo?i=6c2607e243b1b7d0960dd1ad68c60b72

Filed Under: Business News Tagged With: financial markets, lawmakers, night deadline

James Murdoch to Face More Questions in Phone Hacking Scandal

November 9, 2011 by NewsMaker Leave a Comment

Mr. Murdoch, the company’s deputy chief operating officer and the younger son of its chairman, Rupert Murdoch, was a deft and deflecting witness in July, nimbly parrying lawmakers’ questions while maintaining essentially that he had learned only recently how widespread the hacking problem really was. Now, he will be faced with defending himself against mounting evidence that top executives at News International, the company’s British newspaper arm, knew a full three years ago that hacking was pervasive at The News of the World, the tabloid newspaper that the company shut down in July, and that the executives discussed it with Mr. Murdoch at the time.

“Obviously, there are things which the committee wishes to raise with him, particularly in relation to some of the evidence we have received since he testified,” said John Whittingdale, a Conservative member of Parliament and chairman of the committee holding the hearings, the select committee on culture, media and sport.

Mr. Murdoch will also be asked about News International’s behavior after the investigation into its hacking operation intensified. The company acknowledged this week that over the past year and a half, The News of the World had hired a private investigator to conduct covert surveillance of two lawyers representing victims of phone hacking.

The admission was prompted by a report in The Guardian that the investigator, Derek Webb, followed and photographed the lawyers and their families, presumably in the hope of unearthing unsavory information about them and using it to discourage them from pursing their cases.

“While surveillance is not illegal, it was clearly deeply inappropriate in these circumstances,” the company said in a statement. “This action was not condoned by any current executive at the company.”

Mr. Webb told the BBC that he had done such work for The News of the World routinely for eight years, spying on dozens of people, including Prince William; the sports broadcaster Gary Lineker; Lord Goldsmith, the former attorney general; Chelsy Davy, Prince Harry’s former girlfriend; José Morinho, the former manager of the Chelsea soccer team; and the parents of the actor Daniel Radcliffe.

“I was working for them extensively on many jobs throughout that time,” Mr. Webb told the network. “They phoned me up by the day or by the night.”

Recently released News of the World documents, some of them obtained by the parliamentary committee from News International’s former lawyers, Farrer Company, show that on June 3, 2008, a lawyer warned company executives in a memo that there was “a powerful case that there is (or was) a culture of illegal information access” at the paper.

The lawyer, Michael Silverleaf, also said there was “overwhelming evidence of the involvement of a number of senior journalists” in the paper’s attempts to illegally obtain information about Gordon Taylor, the chief executive of the Professional Footballers’ Association.

Mr. Silverleaf’s memo was written at a time when top News International executives, including James Murdoch, were mulling over how to respond to Mr. Taylor’s claim that his voice mail messages had been repeatedly hacked by the News of the World. Mr. Silverleaf counseled them to handle the case privately. “To have this paraded at a public trial would, I imagine, be extremely damaging” to the company, he said.

Even more potentially worrying for Mr. Murdoch is the growing body of evidence that other executives discussed newly discovered details of phone hacking at the paper with him around the same time.

For example, a May 27 note by Julian Pike, a Farrer Company lawyer, says that Colin Myler, the editor of The News of the World, spoke to Mr. Murdoch about Mr. Taylor’s claims and that the two men decided to refer it to outside counsel. Another note two weeks later — after Mr. Silverleaf wrote his damning conclusions — says that after meeting Tom Crone, who was the legal manager of News International at the time, Mr. Murdoch “said he wanted to think through options” about how to proceed in the case.

Several days later, Mr. Murdoch authorized News International to pay Mr. Taylor more than £450,000 ($725,000) and legal fees exceeding $322,000. Mr. Pike has said that Mr. Murdoch personally authorized the amount, in exchange for a pledge of confidentiality, to keep the matter from being made public.

Tom Watson, a Labour member of the parliamentary committee and a persistent critic of News International, said that the panel would question Mr. Murdoch further about the Taylor settlement.

Article source: http://feeds.nytimes.com/click.phdo?i=bce4a24d03183aa0d081831dcef5c534

Filed Under: Business News Tagged With: chief operating officer, lawmakers, witness

Books of The Times: ‘The Quest,’ by Daniel Yergin

September 20, 2011 by NewsMaker Leave a Comment

Mr. Yergin is back with a sequel to “The Prize.” It is called “The Quest: Energy, Security, and the Remaking of the Modern World,” and, if anything, it’s an even better book. It is searching, impartial and alarmingly up to date. (Events like the partial meltdowns at the Fukushima nuclear complex in Japan, the political upheavals in Egypt and Libya, and the killing of Osama bin Laden, all from this year, are combed into his arguments.) Mr. Yergin brooks no cant about climate-change denial, and lingers on the topic of cleaner future fuels. Our heads may be buried in our sleek laptops and gadgets, his masterly book announces, but our toes are still soaking in dirty, morally contaminated oil.

“The Quest” will be necessary reading for C.E.O.’s, conservationists, lawmakers, generals, spies, tech geeks, thriller writers, ambitious terrorists and many others. But it won’t be easy reading. This is a very large and not overly elegant book; committing to it is like committing to a marriage, or to a car lease, or to climbing Everest. Base camps will periodically need to be established on this 804-page mountain. Sherpas — perhaps in the form of your children, delivering sustaining tea and coffee and rum — will be required. Nearing the summit you may find the dead bodies of those who did not make it all the way.

The book’s girth makes its own environmental statement. The idea that tens of thousands of copies, produced from a slaughtered forest, will then be flown and trucked around the country is honking madness. I don’t own an e-reader and haven’t longed for one. But maybe it’s time; using a Kindle or an iPad, especially as prices fall, is surely an ecological declaration.

“The Quest” is encyclopedic in its ambitions; it resists easy synopsis. What sucks you onward are its strong set pieces, some of the best of which are about what Mr. Yergin calls “the new world of oil.” Examples include the breakup of the Soviet Union and the race for control of oil deposits in the newly independent Russian states. This murderous contest became known as the new “Great Game.”

Mr. Yergin delivers a gripping financial tick-tock account of the swift mergers in the energy industry in the late 1990s and early 2000s, when six companies — BP and ARCO, Exxon and Mobil, and Chevron and Texaco — became three. He takes in Sept. 11, the Iraq war, Hurricane Katrina and the tangled global reasons why oil prices spiked dramatically between 2004 and 2008, ultimately hitting a record $147 a barrel. He appraises the rapid growth of China, now the world’s largest automobile market. “Sometime around 2020,” Mr. Yergin suggests, China “could pull ahead of the United States as the world’s largest oil consumer.”

He considers the notion of “peak oil” — the idea that the world’s supply is rapidly running out — and mostly dismisses it. Thanks to new technologies, estimates of the world’s total stock keep growing. But there are other reasons to move beyond oil, not all of them ecological.

Among Mr. Yergin’s fears is Iran possessing an atomic bomb and upsetting the balance of power in the Middle East. A nuclear Iran is especially terrifying, he writes, because of the West’s lack of direct “communication with Tehran, which could increase the likelihood of an ‘accidental’ nuclear confrontation.” He worries too about future cyber attacks on energy grids, perhaps even a “cyber Pearl Harbor.”

Mr. Yergin devotes a large chunk of his book to renewable sources of energy: wind, direct sunlight, biofuels and hydropower, among others. He is particularly interested in the possibility of “disruptive technologies,” or unforeseen, game-changing energy sources. He describes these as the “Googles” of energy, and notes that venture capitalists are increasingly interested in financing research in them.

Threaded throughout the book are small, adept profiles both of world leaders and of less well known figures, like H. L. Williams, the godfather of offshore drilling; the Princeton mathematician John von Neumann, a pioneer of computer-driven weather forecasting; and Roger Revelle, who, while teaching at Harvard in the 1960s, educated Al Gore on global warming.

“The Quest” often works on a micro as well as a macro level; that is, there are incidental pleasures. Mr. Yergin prints an oilman’s maxim: “Easy glum, easy glow.” He quotes the Venezuelan leader Juan Pablo Pérez Alfonso, a founder of OPEC, who called oil “the excrement of the devil.” He catalogs Jimmy Carter’s Sisyphean struggle to make energy independence a central issue during his presidency. The effort, Mr. Carter argues, was the “moral equivalent of war.” Critics mocked him with that phrase’s initials: MEOW.

When it comes to assessing the world’s energy future Mr. Yergin is a Churchillian. He argues that we should consider all possible energy sources, the way Winston Churchill considered oil when he spoke to the British Parliament in 1913. “On no one quality, on no one process, on no one country, on no one route, and on no one field must we be dependent,” Churchill said. “Safety and security in oil lie in variety and variety alone.”

One of Mr. Yergin’s closing arguments focuses on the importance of thinking seriously about one energy source that “has the potential to have the biggest impact of all.” That source is efficiency. It’s a simple idea, he points out, but one that is oddly “the hardest to wrap one’s mind around.” More efficient buildings, cars, airplanes, computers and other products have the potential to change our world.

So does old-fashioned individual action. Mr. Yergin turns to the Japanese, who have rarely had abundant natural resources. He brings up the notion of “mottainai,” a word that is difficult to translate into English yet explains why the Japanese save wrapping paper from gifts to use again and again. The best translation of “mottainai,” Mr. Yergin writes, is “too precious to waste.”

Article source: http://feeds.nytimes.com/click.phdo?i=caa772ab5fac3e472745b35f8833891c

Filed Under: Business News Tagged With: car lease, lawmakers, political upheavals

Poor Are Still Getting Poorer, but Downturn’s Punch Varies, Census Data Show

September 15, 2011 by NewsMaker Leave a Comment

And so it does. But not evenly.

The Midwest is battered, but the Northeast escaped with a lighter knock. The incomes of young adults have plunged — but those of older Americans have actually risen. On the whole, immigrants have weathered the storm a bit better than people born here. In rural areas, poverty remained unchanged last year, while in suburbs it reached the highest level since 1967, when the Census Bureau first tracked it.

Yet one old problem has not changed: the poor have rapidly gotten poorer.

The report, an annual gauge of prosperity and pain, is sure to be cited in coming months as lawmakers make difficult decisions about how to balance the competing goals of cutting deficits and preserving safety nets.

Its overall findings — income down, poverty up — are hardly surprising in the worst economic downturn since the Great Depression. Of equal interest, with fiscal knives in the air, are the looks at who has suffered the most and who has largely escaped.

“Certainly in a recession we want to put resources where they’re most needed,” said Eugene Steuerle of the Urban Institute, who served as a Treasury official under Democratic and Republican presidents. “And in a recession, needs change dramatically from group to group.”

Perhaps no households have weathered the downturn better than those headed by people 65 and older, whose incomes rose 5.5 percent from 2007 to 2010. By contrast, household income for every other age group fell. Among people ages 15 to 24, it plunged 15.3 percent.

Partly that is because older Americans get more of their income from pensions and investments, so a job shortage hurts them less. Also, the generation now retiring has been the most prosperous in history, so as poorer Americans die off, the income of the age group grows.

Such data is likely to feed longstanding debates about generational equity, since the largest portion of safety net spending goes to those 65 and older, through Social Security, Medicare, and Medicaid.

“We are spending too much of our limited resources on the elderly, and not investing enough in programs for younger Americans, such as job training and education,” said Isabel V. Sawhill, a budget expert at the Brookings Institution.

Another noteworthy finding comes from the suburbs, which have traditionally had the lowest rates of poverty. Suburban dwellers experienced a sharp increase toward the end of the past decade. Nearly 12 percent of them were living in poverty in 2010, the highest level ever recorded, up from just 8 percent in 2001. (The rate in cities was 19 percent, but rose less sharply.)

“There’s been a suburbanization of poverty,” said Alan Berube, a Brookings demographer, who cited the growth of service, retail and construction jobs that lured low-income Americans to the suburbs before the recession. “The notion of poverty being only in inner cities and isolated rural areas is increasingly out of step with reality.”

Household income fell in every region of the country from 2007 to 2010. But it fell much less in the Northeast (3.1 percent) than in the South (6.3 percent), the West (6.7 percent) or the Midwest (8.4 percent). And the Northeast was the only region where household income did not fall last year.

The declines in the West have been fueled in part by the collapse of the housing industry, especially in Arizona and Nevada. And the Midwest has suffered idled factories. Its status as the hardest-hit region is likely to come into play next year as presidential candidates hunt such big Electoral College prizes as Michigan, Iowa, Wisconsin and Ohio.

“The big hurt has been in the manufacturing and construction industries, which were big in the Midwest and West,” said Timothy Smeeding, an economist at the University of Wisconsin, Madison.

The census findings present two competing stories of immigrants — a reminder of just how economically diverse that group has become. From 2007 to 2010, they have fared both better and worse than the native born.

Among people born in the United States, household incomes declined 6.1 percent. Among non-citizens, the decline was steeper — 8 percent. But for immigrants who had attained citizenship, the decline was only 3.9 percent.

That latter group may disproportionately include the highly educated professionals who increasingly fill the new Americans’ ranks. A recent study by Audrey Singer, a demographer at the Brookings Institution, found that the number of immigrants with college degrees now exceeds those who lack a high school education.

“The high-skilled people are starting to dominate,” she said

Two worrisome numbers in the report raise questions about the recent response of the safety net. Poverty has risen especially fast among single mothers. More than 40 percent of households headed by women now live in poverty, which is defined as $17,568 for a family of three.

That is the first time since 1997 that figure has been so high. Analysts attribute the rise in part to changes in the welfare system, enacted in the mid-1990s, which make cash aid much harder to get. Those changes were credited with encouraging recipients to work in good times, but may leave them with less protection when jobs disappear.

“The business cycle is going to hurt them a lot more than it used to,” said Robert Moffitt, a Johns Hopkins University economist.

Poor people not only grew more numerous — 46.2 million — but also poorer. Among the poor, the share in deep poverty (defined as having less than half the income to escape poverty) rose to the highest level in 36 years: 44.3 percent.

The census data may overstate hardship by failing to count some benefits the needy receive, like tax credits and food stamps. But it also may also understate their needs by failing to adjust for health care expenses and variations in the cost of living.

About 20.5 million people are in deep poverty, with food stamps increasingly replacing cash aid as the safety net of last resort. More than 45 million people get food stamps, an increase of 64 percent since January 2008. About one in eight Americans, and one in four children, receives aid. Using an alternative definition of income, the Census Bureau found that food stamps lifted 3.9 million people above the poverty line.

“Given that poverty and hardship are likely to continue for some time, it’s imperative that we protect the program,” said Stacy Dean, an analyst at the Center on Budget and Policy Priorities, which aids in food stamp outreach campaigns.

Article source: http://feeds.nytimes.com/click.phdo?i=c924c259a7af646d0db8a8dfb1b91782

Filed Under: Economy News Tagged With: lawmakers, recession, safety nets

Your Money: Muddying the Budget Waters With Social Security

September 1, 2011 by NewsMaker Leave a Comment

But for all of the difficulty lawmakers are having now, their hardest decisions may come this fall when they do battle over which government programs to cut back. And one program that has already been put on the table for discussion is Social Security, even though it has not contributed to the budget deficit.

There is no question the program needs to be tweaked so it can remain solvent for decades to come. And experts say the problem is not that difficult to solve, as long as it is dealt with relatively soon.

The proposed changes would have tinkered with one of the most beloved features of Social Security: the cost of living adjustment, which helps benefits keep pace with inflation so the elderly maintain their purchasing power. The proposed changes would link benefits to a new measure of inflation — one that is projected to rise more slowly than the current index.

“It amounts to a benefit cut,” Alicia H. Munnell, the director of the Center for Retirement Research at Boston College, said.

The proposal, which emerged as a potential bargaining chip earlier in the budget debate, caused Social Security preservationists to cringe. And that is a big reason they argue that any changes should not be fast-tracked as part of the broader deficit debate.

If no changes are made, the program’s reserves are now projected to be exhausted in 2036, a year earlier than last year’s projection. Then the taxes collected would be enough to pay only about 75 percent of benefits through 2085, according to the latest annual report from the agency’s trustees.

The shortfall can largely be attributed to demographic shifts. The coming wave of baby boomers will strain the system, while the number of workers paying into the system is declining. On top of that, people are living longer, and the weak economy is not helping matters.

Changing the cost of living adjustment is just one of several ways to bolster Social Security’s finances. Suggestions have included gradually increasing the retirement age or raising the amount of income subject to Social Security payroll taxes.

The Obama administration’s deficit-reduction commission proposed switching to the new type of index because, members said, it would be more accurate. Unlike the current measure, it takes into account that people tend to change their buying habits when prices rise, substituting cheaper items for more expensive ones. If, for instance, the price of apples goes up, people may instead buy pears, if they are cheaper. The current index assumes that if the price of apples go up, people will just buy fewer apples.

But there is a question of whether the elderly and disabled can make the same substitutions as working people. “If you are down to paying your rent and your food, and the price of your food goes up, you probably just eat less,” Ms. Munnell said.

In addition, the slower rise in benefits would compound over time. That means the older that retirees grew, the bigger the pinch they would feel, especially people who depended heavily on the program. About 43 percent of single people and 22 percent of married couples rely on the benefits for more than 90 percent of their income, the Social Security Administration says. More than half of couples and 73 percent of singles draw more than half their income from the program.

So how much would this cost? Over the last decade or so, the “chained CPI-U” — that is the name of the new proposed index — has risen 0.3 percentage points a year less than the measure used now, according to Stephen Goss, the chief actuary at Social Security. And he expects that would continue in the future.

Consider a worker who retired at 65. After 10 years, the worker would receive 3.7 percent less in benefits than he would receive under the current system; after 20 years, 6.5 percent; and 9.2 percent after 30 years, according to Mr. Goss’s calculations. (He ran the numbers in response to a request by Representative Xavier Becerra, a Democrat from California who is the ranking member of the Ways and Means subcommittee on Social Security).

Let’s assume the retiree had a monthly benefit of $1,261, or $15,132 annually. But as he aged, his benefits would not rise as quickly as they would have under the current system. At 75, he would receive $560 less a year under the new system compared with the current one. At 85, he would receive $984 less, and, at 95, he would receive $1,394 a year less. These changes would resolve about 23 percent of the program’s current shortfall, according to Social Security’s actuaries.

But what is most irksome to some critics is that the proposed index has been called “more accurate.” It may be more accurate for the broader population, they say, but that doesn’t necessarily hold for retirees. (It would, however, save $112 billion over 10 years, according to the Congressional Budget Office).

If accuracy, and not cost savings, is the goal, they suggest further analysis of an experimental “elderly” index that accounts for the fact that older people spend a greater share of their budget on medical care. That index is estimated to increase about 0.2 percentage point more each year than the broader indexes. In fact, Ms. Munnell said that moving to the elderly index — and adding the mechanism to account for substituting cheaper items when prices rise — might make more sense.

Article source: http://feeds.nytimes.com/click.phdo?i=dbc046c5f84b35704358cf9d53acdafe

Filed Under: Your Money Tagged With: bargaining chip, budget deficit, lawmakers

Fast Traders, in Spotlight, Battle Rules

July 18, 2011 by NewsMaker Leave a Comment

Now high-frequency trading firms, normally secretive, are stepping into the light to buff their image with regulators, the public and other investors.

After quietly growing to account for about 60 percent of the seven billion shares that change hands daily on United States stock markets, the firms are trying to stave off the regulators who are proposing to curb their activities.

To make their case, the firms have formed their first industry trade group, hired former Securities and Exchange Commission staff members and spent nearly $2 million in the last few years on Washington lobbying and contributions to lawmakers. Some even want to be called “automated trading professionals” rather than high-frequency traders.

“Once the spotlight was placed on them they looked at each other, and said, ‘Us, evil? Are you kidding?’ ” said James J. Angel, a finance professor at Georgetown University. “They are reacting in the same way as any threatened industry. They are stepping out of the shadows. They are trying to get their side of the story out.”

At stake is billions in profits for the high-frequency traders and investor confidence in the financial system.

Critics say traders with access to the fastest machines win at the expense of ordinary investors by seizing on the best deals and turning fast profits before other traders. They also say the lightning-fast trading strategies may be making financial markets less stable because the speed and volume of trades distort prices.

The traders say they have brought greater competition to the markets and have substantially cut trading fees for even the smallest investors.

“Central to our view is that our role and other firms’ role in the market is very constructive and very beneficial to investors,” said Richard Gorelick, chief executive of RGM Advisors, a high-frequency trading firm based in Austin, Tex., and one of the companies assuming a higher public profile.

Many firms remain hesitant to speak on the record. But one of the conditions for membership in the new industry group, called the Principal Traders Group, is that firms identify themselves publicly on its Web site.

The group comprises 31 firms. According to data calculated in June, its biggest members spent $690,000 on lobbying last year, more than double what they spent in 2009. They gave more than $547,000 to lawmakers’ political campaigns in 2010, on top of the $456,000 they handed out in the last political cycle in 2008.

High-frequency techniques are used by Wall Street banks and hedge funds, but it is the new independent firms that account for the bulk of this new kind of activity. Most of them were founded in the last 10 to 12 years. Many are still relatively small, employing a dozen to a hundred people, though some have as many as 250.

Trading mostly with their owners’ money, they scoop up hundreds or thousands of shares in one transaction, only to offload them less than a second later before buying more. They can move millions of shares around in minutes, earning a tenth of a penny off each share.

As a group, they earned $12.9 billion in profit in the last two years, according to the Tabb Group, a specialist on the markets. Tabb expects their earnings to slow this year as Wall Street’s big brokerage firms fight back with their own faster computerized trading.

The S.E.C. started to think these firms needed tighter controls in early 2009 when analysts for the first time began to point to the sector’s billions in profit, and critics wondered whether their technological firepower gave them an unfair advantage.

The scrutiny intensified after the May 6, 2010, flash crash, one of the most abrupt market moves in recent history, when stocks plunged some 700 points in minutes before recovering.

Article source: http://www.nytimes.com/2011/07/18/business/fast-traders-under-attack-defend-work.html?partner=rss&emc=rss

Filed Under: Global Business Tagged With: high frequency, lawmakers, stepping into the light

DealBook: Unearthing Exotic Provisions Buried in Dodd-Frank

July 13, 2011 by NewsMaker Leave a Comment

Johan Spanner for The New York TimesThe Dodd-Frank Act requires firms to disclose their use of so-called conflict minerals from Congo or neighboring countries.

At a meeting in February to discuss the recent overhaul of financial regulations, lobbyists and policy makers never once mentioned Wall Street. They did not talk about derivatives, mortgage-backed securities or any of the exotic products at the center of the crisis.

Instead, Mary L. Schapiro, the head of the Securities and Exchange Commission, hurled questions at representatives of Apple and Hewlett-Packard about war-torn central Africa, an odd topic for a financial regulator. She wanted to know more about the American companies that buy coveted minerals extracted from the region.

After months of writing dozens of rules on arcane financial instruments, Ms. Schapiro told attendees the discussion was “certainly an interesting change of pace,” according to two people with knowledge of the meeting who spoke on condition of anonymity because the discussions were private.

While the issue may be outside the S.E.C.’s core expertise, it is now within its jurisdiction. A little-known amendment tacked on to the Dodd-Frank financial reform law requires corporations to disclose whether they manufacture products using so-called conflict minerals from Congo or neighboring countries.

Lawmakers are worried about metals like tantalum, tin and gold, which they believe have financed armed rebels throughout the region during a roughly 15-year conflict punctuated by grave incidents of mass slaughter and rape. Many American companies use these metals to build cellphones, computers and cameras.

The conflict minerals amendment is one of several unusual elements buried in Dodd-Frank, which spans some 2,300 pages and touches nearly every corner of Wall Street. One section is dedicated to derivatives. Another chunk covers lavish Wall Street bonuses.

Then there are the “miscellaneous provisions” Congress tucked into Dodd-Frank last summer — a catchall for some lawmakers’ pet concerns, among them conflict minerals, mining safety and spending by the International Monetary Fund.

One provision requires companies to disclose payments made to foreign governments for the right to extract oil and natural gas. The proposal had an influential backer: the co-author of the financial overhaul package, Representative Barney Frank, Democrat of Massachusetts, who introduced similar legislation in 2008.

“The provisions are appropriately called miscellaneous,” said Andrew J. Foley, a partner at the law firm Paul, Weiss, Rifkind, Wharton Garrison, which represents oil, natural gas and mining companies that are subject to the rules. “There’s no question it’s unrelated to the financial crisis.”

Even amid an ongoing partisan stalemate, Dodd-Frank presented a rare opportunity for Republicans and Democrats. In the aftermath of the economic crisis, the act was the closest thing to a sure bet in Washington. Congressmen “jumped on to the passing bandwagon,” Mr. Foley said, using the moment to insert popular, if sometimes random, rules.

Raveen Dran/Agence France-Presse — Getty ImagesRepresentative Jim McDermott, Democrat of Washington State.

Representative Jim McDermott, Democrat of Washington State, had tried for years to regulate conflict minerals.

Mr. McDermott, who served as a Foreign Service medical officer in central Africa during the 1980s, returned to Congo four years ago to tour a hospital that was treating people wounded in the continuing civil war.

After visiting with a group of rape victims, he said he was shocked by the “human rights abuses.” Mr. McDermott traced much of the suffering to rebel soldiers who sold tantalum and other minerals to finance their war.

John Hanna/Associated PressGovernor Sam Brownback, Republican of Kansas.Andrew Harrer/Bloomberg NewsSenator Richard Durbin, Democrat of Illnois.

The issue gained traction in 2008 after Sam Brownback, then a Republican Senator from Kansas, introduced legislation requiring companies to disclose their use of conflict minerals. A few years before, Mr. Brownback, now the governor of Kansas, had traveled to the Congo with Senator Richard Durbin, Democrat of Illinois. But the effort soon stalled.

“Of course, it never moved anywhere — and along comes the Dodd-Frank bill,” said Mr. McDermott. After a short debate on the Senate floor, the plan to regulate conflict minerals was attached to the sweeping new law by Mr. Brownback.

“You get bills passed anyway you can,” Mr. McDermott said.

Almost immediately, companies took aim at the regulation. They figured it would be a costly proposition to trace the roots of such minerals.
In February, the United States Chamber of Commerce called on the S.E.C. to withdraw its plan to enforce the regulation.

“The proposed rule, if implemented, would create a disclosure regime that is burdensome and difficult, if not impossible to comply with, resulting in potentially erroneous disclosure,” lobbyists for the group said in a letter to the commission.

Tiffany Company, one of the world’s largest jewelry companies, pushed the agency to exempt gold from the disclosure requirements, arguing in a separate letter that the proposed rules “would violate the First Amendment.”

Many other companies were caught totally offguard by the rule. In recent months, corporate lawyers and auditors say they have had to explain the rule to clients who were unaware of its existence.

“Some weren’t aware of the provision and most didn’t realize its complexity,” said Douglas K. Dean, a partner in the sustainable business solutions practice at PricewaterhouseCoopers.

The S.E.C. did not fully grasp the intricacies of the provision either. As with other Dodd-Frank rules, the agency has missed important deadlines for both the conflict minerals provision and the one about payments to foreign governments.

While the S.E.C. proposed rules to enforce the disclosure requirements, it was supposed to finalize the regulations about three months ago. The agency said it needed additional time to study the thorny topics.

“The new disclosure rule is a powerful tool, but we are still waiting for the law to be enforced,” said Ian Gary, a senior policy analyst at Oxfam America, an advocacy group focused on poverty.

Mr. Dean of PricewaterhouseCoopers said his clients were anxiously awaiting the S.E.C.’s final rule, hoping it would finally clarify the issue. They also want to know whether the agency will issue exemptions for businesses that use only trace amounts of conflict minerals or recycled sources of the substances, he added.

“Companies,” he said, “are basically in a holding pattern.”

Article source: http://feeds.nytimes.com/click.phdo?i=aab9f9f22b47c3250a8fb7ffbc0508c2

Filed Under: Business News Tagged With: financial instruments, lawmakers, minerals

Europe Tries to Curb U.S. Role in Tracking Terrorists’ Funds

July 13, 2011 by NewsMaker Leave a Comment

BRUSSELS — The European Commission on Wednesday presented proposals for tracking the finances of terrorists in Europe that are aimed at ending the primary role of the United States in those efforts.

The European Union needed “to find a European solution for extracting the requested data on European soil,” said Cecilia Malmström, the E.U. commissioner for home affairs.

Many E.U. lawmakers have long objected to an existing program that sends information on financial transactions in bulk to the United States where it is sifted for evidence of terror plots.

That program was established by the administration of George W. Bush in the wake of the attacks on the United States on Sept. 11, 2001. The program became a symbol of differences between the United States and the European Union over how to balance personal privacy guarantees with concerns on national and international security.

Ms. Malmström’s proposals could help to quell criticisms that financial tracking jeopardizes European standards of privacy by establishing a parallel system that would share tips with the United States and other powers.

Any European system “would need to fully respect fundamental rights, and in particular ensure a high level of data protection,” said Ms. Malmström.

A key objective would be “limiting the amount of personal data transferred to the U.S.,” according to a statement by Ms. Malmström’s department.

The commission already has discussed plans to create a so-called European Terrorist Finance Tracking System with the American authorities who have participated in expert meetings on the initiative.

But a European system still could cost nearly 50 million euros to implement and about 11 million euros in annual running costs. Depending on how a European system was designed, it also could require unprecedented cooperation among the security services of fractious E.U. member states, raising questions about feasibility.

The current program allows American agencies to get access to European banking data held by a cooperative — the Society for Worldwide Interbank Financial Telecommunication, or Swift — which is responsible for routing trillions of dollars daily among banks, brokerage houses, stock exchanges and other institutions.

But members of the European Parliament and other campaigners have complained for years that the program undermines privacy because it requires large batches of information to be sent to the United States for analysis and storage there.

Frustration among members of the Parliament welled up in February 2010, when they vetoed a previous accord and deprived the United States of access to the information.

The European Commission, the E.U. executive, then led negotiations with the United States to win assurances that any requests for information would be evaluated by the European police agency, Europol.

The European Parliament approved a revised agreement in July 2010.

But some lawmakers who approved that agreement have criticized Europol for too readily approving American requests for large amounts of data, and they have suggested they could withdraw their support again in the future.

Article source: http://feeds.nytimes.com/click.phdo?i=e8707874f8113dc703cd591f09ecbaa2

Filed Under: Business News Tagged With: lawmakers, personal data, running costs

Economix: Taxes Have Always Been Too Complicated

April 15, 2011 by NewsMaker Leave a Comment

President Obama, like many Americans, has called for Congress to simplify the tax code.

Good luck with that.

With 14,000 pages of Internal Revenue Code and Federal Tax Regulations, today’s tax system is quite complicated. But Americans have been complaining about the complexity of the income tax system virtually since it was created.

Joseph J. Thorndike, the director of the Tax History Project at Tax Analysts, writes:

In 1915, Chicago lawyer Charles H. Hamill of Rosenthal Hamill made headlines with some vigorous complaints about the new income tax, then less than two years old. The law, he said, was “the worst piece of legislative draftsmanship I have ever seen placed upon a statute book anywhere.” Indeed, it was very nearly incomprehensible:

“It is so complicated that it is utterly impossible to understand its meaning save by consulting a palmist.”

The year before, editors at The Washington Post had reacted in horror to the publication of new tax forms. “Complicated as the individual income tax blanks were this year, the return blanks for 1915 are even more so,” the paper whined.

By 1920, lawmakers were beginning to wrestle with serious proposals for simplification. Which prompted The New York Times to pose some hard questions:

What are the whys and wherefores of the elaborate forms which cause so much bother?
Why can’t we have a simpler method?
What are the excuses given by members of Congress for the complications?
Will they try to simplify the procedure?

Article source: http://feeds.nytimes.com/click.phdo?i=12790a41bcf59518c6ccee71bf9bfb6b

Filed Under: Economy News Tagged With: chicago lawyer, lawmakers, tax forms