US reaches $95.5M settlement in for-profit education case

US reaches $95.5M settlement in for-profit education case - Yahoo Finance

"A Pennsylvania company that
enrolls more than 100,000 students at for-profit trade schools and
colleges across the U.S. and Canada has agreed to pay $95.5 million to
settle claims it illegally paid recruiters and exaggerated the
career-placement abilities of its schools.

Under the deal
announced by the Justice Department on Monday, Education Management
Corp. also agreed to forgive $102.8 million in loans it made to more
than 80,000 former students.

"This
case not only highlights the abuses in EDMC's recruitment system; it
also highlights the brave actions of EDMC employees who refused to go
along with the institution's deceptive practices," U.S. Attorney General
Loretta Lynch said at a news conference."

..

"That lawsuit, and others like it, claimed the company signed up students
it knew likely wouldn't succeed or finish its programs. It did so by
paying recruiters using illegal enrollment-based incentives in hopes of
raking in government financial aid, which provided the bulk of the
company's income, the lawsuit said."

...

"

Nadia Taylor, 23, of Durham,
North Carolina, said she enrolled at the Culinary Institute at
Raleigh-Durham in 2011 after being cold-called by a recruiter who knew
personal details about her, including her low-income status, and that
her mother was incarcerated and her father deceased.

Taylor
said the recruiter talked her into a four-year bachelor's degree
program without disclosing its cost — $100,000 — which Taylor learned
about only after completing her first quarter. Taylor said she
eventually quit school in 2014, with two months left, when the
curriculum was changed requiring her to take more classes she couldn't
afford.

"I would love a
degree," said Taylor, who cooks at a steakhouse after losing her job as a
hotel sous chef because she doesn't have a diploma. "Right now I have
$47,000 in debt and literally not one thing to show for it.""

How Pfizer has shifted U.S. profits overseas for years

How Pfizer has shifted U.S. profits overseas for years - Yahoo Finance

"Pfizer has used transactions
between companies within its group to allow an Irish subsidiary based in
Ringaskiddy - Pfizer Ireland Pharmaceuticals - to buy the rights to
patents developed in the United States and then use them to make drugs
which are sold back to U.S. affiliates.

Even
though the Irish and other overseas units pay $3.2 billion a year in
royalties to use such patent rights, the higher prices at which Pfizer
in the United States imports manufactured drugs from affiliates means
almost all the profits from these drugs are reported overseas.

Drugs
which were discovered in the United States, manufactured in Ringaskiddy
and sold back to the United States include anti-cholesterol treatment
Lipitor - the best-selling prescription drug of all time - and epilepsy
drug Lyrica, which generated revenue of over $5 billion last year for
Pfizer."

...

"

Pfizer does have manufacturing
plants in the United States but filings for its overseas units show
non-U.S. companies supply over 80 percent of U.S. sales.

Those
sales generate margins of around 40 percent for Pfizer's overseas arm -
earning it over $17 billion in 2013. However, Pfizer has reported
losses on its U.S. business in each of the past five years.

Pfizer
said it follows the "arm's length" tax principle when conducting
inter-company sales and purchases. This says companies should transact
with affiliates at the same prices unconnected companies would.

However,
academics say it is very hard to judge whether inter-company sales of
unique products like patented chemicals, for which there is no
independent open market, are conducted at prices that independent
companies would agree to use.

"The
current arm's length rules are always difficult to enforce because of
the lack of a comparable price (in the drugs industry)," said Edmund
Outslay, tax accounting professor, Eli Broad College of Business at
Michigan State University" 

...

" Ed Kleinbard, Professor of law
at the University of Southern California said the company's arrangements
reflected "aggressive tax planning" and it seemed, from the outside, to
be almost as capable in tax planning as pharmacology.

"This is a company that is investing heavily in tax research, as well as pharmaceutical research," he joked."

How companies prey on your weaknesses: Robert Shiller

How companies prey on your weaknesses: Robert Shiller 

It's no secret we do things we
know we shouldn't. We overeat, gamble away our savings and live like
tomorrow will never come. One reason, two Nobel laureates argue, is that
there are plenty of businesses happy to lead us astray.

Robert
Shiller, an economist at Yale University, used his understanding of how
human behavior can affect markets to predict the dot-com crash of the
early 2000s and the housing collapse of 2007. He won the Nobel Prize for
Economics in 2013 for his work showing that stock and bond prices can
move out of step with economic fundamentals even over the long run.

In
his new book with George Akerlof, another Nobel-prize winning
economist, Shiller examines the many ways credit-card companies,
financial firms and other businesses lure people into buying things that
might harm them. The authors call that phishing, adopting the word for a
common email scam to a broad array of cynical business practices. They
call the person who takes the bait a phool. Their book is called
"Phishing for Phools: The Economics of Manipulation and Deception."

Their
big point: It's not that bad actors are gaming the free market, it's
that hucksters and dishonest marketing are part of the free-market game.

In
a recent interview with The Associated Press, Shiller talked about how
phishers lure phools, the appeal of one-armed bandits and the media's
misleading fascination with splashy stories. The interview has been
edited for length and clarity.

Q: What prompted you to write this book?

A: I often tend to think that things are not what they seem.

Q: Your focus isn't on malevolent fraudsters but people just doing their job?

A:
We agreed that we shouldn't portray these people as evil. This is just
what you get with free markets, depending on how free you let them be.
My previous books were all about the positive aspects to markets. But
markets are often presented too positively, with a certain reverence.
Life is more complicated than that.

Q: Could you explain why you chose the word, phish?

A:
We use it as a metaphor because people are aware of computer phishing.
You can so easily be fooled by them because you don't see all the work
that went into luring you in. Things look perfectly plain and simple but
in fact it's all artifice. There are a lot of these phishers, some of
them are savvy operators, and they're experimenting. They find a ploy
and, man, it works.

Q: This isn't a new trend but it's getting worse?

A:
Yes. Take the slot machine. In the 19th Century, it dispensed sweets
and toys. It was the first vending machine. Now, it's optimized for
gambling. Companies experiment with different things. There's the
jingling and bright lights, all part of a mesmerizing effect. They like
to give you the sense that you've almost won, with three cherries, for
instance. You can program it so that two cherries come up, and you can
see the third cherry stopping just one off. You think, "I almost won!"

I don't actually play these machines, mind you.

Q: The gist is that businesses keep casting new lures into the water until they get a bite?

A:
It's the same thing with Cinnabon. They don't publicize the
experimentation they do. Manufacturers of food try to get the optimal
ratio to tap into your impulsivity. They don't care about your health.
Cinnabon boasts about their genuine Makara cinnamon from Indonesia. They
can boast about that sort of thing. They can't say, "Boy, we really
cranked up the fat and sugar."

They
place them carefully indoors, in train stations and airports, where
you'll smell it. You're frustrated, your flight was delayed, and you're
in a bad mood. They catch you right there. The mind tends to have a
conversation, producing an excuse to eat it alongside a memory of your
resolve not to eat it. They try to help one side of this conversation
with the slogan, "Life needs frosting." It's a beautiful slogan, a great
justification for giving in. It works, I bet.

Q: You say the news media is guilty of phishing, too. How so?

A:
They often focus on things that aren't important because they know what
kind of story sells. In March of last year, this Malaysia Airlines
plane went down mysteriously. The logical thing is to think somebody
made a mistake. However, the news media latched onto a mystery story for
days and days. It's just a waste of time to think about. In terms of
human welfare, it would be much better if the cable stations put up the
periodic table of the elements to remind everybody. That would be useful
information compared to the Malaysian airlines story.

I
was on Neil Cavuto's Fox Business TV show. He asked me what I thought
about the Federal Reserve raising interest rates. I said I don't think
it really matters whether the Fed raises rates this meeting or next
meeting. He said, "Look we're doing a whole show about this." There's
too much attention to these little stories.

A former hedge fund manager jacked up the price of a crucial drug 750 per pil

Turing increases price of Darapim to 750 per pill - Business Insider
















A
biotech company founded by a former hedge fund manager recently
purchased the rights to a critical anti-parasitic drug and jacked up the
price by more than 5,000%.Start-up Turing Pharmaceuticals acquired Daraprim, a drug used to treat toxoplasmosis, in August. Toxoplasmosis is a disease caused by a common parasite that can be deadly, especially for those who are immunosuppressed.


Turing immediately increased the price of Daraprim from $13.50 per pill to $750, The New York Times reported.


In an interview with Bloomberg TV's Betty Liu on Monday, the
company's CEO Martin Shkreli defended the move, explaining that
they "need to turn a profit on the drug."


Daraprim, which has been around for 62 years, has had multiple
owners. Shkreli said that other companies were "giving it away almost."
He added that even at $750 per tablet, it's "still underpriced relative
to its peers."


It costs very little to make Daraprim, but Shrkeli said there are
other costs such as distribution costs that have increased over the
years.

It looks like banks might have rigged another huge market - Yahoo Finance

It looks like banks might have rigged another huge market - Yahoo Finance

It looks like banks might have rigged another huge market

The market for US Treasury bonds may have been rigged.

That’s according to a federal antitrust lawsuit, first reported by Bloomberg's Alexandra Scaggs and Matthew Leising.

The plaintiffs — Cleveland
Bakers and Teamsters Pension Fund, represented by law firm Quinn
Emmanuel Urquhart & Sullivan — claim that Treasury dealers including
Goldman Sachs, JPMorgan, and Morgan Stanley coordinated to manipulate
primary market Treasury auctions.

They cite data from Rosa
Abrantes-Metz, who has testified in other market-rigging cases and is
an adjunct associate professor at New York University.

According to her analysis, 69% of a certain type of Treasury auction — for so-called reissued Treasuries — look suspicious.

The richest Americans are winning the economic recovery - Yahoo Finance

The richest Americans are winning the economic recovery - Yahoo Finance

U.S. Census Bureau data out Wednesday underscore just how lousy the recovery has been if you aren't rich.

Looking at eight groups of household income selected by Census,
only those whose incomes are already high to begin with have seen
improvement since 2006, the last full year of expansion before the
recession. Households at the 95th and 90th percentiles had larger
earnings through 2014, the latest year for which data are available.

Income
for all others was below 2006 levels, indicating they're still clawing
their way out of the hole caused by the deepest recession in the
post-World War II era.

Median household income is 6.5 percent lower than in 2007, the year the recession started.

Overall,
median income was $53,657 in 2014, not a statistically significant
difference on an inflation-adjusted basis from 2013's median of $54,462.
It's the third straight year that there's been no significant change,
after two consecutive years of annual declines.

More Than Half Of American Schoolchildren Now Live In Poverty

More Than Half Of American Schoolchildren Now Live In Poverty

"Overall, 51 percent of U.S. schoolchildren came from low-income
households in 2013, according to the foundation, which analyzed data
from National Center for Education Statistics on students eligible for
free or reduced-price lunches."

"The report shows the percentage of schoolchildren from poor households
has grown steadily for nearly a quarter-century, from 32 percent in
1989. "By 2006, the national rate was 42 percent and, after the Great
Recession, the rate climbed in 2011 to 48 percent," says the report."

"The analysis shows the highest percentages of poor students in
Southern and Western states. Mississippi had the highest rate of
low-income students -- 71 percent. New Hampshire had the lowest, at 27
percent.

“No longer can we consider the problems and needs of low
income students simply a matter of fairness," the report says. "...
Their success or failure in the public schools will determine the entire
body of human capital and educational potential that the nation will
possess in the future."

Most Americans are one paycheck away from the street

Most Americans are one paycheck away from the street - MarketWatch

"Approximately 62% of Americans have no emergency savings for things such
as a $1,000 emergency room visit or a $500 car repair, according to a
new survey of 1,000 adults by personal finance website Bankrate.com.
Faced with an emergency, they say they would raise the money by reducing
spending elsewhere (26%), borrowing from family and/or friends (16%) or
using credit cards (12%)."

"The findings are strikingly similar to a U.S. Federal Reserve survey
of more than 4,000 adults released last year. “Savings are depleted for
many households after the recession,” it found. Among those who had
savings prior to 2008, 57% said they’d used up some or all of their
savings in the Great Recession and its aftermath. What’s more, only 39%
of respondents reported having a “rainy day” fund adequate to cover
three months of expenses and only 48% of respondents said that they
would completely cover a hypothetical emergency expense costing $400
without selling something or borrowing money."

"Why aren’t people saving? “A lot of people are in debt,” says Andrew Meadows, a San Francisco-based producer of “Broken Eggs,”
a documentary about retirement. “Probably the most common types of debt
are student loans and costs related to medical issues.” He spent seven
weeks traveling around the U.S. and interviewed over 100 people about
why they haven’t saved enough money. “People are still feeling the heat
from the Great Recession.” Some 44% of senior citizens have enough
savings to cover unexpected expenses versus 33% of millennials,
Bankrate.com found."

"But while the jobs market is improving and the Affordable Care Act has
given an estimated 15 million people access to medical care, the Great
Recession does appear to have taken its toll on Americans’ finances; in
fact, they’re 40% poorer today than they were in 2007. The net worth of
American families — that is, the difference between the values of their
assets, including homes and investments, and liabilities — fell to
$81,400 in 2013, down slightly from $82,300 in 2010, but a long way off
the $135,700 in 2007, according to a report released last month by the
nonprofit think tank Pew Research Center in Washington, D.C."

Is Global Poverty Falling? Not in Absolute Terms - WSJ

Is Global Poverty Falling? Not in Absolute Terms  - WSJ

While there has been progress in reducing
the number of people living below the poverty line, this has been
achieved largely by raising those considered ultrapoor to just above the
poverty line, rather than by boosting the standard of living of the
poor more broadly, according to a paper from Martin Ravallion, economist at Georgetown University’s Center for Economic Research.


“There has been very little absolute gain for the poorest,” Mr. Ravallion writes in a new working paper from the National Bureau of Economic Research.
“Using an absolute approach to identifying the floor, the increase in
the level of the floor seen over the last 30 years or so has been
small—far less than the growth in mean consumption.”

“The bulk of the developing world’s progress against poverty has been
in reducing the number of people living close to the consumption floor,
rather than raising the level of that floor,” Mr. Ravallion. “Growth in
mean consumption has been far more effective in reducing the incidence
of poverty than raising the consumption floor. In this sense, it can be
said that the poorest have indeed been left behind.”

Goldman Sachs, JPMC, Morgan Stanley rigging of the commodities markets

Did Goldman Sachs rig the commodities markets? - Nov. 20, 2014

"Goldman Sachs has been trying to distance itself from the "vampire
squid" image it developed during the financial crisis. The findings of a
Senate investigation into commodities market rigging probably won't
help.

According to the report, Wall Street banks may have manipulated commodity prices in recent years, raising costs on consumers. The investigation looked into the holdings and dealings of Goldman (GS), JPMorgan Chase (JPM) and Morgan Stanley (MS) in physical commodities.


Banks have long been involved in trading commodities, but recently
they've become major players in the transport and storage of commodities
like aluminum, copper, and uranium

The report found that in
some cases, the banks "used their physical commodity activities to
influence or even manipulate commodity prices."

Market jamming: The
probe zeroed in on Goldman's ties to aluminum, a key metal involved in
everything from soda and beer cans to manufacturing cars and jets.


Goldman encouraged its clients to move aluminum around for one
warehouse to another, the report said. The bank even went as far as
offering cash incentives to do so.

The deals, referred to as
"merry-go-round" transactions by the report, helped cause unprecedented
backlogs. Some metal owners to wait up to about two years to get their
metal out of storage, the report claimed.

The long lines drove
prices higher and made it harder for aluminum buyers to hedge their
price risks. Some industrial aluminum users claimed the dysfunction
inflated aluminum costs by $3 billion, the report said."

...

"Bailout risk: As if possible manipulation wasn't
bad enough, the Senate probe found that these banks' physical commodity
activities put them at risk of needing another taxpayer-funded bailout.


That's because the firms failed to protect themselves against the risk
of a catastrophic event like an oil spill or mine explosion that could
leave them on the hook for serious liabilities, similar to what happened
with "toxic assets" during the financial crisis of 2008.

"More
is needed to safeguard the U.S. financial system and protect taxpayers
from being forced to bailout large financial institutions involved with
physical commodities," the report found."

Some notes on Technology/Automation and its effect on Jobs

The following is from Economist:
“Yet some now fear that a new era of automation enabled by ever more powerful and capable computers could work out differently. They start from the observation that, across the rich world, all is far from well in the world of work. The essence of what they see as a work crisis is that in rich countries the wages of the typical worker, adjusted for cost of living, are stagnant. In America the real wage has hardly budged over the past four decades. Even in places like Britain and Germany, where employment is touching new highs, wages have been flat for a decade. Recent research suggests that this is because substituting capital for labour through automation is increasingly attractive; as a result owners of capital have captured ever more of the world’s income since the 1980s, while the share going to labour has fallen.
At the same time, even in relatively egalitarian places like Sweden, inequality among the employed has risen sharply, with the share going to the highest earners soaring. For those not in the elite, argues David Graeber, an anthropologist at the London School of Economics, much of modern labour consists of stultifying “bullshit jobs”—low- and mid-level screen-sitting that serves simply to occupy workers for whom the economy no longer has much use. Keeping them employed, Mr Graeber argues, is not an economic choice; it is something the ruling class does to keep control over the lives of others.”
http://www.economist.com/news/briefing/21594264-previous-technological-innovation-has-always-delivered-more-long-run-employment-not-less
And this is from MIT Technology Review Article:
Even some of the area’s biggest technology boosters are appalled. “You have people begging in the street on University Avenue [Palo Alto’s main street],” says Vivek Wadhwa, a fellow at Stanford University’s Rock Center for Corporate Governance and at Singularity University, an education corporation in Moffett Field with ties to the elites in Silicon Valley. “It’s like what you see in India,” adds Wadhwa, who was born in Delhi. “Silicon Valley is a look at the future we’re creating, and it’s really disturbing.” Many of those made rich by the recent technology boom, he adds, don’t seem to care about “the mess they’re creating.”
…
The anger in Northern California and elsewhere in the United States springs from an increasingly obvious reality: the rich are getting richer while many other people are struggling. It’s hard not to wonder whether Silicon Valley, rather than just exemplifying this growing inequality, is actually contributing to it, by producing digital technologies that eliminate the need for many middle-class jobs. Here, technology is arguably evolving faster than anywhere else in the world. Does the region really portend a future, as Wadhwa would have it, in which a few very rich people leave the rest of us hopelessly behind?
“My reading of the data is that technology is the main driver of the recent increases in inequality. It’s the biggest factor,” says Erik Brynjolfsson, a professor of management at MIT’s Sloan School.
Brynjolfsson lists several ways that technological changes can contribute to inequality: robots and automation, for example, are eliminating some routine jobs while requiring new skills in others. But the biggest factor, he says, is that the technology-driven economy greatly favors a small group of successful individuals by amplifying their talent and luck, and dramatically increasing their rewards.
For much of the population, incomes have stagnated or even shrunk, and technology is one of the leading culprits. Simply put, as we getter better at automating routine tasks, the people who benefit most are those with the expertise and creativity to use these advances. And that drives income inequality: demand for highly skilled workers rises, while workers with less education and expertise fall behind.
http://www.technologyreview.com/featuredstory/531726/technology-and-inequality/
This is from Pew research report:
Some 1,896 experts responded to the following question:
The economic impact of robotic advances and AI—Self-driving cars, intelligent digital agents that can act for you, and robots are advancing rapidly. Will networked, automated, artificial intelligence (AI) applications and robotic devices have displaced more jobs than they have created by 2025?
Half of these experts (48%) envision a future in which robots and digital agents have displaced significant numbers of both blue- and white-collar workers—with many expressing concern that this will lead to vast increases in income inequality, masses of people who are effectively unemployable, and breakdowns in the social order.
The other half of the experts who responded to this survey (52%) expect that technology will not displace more jobs than it creates by 2025. To be sure, this group anticipates that many jobs currently performed by humans will be substantially taken over by robots or digital agents by 2025. But they have faith that human ingenuity will create new jobs, industries, and ways to make a living, just as it has been doing since the dawn of the Industrial Revolution.
AI, Robotics, and the Future of Jobs - http://www.pewinternet.org/2014/08/06/future-of-jobs/

And finally, workers are complaining about automation right now:

Stop ROBOT exploitation, cry striking Foxconn workers - HP downturn and automation eroding overtime on China's production lines - http://www.theregister.co.uk/2014/10/14/stop_robot_exploitation_cry_striking_foxconn_workers/

Slump in mortgage rates fails to rally home buyers

Slump in mortgage rates fails to rally home buyers - Yahoo Finance

More proof that low mortgage rates are not the key to home ownership:
Rates dropped to their lowest level in nearly 18 months last week,
causing an 11.6 percent rise in applications, the Mortgage Bankers
Association reported Wednesday. The gains, however, were driven entirely
by refinances, just as they have been for several weeks.

Refinance
applications jumped a whopping 23 percent week-to-week on a seasonally
adjusted basis; volume was at the highest level since November. Mortgage
applications to purchase a home saw no boost at all from lower rates,
falling 5 percent from the previous week and 9 percent from a year ago.

"Continuing
concerns about weak economic growth in Europe and a few U.S. economic
indicators that came in below expectations caused a flight to quality
into U.S. Treasurys last week, leading to sharp drops in interest
rates," said Mike Fratantoni, the MBA's chief economist. "Mortgage rates
have fallen close to 30 basis points over the last four weeks."

The average contract interest rate for 30-year fixed-rate mortgages
with conforming loan balances ($417,000 or less) decreased to 4.1
percent, the lowest level since May 2013, from 4.2 percent, according to
the MBA. Some lenders are now offering rates below the psychologically
significant 4 percent line, but only to their highest credit-worthy
customers. The average loan balance for refinance applications increased
to $306,400, the highest level in the MBA survey's history, suggesting
that wealthier homeowners are benefiting most from the drop in rates.

Sales of existing homes did increase in September by just over 2
percent from August, according to the National Association of Realtors;
however, they are weaker than a year ago, when investors were competing
for distressed homes and pushing prices ever higher. The NAR's chief
economist, Lawrence Yun, said sentiment among real estate agents was at
its lowest level of the year, suggesting that sales may be weaker going
forward.

"It's turned into
what I think is really a classic buyers' market," said Sherry Spinelli,
a real estate agent with Long and Foster in Northern Virginia. "More
days on market, prices are coming down, the offers are even lower and
there are just a lot of houses out there, so it's a challenge for
sellers. I think you have to lower the price in order to sell it." 

Libyan Investment Authority - Goldman Took Us For 'A Complete Ride'

Libyan Investment Authority Goldman Sachs - Business Insider

The Libyan
Investment Authority, a government-managed sovereign wealth fund, is
suing Goldman Sachs for $1 billion and claims that the bank "took them
for a complete ride," according to a report by the Financial Times.


In the lawsuit, LIA
claims that Goldman exploited the fund and "encouraged" it to pursue 9
extremely risky and ultimately unsuccessful investments worth over $1
billion in 2008, according to the FT's report.


But by 2011, these trades were "worthless."


The LIA claims that Goldman took advantage of the LIA's (allegedly) financially illiterate staff in order to make money, and that Goldman seduced its staff with fancy gifts and — for lack of a more politically correct term — bribes.


The LIA claims that they "completely trusted Goldman" and believed
that its former head of north Africa, Youssef Kabbaj was "their very
close friend."


Apparently, Kabbaj took the LIA staff members on a "lavish trip to
Morocco" that included "heavy drinking and girls." The trip was expensed
entirely on Kabbaj's Goldman corporate credit card.


And there's much more where this came from, including "expensive nights out" in London.

....

Secret Goldman Sachs tapes show regulators still respect bankers too much

Secret Goldman Sachs tapes show regulators still respect bankers too much - The Washington Post

The problem with Wall Street's cops is that, before the crisis, they didn't actually fall asleep on the job.

Regulators
knew the big banks were taking big risks, and had the power to do
something about it. But they didn't. It's worse than outright neglect,
since it's not as obvious how to fix it. And now, thanks to 46 hours of secret audio tapes
from inside the New York Federal Reserve, we can hear that they're
still having trouble fixing it. The problem isn't that regulators don't
have the tools they need. It's that they won't use the tools they have,
because they respect the bankers too much.

...

This is where you need to go to This American Life, who, in conjunction with Jake Bernstein
of ProPublica, put together the highlights of Segarra's 46 hours of
audio recordings. You have to hear how obsequious the supervisors sound
when they talk to Goldman's executives, almost apologetic for not-quite
doing their jobs. The best example of this came during a deal between
Goldman and the Spanish banking behemoth Banco Santander in 2012. "We're
looking at a transaction that's legal but shady," Segarra's boss Mike
Silva said, and "I want to put a big shot across their bow on that."
Specifically, Goldman was making it look like it was taking assets from
Santander without really doing so — for a fee, of course — all so
Santader could avoid having to raise more capital. This was regulatory
arbitrage of the worst kind: It was potentially destabilizing. But the
term sheet said the deal wouldn't go ahead unless the New York Fed
explicitly signed off on it. Until, that is, Goldman just went ahead
without it.

...

Americans Continue to Say a Third Political Party Is Needed

Americans Continue to Say a Third Political Party Is Needed - Gallup

A majority of U.S. adults, 58%, say a third U.S. political party is
needed because the Republican and Democratic parties "do such a poor
job" representing the American people. These views are little changed
from last year's high. Since 2007, a majority has typically called for a third party.

The results are based on Gallup's Sept. 4-7 Governance poll. The
first time the question was asked in 2003, a majority of Americans
believed the two major parties were adequately representing the U.S.
public, which is the only time this has been the case. Since 2007, a
majority has said a third party is needed, with two exceptions occurring
in the fall of the 2008 and 2012 presidential election years.


The historical 60% high favoring a third party came in a poll
conducted during the partial federal government shutdown last October.
At that time, 26% of Americans said the parties were doing an adequate
job. That figure is up to 35% now, but with little change in the
percentage calling for a third party.


Americans' current desire for a third party is consistent with their generally negative views of both the Republican and Democratic parties,
with only about four in 10 viewing each positively. Americans' views
toward the two major parties have been tepid for much of the last
decade. However, even when the party's images were more positive in the
past, including majority favorability for the Democrats throughout 2007
and favorability for the GOP approaching 50% in 2011, Americans' still
saw the need for a third party.


Independents Maintain Solid Preference for Third Party


Political independents, as might be expected given a lack of
allegiance to either major party, have shown a far greater preference
for a third political party than those who identify as Republicans or
Democrats. Currently, 71% of independents say a third party is needed,
on the upper end of the trend line. That compares with 47% of Democrats
and 46% of Republicans who say the same.

For most of the past 11 years, Republicans and Democrats were about
equally as likely to favor a third party. From 2003 to 2006 -- when
Republicans had control of the presidency and both houses of Congress --
Democrats were more likely than Republicans to see the need for a third
party. And in 2011, after the rise of the Tea Party movement,
Republicans were a bit more inclined than Democrats to see a third party
as necessary.


Implications


Although Americans express a desire for a viable alternative to the
Democratic and Republican parties, third political parties have had
little success in American politics. The U.S. political system makes it
difficult for third parties to hold elected office given the Electoral
College system of electing presidents and election of members of
Congress from individual states and districts based on the candidate
getting the most votes. Such a system generally favors two parties -- a
center-right and a center-left party -- that have the ability to
assemble a winning plurality or majority in districts and states across
the country. Also, some states have restrictive laws on ballot access
that make it difficult for third-party candidates to appear on the
ballot.


Third parties have had success in other countries when they had
strong support in a particular region, or if members of the legislature
were allocated proportionately to the nationwide vote each party
received. This allowed third parties to hold seats with national vote
shares usually well less than 30%.


Given the U.S. political system, those whose ideology puts them to
the left of the Democratic Party or the right of the Republican Party
are better served trying to work within a major political party than
establishing their own party. Supporters of the Tea Party movement
generally took this approach, with some success, by trying to get their
preferred candidates nominated as Republicans in the last few election
cycles. But as with most U.S. third parties historically, the Tea
Party's influence appears to be waning as the movement did not play a
pivotal role in the 2012 Republican presidential nomination and was less
successful in defeating more moderate Republican candidates in the 2014
congressional primaries than in 2010.


Though the desire for a third party exists, it is unclear how many
Americans would actually support a third party if it came to be.
Americans' preference for a third party may reflect their frustration
with the way the Republican and Democratic parties are performing, as
well as the idea that the system ought to be open to new parties,
regardless of whether this is viable in practice.

The Recovery That Left Out Almost Everybody

The Recovery That Left Out Almost Everybody - WSJ -Yahoo Finance

According to a Pew Research
Center report released this month, only 21% rate current conditions as
excellent or good, versus 79% fair or poor. Only 33% say that jobs are
readily available in their communities; when asked about good jobs, that
figure falls to 26%. Only 22% believe the economy will be better a year
from now; 22% think it will be worse, while fully 54% think it will be
the same.

More than five years after the
official end of the recession, the Public Religion Research Institute
finds, only 21% of Americans believe the recession has ended.

Two recent reports help explain
the disconnect between the official jobs numbers and the economic
experience of most Americans. Every fall, the U.S. Commerce Department
issues a detailed analysis of trends in income, poverty and health
insurance. Although economists have some technical quibbles with the
Commerce data, the broad trends are unmistakable.

This year's report found that
median household income was $51,939 in 2013, 8% lower than in 2007, the
last year before the recession. Households in the middle of the income
distribution earned about $4,500 less last year than they had six years
earlier. No wonder 56% of Americans told the Pew Research Center that
their incomes were falling behind the cost of living.

The Federal Reserve's triennial
Survey of Consumer Finances confirms these findings. Between 2010 and
2013, the Fed reports, median family income fell by 5%, even though
average family income rose by 4%. This is, note the authors, "consistent
with increasing income concentration during this period." Only families
in the top 10%, with annual incomes averaging nearly $400,000, saw
gains during these three years. Families headed by college graduates
eked out a gain of 1%, while those with a high-school diploma or less
saw declines of about 7%. Those in the middle—with some postsecondary
education—did the worst: From 2010 to 2013, their annual incomes
declined to less than $41,000 from $46,000—an 11% plunge. Families
headed by workers under age 35 have done especially badly—even when the
heads of those young families have college degrees. The economic
struggles of the millennials are more than anecdotal.

What's going on? The Census
report offers a clue. The median earnings for Americans working
full-time year round haven't changed much since 2007. But more than five
years into the recovery, there are fewer such workers than before the
recession. In 2007, 108.6 million Americans were working full time,
year-round; in 2013 only 105.9 million were doing so. Although jobs are
being created, too many of them are part-time to maintain growth in
household incomes.

This is not by choice. About
the same number of Americans were employed last month as in December
2007. But during that period, according to the Bureau of Labor
Statistics, the number of Americans working part time who wanted a
full-time job jumped to 7.2 million from 4.6 million. Not only are
hourly wages stagnating; America's families want more hours of work than
the economy is providing.

Although the Great Recession
was the most severe since World War II, in many ways it underscored
trends that have been under way for decades. Adjusted for inflation,
median earnings of men working full time, year-round are no higher than
they were in 1980. Median household income is almost $5,000 lower than
it was in 1999, and no higher than it was it 1989.

The modest income increases of
the past two generations have occurred because women have surged into
the paid workforce—and because their real wages have grown at a compound
annual rate of 0.8%. But both these trends peaked in 2000. Not
surprisingly, the years after the 2001 recession witnessed the only
postwar recovery in which median incomes failed to regain their previous
peak.

How 1% shelter hundreds of millions in IRA accounts

How to shelter hundreds of millions in an IRA account - MarketWatch

The GAO report shows that the top 1% have saved $1 trillion in their IRAs, 22% of the total.

It’s no surprise that rich people have a large share of wealth, but it is a bit surprising that they own such a large percentage of IRA assets, which were designed to help middle-class people save a few hundred thousand, not to help billionaires save a few hundred million.

The IRA is not supposed to be a giveaway to millionaires. But that’s what it’s become.

“Concerns
have been raised that tax benefits accrue primarily for higher-income
individuals,” the GAO says in its usual monotone.

Democratic Sen. Ron Wyden of Oregon used stronger language at a hearing at the Senate Finance Committee this week.

“Something is out of whack,” Wyden fumed. “The IRA was never intended to be a tax shelter for millionaires.”

While
millionaires take advantage of “sweetheart deals” to avoid taxes, the
typical American has saved only about $59,000 for retirement, Wyden
pointed out. A third of Americans can’t save anything.

Recall that during the 2012 election, Romney released tax documents
showing that he had between $20.7 million and $101.6 million in his IRA
accounts. It became a minor campaign issue, not just because it put the
spotlight on Romney’s wealth but also because it revealed just how easy
it is for the wealthy to take advantage of tax loopholes to amass even
more wealth.

The GAO report shows that Romney was a piker when it came to avoiding taxes on his millions.

As
of 2011, 314 multi-millionaires had more than $25 million saved in
their IRA, with average holdings of $258 million, the GAO reported.
About 9,000 taxpayers had at least $5 million in their IRA, with average
holdings of $16 million.

All told, 630,000 millionaires — about 1% of all IRA savers —
cumulatively had more than $1 trillion in IRA accounts, accounting for
22% of all IRA assets.

Meanwhile, the other 99% — the 42 million
taxpayers whose IRAs held less than $1 million — had average savings of
just under $100,000.

There are two main ways to accumulate assets
in an IRA: 1. Contribute up to the maximum each year. 2. Roll over a
distribution from a defined-contribution pension — such as a 401(k) — or
from a defined-benefit pension plan.

It would be nearly
impossible to accumulate $5 million in an IRA using those two methods,
the GAO found. If a couple contributed the maximum every year since 1975
(when the IRA was invented), they would have about $350,000 today if
they had invested it all aggressively in the S&P 500 Index


A couple who rolled over the
maximum from another pension could have earned about $4 million if they
invested 100% in stocks.

But only a few people contribute the
maximum to an IRA or defined-contribution plan in any year, the GAO
says. So it’s extremely unlikely that many people contributed the
maximum for 35 years.

If it’s nearly impossible to accumulate $5
million, then how did those 314 taxpayers accumulate an average of $258
million? Perhaps they were very fortunate in their investments, buying
Microsoft

at the bottom and riding them to the top.

Or
maybe they took advantage of a trick Romney used to fund his IRA:
putting undervalued non-publicly traded assets in his IRA to stay under
the maximum contribution limits, and then watching those investments
turn into gold.

According to the Wall Street Journal,
that’s what Romney and others at Bain Capital were able to do to
achieve astronomical returns in their IRAs. Bain took over companies and
allowed its employees to invest in those deals. After turning the
companies around, Bain sold them, and the employees who invested earned
returns averaging 50% to 80% annually, the Journal reported.

But that wasn’t enough.

“Bain added a couple of unusual twists
that made co-investing even more rewarding,” Mark Maremont of the
Journal reported. “It allowed employees to co-invest via tax-deferred
retirement accounts, and to do so by buying a special share class that
cost little but yielded much larger gains than other shares when deals
proved successful.”

In essence, Bain would value the special,
riskier shares at pennies on the dollar. In one deal, employees invested
about $23,000 in their IRAs. When the takeover target went public,
those shares were worth about $14 million, and were worth about $23
million they finally sold the shares. That’s a 100,000% return.

Those
are the kind of “sweetheart stock deals” that Wyden complained about.
They may be legal, but they violate the spirit of the law, which is to
limit contributions so that middle-class families can get most of the
benefits of the tax breaks.

Taxpayers spend $140 billion a year
subsidizing retirement savings, with about $20 billion going to the top
1% of earners. If we’re going to subsidize savings, let’s help those who
really need it, not millionaires and billionaires.

Census: Nearly 1 in 5 Children in U.S. in Poverty

Census: Nearly 1 in 5 Children in U.S. in Poverty | Juvenile Justice Information Exchange

Nearly one in five children in the United States lived in poverty
last year, with a much higher proportion of poverty among
African-American and Hispanic children, new U.S. Census figures released Tuesday show.


Overall, the number of children living in poverty declined slightly
from 21.8 percent of all children, or 16.07 million, in 2012 to 19.9
percent, or 14.66 million, in 2013, the new figures show.


Nearly 37 percent of African-American children and just over 30
percent of Hispanic children lived in poverty in 2013, determined by the
income of their household.

...

Childhood poverty in Britain declined more than 50 percent during 1999-2009 while America’s child-poverty rate
rose by 20 percent during the same period.

America's Poor, Deeper in Debt Than Ever

America's Poor, Deeper in Debt Than Ever - Bloomberg View:

Fresh data from the Federal Reserve shows that millions of the poorest families are still very deep in the hole -- and might be getting deeper.

The triennial Survey of Consumer Finances, released by the Fed last
week, confirms an overall improvement in the state of U.S. household
finances. The average debt burden for all families stood at about 105
percent of pretax income in 2013, down from about 125 percent in 2010
and the lowest level since the 2001 survey.

A closer look at the Fed data, however, suggests that the financial
improvement is far from evenly distributed. The least wealthy families
have made the least progress, and by some measures are in worse shape
than ever.

As of 2013, the debts of the quarter of families with
the lowest net worth stood at about 156 percent of pretax income,
according to the Fed data. That's more than in 2007, before the
financial crisis hit. It's also more than any of the wealthier groups --
something that hadn't happened before 2010.

The poorest quartile of families is the only group that owes
more than it owns. Thanks to declines in the value of assets, the
group's average leverage ratio -- debt as a percent of assets --
increased to 137.5 percent in 2013, the highest on record since the
survey started in 1989.

More ominous is a steady increase in installment debt, a category
that includes both student and auto loans -- areas that have recently
seen a lot of questionable lending to lower-income borrowers.

Whatever the drivers, the data suggest that the 2008 crisis
and subsequent economic malaise have left a troubling legacy: A group of
the poorest families, numbering roughly 14 million, whose precarious
finances make them vulnerable to shocks and limit their ability to
contribute to future growth. That's hardly a strong foundation for a
healthy recovery.

Fed Says Growth Lifts the Affluent, Leaving Behind Everyone Else - NYTimes.com

Fed Says Growth Lifts the Affluent, Leaving Behind Everyone Else - NYTimes.com

"Economic
growth since the Great Recession has improved the fortunes of the most
affluent Americans even as the incomes and wealth of most American
families continues to decline, the Federal Reserve said Thursday.

For
the most affluent 10 percent of American families, average incomes rose
by 10 percent from 2010 to 2013. For the rest of the population,
average incomes were flat or falling.

The
least affluent families had the largest declines. Average incomes
dropped by 8 percent for the bottom 20 percent of families, the Fed
reported in its triennial Survey of Consumer Finances, one of the most comprehensive sources of data on the financial health of American families.

The
new report, broadly consistent with other data on the aftermath of the
Great Recession, underscores why so many Americans think the economy
remains in poor health. While the pie has grown, most people are getting
smaller slices.

The
result is that wealth also is increasingly concentrated. While overall
wealth barely changed during the survey period, the money sloshed from
the bottom toward the top. For the top 10 percent of families, ranked by
income, estimated average wealth increased by 2 percent to $3.3
million. For the bottom 20 percent of families, average wealth sharply
declined by 21 percent to $65,000.

There
is growing evidence that inequality may be weighing on economic growth
by keeping money disproportionately in the hands of those who already
have so much they are less inclined to spend it.

President Obama last year described
income inequality as “the defining challenge of our time.” The Fed’s
chairwoman, Janet L. Yellen, said earlier this year it was “one of the
most important issues and one of the most disturbing trends facing the
nation.”

But
the trend so far has provoked little more than public outrage and
political debate, in part because there is no agreement about the
causes, let alone potential remedies. Some economists point to the
impact of mechanization and foreign competition. Others say that legal
changes have undermined the bargaining power of workers. Still others
think the economy is suffering from a drought of lucrative innovations.

The French economist Thomas Piketty argued in his recent book that wealth concentration is a natural tendency in market economies.

The
Fed’s report said the widening income gap represented a reversion to a
long-term trend that was disrupted by the recession. It said that the
top 3 percent of families collected 30.5 percent of all income in 2013,
up from 27.7 percent in 2010, but still slightly below their 31.4
percent share in 2007.

The
concentration of wealth continued without interruption, albeit at a
slower pace during the recession. The Fed said that the top 3 percent of
families held 44.8 percent of wealth in 1989, then 51.8 percent in 2007
and 54.4 percent in 2013.

One
signal of the growing divide is a decline in the share of families that
hold assets. The share of families that directly own stock fell to 13.8
percent from 15.1 percent, the Fed found. The share of families with
retirement accounts, savings bonds and life insurance also declined.
Likewise, the share of families that owned homes, owned rental
properties or had a stake in a business declined.

In
a more positive trend, debt burdens also fell. The debts of the average
American family continued to exceed its annual income, but the ratio
declined to 105 percent of income in 2013 from 125 percent of annual
income in 2010. Importantly, the share of Americans probably struggling
to pay those debts has also declined. Just 8.2 percent of households
devoted more than 40 percent of income to debt payments in 2013, the
lowest rate since the 1990s."