After Getting Amazon To Boot Wikileaks, Lieberman Eyes Other Firms (VIDEO)

December 2, 2010 · Posted in The Capitol · Comments Off 

Sen. Joe Lieberman (I-CT), chairman of the Homeland Security Committee, yesterday succeeded in getting to boot Wikileaks off its servers.

Now, Lieberman says he’s widening his scope.

“We’ve gotta put pressure on any companies — like Amazon, [which] just cut Wikileaks off from its servers to distribute — there’s a company now in Sweden, I think it’s called Bahnhof, which is providing that kind of access to the Internet to Wikileaks,” he said on MSNBC this afternoon. “We’ve got to stop them from doing that.”

As TPM reported yesterday, Lieberman’s committee staff called Amazon and asked, “Are there plans to take the site down?”

Amazon responded by removing the site, telling the committee it violated unspecified terms of use.

TPM yesterday asked a committee spokeswoman, Leslie Phillips, whether Lieberman was planning to reach out to other companies.

“The committee is not reaching out to other companies,” she said. “Senator Lieberman hopes that the Amazon case will send the message to other companies that might host Wikileaks that it would be irresponsible to host the site.”

Phillips said that hasn’t changed, and that Lieberman has no specific plans as of now to speak with other companies, including the Swedish firm Bahnhof AB where Wikileaks is now reportedly residing.

But his pressure on Amazon is already having a wider effect. The New York Times reported this afternoon that a Seattle-based company called Tableau had deleted charts and graphs uploaded by Wikileaks.

Tableau explains on its web site:

Our decision to remove the data from our servers came in response to a public request by Senator Joe Lieberman, who chairs the Senate Homeland Security Committee, when he called for organizations hosting WikiLeaks to terminate their relationship with the website.

The company also said Wikileaks violated the site’s terms of use by uploading content it doesn’t have the rights to.

Watch the video of Lieberman on MSNBC:


Duties of Directors of Distressed Firms

November 8, 2010 · Posted in The Capitol · Comment 

Francis Pileggi and Jeff Schlerf have a short (4 page) but very helpful analysis of recent Delaware cases dealing with the duties of directors of corporations in financnial distress. You can download it from Pileggi’s blog.

I tackled a related set of issues a couple of years ago in Much Ado about Little? Directors’ Fiduciary Duties in the Vicinity of Insolvency

Abstract: Where the contract between a corporation and one of its creditors is silent on some question, should the law invoke fiduciary duties as a gap filler? In general, the law has declined to do so. There is some precedent, however, for the proposition that directors of a corporation owe fiduciary duties to bondholders and other creditors once the firm is in the vicinity of insolvency.

Courts embracing the zone of insolvency doctrine have characterized the duties of directors as running to the corporate entity rather than any individual constituency. This approach is incoherent in practice and insupportable in theory. Courts should focus on whether the board has an obligation to give sole concern to the interests of a specific constituency of the corporation.

Concern that shareholders will gamble with the creditors’ money is the principal argument for imposing a duty on the board running to creditors when the corporation is in the vicinity of insolvency. On close examination, however, this argument proves unpersuasive. It is director and manager opportunism, rather than strategic behavior by shareholders that is the real concern. Because bondholders and other creditors are better able to protect themselves against that risk than are shareholders, there is no justification for imposing such a duty.

This article also argues that the zone debate is much ado about very little. The only cases in which the zone of insolvency debate matters are those to which the business judgment rule does not apply, shareholder and creditor interests conflict, and a recovery could go to directly to those who have standing to sue. In those cases, as this Article explains, there is a strong policy argument that creditors should be limited to whatever rights the contract provides or might be inferred from the implied covenant of good faith.

Firms who received bailout cash giving generously to Pols

October 25, 2010 · Posted in The Capitol · Comment 

GM and others hedging their bets by donating to both parties.
American Thinker Blog

Wonkbook: TARP firms favoring GOP; fiscal commissions hits tax deductions; Christina Romer warns against deficit reduction

October 25, 2010 · Posted in The Capitol · Comment 


On Sunday, I rewatched an old episode of the West Wing. “Enemies Foreign and Domestic,” it was called, and one of the subplots involved a computer-chip manufacturer who’d just discovered a serious defect. The company was doing the right thing and recalling the product, but that left it, and its 90,000 workers, in jeopardy. Leo wants a bailout. President Bartlett doesn’t. And though, for awhile, the arguments gets made in economic terms, eventually Bartlett rounds on Leo. “They were huge contributors!” He yells. “Huge!”

The company gets some government help, but it comes at a cost. You can never donate to me, or any other candidate, again, Bartlett tells the CEO. “You can vote, but that’s it.”

The Obama White House is probably wishing it had added a similar clause to TARP. Not only are the bailed-out companies giving significant amounts of money — more than $ 1.4 million, at last count — but they’re giving most of it to Republicans. That leaves Democrats in an unhappy position: The voters blame them for the bailout (most Americans don’t know TARP was conceived and signed by the Bush administration), and the bailed-out companies are funding the other guys. They’ve managed to end up on the wrong side of both the people and the powerful. What would Bartlett have done?

It’s Monday. Welcome to Wonkbook.

Top Stories

Bailed out companies are giving considerable sums to midterm campaigns — and mostly to Republicans, reports T.W. Farnham: “Senate Minority Leader Mitch McConnell (Ky.) was a fierce critic of the federal bailout of General Motors and Chrysler last year, saying he could not ‘ask the American taxpayer to subsidize failure.’ But GM doesn’t seem to hold a grudge. The political action committee formed by the company, which is now largely owned by taxpayers, cut McConnell a $ 5,000 campaign check in September, a small piece of the $ 190,000 it donated to campaigns in the past month… Among companies with PACs, the 23 that received $ 1 billion or more in federal money through the Troubled Assets Relief Program gave a total of $ 1.4 million to candidates in September, up from $ 466,000 the month before. Most of those donations are going to Republican candidates.”

The deficit commission will likely focus on tax deductions, reports Damian Paletta: “Sacrosanct tax breaks, including deductions on mortgage interest, remain on the table just weeks before the deficit commission issues recommendations on policies to pare back with the aim of balancing the budget by 2015…At stake, in addition to the mortgage-interest deductions, are child tax credits and the ability of employees to pay their portion of their health-insurance tab with pretax dollars. Commission officials are expected to look at preserving these breaks but at a lower level, according to people familiar with the matter. The officials are also looking at potential cuts to defense spending and a freeze on domestic discretionary spending.”

Obama is being too hard on pomegranate juice?

Now is not the time for deficit cuts, writes Christina Romer: “The best thing would be for Congress to pass a plan now that will reduce deficits when the economy is back to normal. France’s recent plan to gradually raise its retirement age to 62 from 60 is a classic example of such ‘backloaded’ reduction. President Obama’s proposal to eliminate the Bush tax cuts on high incomes is another: it would raise revenue by only $ 30 billion in 2011, but by more than $ 600 billion over the next decade. History shows that well-designed backloaded plans are credible. For example, changes to Social Security eligibility and taxes have been passed years, if not decades, before they took effect.”

Got tips, additions, or comments? E-mail me.

The G-20 — China included — has agreed to try and even out currency imbalances, reports Howard Schneider: “The statement from the finance leaders of the Group of 20 nations was a carefully worded bargain across a range of issues. It put China on the record as seeking to bring down its massive trade surplus and let its exchange rate fluctuate more. It also hinted that any move by the U.S. Federal Reserve to further ease monetary policy would be measured so as not to disrupt currency values or capital flows in emerging market nations… The plan envisions a greater role for the International Monetary Fund in overseeing whether exchange rates and trade balances are moving as intended.”

’90s power pop interlude: Matthew Sweet and John Hiatt play “Girlfriend”.

Still to come: The top Republican on the House Financial Services Committee is chiding financial lobbyists for donating to Democrats; Business Week walks you through the foreclosure crisis; Britain imposes a carbon tax; some states moving towards unicameral legislatures; state health exchanges could vary wildly; and Sears caters to a new, undead clientele.


The top Republican on the House Financial Services committee is attacking financial lobbyists for being too soft on financial regulation — and donating too much to Democrats: “When Republican Rep. Spencer Bachus of Alabama stepped in front of 100 financial services lobbyists at the Capitol Hill Club last month, he asked for an equal chunk of their campaign cash — and made clear he was watching closely. It is hard to believe, he told the crowd, that some in their industry were still giving more to Democrats than Republicans after, he said, Democrats hammered them with over-reaching Wall Street reform legislation, people familiar with the presentation said.”

Alice Rivlin’s deficit group, however, is likely to go further:

Confused by the foreclosure crisis? Business Week’s cover story is the most comprehensive overview I’ve seen: “Wall Street’s unspoken strategy has been to kick mortgage losses down the road until an economic recovery reinflates the housing market. The faulty-foreclosure crisis has forced the issue back into the present tense, triggering a fight over who will bear the brunt of those losses. The combatants—all of whom are trying to minimize their share of the damage—include homeowners, lenders and mortgage brokers, loan servicers and the underwriters of mortgage-backed securities, the buyers of those securities, title insurers, rating firms, and the federally controlled mortgage buyers Fannie Mae (FNM) and Freddie Mac (FRD). J.P. Morgan predicts that bondholders will absorb most of the estimated $ 1.1 trillion loss—but may succeed in foisting about $ 55 billion on banks.”

Thrifty homeowners are seeing generous refinancing packages:

Rick Wagoner did more to save GM than Steve Rattner, writes Malcolm Gladwell: “What Wagoner meant in his testimony before the Senate, in other words, was something like this: “At G.M., we are finally producing world-class cars. We have brought our costs, quality, and productivity into line with those of our competitors. We have finally disposed of the crippling burden of our legacy retiree costs. We have expanded into the world’s fastest-growing markets more effectively than any other company in the United States. But the effort required to bring about that transformation has left our balance sheet thin—and, at the very moment that we need a couple of years of normal economic activity to refill our coffers, auto sales have fallen off a cliff. Do you mind giving us a hand until things get back to normal?” This is not arrogance. It happens to be something very close to the truth. “

Obama’s caution has discredited fiscal stimulus with voters, writes Paul Krugman: “What we do know is that the inadequacy of the stimulus has been a political catastrophe. Yes, things are better than they would have been without the American Recovery and Reinvestment Act: the unemployment rate would probably be close to 12 percent right now if the administration hadn’t passed its plan. But voters respond to facts, not counterfactuals, and the perception is that the administration’s policies have failed. The tragedy here is that if voters do turn on Democrats, they will in effect be voting to make things even worse.”

We should privatize the mortgage market, writes Dwight Jaffee:

We need a fiscal policy to match the Fed’s monetary easing, writes Alan Blinder: “The two main thoughts that are probably going through Mr. Bernanke’s head today are, first, ‘I sure wish I could get some help from fiscal policy,’ and second, ‘I probably can’t, so I’d better do whatever I can.’ He’s right on both counts. In a more rational world, it wouldn’t be this way. Fiscal policy, which packs the power, would be doing the heavy lifting-by combining tax cuts and spending today with credible deficit reduction for the future. Monetary policy would take the back seat by keeping interest rates low. But we don’t live in a rational world. And as Donald Rumsfeld might have said, you go to war against recession with the army you have. Right now, that’s the Federal Reserve. The fiscal army is AWOL.”

Adorable animals acting like children interlude: Two cats play patty-cake.

Domestic Policy

How states set up health exchanges will have a major effect on coverage, reports Robert Pear: “Massachusetts and Utah provide a glimpse of the future, and they offer radically different models for other states. The battle over health care is shifting to the states, and the design of insurance exchanges will be one of the most pressing issues for state legislators when they convene early next year…The Utah Health Exchange organizes the market, allowing consumers to compare a wide variety of health plans sold by any insurers that want to participate. In the Massachusetts exchange, known as the Connector, the state serves as an active purchaser, soliciting bids from insurance companies and negotiating prices and benefits in an effort to secure the best value for state residents.”

Health insurers have switched their campaign donations from Democrats to Republicans:

Some employers are adjusting health plans as health care reform takes effect, reports Ricardo Alonso-Zaldivar: “Two provisions in the new law are leading companies to look at their plans in a different light. One is a hefty tax on high-cost health insurance aimed at the most generous coverage. Although the ‘Cadillac tax’ doesn’t hit until 2018, companies may have to disclose their exposure to investors well before that. Karen Forte, a Boeing spokeswoman, said concerns about the tax were partly behind a 50 percent increase in insurance deductibles the company just announced…Bigger questions loom over the new insurance markets that will be set up under the law.”

Health care reform has failed to fix American health care’s provider-pricing problem — and thus its cost problem, writes Alec MacGillis: “Health-care providers in the United States have tremendous power to set prices. There is no government ‘single payer’ on the other side of the table, and consolidation by hospitals and doctors has left insurers and employers in weak negotiating positions. ‘We spend fewer per capita days in the hospital compared with other advanced countries, we see the doctor less frequently, and we swallow fewer pills,’ said Jon Kingsdale, who oversaw the implementation of Massachusetts’s 2006 health-care law. ‘We just pay a lot more for each of those units than other countries.’ The 2010 law does little to address this. Its many cost-control provisions are geared toward reducing the amount of care we consume, not the price we pay.”

A few states are considering moving to unicameral legislatures, reports Keith Johnson: “In Maine, members of the state’s House of Representatives passed a bill last year that would shrink the legislature to one chamber from two. A Pennsylvania legislator introduced a bill this year to do the same. The speaker of the House in Kentucky also floated the idea. Over the past year, officials in half a dozen other states have discussed attacking the size of government by cutting the size of the legislature. The current election campaigns across the country have further fired the debate…At the height of the Depression, Nebraska decided to save money by getting rid of its second legislative chamber. It worked.”

Secret campaign spending is incompatible with democracy, writes E.J. Dionne:

James Fallows worries that the Juan WIlliams imbroglio will harm NPR: “I have known and frequently worked a variety of people at National Public Radio, and I do want to say something about them. The worst aspect of the Williams-NPR imbroglio is that it has allowed Fox and its political allies to position NPR as something it is not, and in the process to jeopardize a part of American journalism we can’t afford to lose…[NPR] has reporters at state houses and in war zones. At last count, it has something like 17 foreign bureaus and 16 domestic. In much of the country, especially away from the coasts, it’s a major source of local information and news. It claims that its total audience is some 27 million people a week; with all allowances for counting differences, it reaches a lot more people than Fox does.”

Niche marketing interlude: Sears’ store for zombies.


The British government has quietly enacted a carbon tax: “The government today quietly imposed a £1B-per-year (US$ 1.58B) carbon tax on around 4,000 of the largest businesses and public sector bodies in the UK as part of its spending review. The move was not announced as part of chancellor George Osborne’s (pictured at left) speech to parliament. Instead, it was left to a statement by the Department of Energy and Climate Change in which it detailed its spending review settlement and confirmed the Carbon Reduction Commitment (CRC) would be reformed so that the Treasury keeps revenue raised through the carbon pricing scheme.”

New EPA regulations will force efficiency improvements for trucks, reports Ken Thomas: “The plan is expected to seek about a 20 percent reduction in greenhouse gas emissions and fuel consumption from longhaul trucks, according to people familiar with the plan. They spoke on condition of anonymity because they did not want to speak publicly before the official announcement, expected Monday. Overall, the proposal is expected to seek reductions of 10 percent to 20 percent in fuel consumption and emissions based on the vehicle’s size. Large tractor-trailers tend to be driven up to 150,000 miles a year, making them ripe for improved miles per gallon.”

Research funding and a carbon price are both effective emissions-reduction tools, writes David Leonhardt: “The debate between these two camps — pro-research and pro-carbon price — can often sound hostile. But there is actually a lot of agreement. Finding more money for clean-energy research is a crucial part of dealing with climate change. So is raising the cost of emitting carbon. My guess is that the policy that seems more like a free lunch — research funds — will need to come first and the harder stuff will, unfortunately, have to wait.”

Closing credits: Wonkbook is compiled and produced with help from Dylan Matthews, Mike Shepard, and Michelle Williams. Photo credit: NBC.

Ezra Klein

‘US’ Chamber Of Commerce Hosts Seminars With Chinese Gov Officials To Teach American Firms How To Outsource

October 19, 2010 · Posted in The Capitol · Comment 

Among the many lies told by the U.S. Chamber of Commerce recently, chief Chamber lobbyist Bruce Josten said that his organization’s foreign affiliates, called AmChams, are only “comprised of American companies doing business abroad in those countries.” In fact, the Chinese AmCham is comprised of Chinese firms like Northern Light Venture Capital; the AmCham in Russia is comprised of Russian state-run companies like VTB Bank; and, the AmCham of Abu Dhabi is comprised of UAE state-run oil companies.

The ties between the AmChams and the U.S. Chamber are deep. In addition to sharing staff members, the Chinese AmCham has worked closely with the U.S. Chamber and the Chinese government to sponsor a series of seminars in America to teach American businesses how to outsource jobs to China (called the China Grassroots Program). Below is an invite to an event sponsored by the right-wing billionaire Sheldon Adelson, inviting local businesses in Florida to come to Jacksonville and learn about outsourcing from Chinese government officials like Li Haiyan, the Counselor for Economic Affairs for the People’s Republic of China, U.S. Chamber lobbyist Joseph Fawkner, and BChinaB, a firm that specializes in helping American firms outsource their manufacturing jobs to China. Click the screenshot below for the invitation:

Similar events like the one above continued into 2009 and beyond.

The Chamber’s CEO, Tom Donohue, frequently defends outsourcing: for example, in 2004, he said “there are legitimate values in outsourcing — not only jobs, but work.” Recently, the Chamber came out against a Senate bill that would have discouraged outsourcing. As Campaign Money Watch report found that more than 1.4 million jobs were outsourced since 1994 in the nine states in which the U.S. Chamber of Commerce is spending significant money.

Separately from their relationship with the AmCham affiliates, the U.S. Chamber of Commerce receives direct foreign donations to the same 501(c)(6) political account the Chamber is using to run an unprecedented $ 75 million attack ad campaign against progressives. In an exclusive investigation, ThinkProgress documented over 80 foreign firms donating at least $ 885,000 to the Chamber’s 501(c)(6) account. As ThinkProgress’ Brad Johnson noted, many of these foreign supporters of the Chamber financing its 501(c)(6) are also some of the world’s largest outsourcing companies.


Report: Rick Perry Gave $16M In State Money To Firms Backed By Donors

October 4, 2010 · Posted in The Capitol · Comment 

The Dallas Morning News came out with a story this weekend that Texas Gov. Rick Perry used the state’s Emerging Technology Fund to funnel some $ 16 million to firms that were backed by major donors to his campaign.

Created in 2005, Perry pushed for the fund, which is meant to encourage the development of new technology and attract researchers to the state. The grants — which have totaled $ 173 million since the fund’s creation — are overseen by the governor’s office and must be approved by the governor himself.

The lieutenant governor and speaker of the state house must also sign off, the News reports, but they wait for governor’s go-ahead before doing so.

In other words, Perry dictates who gets the money. Firms that got cash include Terrabon Inc., which received $ 2.75 million and is backed by one Phil Adams, a college friend of Perry’s who has donated $ 314,000. Another is ThromboVision Inc., whose investors include Charles W. Tate, a donor of some $ 424,000 to Perry. ThromboVision got $ 1.5 million from the fund.

Perry told the News he doesn’t see who’s invested in a company when he reviews applications.

“Whether they contribute to my campaign or not has nothing to do with whether or not the project is appropriate” for funding, he said.

But a spokeswoman for his office said applicants must provide full financial disclosure — including investors.

Rick Perry - Texas - Dallas Morning News - United States - Business


Arranged marriage and family firms

September 17, 2010 · Posted in The Capitol · Comment 

This is fascinating (at least to me):

firms depend on a succession of capable heirs to stay afloat. If
talent and IQ are inherited, this problem is mitigated. If, however,
progeny talent and IQ display mean reversion (or worse), family firms
are eventually doomed. This is the essence of the critique of family
firms in Burkart, Panunzi and Shleifer (2003). Since family firms
persist, solutions to this succession problem must exist. We submit
that marriage can transfuse outside talent and reinvigorate family
firms. This implies that changes to the institution of marriage,
notably, a decline in arranged marriages in favor of marriages for
“love” bode ill for the survival of family firms. Consistent with this,
the predominance of family firms correlates strongly across countries
with plausible proxies for arranged marriage norms
. Interestingly,
family firm dominance interacted with arranged marriage norms also
correlates with lower GDP per capita
, suggesting that cultural inertia
may also impede convergence to more efficient economic organization.

One wonders whether there is a political corollary to this finding. When Europe was dominated by monarchies, the elites had norms of arranged marriages. Maybe the old timers knew what they were doing after all.

SEC Exempts small firms from SOX 404

September 17, 2010 · Posted in The Capitol · Comment 

Jim Hamilton reports that:

The Securities and Exchange Commission has adopted a final rule to
implement Section 989G of the Dodd-Frank Wall Street Reform and Consumer
Protection Act (Release No. 33-9142
Section 989G affords small issuers an exemption from the internal
controls auditor attestation requirement of Section 404(b) of the
Sarbanes-Oxley Act of 2002. SOX Section 404(b) requires registered
public accounting firms that prepare or issue audit reports for an
issuer to attest to, and report on, the assessment made by the issuer’s
management of the company’s internal controls. Previous SEC rules
required a non-accelerated filer to include an attestation report in its
annual report for years ending on or after June 15, 2010.

He’s got the details on the regulatory mechanics of the rule changes.

WaPo: ‘Florida Senate Race Begins Without a Clear Favorite’; But Paper Ignores Rubio Lead in Dem Firm’s Poll

August 26, 2010 · Posted in The Capitol · Comment 

In today’s Washington Post, Dan Balz argues that the "Florida Senate race starts without a clear favorite." While that may be true in some sense, recent polling data has some favorable signs for conservative Republican candidate Marco Rubio.

Yet nowhere in his 20-paragraph story did Balz delve into those poll numbers. Instead, Balz presented the Florida race as complete wild card that is unpredictable due to the three-way nature of the contest:

Gov. Charlie Crist is the man in the middle in Florida’s high-stakes race for the Senate, a candidate without a party whose hopes of moving from Tallahassee to Washington depend on his ability to fend off a squeeze play from his Democratic and Republican rivals.

The three-way campaign for the Senate is the latest in a series of important races in Florida - including the 2000 recount that helped define red-blue divisions in America - but with dynamics new to the Sunshine State. 

But a look at recent polling data available on seems to indicate Rubio went to bed on primary election night in good shape for the general election fight ahead.

The last poll taken before Tuesday’s primary was conducted of likely voters by the liberal Democrat-friendly polling firm Public Policy Polling (PPP). That poll had Rubio up eight points over Crist, 40 to 32, with Meek garnering a humble 17 percent. 

Rubio had a 5-point edge over Crist in a poll by Mason-Dixon in mid-August with Meek at a paltry 18 percent. Other polls from August show a Crist lead, but those are of registered, not likely voters, and in a midterm election it’s the motivated, fired-up voters that are most likely to show up.

While it’s true that the two-and-a-half months until Election Day are an eternity in politics, it seems that right now Rubio is doing pretty well. It could change for the better or for the worse, but it should have been noted by Balz. - Exposing Liberal Media Bias

Great news: Bailout helped foreign firms

August 12, 2010 · Posted in The Capitol · Comment 

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