From Finance Chief, a Bill That May Weather the Blows

On the surface, it appears that no one is happy with Sen. Max Baucus (D-Mont.) -- and that may be the best news President Obama has haWithin minutes of the release of the Senate Finance Committee chairman's long-awaited health-care reform bill Wednesday, the attacks started flying. Liberal Democrats and allies, particularly labor unions, fumed. Republicans, after being courted for months, denounced the work as pure partisanship.

But behind the rhetorical fireworks was a sense that the fragile coalition of major industry leaders and interest groups central to refashioning the nation's $2.5 trillion health-care system remains intact. As they scoured the 223-page document, many of the most influential players found elements to dislike, but not necessarily reasons to kill the effort. Most enticing was the prospect of 30 million new customers.

At the White House, after the delays and drama of summer, strategists spoke finally of movement and a possible path toward success on the president's centerpiece domestic policy goal. To keep up the pressure, Obama met with three lawmakers who had warned they would not support the Baucus bill.

Sen. John D. Rockefeller IV (D-W.Va.), who is upset that Baucus did not include a public health insurance option, tempered his criticism after a private meeting with Obama, signaling that he hopes to work out a compromise.

"Nothing is clearer than the president's commitment to providing affordable and effective health care for all Americans, and he and I are united in our efforts to deliver on this promise," he said.

Lawmakers and lobbyists alike cautioned that Obama remains far from a White House signing ceremony and that perhaps the greatest danger at this point is death by a thousand legislative changes.
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The goal now is to keep the legislation moving toward a House and Senate conference committee, in which the administration would have its greatest influence on the outcome.

"He is open to a variety of different approaches if it gets it out of the Finance Committee," Sen. Ron Wyden (D-Ore.) said after talking to Obama. "He also knows he's got a lot of heavy lifting to do to get it out of the Finance Committee."

At the heart of the administration's strategy -- and Wednesday's guarded optimism -- is a collection of deals intended to neutralize the interest groups that helped defeat President Bill Clinton's health-care overhaul 15 years ago. In each instance, the industry has agreed to make financial concessions in return for new customers or other protections that could have lasting effects.

Hospitals, for example, have said they would accept about $155 billion in cuts over the next decade in return for promises that they would be exempt from actions taken by a proposed commission that would pursue additional savings in the Medicare program.

The best evidence that the approach was holding was the calm emanating from organizations that have criticized House health-care bills and a version approved by the Senate health committee.
d in months.

Finance Chief to Tackle Japan's Economic Woes

TOKYO -- Japan's newly appointed finance minister, Hirohisa Fujii, will focus on fixing the country's economy, even if that means it will take longer to reduce Japan's massive public debt and possibly prompt more new-debt issuance.

In an interview this week, the 77-year-old Mr. Fujii said he would prioritize economic growth over fiscal overhaul. "If you allow me to make the story short, while fiscal rehabilitation is important, it comes after economic growth," he said. "There's no question that unless the economy recovers to some extent ... our country's fiscal state will get even worse."

He also hinted that the Democratic Party of Japan government may come up with new stimulus steps if the economy weakens, even if that would require a further issuance of bonds.

"We certainly must keep in mind the possibility of [the Japanese economy entering] a second round of sharp contraction," said Mr. Fujii, who was named finance minister Wednesday by new Prime Minister Yukio Hatoyama.

While exports to China and India are rebounding, Japanese business investment remains weak, and "wage and employment conditions are considered to be in the worst shape in the postwar era ... which will surely ricochet against consumer spending," he said.

Mr. Hatoyama has insisted that the DPJ's promised economic-support measures will be financed without floating more debt, but Mr. Fujii's remarks suggest the government's focus will be ensuring that the economy doesn't deteriorate further.

Should the economy demand more money, "it is possible" the government will sell more bonds to raise cash, Mr. Fujii said, despite worries about how that could worsen Japan's poor fiscal state. The country's public debt stands at 170% of gross domestic product -- the worst ratio in the industrialized world -- and the Organization for Economic Cooperation and Development expects the figure to hit around 200% next year.

The DPJ government could also support the economy by redirecting trillions of yen it plans to save through scrapping steps it considers ineffective in the previous government's last stimulus package, valued at 15.4 trillion yen, or $169 billion.

Mr. Fujii's immediate task is to work with Naoto Kan, a top DPJ officials who Wednesday was formally named minister in charge of the new National Strategy Bureau. The bureau is expected to set guidelines on key policies such as the national budget. Mr. Kan is expected to determine the priorities and outline of the budget, while Mr. Fujii will finalize details and make ends meet as tax revenue shrinks due to the economic slump.

The Court and Campaign Finance

In the Supreme Court this week, Elena Kagan, the new solicitor general, eloquently defended the longstanding ban on corporate spending in political campaigns. But the conservative justices who spoke showed a disdain for both Congress’s laws and for the court’s own prior rulings. If the ban is struck down, as we fear, elections could be swamped by special-interest money.

Conservative jurists talk about judicial modesty and deferring to the elected branches. But in the questioning, Justice Antonin Scalia made clear that he considers Congress to be a self-interested actor when it writes campaign finance laws. Chief Justice John Roberts and Justice Samuel Alito seemed to put little weight on the fact that the court has repeatedly upheld a ban on corporate campaign expenditures.

What the conservatives seemed most concerned about was protecting the interests of corporations. The chief justice and Justice Scalia seemed especially perturbed that what they see as the inviolable right of these legal constructs to speak might be infringed upon.

The conservatives also seemed incredulous that vast amounts of corporate money flooding into campaigns could be seen as corrupting the system. We agree with Senator John McCain, who told reporters after the argument that he was troubled by the “extreme naïveté” some of the justices showed about the role of special-interest money in Congressional lawmaking.

The more liberal justices — including Justice Sonia Sotomayor, who was participating in her first argument — were far more sympathetic to the ban on corporate expenditures, but they have only four votes.

There is still some hope that Chief Justice Roberts may decide his affection for corporations is less important than the reputation of the Roberts court. If he does, there is a chance for a limited, and relatively undamaging, ruling that hews closely to the facts of this case.

The underlying dispute is a narrow First Amendment challenge brought by Citizens United, a nonprofit group that wanted to show an anti-Hillary Clinton movie on a video-on-demand service during the primary season. The court could uphold its right to show the movie without opening the door to a new era of political corruption.

Obama to give speech on financial crisis Monday

WASHINGTON (Reuters) - U.S. President Barack Obama will give a speech about the financial crisis on Monday in New York, marking the anniversary of the collapse of Lehman Brothers, the White House said on Thursday.

The fall of Lehman last year triggered a worldwide financial crisis and accelerated Obama's race to the presidency as the Democrat's cool reaction to the country's economic problems contrasted with a more scattered response from his Republican opponent, Senator John McCain.

Obama made financial regulatory reform a key platform of his candidacy and is trying to push through Congress legislative measures on the issue as president.

"He will discuss the aggressive steps the administration has taken to bring the economy back from the brink (and) the commitment to winding down the government's role in the financial sector," the White House said in a statement about the speech.

Actions the United States and other nations around the world must take to prevent "a crisis like this from ever happening again" would also feature in the speech, the statement said.

Lehman, once the fourth-largest U.S. investment bank, filed for bankruptcy protection on September 15, 2008, in the largest U.S. bankruptcy filing in history.

Obama's speech will take place at midday in New York City's Federal Hall.

Big target on small business - Now !

Small-business owners are sweating this summer — and it's not necessarily because of the weather.

Many worry that a form of nationalized health care could soon become law, and that this would cost jobs.

"I give my employees health insurance but I can't afford to meet the government mandates," one owner told the National Federation of Independent Business. "I will have to eliminate several employees to reduce my payroll expense."

(NFIB is a trade organization that helps businesses).

"I don't believe we'll be able to comply. We will have to eliminate pay increases and Christmas bonuses. Full-timers will be eliminated and all staff will be part-timers, and that will likely be insufficient," another added.

"In general, H.R.3200 will hurt my business due to increasing my costs. Ultimately that may mean letting people go. How is that helping the economy or small business?" wondered a third owner.

No wonder NFIB has come out in opposition to the "reforms" proposed in the House of Representatives.

Many politicians insist they can add a government-run "public option" health insurance plan on top of the trillions of dollars in obligations our federal government is already facing. But small business owners know better.

The government plans have a big problem: The extra taxation and spending would destroy many small businesses, the very foundation of the American economy.

Half of all private workers in the U.S. are employed in firms with fewer than 500 workers. These small firms have also created somewhere between 60 and 80 percent of all new jobs in the last decade.

But some politicians are willing to endanger that growth.

Rep. Charlie Rangel, D-N.Y., chairs the crucial Ways and Means Committee. To pay for health-care "reform," he wants to slap a surtax on roughly 2 million tax filers.

Some 60 percent of these returns reflect money made by a small business or partnership.

While 400,000 of people affected by the surtax derive most of their adjusted gross income from a small business, these taxpayers already shell out one quarter of all income taxes. They represent our economic foundation.

The proposed extra tax would be on a sliding scale: 1 percent for joint filers with more than $350,000, 1.5 percent for joint filers with more than $500,000, and 5.4 percent for joint filers with more than $1 million in adjusted gross income.

In addition to higher taxes, the House health care bill would force small businesses with at least $250,000 in payroll to provide health insurance or pay a tax penalty up to 8 percent of payroll.

And as if the initial proposed tax rate wasn't high enough, there's every chance it could go up.

The House bill would empower the Office of Management and Budget to jack the tax rates up to 2 percent for those making $350,000 and 3 percent for those making less than $1 million, if bureaucrats decide that's necessary.

Businesses would have an even harder time preparing for the future, because they'll never be able to know when their taxes may increase or how high they'll eventually go. Few business owners would hire new workers under those conditions.

The national unemployment rate in July reached 9.4 percent, and of course we all want to bring that number down by creating as many jobs as possible, as quickly as possible.

To do so we need to shore up small businesses, not chip away at them with higher taxes and expensive mandates.

As summer winds down, Obamacare seems to be on life support.

Small-business owners have spoken. We ought to pull the plug, and start over again with an effective reform plan that won't hammer our nation's economy.

Future Financing For Small Business Clouded, Hurting Recovery

Even as the economy improves, financing may continue to be elusive for small businesses that drive job creation in the U.S.

Battered banks have cut back on loans and lines of credit. While smaller banks and credit unions have jumped in, they don't have the capacity to fully make up the financing needs.

It's unclear how small businesses, which account for half the U.S. economy, will find the funds to invest and propel the fragile recovery.

"We have to figure out how to get to the institutions and avenues small businesses actually use," said William Dennis, senior research fellow at the National Federation of Independent Business Research Foundation.

Despite government efforts to shore up the banking system, credit remains tight. The Federal Deposit Insurance Corp. last week said loans to small firms declined 1.9% in the past year. A Federal Reserve survey showed a third of banks tightened lending to businesses in the three months ended in July.

While the recession depresses demand for funds and hurts credit quality for small businesses, lines of credit are being cut for even solid firms, say advocates.

Meanwhile, community development financial institutions, such as credit unions and microloan funds, are making more loans, and larger ones, this year compared with last, according to a Philadelphia Federal Reserve Bank report on its region.

When it comes to number of loans made under the U.S. Small Business Administration's primary loan program, National Penn Bank and Susquehanna Bank have moved up in the Philadelphia area. They rank seventh and sixth respectively in the nine months ended July, from eighth and 12th during October 2006 through September 2007. In contrast, Bank of America Corp. (BAC) in the same period has gone from ranking fifth in number of loans - 118 - to 29th, with just four loans.

"Now, we're seeing more and more credit-worthy firms that are unable to get conventional financing," said Lynn Ozer, who manages Susquehanna's government guaranteed lending. She's seeing at least double the number of applicants for the SBA program than a year ago. Susquehanna Bancshares (SUSQ), based in Lititz, Pa., has $13.8 billion in assets.

Bank of America spokeswoman Tara Burke said the bank remains committed to small business. It lent more than $8 billion to companies with less than $20 million in annual revenue and modified payment structures for 32,000 small business credit-card customers so far this year, she said.

National Penn Bancshares Inc. (NPBC), based in Boyertown, Pa., with $9.7 billion in assets, didn't return a call for comment.

Groups that help small businesses are encouraging them to try regional banks. Philadelphia's Wharton Small Business Development Center is inviting more regional banks to attend its "meet the lenders" program in November and arranging its first-ever panel discussion with regional bank presidents in December.

But while regional banks didn't delve into the securitized products that bedeviled larger banks, they have exposure to commercial real estate - the next phase of the crisis. The National Association of Realtors recently said the market may only see meaningful recovery in the second half of 2010. Regional banks facing impending losses may cut back on credit even more.

Larger companies have the ability to bypass tight bank credit - they can sell bonds to investors, who lately have shown an insatiable appetite for the attractive assets. But small businesses have no such access. A long, protracted recovery may be the result.
Source: CNN

2nd UPDATE: Medtronic Consolidate Businesses Into Two Groups

Medical-devices giant Medtronic Inc. (MDT), which has been restructuring amid efforts to control costs and manage pressure on top businesses, said Monday it is moving its various business units into two main groups.

The moves include some changes among Medtronic's top managers, and Medtronic said it's searching outside the company for someone to run a new group covering its cardiology franchises. The other group includes businesses making orthopedic, diabetes, neurology and surgical devices, Medtronic said in a release.

"This new structure enables us to capitalize on existing synergies across our businesses," Chairman and Chief Executive William A. Hawkins said in a statement.

Shares of Medtronic recently traded down 55 cents, or 1.4%, at $38.12, although they've generally been on an upswing since March. The company, which is battling to stabilize its position in markets for key devices amid a slumping economy, has enacted job cuts and other moves in its restructuring efforts this year.

The "CRDM, CardioVascular and Physio-Control" group will contain Medtronic's big cardiac-rhythm business, which includes implantable defibrillators. It will also cover the business that makes stents to open heart arteries and Physio- Control, an external defibrillator business Medtronic would like to spin off once issues raised by the Food and Drug Administration are resolved.

Medtronic said it's currently conducting an external search for someone to run this new group. Segment leaders from the three businesses within the group - Pat Mackin, Scott R. Ward and Brian Webster - will report to that person.

Morgan Stanley analyst David Lewis called Medtronic's decision to search outside the company for this spot the "biggest surprise." Outside perspective has worked before, but the decision to not promote either Mackin or Ward "will come as a surprise to some investors," Lewis said.

"We are not convinced this sends any message regarding the outlook for these businesses," he added.

Christopher J. O'Connell, who had led Medtronic's diabetes franchise, was promoted to head the "Spinal and Biologics, Neuromodulation, Diabetes and Surgical Technologies" group. Catherine Szyman, formerly senior vice president of strategy and innovation, will now run the diabetes business.

Richard E. Kuntz, who had run Medtronic's Neuromodulation business, which includes "deep-brain stimulation" devices used to treat neurological disorders, was named chief scientific clinical and regulatory officer. Tom Tefft, formerly vice president and corporate controller, will take over the neuromodulation unit.

In addition, Jean-Luc Butel was promoted to a new position overseeing international operations.

Last week, the company reported its fiscal first-quarter profit dropped 38%, weighed down by charges from a recent legal deal, but core earnings and sales beat expectations with help from extra time on the fiscal calendar.
Source : cnn

Starting a Business : is my Plan B

CALL them accidental entrepreneurs, unintended entrepreneurs or forced entrepreneurs. A year and a half into the Great Recession, with the jobless rate hovering near double digits, corporate refugees like Lisa Marie Grillos of San Francisco are trying to fend for themselves.

Along with her brother Hernan Barangan, Mrs. Grillos started Hambone Designs, after her full-time contract position with Williams-Sonoma as a production manager wasn’t renewed in January. The new company makes bicycle bags that hold things like keys, wallets and cellphones.

“You have the time — why not focus your energy on something, rather than just trolling Craigslist and sitting and watching TV?” Mrs. Grillos says. “It’s really taking matters in my own hands.”

Mrs. Grillos, 34, built a Web site called hambonedesigns.com, opened a virtual shop on Etsy.com, an online marketplace, and hit San Francisco street fairs. So far, between the online marketing and the street fairs, she and her brother have sold 70 bags, which retail for $20 to $40. Each sale results in a profit.

“We have been talking about mass producing, but we’re not there yet,” Mrs. Grillos says. “It is a whole other thing, approaching stores and having the inventory.”

To help make ends meet, Mrs. Grillos also does textile design and photography projects, and it helps that her husband has a full-time job.

Others among the unemployed are taking the entrepreneurial route. The most recent Index of Entrepreneurial Activity by the Kauffman Foundation showed a slight uptick of new businesses in 2008 — a full recessionary year — over 2007. An average of 320 Americans out of 100,000 formed a business each month, Kauffman said. What’s more, it found, the patterns “provide some early evidence that ‘necessity’ entrepreneurship is increasing and ‘opportunity’ entrepreneurship is decreasing.”

Accidental or by design, entrepreneurship is on the rise again this year. LegalZoom, the online legal document service, says the number of new businesses it helped to form was up 10 percent in the first half of the year, compared with the period a year earlier.

“We were surprised,” says Brian Liu, co-founder and chairman of LegalZoom. “We expected there to be a drastic downtick.”

LegalZoom’s top five areas of incorporation, he says, are real estate, consulting, Internet (including electronic commerce), retail, and construction and contractors.

To be sure, a vast majority of corporate workers who have been laid off since December 2007 have sought another corporate job. After all, starting a business in the worst downturn in decades seems especially risky. Only two-thirds of new small businesses survive at least two years, according to the Small Business Administration. That survival rate falls to 44 percent at four years, and to 31 percent at seven.

The silver lining may be that the survival rate is about the same in expansions and recessions, says Dane Stangler, senior analyst at Kauffman.

WHILE the Internet has made the formation process quick and inexpensive — papers can be filed with LegalZoom, for example, for $149 in addition to state filing fees — the costs of owning a business add up quickly. There are state and local taxes and fees, insurance, salaries and contract pay, overhead, inventory and the like. And these days, lenders are none too generous when it comes to forking over money to new businesses.

These factors, combined with the lack of a steady paycheck, often-inadequate health insurance and the sheer emotional stress of being unemployed, may prevent many people from setting out on their own.

But research on what is known as post-traumatic growth has found that some people become more resilient when faced with adversity, says Shawn Achor, a Harvard researcher. Creativity surges, he says, as they adapt to a new situation.

“Their brain is actually learning at a faster pace than when they are not challenged,” Mr. Achor says. “As a result of this, some individuals, the accidental entrepreneurs, they are the ones who in the midst of crisis actually respond with growth.”

In a report this summer on innovation, Ernst & Young wrote, “Experience shows that entrepreneurs should not give up on start-ups in a down economy.”

Many companies with billion-dollar market capitalizations were started during a recession, the report said, including Starbucks, Intuit and PetSmart.

Research from Kauffman in June found that more than half of the companies on the Fortune 500 list in 2009 and nearly half of the companies on the Inc. magazine 2008 list were founded during a recession or bear market.

Lynn Zuckerman Gray, 60, hopes to be one of the success stories of this recession. She lost her job at Lehman Brothers almost a year ago, when the firm collapsed. A former chief administrative officer of its global real estate group, she found herself competing with a rising number of job seekers for a dwindling pool of jobs.

Ms. Gray ended up participating in a New York City program, offered in conjunction with the Kauffman Foundation, called FastTrac NewVenture. The program, for employees displaced by the financial crisis, sent Ms. Gray in a direction she never thought she would go: starting an on-campus recruiting company called Campus Scout.

“I guess I had an entrepreneur simmering inside me because I’ve always been very creative,” she says.

The cost has been hundreds of dollars here and there, she says. Still, the reality of her financial situation is daunting. Her severance pay from Lehman ended this month, and she is now eating into her savings. So far, her new venture, Campus Scout, is in start-up mode and does not have any clients.

She says she is going to try to get part-time work, teach university classes and do some freelance writing to generate cash flow so she can keep her business going for at least two years.
Source: NYTIMES

Now, Credit Crisis Is a Big Draw for Finance Museum

The Museum of American Finance was faced with an awkward situation recently: some of the corporate sponsors of the museum — dedicated to glories of free markets — had, well, failed.


Lee Kjelleren, the museum president, said the purpose of the exhibit was to illustrate the “forces that affected everybody’s lives.”

Rather than fretting, the museum tapped its own entrepreneurial spirit and mounted an exhibit — “Tracking the Credit Crisis” — that reveals what the museum’s president, Lee Kjelleren, calls the “greed, recklessness and arrogance” of Wall Street.

Probably not what Lehman Brothers, Merrill Lynch or the American International Group had in mind when they donated money to the museum.

But in the wake of the financial crisis, attendance at the museum — located at 48 Wall Street, near the epicenter of last year’s market collapse — has risen to about 200 visitors a day, nearly double its tally last summer. (The Metropolitan Museum of Art averages that many visitors almost every 90 seconds.)

And where else can you buy a poster for just $12 chronicling the lowlights of the credit crisis — so many, in fact, that it’s a five-poster set?

Among the biggest attractions for visitors? The morbid curiosity of a financial train wreck.

“This is about the market crashing,” said Lizzie McNeely, 26, a high school teacher from Toronto, as she wandered around the museum one recent afternoon. “I am interested in how they are going to represent that.”

For the $8 price of admission (or free Tuesday to Saturday from 10 to 11 a.m. through October), visitors who have seen enough van Goghs at the Met and Pollocks at the Museum of Modern Art can get a detailed look at the events that brought the global economy to its knees.

The most popular sections of the exhibit, Mr. Kjelleren said, describe so-called toxic assets and how these were exported from America around the world — “As if the rest of the world didn’t already love America enough!” — as well as the dubious role of the ratings agencies in concealing the riskiness of subprime mortgages and the securities based on their values.

A film about the crisis includes a still photograph of Richard S. Fuld Jr., the vilified former chief executive of Lehman Brothers, being harangued by an angry crowd, including a person holding a sign with the word “Crook” scrawled across it.

In curating the installation, Mr. Kjelleren said one of the things he wanted to capture was how “dumb” the banks had been about investment vehicles like credit-default swaps. “It was dumb, it was more than dumb, and it was occasionally reckless and irresponsible,” he said.

He pointed significantly to a section of the exhibit that discussed the so-called Lehman weekend last September, and the government’s decision to allow Lehman Brothers to fail, which Mr. Kjelleren characterized as a big mistake.

But he reminded visitors that the museum was all about learning from past mistakes.

One group striding by — five bankers from Goldman Sachs — seemed more focused on avoiding the educational experience of the exhibit devoted to the credit crisis.

John Cirincion, 60, one of the museum’s volunteer guides, beckoned to them to take a closer look, but the bankers shook their heads.

“We lived it!” one said, as the group headed instead for an exhibit titled “Women in Finance.”

The museum presents the global financial crisis employing a video and a dense timeline that catalogues what Mr. Kjelleren breathlessly describes as what may have been “the most challenging man-made calamity in modern experience,” excluding wars.

The color-coded timeline depicts crucial events from February 2007 through March 2009 in presenting an overview of the crisis, and provides definitions for important financial terms like subprime mortgage.

Mr. Kjelleren, a former banker for JPMorgan, said, “The idea was to create an awareness of the nature of the driving forces that affected everybody’s lives.”

One of the best measures of the scale of the crisis is not on display, but can be found in museum literature detailing its corporate sponsorships.

Goldman Sachs, Citigroup, Morgan Stanley and Wells Fargo generously opened their wallets here a year ago, long before they became part of Exhibit A in a display on the financial crisis.

And Lehman Brothers and Merrill Lynch are effectively gone, and American International Group is a shadow of its former self. The government owns nearly 80 percent of that company.

Alina Sichevaya, an 11-year-old whose father works for Credit Suisse, had just completed a weeklong finance camp for children at a Camp Millionaire program in her hometown of Cary, N.C. She strode into the gilded halls of the museum and made a beeline for the credit exhibit, staring intently at the giant panels of color-coded cards.

Though she had just learned at camp about complicated concepts like taxes and depreciating assets, Ms. Sichevaya said she found the exhibit “kind of confusing.”

“It’s a lot of information,” she added, as she and her mother, Olga, headed off to catch a sightseeing tour of the Brooklyn Bridge.

Even in the best of times, it was never going to be easy to curate an homage to high finance.

Correction: An earlier version of this article misstated the address of the Museum of American Finance.
Source: NYTIMES

Is commercial real estate finance a house of cards?

This is a good question for all readers, anyway The credit freeze, falling values, highly structured debt and the unstable economic environment have created a perfect storm for commercial real estate loans. The capital markets are likely to see unprecedented levels of loan defaults, which will test much of the structure underlying these loans. PLI On-Demand examines the problem and solutions with the 68-minute PLI On-Demand presentation (audio only) Overcoming Challenges in Structured Commercial Real Estate Workouts 2009.

Source :Smartbrief

U.S. business: welcomes Obama export control review

U.S. high-technology exporters on Friday welcomed President Barack Obama's decision to undertake a comprehensive review of U.S. export controls rooted in Cold War fears of the former Soviet Union.

"The economic and security challenges our country faces continue to grow more complex, and we must have a modern export control system that protects U.S. technology while allowing us to cooperate and trade with our close allies and partners," Marion Blakey, president of the Aerospace Industries Association, said in statement.

Many U.S. companies are frustrated by licensing and procedures that limit export sales of commercial high-tech goods that also have military applications. They complain countries such as China can easily buy some of the technology on the open market from other suppliers.

Beijing also has pressed Washington to loosen restrictions, arguing that would help close the U.S. trade deficit with China, which reached a record $268 billion last year.

"The U.S. has one of the most robust export control systems in the world," White House spokesman Robert Gibbs said on Thursday. "But it is rooted in the Cold War era of over 50 years ago and must be updated to address the threats we face today and the changing economic and technological landscape."

That statement accompanied Obama's decision to extend the Commerce Department's emergency authority to continue administering export controls for another year.

The 1979 Export Administration Act expired in 2001 and since then Congress has been unable to agree on reforms to replace the highly technical piece of legislation.

"Export control reviews are frequently announced, occasionally begun, and never completed. The really good news will be when it is finished," Bill Reinsch, president of the National Foreign Trade Council, said in a statement.

Representative Howard Berman, chairman of the House of Representatives Foreign Affairs Committee, has already begun a congressional review of U.S. export controls and plans to introduce reform legislation early next year.

Health finance reform needed

The behavior of opponents of health reform is completely embarrassing and also seems to miss the main point -- our current system of financing health care in this country is completely unsustainable.

With the increases of between 10 and 20 percent annually for private insurance coverage, eventually all small businesses will have to stop subsidizing employee health insurance. Already many companies, large and small, are in effect reducing employees' wages by increasing the amount each must contribute for health insurance -- a process that will only increase over time and harm the average American's standard of living.

Meanwhile, those without insurance often use emergency rooms for their care and end up with hospital bills that they can't pay and therefore harm their credit or end up in bankruptcy. Then the cost of uncompensated care is passed on to those with insurance.

Our public health insurance system is also a mess. Medicaid seems to be chronically underfunded, resulting in large numbers of providers refusing to accept Medicaid coverage. Medicare reimbursements reportedly are also insufficient, yet the expenses of Medicare continues to rise and, with the upcoming spike in the 65 and over population, will bankrupt our federal government by about 2020 without more cost controls being put in place.

Solving these problems is far from easy, or else solutions would have been enacted long ago -- but the status quo is not acceptable. Rather than ranting and raving, the opponents attending town hall meetings should discuss constructive suggestions to these problems. All Americans need to have access to decent, affordable health care, and those Americans with the means (and desire) to pay for "premium" health care services should be free to spend in that manner.

Source: Baltimoresun

ALL BUSINESS: What is fair executive pay?

The scrutiny of executive pay in Washington isn't knocking down the compensation of banks' head honchos. It's just changing what form the money comes in.

Just look at Wells Fargo & Co.'s recently altered pay plan. Earlier this month, the San Francisco bank raised CEO John Stumpf's salary to $5.6 million, through a mix of cash and stock. That's more than six times his salary last year.

The generous bump doesn't violate any rules Wells Fargo is bound by under the Treasury Department's Troubled Asset Relief Program, which doled out $25 billion to the bank last fall to shore up its capital base. That's because the new pay scheme doesn't include a bonus, just a guaranteed higher salary.

But the move stretches what's allowed to its limits. It's that tactic the Obama administration's new pay czar Kenneth Feinberg has to be on the lookout for in the coming months as he reviews the compensation plans of seven companies that have received "exceptional assistance" from the government. Feinberg received the pay information over the last week, and his findings due in October are expected to be a blueprint for pay programs throughout the financial industry.

Wells Fargo isn't one of the companies on Feinberg's to-do list, but it well illustrates the struggle to determine what is "fair" pay in today's corporate world.

"There is no denying that some of these executives have really hard jobs," said J. Robert Brown, a professor of business law and corporate governance at the University of Denver. "But there is another element to all this over what is politically acceptable."

Soaring bonus payouts to financial service company executives tied to short-term results clearly played a role in the financial crisis. In recent years, 80 percent to 90 percent of executive compensation was driven solely by annual performance, according to compensation consultant David Wise of the Hay Group.

That led to excessive risk-taking, which ultimately backfired and resulted in losses so large that the government had to step in with multiple rescue plans.

Congress and the White House have been wrangling over how to shift the compensation paradigm. The House on July 31 voted to prohibit pay and bonus packages that encourage bankers and traders to take risks so big they could bring down the entire economy.

The Obama administration has proposed giving shareholders at all public companies a nonbinding vote on compensation packages. In addition, it wants to diminish management's influence on pay decisions by banning members of board compensation committees from having financial relationships with the company and its executives.

Feinberg is the first federal official to have veto power over the how much private-sector executives are to be compensated. Included in his review are pay plans submitted by American International Group, Citigroup, Bank of America, General Motors, Chrysler and the financing arms of the two automakers.

All this political intervention isn't intended to drag down executive pay to nothing. In fact, financial companies will continue to pay sums to executives that will likely astonish average workers.

The goal is to force companies to come up with compensation programs that better align shareholders' and executives' interests. Getting there won't be easy because there isn't a magic metric for fair pay.

The compensation changes at Wells Fargo shows how deciding what's appropriate can get murky.

Its CEO Stumpf will get $900,000 in cash as part of his 2009 salary, the same as last year. But he will also get another $4.7 million in stock that has been labeled as being part of his salary. Stumpf and three other executives who also got large salary increases can't sell these new shares until the company repays the government's bailout money.

Stumpf will also receive 108,528 in restricted share rights this year, valued at $2.8 million when they were granted earlier this month. Those shares will begin to vest in 2011.

That brings his total compensation in stock and cash at the time it was granted to $8.4 million for 2009. Last year, his total compensation in cash and stock options was valued at about $8.8 million when it was granted.

"We are using stock to increase their salaries to keep the pay of these leaders closely tied to the success of the shareholder," said Wells Fargo spokeswoman Melissa Murray. "We must pay our senior leaders competitively for the long-term success of our company."

But another way of looking at this is that Wells Fargo's top brass are getting guaranteed pay not necessarily tied to financial results. At the end of every two-week payroll period, Stumpf will get a portion of that $4.7 million in stock, with the amount of shares determined by where the stock is trading then. If the stock goes down, he gets more shares; if it goes up, he gets fewer.

That means a short-term drop in Wells Fargo stock could actually benefit the bank's executives. They also benefit from the fact that the stock now trades around $28 each, about a third less than what it was last fall.

"How can this be called a well designed plan because all the executives have to do is sit around in order to get paid?" said Paul Hodgson, a senior research associate at The Corporate Library, an independent corporate governance research firm.

Hay Group's Wise said financial companies that took government money don't have many options in how they can structure their pay programs at a time when there is talk of a potential brain drain of top talent. He believes the amount of compensation won't change much, just the makeup — most likely meaning salaries will grow while bonuses could shrink.

"Wells Fargo is doing exactly what the taxpayers were afraid banks would do, and the Treasury led them there," Wise said.

The coming months will be very telling for the future of executive pay, especially for financial firms. Feinberg's recommendations for the seven firms he reviews will be closely watched, and likely mimicked.

What's becoming ever more apparent is the fine line between allowing for competitive compensation and creating imbalanced incentives.

Source: Rachel Beck