Big Business

Envirowonk has an interesting observation regarding the new smog standards released this week by the EPA:

A year ago, the EPA’s Clean Air Scientific Advisory Committee said the allowable amount of smog-forming ozone should be reduced from 80 to 60 parts per billion, and at the very least should be no higher than 70 ppb.

The American Lung Association also lobbied for the 60 ppb limit in order to prevent thousands of premature deaths and respiratory problems.

Electric utilities, cement manufacturers and other business groups urged White House officials to keep the status quo at 80 ppb, lest they be forced to spend millions installing pollution controls.

The answer: 75 part per billion is your new standard.

Interesting relationship between the new standard, the recommendations, and what was lobbied for by whom.

At least the standard has been lowered. Besides, I question the efficacy of current enforcement of the standard. For example, have you watched the color of the air over Atlanta, if you’ve had the opportunity to look out a window when making a daytime landing at Hartsfield?

One thing that seems virtually certain about this year’s election is that the climate in Washington will likely be different. If Hillary or Obama win, the Dems will control the executive and legislative branches, leaving them mostly free to pursue their own, probably somewhat pro-consumer agenda. And if McCain wins…well, let’s be diplomatic and express some expectation that he seems somewhat less likely to demonstrate the “creativity” of our current MBA-in-chief.

So, it’s probably no surprise that big business and certain interest groups are pushing for some regulatory changes and decisions to be resolved before 20 January. Seen in Tuesday’s Wall Street Journal (free link):

This week, the Interior Department is expected to publish its decision to remove the gray wolf from its endangered species list in three Northern Rockies states. Ranchers sought such a decision, which angers environmental groups like the Natural Resources Defense Council, which is fighting the de-listing.

The Small Business Administration recently released its Top Ten list of rules businesses want changed before President Bush leaves office in January. Business owners and their representatives nominated more than 80 rules for the list, including workplace safety, tax, and contracting regulations.

The U.S. Chamber of Commerce is challenging several pending employment and labor rules, including one that would tighten the requirements for employees seeking family medical leave. If the lobbying group can’t influence the wording of regulations, it will try to influence the instructions on interpreting them issued by the agency, said Randel Johnson, vice president of the group, which lists battles against regulation as a key challenge for the next five years.

While some acceleration in the turning of the wheels of bureaucracy would be most welcome, I suspect that not everyone would be happy with what the Executive Branch will be publishing into the Federal Register in coming months….

One of the hot topics in the Dems’ campaigns for the Ohio and Texas primaries was a debate on the merits of NAFTA and free trade in general.

Within the context of that discussion, Ohio and Texas provide an interesting contrast.  On the one hand, you have the rust-belt state of Ohio, which has seemingly been walloped by industry leaving the state for less-costly venues.

On the other hand, you have Texas, which is not only a lower-cost venue, but is seeing a boom from being so centrally located on the new free-trade axis, and the new industry and services that result from that enviable position.

I am a firm believer in the power of the free market.  In the long run, society in general benefits from an environment where trade is free and fair…although the transition to such freedom, and shifts in the general market, can be painful for the folks closest to the change.

However, I suspect that our leaders tend to forget the “and fair” portion of “free and fair trade”.  Granted, fairness is a subjective measure, but “free trade” isn’t supposed to simply be a codeword for “throwing open the doors for a mass exodus of industry without some benefit flowing back”.

When looking at alleged free-trade practices or arrangements, it is I think important to remember that “trade” consists of more than just goods.  True, you would expect to see a shift in manufacturing operations to those areas where it is cheapest or most efficient under a “free and fair” trade environment.

However that freedom shouldn’t be turned into a backdoor to avoid taxation or environmental protections.  And, to be truly fair, that freedom also needs to allow for movement of labor and of capital.  

If it’s more efficient to operate a factory in Country X (even after allowing for the same standards of environmental protection), that’s fine…but let us freely invest in and provide services to Country X in return for giving up the industrial production at home.

Similarly, if it’s more efficient to manufacture in Country X, perhaps provision should be made for some of our manufacturing laborers to have a chance to compete for jobs in Country X…or for Country X’s folks to come here, if the real cause of that disparity is a shortage of cheap labor domestically.

I know that it is likely in the next administration that there will be some reform of “free trade”.  I hope that it won’t be the readoption of inefficient protectionism.  I’d much prefer to see an expansion to “free and fair trade” rather than the half-baked implementation we have today.

Apparently there was a mini-protest in Hartford today. Quoting CTNewsJunkie for the reason:

Aetna announced Thursday that its fourth-quarter profits rose 3 percent and its net income grew to $448.4 million. This is the fifth time protestors stood outside the health care giant’s headquarters to protest its quarterly profits. It began the protests last February.

“You know something is wrong with our health care system when one insurance company’s profits could buy more than five hours of non-stop Super Bowl advertising time, or pay the salaries of the Giants and the Patriots for the past two years,” Jon Green, executive director of the Working Families Party said.

If I were my normal self, I would make comments here about a sad state of affairs when profit deemed evil in and of itself in this country, and of investors needing an expectation of returns on their investment proportionate to the risk they bear….

However, for reasons that will become clear on Monday… for some reason I don’t feel like doing that right now.

So, Travelers reported year-end results this morning — an event that many folks in the insurance industry have an interest in.  Travelers is, after all, an 800-pound gorilla in insurance circles (outside, perhaps, of personal lines), and under almost any rock in the industry, you can find an ex-Travelers, ex-St. Paul, ex-USF&G or ex-”old Aetna” professional.  (Sometimes it’s a professional satisfying several or all of those ex-es, since we are a small, incestuous industry.)

If you were just skimming the headlines, you might get a misleading or conflicting impression of what the results looked like.

For instance, one AP reporter lead with:

Travelers 4th-Quarter Earnings Fall 11 Percent on Lower Premiums

Meanwhile, the Dow Jones wire announced (WSJ.com subscriber link):

Travelers Posts 11% Drop in Net Amid Higher Claim Costs

So, which is it?

Well, the answer is a bit more complicated than that.   To avoid my own rule about not posting on matters “too close to home” (part of the day job involves analyzing competitors) I’ll just direct you to the Travelers’ investor page for you to judge for yourself.

Folks who have paid attention to Citibank in the markets are aware that all has not been well beneath the big red arch. Another sign of that, from the Wall Street Journal: (subscriber link)

Prince Alwaleed bin Talal is poised to once again come to the rescue of Citigroup Inc.

This time, the Saudi billionaire is expected to be joined by other investors, including the China Development Bank, people familiar with the matter said.

While it isn’t clear how much Prince Alwaleed will invest, the Chinese entity is expected to invest roughly $2 billion, one person said. Prince Alwaleed’s total stake in Citigroup is likely to remain below 5% in order to avoid regulatory scrutiny. However, given that Citi has a stock-market value of $140 billion, even a 1% stake would end up being a significant sum of money.

While Citigroup is still working out details of the planned investments, and there’s a chance they could fall apart, the bank is hoping to collect a total of $8 billion to $10 billion from a number of investors, likely including at least one fund affiliated with a foreign government, the people said.

I can’t wait until the conspiracy theorists and xenophobes get involved with spinning this news.

There’s still plenty of noise circulating about the “Hope Now Alliance” plan—both in the “it doesn’t go far enough” vein and in the “it doesn’t help avoid a market crash” class. However, an opinion piece in the New York Times by Paul Krugman caught my eye.

Although the column has a bit more of a “heaven help the poor consumer who didn’t consider the consequences…” tone than I’m comfortable agreeing with, there is one observation that merits highlighting:

This is supposed to help investors, because foreclosing on a house is expensive: there are big legal fees, and the house normally sells for less than the value of the mortgage. “Foreclosure is to no one’s benefit,” said Mr. Paulson in a White House interactive forum. “I’ve heard estimates that mortgage investors lose 40 to 50 percent on their investment if it goes into foreclosure.”

But won’t the borrowers gain, too? Not if the planners can help it. Relief is restricted to borrowers whose mortgage debt is at least 97 percent of the house’s value — which means that in many, perhaps most, cases those who get debt relief will be borrowers who owe more than their house is worth. These people would be nearly as well off in financial terms if they simply walked away.

You know; that would be illustrative of the societal cynicism some of us seem to feel towards Washington these days—and the White House in particular: a program, spun as aid, that can be viewed as seeking to bolster the portfolios of investors by keeping the serfs attached to their properties for a bit longer than they would otherwise be….

I realize that I could be coming across as a bit overly capitalistic on the mortgage mess. And, while it’s true that I’m not happy about the prospect of directly or indirectly subsidizing some bad decisions / bad bets made by others, I would be remiss if I didn’t mention that I can easily believe in there being plenty of schemes in play to take advantage of borrowers in trouble. For example, consider this report, which made the local broadcast news circuit about a month ago (from WBIR):

Homeowners facing foreclosure are being warned that some companies are preying on borrowers facing financial distress.

According to a new study from the University of Iowa, questionable fees and claims were added to half of the foreclosure cases they examined.

One lender claimed that the borrower owed $1 million when they actually owed $60,000.

You’d think that there’s plenty to be done to clean up some of the dirty tricks some lenders may engage in, as well as seeking to curb some of the craziness/usury that lead us to this point in the market, without the government attempting to prolong the inevitable.

Seen at WSJ.com (subscriber link):

CompUSA Inc. said it has been sold to Gordon Brothers Group, a restructuring firm that will wind-down the retailer’s operations and sell off its assets. Financial terms were not disclosed.[...]

The article mentions that CompUSA stores will remain open through the holiday season, and that apparently the restructuring featuring the shut-down of over a hundred stores several months ago didn’t work out.

I feel a little nostalgic over this news. After college, when I was exiled to the then mostly internet-less realm of Southeastern Alabama, I roadtripped quite regularly to Atlanta, where part of my ritual was to wander around the CompUSA by Lenox Square, just enjoying a bit of a geek/technological vibe that you just couldn’t get from the Wal-Mart in Enterprise.

Even though that habit of mine has long since waned, thanks to the rise of online shopping and my disturbing trend towards ludditism (not to mention lousy customer service at the local store), I have noticed that locally CompUSA seemed to be the only local retailer that regularly carries (carried?) computers with nice enough specs to attract my interest, and indeed the laptop I’m composing this post on is one that I bought through CompUSA.com and picked up locally (I could have gotten it slightly cheaper through a pure online operation, but instant gratification was worth a small premium).

Ah well. Times are changing, I guess, and I hope you don’t mind my wistfully remembering the days when CompUSA was a big toy store to me.

It sounds like the holiday season of excessive consumerism got off to a better-than expected start from the retailers’ point of view. From an AP story:

According to ShopperTrak RCT Corp., which tracks sales at more than 50,000 retail outlets, total sales rose 8.3 percent to about $10.3 billion on Friday, the day after Thanksgiving, compared with $9.5 billion on the same day a year ago. ShopperTrak had expected an increase of no more than 4 percent to 5 percent.[...]

In an apparent sign of desperation, the nation’s stores ushered in the official start of the holiday shopping season on Friday with expanded hours, including midnight openings, and a blitz of early morning specials that were more generous than a year ago. J.C. Penney and Kohl’s Corp. (KSS) opened at 4 a.m., an hour earlier than a year ago.

The strategy appears to have worked, as shoppers jammed stores in record numbers for early morning deals on Friday. Martin noted that judging by the strong figures on Friday, stores were able to sustain strong sales throughout the day. He said he’s counting on strong traffic throughout the weekend as many stores, including Macy’s Inc. (M), are continuing with special deals.

I must admit that the craziness of Black Friday is somewhat lost on me. Sure, I skimmed through some of the promotions….but is the potential to gamble on getting one of a limited supply of loss-leader trinkets really worth braving the hordes early on a 4-day weekend morning?

Some of you may be aware of Senator Grassley’s inquiries into the alleged excesses of a half-dozen megachurches. Quoting an AP article:

“I’m following up on complaints from the public and news coverage regarding certain practices at six ministries,” Grassley said in a statement. “The allegations involve governing boards that aren’t independent and allow generous salaries and housing allowances and amenities such as private jets and Rolls Royces.

“I don’t want to conclude that there’s a problem, but I have an obligation to donors and the taxpayers to find out more,” Grassley said.

The Atlanta Journal-Constitution, in an article reporting on one televangelist’s “voluntary” disclosure of the desired financial information includes a bit of discussion on the prosperity ministry that attracts the attention:

The six religious broadcast empires under the gun all preach and teach forms of a gospel that justifies the accumulation of money and material goods as one sign of God’s blessing. It includes benefits like health, a good family life and benevolence toward others.

It is an American-born faith that mixes Christianity with capitalism, individualism and materialism, said Shayne Lee, a Tulane University sociologist who studies megachurches and religion.[...]

“Without a doubt, my life is not average,” [Rev. Creflo Dollar of the World Changers Church International] said. “But I’d like to say, just because it is excessive doesn’t necessarily mean it’s wrong.”

I wouldn’t be surprised to learn that everything is at least nominally on the up-and-up as regards federal tax laws. And it’s certainly not my place to accuse anyone or any entity of heresy.

However, I am reminded of a disturbing sensation I had when in high school. I spent some time playing in the orchestra at Bellevue Baptist Church, recruited by my junior high band director who was helping secure musicians to fill out the ranks of an orchestra of biblical proportions for the groundbreaking of Bellevue’s new campus on the east side of Memphis.

Millions of dollars were being pledged and spent to build a mighty island of fundamentalist Christianity…and to assist the congregation in escaping a particularly destitute neighborhood in Memphis’ inner city.

It just reeked of hypocrisy.

I don’t want to begrudge anyone their success, and there is something to be said for matters of faith being an uplifting experience. There are definitely times where community-building and support can have an inward-focused nature.

However, isn’t much of the justification for giving religious institutions tax-exempt status driven by the concept that they, like other tax-free, non-profit entities, tend to have an expectation that they will benefit society at large, and therefore merit tax-advantaged status, as individuals’ contributions to such organizations could be interpreted as “directed support” rather than just relying on the state to allocate tax dollars in support of society appropriately?

In that regard, perhaps inquiring about certain alleged excesses at some megachurches might be appropriate.