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December 31, 2011

Risk ratings, structured finance who's who

The departures of Ms. Tillman and Ms. Rose come as S&P President Doug Peterson works to forge a new identity for the firm and restore a reputation tarnished by the crisis. The former Citigroup Inc. banker has sought to enhance the firm's internal controls while championing analysts' independence.

Some former S&P analysts say those changes, some under way since Mr. Peterson took over in September, have been slow going. They say many of their one-time colleagues who oversaw the ratings on complex mortgage-linked deals have remained at the firm since 2008--despite calls from investors, regulators and lawmakers for wholesale changes to the way S&P and the other major rating firms do business.

An S&P spokesman declined to comment.

Despite the backlash, S&P and rivals Moody's Investors Service and Fitch Ratings remain the dominant players in the business of ratings everything for corporate and sovereign debt to asset-backed securities.

The Justice Department and the Securities and Exchange Commission are investigating S&P's crisis-era ratings on mortgage-linked deals, people familiar with the matter have said. Former S&P employees who have been questioned as part of the probe say that Justice Department investigators have expressed consternation that so many of the managers who oversaw the ratings on mortgage-linked securities remain at the firm, making it difficult for them to speak with a broad group of former analysts.

A Justice Department spokeswoman declined to comment.

Mr. Peterson succeeded Deven Sharma in September. S&P replaced its chief credit officer, Mark Adelson, in early December. Mr. Adelson was hired by Mr. Sharma in May 2008 and given the mandate to make it harder for debt-issuers to earn a triple-A from the firm. Mr. Adelson was moved to a "senior research fellow" position, considered by former and current S&P employees to be a demotion. At the time Mr. Adelson had declined to comment.

The firm also announced earlier this month that David Jacob, who succeeded Ms. Rose as S&P's structured finance chief, would step down at the end of the year.

Vickie Tillman, who served as S&P's executive vice president until 2009, is in talks to leave S&P parent McGraw-Hill Cos., a person familiar with the matter said. She is currently head of global sustainability business development at McGraw-Hill.

Joanne Rose, who from 1999 until 2008 had run the S&P team that rated mortgage securities and other structured-finance deals, will leave the firm in January, according to people familiar with the matter. Some of those ratings are now the subject of probes by U.S. prosecutors and securities regulators.

DECEMBER 28, 2011, 3:38 P.M. ET
Two Crisis-Era S&P Officers to Leave

December 30, 2011

Un redeamed, unspent gift cards: seigniorage ?

The vast majority of the money put on gift cards gets redeemed, but Riley estimates that since 2005 $41 billion in money on gift cards has been lost or is likely never to be cashed in. The lion's share of money lost on gift cards from 2005-2009 came from fees and expiration dates. All that changed with the passage of the Credit Card Accountability Responsibility and Disclosure Act of 2009 that was signed into law last year. The Act largely forbids fees on cards sold by retailers (cards given away as promotional items can still charge fees), and it prohibits expiration dates less than 5 years after the card is purchased.

But what happens when the purchases go under the face value and then sit in the junk drawer in perpetuity, or when grandma, who can barely check her AOL email, gets an Amazon.com card that she'll never redeem? Some $3.4 billion of the $41 billion lost on gift cards from 2005-2011 resulted from cards being lost or simply left unused. The Credit CARD Act doesn't do much to address that, and as the market grows that number will grow along with it.

The answer to how retailers deal with those "lost" funds isn't simple, and there are no hard-and-fast rules -- either at the federal level of government or through national regulatory accounting principles. The Securities and Exchange Commission allows companies to take unused gift-card money as income once they can reasonably say the card won't be redeemed, but there's no set time limit. Best Buy, for example, sets that level at about two years. In fiscal 2011, the electronics company recorded $53 million in income from gift-card "breakage," or cards that are unlikely ever to be redeemed, up from $43 million a year earlier.

But some states don't allow companies to keep unused gift-card cash. They demand that companies give the money to the state after a certain period of time to add to unclaimed-funds accounts. States claim this is a way to reunite consumers with their unspent money, but practically it's a way for cash-strapped governments to give themselves more liquid funds. Money the state holds as unclaimed funds can be used for general purposes until someone claims it. For example, in 2008 -- the most recent year for which data could be obtained -- New York state collected $9.6 million in unredeemed gift cards and returned around $2,150 to the rightful owners.

[ Via WSJ Number of the Week: Billions in Gift Cards Go Unspent, 2011 Dec 24 ]

December 29, 2011

Grade-School reform feedback loop

Today in 'think like an economist' -- incentives matter:

Hypothesis: these new tests are measuring the right things and that teaching to the test is an improvement over teaching one's own possibly-haphazard curriculum.

Data: every teacher casually encountered just has no notion that this Reach For The Top business could even in theory accomplish anything. It's just more hoops to jump through.

Analysis: given that the thing that is being measured seems to be the wrong thing, it seems like the changes are worse than nothing. Pre-reform: teachers try to do the right thing, but who knows whether they do it or not. Post-reform: teachers are now being judged on the wrong thing, so they have to focus on that instead of what they think is the right thing.

Maybe the average teacher is relying on slanted and inaccurate information from their union leaders here. But the people who are actually making the policy are either making no effort to explain the point of the policy, or are unable to communicate with the people "on the front lines".

December 28, 2011

Business of fashion, the-business-of-blogging: the sartorialist.

Business of fashion looks at the-sartorialist for design and recurring revenue.

December 27, 2011

knowyourmeme : memes : hipster-cop

KnowYourMeme curates memes. Example: hipster-cop

December 26, 2011

Optimizing resume for keyword scanners

It's more than just single keywords that make you stand out from the crowd:

After all, a lot of other people are making sure that their resumes mimic the words mentioned in job descriptions as well. Instead, Lifehacker suggests that many companies now look for semantic matches, which are related terms like CPA, accounting, audits, and SEC to ensure that your resume represents real-world, useful, and related experience rather than just being stuffed with keywords. For an example of how this works, check out Monster.com's Power Resume Search Test Drive.

-- CBS

December 25, 2011

Middle class up to $400,000

An agenda for the middle class ?

RAISING TAXES, REDUCING THE DEFICIT Tax reform is essential. But there is no way to build public consensus for broad reform without first reversing the lavish tax breaks for the rich. In addition to letting the high-end Bush-era tax cuts expire at the end of 2012, Mr. Obama could call for all forms of income to be taxed at the same rates, rather than allowing lower rates for investment income, which flows mostly to wealthy Americans. Income tax rates also need to be adjusted at the top of the scale, so that the affluent, say, couples with taxable income of $400,000 a year, are not paying the same top rate as multimillionaires.

The Middle-Class Agenda
Andrew Rosenthal
Published: December 19, 2011
President Obama knows what ails the middle class. But does he know how to fix it?

December 18, 2011

The real Newt Gingrich, Conservative ?

Furthermore, he has an unconservative faith in his own innocence. The crossroads where government meets enterprise can be an exciting crossroads. It can also be a corrupt crossroads. It requires moral rectitude to separate public service from private gain. Gingrich was perfectly content to belly up to the Freddie Mac trough and then invent a Hamiltonian rationale to justify his own greed.

Then there is his rhetorical style. He seems to have understood that a moderate Republican like himself can win so long as he adopts a bombastic style when taking on the liberal elites. Most people just want somebody who can articulate their hatreds, and Gingrich is demagogically happy to play the role.

Most important, there is temperament and character. As Yuval Levin noted in a post for National Review, the two Republican front-runners, Gingrich and Mitt Romney are both "very wonky Rockefeller Republicans who moved to the right over time as their party moved right."

But they have very different temperaments. Romney, Levin observes, has an executive temperament -- organization, discipline, calm and restraint. Gingrich has a revolutionary temperament -- intensity, energy, disorganization and a tendency to see everything as a cataclysmic clash requiring a radical response.

I'd make a slightly similar point more rudely. In the two main Republican contenders, we have one man, Romney, who seems to have walked straight out of the 1950s, and another, Gingrich, who seems to have walked straight out of the 1960s. He has every negative character trait that conservatives associate with '60s excess: narcissism, self-righteousness, self-indulgence and intemperance. He just has those traits in Republican form.

The Gingrich Tragedy
Published: December 8, 2011
Newt Gingrich may be big-government conservatism's leading messenger, but his temperament and character distort the effect.

December 17, 2011

The real Romney ?

How ably Romney the nominee will defend himself, given the kid-gloves treatment by his current competition and the campaign's avoidance of large segments of his own life story, is difficult to say just yet. In early November I watched Romney return to Iowa for only the fourth time. He stopped in Dubuque and Davenport and, before decent-size crowds, essentially regurgitated his address on the economy from the week before. In both cases he spoke for less than 20 minutes and did not take questions from the audience. Far more of his ground time was devoted to filming promotional material in a Dubuque sheet-metal factory, where the footage would capture the candidate seeming engaged in the kind of heart-to-heart dialogues with working-class Americans that the campaign had otherwise left off his schedule that day.

Building a Better Mitt Romney-Bot
Published: November 30, 2011
His camp doesn't need to turn their guy into someone you'd have a beer with. They just need to eliminate the bugs in the machine.

December 12, 2011

For-profit schools -- predatory ?

The industry was on the defensive after a series of federal investigations portrayed it as rife with abuse. They found that recruiters would lure students -- often members of minorities, veterans, the homeless and low-income people -- with promises of quick degrees and post-graduation jobs but often leave them poorly prepared and burdened with staggering federal loans.

In response to the rising concerns, 18 months ago the Obama administration proposed its tough restrictions linking tens of billions of dollars in federal student aid to formulas measuring students' debt levels and income after graduation. Colleges whose students were not earning enough money to start paying back their loans would be in danger of losing federal aid altogether.

The proposal was aimed at ensuring that the for-profit schools were providing "gainful employment" in a wide range of vocational fields they taught, like medical testing, massage therapy, business management and cosmetology. The joke in Washington, however, was that the industry effort to defeat the plan mainly ensured "gainful employment" for the capital's Democratic lobbyists and political consultants.

The final standards leave a maximum of 5 percent of schools facing financial sanctions at the start; the original plan would have meant penalties against an estimated 16 percent.

The rules also pushed back the penalties to 2015 from 2012, while requiring schools to disclose more data about loans, defaults and job placement.

Schools also questioned the motives of a key witness at Mr. Harkin's hearings, the noted hedge-fund trader Steve Eisman, who blasted the colleges' sky-high profit margins and likened them to subprime mortgage lenders. After Mr. Eisman acknowledged he held financial positions in the industry, the colleges charged that he stood to make millions by battering their reputations and short-selling their stocks.

With Lobbying Blitz, For-Profit Colleges Diluted New Rules
Published: December 9, 2011
A ferocious pushback led Education Department and White House officials to relax an effort to cut off the huge flow of federal financial aid to unfit educational programs.

December 10, 2011

Affordable housing and people can't afford it not coming to Darien, yet.

One remark was taken from a 2008 hearing on another affordable housing application, in which Mr. Conze referred to such housing as "a virus" that needed to be contained.

The other is from his State of the Town Address last December, when, speaking of the trend toward development of high-density housing along transportation corridors, Mr. Conze warned, "The demographic and economic forces generated by our immediate neighbors to our east and west cannot be taken lightly," adding that many people "view Darien, CT, as a housing opportunity regardless of its effect on the character of our town and existing home values."

Darien's neighbors to the east and west are the cities of Norwalk and Stamford. Mr. Hamer's complaint contrasts the 0.5 percent of Darien's population that is black with the roughly 22 percent in the bordering cities.

Christopher Hamer, a former Darien resident, filed the lawsuit last month, nearly two years after the commission denied his application to build condominiums, some below market rate, in a single-family neighborhood. The suit maintains that the commission's denial was based on bias against housing that might attract blacks.

It accuses the commission of limiting opportunities for minorities to live in Darien by "keeping housing costs prohibitively high and preventing the construction of affordable housing units."

Mr. Hamer's accusations come as the federal Department of Justice continues investigating whether Darien violated the Fair Housing Act. When that inquiry began more than a year ago, federal authorities said they were specifically interested in a new provision in the zoning regulations that identified seven "priority populations" to be given preference for affordable housing.

Those populations largely consisted of people who already lived and/or worked in town, a policy that some fair-housing specialists said could be exclusionary given Darien's small minority population.

The planning and zoning commission has since repealed the "priority populations" provision.

To bolster its allegations of bias, Mr. Hamer's suit cites public comments made by the commission's chairman, Mr. Conze.

Housing Lawsuit Alleges Bias
Published: December 8, 2011
A former Darien resident says that the planning and zoning commission's denial of his application to build below-market-rate housing was based on racial bias.