Monday, March 29, 2010

Following the money in Hannity-Freedom Alliance scam

Original Link:

By Rick Ungar

Debbie Schlussel is back today with the next part of the Hannity-Freedom Alliance story, reporting that she has tracked down the source of the payment for the high priced goodies lavished on Hannity as he fronts for Ollie North’s military charity.

For those of you who may not have been following this story, Ms. Schlussel has done what few conservatives would be willing to do – take on one of her own. Given the price David Frum paid this week for taking on his own party – the loss of his job – it’s not hard to understand why attacking fellow conservatives, or even publicly disagreeing with them, can be a dangerous occupation.

In keeping with Freedom Alliance’s modus operandi of misleading while technically telling the truth, it appears that the private jets and other benefits that come with being Sean Hannity were, in fact, not paid for by the charity. However, the organization’s suggestion that Hannity paid for these high priced luxuries out of his own pocket – not quite so true. It now seems highly likely, if not a certainty, that the expensive travel benefits provided Hannity were paid for out of the ticket sales of the Freedom Concerts, the organization that promises that all net proceeds go to Freedom Alliance.

To get the ‘flavor’ of this thing, take a look at the Freedom Concerts web page. Pictured on the top of the page, in all his glory, is Sean Hannity. As you scroll further down the page, you’ll see the coming schedule of concerts for this year, followed by a photo of Col. Ollie North and then a message that reads, in part –

All net proceed from ticket (after musical talent, production, promotion and venue expenses) are donated to the Scholarship Fund, aiding greatly in this effort to assist hundreds of families who have lost their loved ones while they were protecting and defending our nation and our freedoms.
Via Freedom

Of course, the devil is always in the details.

Despite the great efforts taken to convince us that the Freedom Concerts are a function and extension of the Freedom Alliance charity, they are not. In fact, it turns out that the shows are profit-making ventures owned and operated by one Duane Ward of Franklin, Tennessee.

Who is Duane Ward? Schlussel reports that Mr. Ward just so happens to be Oliver North’s longtime PR man and the owner of Premiere Speakers Bureau, the speaking engagement agency for both North and Hannity, as well as many FOX News and other conservative personalities. The company also handles all the merchandising for Freedom Concerts and the Freedom Alliance and makes a pretty penny doing so.

In the past, tickets to Freedom Concerts have informed purchasers that approximately $4.00 of the ticket price goes to the cost of renting the concert facility with a guarantee of just $4.00-$4.50 being donated to Freedom Alliance- this on ticket prices that average about $65.00 (higher now according to the concert web page.) The organization then says that all proceeds remaining after costs goes to benefit the charitable purposes of Freedom Alliance which involves providing scholarships to the children of soldiers killed in battle and money for soldiers who return home with life changing injuries. Clearly, there’s a pretty healthy spread between the $8 to $10 accounted for and the remainder of the full ticket price.

So where does all this unaccounted for money actually end up?

Certainly, some of it is used to pay the performers -although Schlussel reports that many, if not most, performers are convinced to not only work for free but also cover their own traveling costs so that more money is available for the charity. As for the rest of it?

Schlussel has turned up multiple sources who confirm that the extravagant private jets and luxury hotel suites for Hannity and his entourage are paid from the revenues of the ticket sales when that money could – and if we are to believe the statements of Freedom Concerts and the Freedom Alliance – should be going to those who are listed as the beneficiaries of the Freedom Alliance charities. And while Mr. Wade refuses to turn over the books of Freedom Concerts, it would not be unreasonable to expect that there might be some profit in there for Mr. Wade and his company.

Nothing like a little good old-fashioned American patriotism for fun and profit, yes?

Apparently, the unseemliness of it all has not escaped the attention of Col. North, if not Mr. Hannity.

While those buying tickets think all of the proceeds of the concerts go to the Freedom Alliance, in fact, none of the proceeds go to the charity, only the $4 surcharge. The source confirmed that Premiere paid for Hannity (out of Freedom Concerts revenue) to fly to many of the concerts on private jets, along with his entourage, and the source confirms the conversation I described in my report last week, in which North scolded Hannity for wasting so much of the Freedom Concert money on private jets, swanky suites, and luxe SUVs. The source is the second source to confirm the conversation. The particular conversation cited took place in 2008, and there were several witnesses to it, including one of Hannity’s radio producers, who is married to Oliver North’s former personal assistant. Don’t look for her to tell the truth . . . if either of them ever wants to work again.

Via Debbie Schlussel

So, how do well-meaning Americans seeking to help our military men and women and their famlies get caught up in these questionable charity schemes?

You would be surprised.

Tomorrow, this page will report on how a federal government agency – existing precisely for the purpose of helping our 2 million plus federal employees make wise decisions when choosing a charity worthy of their donations – is badly misleading and misinforming the very people they are supposed to be helping.

You aren’t going to like what you learn.

Sunday, March 28, 2010

Social Inequality in America, Widening Income Disparities

Original Link:

By Vi_Ransel

"When I give food to the poor, they call me a saint. When I ask why the poor have no food, they call me a communist." - Brazilian archbishop Dom Helder Camara

"The difference between social service and social justice" is that social service "works to alleviate hardship" while social justice "aims to eradicate the root causes of that hardship." - Dr. Martin Luther King, Jr.

The "aristocracy of our moneyed incorporations" has never conceded a thing, not even to suppress a revolt. This "opulent minority" does not "give" what it does not intend to begin to claw back with its cold, non-living corporate "hand" before the ink is dry on the signatures on treaties, the Fourteenth Amendment, even the New Deal, perhaps the greatest bowl of gruel ever cooked up by an oligarchy.

Reforms, regulatory agencies and elections themselves are America's Circus Maximus, mere flourishes on the veneer of democracy painted over the naked concentration of power accrued to the few who hold the reins of the corporate mechanism, the most stunningly efficient means ever invented for accumulating and concentrating wealth, which is then translated into political power.

The mid-twentieth century "deal" between the "opulent minority," the government and the people left the "opulent minority" with the lion's share of the country's wealth, but a little bit more of that wealth was shared with the workers who created it. The government was the referee who enforced the rules, and the years between the end of the Second World War and 1970 were America's most prosperous overall, producing the largest, wealthiest middle class in history.

Americans assumed that this was the new normal, that a solid social contract was now standard operating procedure. But this overall prosperity was only a glitch in minority rule, a safety valve to stem the pressure of a popular, revolutionary mood that had been building since the Civil War and had come to a head during the Great Depression. Now the country is returning to its natural state, including the immense chasm between the incomes of the "opulent minority" and the rest of us, as squalor once again stands side by side with splendor.

"According to the United Nations Gini Coefficient, which measures the national distribution of family income, the US had the highest level of inequality of the highly industrialized countries, based on the data available in 2008. It was ranked slightly more unequal than Sri Lanka, and on a par with Ghana and Turkmenistan. (1)

In the 70s, US economic global supremacy was waning, in large part, due to increasing competition from Europe and Japan as they recovered from the devastation of World War II. This made the "opulent minority" rethink the New Deal-bone they'd tossed to the majority of Americans, and they brought in Ronald Reagan to put in force a Raw Deal that began a cascade of deregulation, privatization and consolidation that put America back astride the global economy by putting America's wealth gap on the way back to the Gilded Age. Today the "opulent minority" appropriates everything it can get its hands on - "legally" - while the middle class holds on by its fingernails and the rest of us go over an economic Niagara Falls without a barrel into "Third" World-style poverty. Government is no longer the referee that promotes the general welfare. Government is the facilitator for the "opulent minority," ensuring that they can extract every last penny from the people they impoverish.

Since 1980, the richest Americans have seen their incomes quadruple, while for the "lowest" 90% of us, incomes fell. The average wage is lower today than it was in the 1970s, while productivity has risen almost 50%. (2) In 1983 middle class debt held at 67% of income. In 2007, middle class debt had gone over the falls to 157% of income. (3) In 1950 the ratio of the average executive's paycheck to the average worker's was about 30 to 1. Since 2000 that average has ranged from 300 to 500 to one. (4)

"As of late 2009, the number of billionaires soared from 793 to 1,011, and their total fortunes from $2.4 trillion to $3.6 trillion. ...Despite the crisis, the list of billionaires has grown by 200 people and their aggregate capital has expanded by 50%. This may seem paradoxical but only at first glance. This result was predictable, if we recall how governments all over the world have dealt with the economic crisis." (5)

This is the result of a deliberate strategy, one Washington has executed many, many times, though usually in "Third" World nations, by using "Free" Trade Agreements (FTAs) and its front groups, the International Monetary Fund, the World Bank, and the World Trade Organization. Purchased politicians plunge their countries into unsustainable debt. Under Structural Adjustment Programs (SAPs), national industries are sold to transnational corporations and privatized. Social programs are cut to the bone or eliminated altogether. Interest rates are ratcheted up and the economy collapses on itself like the World Trade Center while banks and corporate buzzards fight each other to pick the carcass clean.

Building on such controlled demolitions, the corporate-owned media has discovered a rash of "profligate countries" - much like our own - that have been living beyond their means and must now take their medicine. And the near-universal prescription is SAPs. The discovery of this pandemic of profligacy, as opposed to the pandemic of poverty, was prompted by demands from the same international banksters who plunged the world into a financial "crisis" for their personal profit to the point of bankrupting their own countries in order to bail themselves out.

But the New York Times' Thomas Friedman says “...we’ve just had our 70 fat years in America…" and "...leadership… has largely been about giving things away…" He cites Michael Mandelbaum of John Hopkins University saying "...the great task of government and of leadership is going to be about taking things away from people," and adds that " lead now is to trim, to fire or to downsize services, programs or personnel.” He then compares Americans to locusts that have eaten “the prosperity that was bequeathed us.”

But the New York State comptroller's report has outted the real profligates. Wall Street bonuses rose to $20.3 billion in 2009, while New York Stock Exchange broker-dealer firms raked in more than $55 billion in profits, about three times their previous record. And pay packages at the biggest Wall Street banks shot up 31%.

Between 1978 and 2008, almost 35% of America's total income growth went to the top one-tenth of one percent of "us." (6) And according to economists Thomas Piketty and Emmanuel Saez, two-thirds of income increases between 2002 and 2007 went to the wealthiest 1% of society, a higher share of income than at any time since 1928.

The average income of the top-earning 400 US families quintupled from $16 million to $87 million between 1992 and 2007. The rest of us averaged a 13% loss before the financial crisis. And since then millions more of us have plunged over the falls into joblessness, poverty, homelessness and hunger. These are the conditions Friedman tells us must be drastically driven down.

And both the White House and Congress concur. In order to balance the budget they tell us, social programs must be cut because this "profligate" safety net created to promote the general welfare of the majority of the American people has bankrupted the federal government.

But in fact, just the opposite is true. The rich, aided and abetted by the two wings of the Money Party, have bankrupted the government. The economic crisis is pulling back the curtain of democratic pretense to expose the brick wall of a callous system that ignores social needs to satisfy the whims of a parasitic "opulent minority."

And while "...Wall Street has extracted $13 trillion in bailouts just since October 2008, the thought of raising taxes on wealth to pay just $1 trillion over an entire decade for Social Security or health insurance is deemed a crisis that would lead Wall Street to shut down the economy." (7) Wall Street is demanding that governments around the world makeup for the profligacy of the financial sector by taking what little they left to their victims through higher taxes and slashing or eliminating social programs. This is the basis of the global financial "crisis."

It's the mechanism of corporate colonization coming home to roost. This time the US is the economic colony du jour. The middle class in America is being crushed and brushed off the economic banquet table like crumbs, while wealth continues to shift to the "opulent minority" waiting at the top of the wealth pyramid, calmly sipping mint juleps as they arrange all the repression they'll need to put down potential unrest. Deja vu. We're right back where we were when King George III and the British East India Company were in charge.

Reagan's crushing of PATCO, the air traffic controllers' union, was the hunter's horn that signaled to the corporate jackal pack that they were now free to hunt down and attack the right to organize, forcing labor, that's us, to be "flexible," e.g. to accept less and less for more and more work that must be done faster and faster with fewer and fewer of us as we create the real wealth of society. We became contingent labor, part time labor, contract labor, temp labor, permatemp labor, at-will workers , and "free" agents to a contract where employers have all the liberty to contract and we have the liberty to accept their terms or become unemployed labor.

And though US output per worker rose at its fastest rate in six years during the second quarter of 2009, businesses wrung more from remaining workers, and this newly "flexible" labor force got only a fraction of their former wages. New hires at what's left of the Big Three auto companies make less than workers made at those same companies in 1948. (8)

"America touts itself as the land of the free, but the number one freedom you and I have is the freedom to enter into a subservient role in the workplace. Once you exercise this freedom, you've lost all control over what you do, what is produced, and how it is produced. And in the end, the product doesn't belong to you. The only way you can avoid bosses and jobs is if you don't care about making a living, which leads to the second freedom: the freedom to starve." - Tom Morella

The people, the "demos" in democracy, have been propagandized 24/7 with sophisticated Public Diplomacy that manufactures "consent" via the corporate ownership of information/media. It works. They wouldn't spend billions on advertising and lobbying if it didn't. In 2009, 495,145 million dollars was spent on advertising alone,(9) and $3.47 billion on lobbying. (10) Last year, "There were 12,553 lobbyists registered in Washington..." But a better count of those engaged in unregistered lobbying "...would be about 90,000..." (11)

And in this way, the "opulent minority" led us to believe we were actually going to get a deal, whether Square, Fair or New, that we were headed out across a New Frontier as part of a Great Society, that it was Morning in America and we were crossing a Bridge to the 21st Century while engaged in Change We Can Believe In - all while running in place. Way back at Morning in America someone should have told us to wake up and smell the coffee. Can you still afford coffee?

Our representatives, both Republicans and Democrats, ignore their constituents and vote the interests of their corporate campaign contributors, the Supreme Court has given our constitutional rights to a business mechanism for generating profit via "corporate personhood," and our president's campaign was named Advertising Age's "Marketer of the Year," 2008.

The people have been punked by all three branches of our corrupt and purchased government - legislative, executive and judicial - which compete to kiss the hems of the lavish purple robes of board room barons and their lobbyist courtiers, who themselves are puppets of plutocratic shareholders ensconced on the throne behind the corporate curtain.

As the people's attention was diverted not only by sports, gossip as news, and competitive consumption while trying to subsist on crumbs from the "opulent minority's" table, government policy changes were crushing unions and jobs were "exported," first to the southern states, then Mexico, then China, then Thailand and Viet Nam, and soon to Africa in a never-ending safari to find the world's most desperate people, and thus the highest profits by squeezing the most work out of those who have the least.

Disney paid Haitian workers 28 cents an hour to make children's pajamas. Wal-Mart pays Nicaraguans $1.50 a day to make blue jeans. In the US the average Wal-Mart worker earns $12,000, making one-half of the total workforce of 720,000 eligible for food stamps. This saves Wal-Mart about $432 million dollars in wages it doesn't have to pay every year.

Do the math. If 360,000 Wal-Mart workers each receive just $100 in food stamps every month, that's $36 million Wal-Mart doesn't have to pay in wages every month, or $432 million each year. The American people make up for these unpaid wages with their taxes to supply Wal-Mart workers with food stamps to feed their families in lieu of wages. That's going on half a billion dollars every year.

Collectively, Walton heirs have $65 billion and own over 1.7 billion shares, or 43% of Wal-Mart stock. They received another $29 billion from the rise in share prices from November 2007 to June, 2008 alone. (12) If you made $50,000 a year, it would take you 20,000 - that's 20,000 - years to make one billion dollars. And as for the trillions in taxpayer dollars transferred no questions asked to the banks, if you made one million dollars a day every day since the birth of Christ, you still wouldn't have even one trillion dollars.

In the meantime, corporations such as these have left the US with no industrial or economic base, while tax policy continues to divert money from workers and their children to the ridiculously wealthy. Jobs have been shipped out of the US to low wage platforms constructed on desperate people by the largest, most "efficient" and profitable corporations, which are now trying to drive US wages down even further by importing "indentured servants" on H1-B visas who will do high tech jobs at much less than the going rate in America.

And as for illegal immigration, successive administrations have never actually wanted to stop it, which may have been the point of NAFTA in the first place. By driving a flood of impoverished workers across the border to take jobs at the very corporations that wouldn't be able to exist without such "illegal" labor, the cost of US wages could be driven down across the board.

"For the first time since the Great Depression, the United States experienced zero job growth in a decade. Zero. And zero is actually worse than it sounds since none of the preceding six decades registered job growth of less than 20%. By comparison, the 1970s, which are often bemoaned as a time of economic stagflation and political malaise, registered a 27% increase in jobs." (13)

The White House Council of Economic Advisors released its Economic Report to the President on Feb. 12, but despite its projection that mass unemployment will continue for years, its "...projections in fact are optimistic. They are based on the assumption that real GDP will grow by 3.0 percent this year (4th quarter to 4th quarter), and 4.3 percent in 2011. This compares to real GDP growth of minus 1.9 percent in 2008 and minus 0.5 percent in 2009." (14)

Spending can't resume until workers are paid enough to be able to consume. Money in workers' hands is spent immediately into the economy. In the US such spending has been responsible for 70% of GDP, but jobless workers can't sustain demand for consumer goods, and thus can no longer generate that 70%. Still this administration has not lifted a finger to put people back to work and restart the demand mechanism.

But "Sen. John Kyle of Arizona, the Republican whip, argued that unemployment benefits dissuade people from job-hunting 'because people are being paid even though they're not working.' Unemployment insurance 'doesn't create new jobs. In fact, if anything, continuing to pay people unemployment compensation is a disincentive for them to seek new work.'" (15)

And "Former House Majority Leader Tom Delay...has an explanation for the high rates of unemployment that continue to plague the economy... 'There is an argument that these extensions, the unemployment benefits, keep people from going and finding jobs,' he told CNN's Candy Crowley.. 'In fact, there are some studies that have been done that show people stay on unemployment compensation and they don't look for a job until two or three weeks before they know the benefits are going to run out.' 'People are unemployed because they want to be?' asked Crowley. 'Well, it is the truth. And people in the real world know it.'" (16)

And while Nevada representative Dean Heller says he believes there should be a social safety net, he questions the wisdom of extending unemployment benefits, asking, "Is the government now creating hobos?"

The "official" American jobless count as 2010 began was over 10%, but it's actually closer to one in five, both unemployed and underemployed. There are six of us for every job available. Former auto production center Detroit has the highest official unemployment rate at 27%, but the real figure stands near 50 %. No new jobs have been added since December 2007, while in the same period Fed Chairman Ben Bernanke says the private sector lost eight million jobs. Factoring in population growth, we need to add 150,000 jobs a month just to stay even, so the total jobs lost is over 10.5 million. The Fed predicts unemployment will stay at least 7% through 2011, and we're shedding half a million jobs a month on average. (17)

Twenty million of us collected unemployment in 2009 and 25 states borrowed billions of dollars to keep those benefits flowing. (18) First time jobless benefit claims in the third week of February rose to their highest levels since the week ending Nov 14, according to the US Labor Department.

In New York, unemployment benefits are taxed at roughly 40%, even though the people receiving unemployment are getting back money they paid into federal and state unemployment systems when they were still working. This "unemployment tax" goes back to the Reagan Administration. "Under the guise of tax reform, we agreed to raise $2.3 billion from people who don't have jobs." - Rep. Brian Donnelly (D - MA) 1985 And when banks and insurance firms are literally awash in hundreds of billions of taxpayer bailout dollars, it seems supremely hypocritical to tax unemployment checks, which are the only "income" millions of people have - and their only means of survival. (19)

And since 1996 the number of people with no income at all has been rising. Clinton and a Republican Congress ended welfare, the federal relief program instituted in the 30s. Pledging to "end the cycle of dependency," the Democrats joined the Republicans to impose lifetime limits on benefits, drastically reduce cash assistance, and place restrictive "workfare" and other requirements on further aid. And in spite of our current need for relief, the Obama Administration opposes any additional funding for Temporary Assistance for Needy Families (TANF), all that's left of the welfare program. (20)

In January 2003 the Washington Post reported, "Citing a shortage of money, the Bureau of Labor Statistics will stop publishing information about factory closings across the country...known as the Mass Layoffs statistics report, (it) detailed where workplaces with more than 50 employees closed and what kinds of workers were affected." (21)

While Congress overturned this move by the Bush Administration, on March 3, 2010 the Post again reported "...The Bureau of Labor Statistics tracks globalization's winners and losers... Manufacturing jobs here, for example, have fallen faster since 1979 than in Canada, Germany or Japan. Compensation for these jobs dropped here in 2008, but jumped in South Korea and Australia. Soon, however, Americans may be spared the demoralization of these numbers: the White House wants to shutter the unit that produces them." (22)

How convenient. In his State of the Union Address, the president "called for a massive expansion of the NAFTA trade model into Colombia, South Korea and Panama. So you can bet this announcement by the White House is no accident - it's preemptive." (23) Now you can't know.

In 2009 there were 2.82 billion foreclosures - almost 8,000 every day. (24) Another 2.4 million are expected this year. (25) By year's end, foreclosures will exceed 7 million, possibly going to 10 million. (26) And the Commerce Department reported that new home sales dropped 11.2% in January, the lowest level on record in nearly 50 years.

"Houses on sale for a few dollars are something of an urban legend in the US on the back of the mortgage crisis that drove millions of people from their homes. But in Detroit, it is no myth. One in five houses now stand empty in the city that launched the automobile age, forged America's middle class and blessed the world with Motown. Drive through Detroit neighbourhoods once clogged with the cars that made the city the envy of America and there are homes to be had for a single dollar." (27)

First American CoreLogic data shows 11.3 million houses had underwater mortgages in the fourth quarter of 2009, or 24% of all residential home loans in the US, and that "an additional 2.3 million mortgages were approaching 'negative equity' at the end of last year..." This means that three out of ten American homes "have virtually no value to their owners." (28)

One point four million Americans filed for personal bankruptcy in the first nine months of 2009 in spite of the punitive new Bankruptcy Abuse Prevention and Consumer Protection Act of 2005. A study conducted by Harvard Medical School in 2007 found that 62.1% of the bankruptcies in their sample were due to medical expenses, and that three-quarters of those who filed for bankruptcy had health insurance. (Forty-seven million of us have no health insurance at all.)

More and more Americans are filing "for Chapter 7 bankruptcy which - if approved - allows a court to discharge most unsecured consumer debt, including credit card bills." The goal of the 2005 law was to force more people to file for Chapter 13 bankruptcy, which requires those with regular income to pay debts in full, or in part, over several years. (29)

But Chapter 13 filings decreased 3% from January to February (30) because "People generally file for Chapter 13 to try to save a home." - Robert Lawless, University of Illinois Now people are unable to borrow on the equity in their homes to avoid bankruptcy, and many of them no longer have homes to save. (31)

But since the law changed in 2005, the bankruptcy rate has risen every year. "We are already on a faster pace in 2010 than we were a year ago.. Consumer filings will likely surpass 1.5 million filings this year." - Samuel Gerdano, American Bankruptcy Institute Chapter 7 filings were up 41% in 2009, while Chapter 13 filings were up only 12%. (32)

The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, in effect, makes the government a collection agency for credit card corporations that make "bad judgments" about credit risks (often on purpose). In a real free market, those who make bad loans risk losing money. This law does away with that risk, charging government with following debtors for decades, and bailing out reckless credit card corporations.

In 2008 the US Census showed 47.4 million of us were living under the official poverty line. For a family of four it's just $22,000, or $4,400 per person per year. Can you live on $4,400 a year? In 2008 the USDA reported that 49.1 million of us had no dependable access to food. Food charities saw demand rise 30% between the summer of 2008 and the summer of 2009. On December 11, 2009, the USDA reported that a record 37.2 million of us were eating thanks to food stamps, or one out of every eight. On January 13, 2010, the New York Times reported that six million of us were living on no income other than $100-$200 in food stamps.

"Over 8.8 million households will have received heating assistance by winter's end, up from 7.7 million last year and 5.7 million in 2008, according to a new report from the National Energy Assistance Director's Association (NEADA). About 4.3 million households had utilities disconnected in 2009..." "In spite of mounting unemployment, Congress this year approved the same amount of money as it did last year for heating assistance, allocating $5.1 billion for the states to administer LIHEAP - a figure substantially less than several Wall Street banks paid their executives in 2009." (33)

Utility shutoffs in July 2009 bit hard as winter settled in on many of us living dangerously without heat or electricity - until we weren't living at all, frozen or else burned to death trying to keep warm with space heaters while "stealing" electricity. More and more people are living in Hooverville-style tent cities, in their cars, and in shacks made of wood, metal and cardboard scraps. They have no running water, plumbing or electricity. And these are the people with "homes." A 2007 study by the National Law Center on Homelessness and Poverty found that approximately 3.5 million of us are likely to experience homelessness in a given year.

Eighty thousand people in Detroit lined up in October 2009 looking for help with their utility bills. Over a three-day period, 10,000 people showed up for 90 jobs making washing machines in Kentucky for $27,000 a year. (34) And remember, even at $50,000 a year it would take 20,000 years to make one of Gates', Buffet's or the Waltons' billions.

But the "opulent minority" of corporate shareholders prefer their workers poor, the poorer the better. Desperately poor people work harder and faster for less, afraid not to take what they're grudgingly offered. And the poorer they are, the less able they are to defend themselves against the abuse doled out by the corporations these shareholders own. "It is easier to control those who are struggling for survival than...those who are striving for improvement." - Dennis Kaiser

And further, we're supposed to be in debt. Consumer debt has been the engine of the American economy since wages leveled off and began to drop in the 70s. Employers paid less in order to raise their profit margins. The financial sector extended credit, aka debt, as a way for workers to continue to consume while receiving less wages. This also had the effect of increasing the financial sector's profit from the interest on that debt. This credit/debt kept the engine going as the employer-corporations and the financial sector profited while American worker-consumers were beginning to drown in that very same debt/credit.

But if no one was in debt and everyone was saving money, the economy wouldn't be performing as well as it should. Alan Greenspan, former Fed Chairman, believes consumer debt is "a very potent and very desirable financial institution" (July 25, 2005) and that pay raises are inflationary. Keeping people poor and using those debt-created income streams, e.g. the monthly interest payments, for collateral allows Wall Street to borrow against that debt in order to take out loans to finance investments/risks/bets and boost the stock market.

"Despite the fact that its charter starts off by directing it to promote full employment and stable prices, the Fed is anti-labor in practice. Alan Greenspan famously bragged that what has caused quiescence among labor union members when it comes to striking for higher wages or even for better working conditions is the fear of being fired and being unable to meet their mortgage and credit card payments. One paycheck away from homelessness, or a downgraded credit rating leading to soaring interest charges has become a formula for labor management." (35)

Our economy is designed to "increase injustice, inequality and exploitation," in order to perpetuate the dominion of the "opulent minority" over us. And the deregulation of every sector of the US market was a deliberate policy decision by these stunningly insane, sociopathic, genocidal maniacs, who kept our economy alive by creating more debt/credit in order to enrich themselves with the interest payments. Now the economy is getting intravenous bailouts of taxpayer money while it languishes on life support.

And how low can they go? Check this out. "The United States is one of the few countries that allow the sale of human blood plasma for profits. Across the country, countless workers are selling the yellowy substance found in their blood to the pharmaceutical giants of Wall Street." (36)

"Cerberus Capital, one of Wall Street's most notoriously ruthless leveraged-buyout firms recently made a $1.8 billion killing in their human plasma paying peanuts to their impoverished human plasma donors..., jacking up the price of plasma by restricting supply,...then selling the refined products to the most desperately ill..." Despite the billions Wall Street makes off plasma, donors get $30 for an hour spent hooked to a blood-sucking machine. Plasma profiteers set up franchises all along the Texas-Mexico border and plastered the Mexican side with ads promising easy cash. They even have special plasma-farm buses on the American side just waiting to haul their human cattle to their milking stations. (37)

But Fed Chair Ben Bernanke says at least the recession is over. Ben is the mouthpiece for "an offshore banking cartel" that predicts precisely the amount of "I.O.U. paper " it can print and circulate without disrupting the Ponzi scheme of fractional reserve banking. And now that Ben's officially declared the end to the recession, "well, hallelujah! We can quit rolling our own and buy ready mades and run recklessly through the Dollar Store scooping up dented canned goods and cheap Chinese tube socks... It is over for the most important members of a capitalist society, the oligarchs and banksters who have made fortunes off this recession, thanks to our unique economic system, and may now return to their standard garden variety usury." (38)

We have a deficit with every part of the world. We're dependent on imports of food, drink, industrial supplies and materials. We can't even produce our own cars and trucks. We depend more on imports of manufactured consumer goods than on imported oil. We can't make our own clothes, shoes, appliances, machinery, electric generation or telecommunications equipment. We don't even own our own roads. (39) Soon imported goods will be priced out of reach and anything still made or grown here will be exported to wealthier consumers overseas.

On 11/17/09 Robert Parry reported that Bernanke, in an address to the Economic Club of New York, gave "Americans a glimpse of the ugly truth about their future job prospects. Simply put, companies have found that they can shed workers and rely on technological advances and overseas factories to operate with a lot fewer employees." They've "found longer-lasting, efficiency-enhancing changes that allowed them to reduce their workforces..." Also, "employers have reduced hours for the workers they have retained... these data suggest that the excess supply of labor is even greater than indicated by the unemployment rate alone..." Employers have "...been able to retain all the workers they need with minimal wage increase, or even with wage cuts..." (emphasis added)

The Highest Productivity at the Lowest Possible Wage equals Maximum Profit. When the supply of labor (that's us) exceeds demand, the price of labor (wages) falls because too many of us are competing for too few jobs. This is the reason for minimum wages, maximum hours, and the elimination of child labor. The fewer workers there are, the higher the wage. But with the globalization of work, transnational corporations have the entire workforce of the world to choose from, and some of the most desperately poor people on earth to employ/exploit.

In Bangladesh, a garment worker makes 22 cents an hour. The wage in Cambodia is 33 cents an hour; in Pakistan, 37 cents an hour; in Vietnam, 38 cents; in Sri Lanka, 43 cents; Indonesia, 44 cents; India, 55 cents; China, 86 cents; the Philippines, $1.07; and Malaysia, $1.18. This is the marketplace for labor in which we must compete. (40)

Why would a US transnational corporation pay you minimum wage, approximately $7.25 an hour, when they can get the same work for from six to 35 times cheaper, leave the ownership and maintenance of the production facility to an overseas subcontractor, ship the manufactured goods into the US with no tariff imposed, and keep the profits offshore to avoid paying income tax? The only way it would be profitable for that transnational corporation to hire you is if you "agreed" to work for less. Could you live on less than 22 cents an hour? Do I have to ask?

"It is in the interest of a tyrant to keep his people poor, so that they may not be able to afford the cost of protecting themselves by arms and be so occupied with their daily tasks (subsistence) that they have no time for rebellion." - Aristotle

"There are two ways to enslave a nation. One is by the sword. The other is by debt." - John Adam

$3 Million to Protect Big Banks and Keep America's Economy at Risk

Original Link:

By Jen Psaki

This week, Senator Chris Dodd introduced a financial reform bill that would begin to bring accountability to our financial institutions and ensure that American taxpayers would never again be on the hook to bail out firms that were deemed “Too Big to Fail.” The President immediately said that he would "work with Chairman Dodd and his colleagues to strengthen the bill and will fight against efforts to weaken it." Not surprisingly, opponents of reform went to work almost immediately taking him up on that fight.

Just yesterday we learned that the U.S. Chamber of Commerce, no stranger to fighting for the status quo, plans to launch a $3 million ad campaign aimed at bringing down the much needed reforms of our financial system. That’s $3 million to fight a bill that will protect American families by establishing a consumer financial protection agency that will bring transparency, stronger supervision and clear rules of the road to our financial system.

The recession and the aftermath of the financial crisis saw over 8 million Americans lose their jobs, trillions in household wealth disappear and small businesses denied the credit they need to grow. And this was all brought about by a system that failed to monitor or constrict the risk-taking of firms that were too big to break apart in a way that would protect taxpayers. The U.S. Chamber of Commerce doesn’t think that’s a problem worth fixing, but the President does.

The American people deserve a strong and independent consumer financial protection agency that enforces clear rules across the financial marketplace, and the President will fight against the Chamber’s or anyone else’s efforts to undermine the agency’s independence.

If the U.S. Chamber of Commerce wants to come to the aid of the financial institutions that helped bring about this crisis, that’s their choice. But the President will work to ensure that we bring long overdue reforms to our financial system, because doing so will benefit the American people by laying a foundation for long-term growth and stability in our economy.

In Health Bill, Obama Attacks Wealth Inequality

Original Link:


For all the political and economic uncertainties about health reform, at least one thing seems clear: The bill that President Obama signed on Tuesday is the federal government’s biggest attack on economic inequality since inequality began rising more than three decades ago.

Over most of that period, government policy and market forces have been moving in the same direction, both increasing inequality. The pretax incomes of the wealthy have soared since the late 1970s, while their tax rates have fallen more than rates for the middle class and poor.

Nearly every major aspect of the health bill pushes in the other direction. This fact helps explain why Mr. Obama was willing to spend so much political capital on the issue, even though it did not appear to be his top priority as a presidential candidate. Beyond the health reform’s effect on the medical system, it is the centerpiece of his deliberate effort to end what historians have called the age of Reagan.

Speaking to an ebullient audience of Democratic legislators and White House aides at the bill-signing ceremony on Tuesday, Mr. Obama claimed that health reform would “mark a new season in America.” He added, “We have now just enshrined, as soon as I sign this bill, the core principle that everybody should have some basic security when it comes to their health care.”

The bill is the most sweeping piece of federal legislation since Medicare was passed in 1965. It aims to smooth out one of the roughest edges in American society — the inability of many people to afford medical care after they lose a job or get sick. And it would do so in large measure by taxing the rich.

A big chunk of the money to pay for the bill comes from lifting payroll taxes on households making more than $250,000. On average, the annual tax bill for households making more than $1 million a year will rise by $46,000 in 2013, according to the Tax Policy Center, a Washington research group. Another major piece of financing would cut Medicare subsidies for private insurers, ultimately affecting their executives and shareholders.

The benefits, meanwhile, flow mostly to households making less than four times the poverty level — $88,200 for a family of four people. Those without insurance in this group will become eligible to receive subsidies or to join Medicaid. (Many of the poor are already covered by Medicaid.) Insurance costs are also likely to drop for higher-income workers at small companies.

Finally, the bill will also reduce a different kind of inequality. In the broadest sense, insurance is meant to spread the costs of an individual’s misfortune — illness, death, fire, flood — across society. Since the late 1970s, though, the share of Americans with health insurance has shrunk. As a result, the gap between the economic well-being of the sick and the healthy has been growing, at virtually every level of the income distribution.

The health reform bill will reverse that trend. By 2019, 95 percent of people are projected to be covered, up from 85 percent today (and about 90 percent in the late 1970s). Even affluent families ineligible for subsidies will benefit if they lose their insurance, by being able to buy a plan that can no longer charge more for pre-existing conditions. In effect, healthy families will be picking up most of the bill — and their insurance will be somewhat more expensive than it otherwise would have been.

Much about health reform remains unknown. Maybe it will deliver Congress to the Republicans this fall, or maybe it will help the Democrats keep power. Maybe the bill’s attempts to hold down the recent growth of medical costs will prove a big success, or maybe the results will be modest and inadequate. But the ways in which the bill attacks the inequality of the Reagan era — whether you love them or hate them — will probably be around for a long time.

“Legislative majorities come and go,” David Frum, a former speechwriter for President George W. Bush, lamented on Sunday. “This health care bill is forever.”

Since Mr. Obama began his presidential campaign in 2007, he has had a complicated relationship with the Reagan legacy. He has been more willing than many other Democrats to praise President Reagan. “Reagan’s central insight — that the liberal welfare state had grown complacent and overly bureaucratic,” Mr. Obama wrote in his second book, “contained a good deal of truth.” Most notably, he praised Mr. Reagan as a president who “changed the trajectory of America.”

But Mr. Obama also argued that the Reagan administration had gone too far, and that if elected, he would try to put the country on a new trajectory. “The project of the next president,” he said in an interview during the campaign, “is figuring out how you create bottom-up economic growth, as opposed to the trickle-down economic growth.”

Since 1980, median real household income has risen less than 15 percent. The only period of strong middle-class income growth during this time came in the mid- and late 1990s, which by coincidence was also the one time when taxes on the affluent were rising.

For most of the last three decades, tax rates for the wealthy have been falling, while their pretax pay has been rising rapidly. Real incomes at the 99.99th percentile have jumped more than 300 percent since 1980. At the 99th percentile — about $300,000 today — real pay has roughly doubled.

The laissez-faire revolution that Mr. Reagan started did not cause these trends. But its policies — tax cuts, light regulation, a patchwork safety net — have contributed to them.

Health reform hardly solves all of the American economy’s problems. Economic growth over the last decade was slower than in any decade since World War II. The tax cuts of the last 30 years, the two current wars, the Great Recession, the stimulus program and the looming retirement of the baby boomers have created huge deficits. Educational gains have slowed, and the planet is getting hotter.

Above all, the central question that both the Reagan and Obama administrations have tried to answer — what is the proper balance between the market and the government? — remains unresolved. But the bill signed on Tuesday certainly shifts our place on that spectrum.

Before he became Mr. Obama’s top economic adviser, Lawrence Summers told me a story about helping his daughter study for her Advanced Placement exam in American history. While doing so, Mr. Summers realized that the federal government had not passed major social legislation in decades. There was the frenzy of the New Deal, followed by the G.I. Bill, the Interstate Highway System, civil rights and Medicare — and then nothing worth its own section in the history books.

Now there is.

The Most Vital Ingredient in Wall Street Reform Goes Missing

Original Link:


Last Fall, it was all about the wall: financial bigwigs like former Federal Reserve Chair Paul Volcker, former Citigroup co-CEO John Reed, Governor of the Bank of England, Mervyn King, all espoused reestablishing the legal barrier between the derivatives casino that masquerades today as Wall Street and commercial banks holding insured deposits.

It made good sense: the wall goes up in 1933, America becomes the premier financial center for 66 years. The wall comes down in 1999, the financial system collapses exactly 9 years later with the precise characteristics of the massive Wall Street swindles that occurred in the late 1920s when there was also no wall.

But the wall has now gone missing in the current financial reform bill advanced out of the Senate Banking Committee by its Chairman, Senator Christopher Dodd. Equally noteworthy, the historic 1933 legislation that built the essential wall between flim-flam securities salesmen and Aunt Tilly’s insured bank account, commonly known as the Glass-Steagall Act, has gone missing itself from the internet. To underscore how extraordinary this is, if you put “Glass-Steagall Act” in the Google search box, it brings up 220,000 hits. And, yet, it is next to impossible to find the actual text of the legislation on the internet.

The Glass-Steagall Act (officially known as the Banking Act of 1933, Public Law 66-73, or H.R. 5661) is one of the most important pieces of financial legislation ever passed in this country. In addition to walling off the predators of Wall Street, it is less commonly known that Glass-Steagall created the Federal Deposit Insurance Corporation (FDIC), the Federal Open Market Committee (FOMC) to implement the monetary policy of the Federal Reserve, and dramatically revised the Federal Reserve Act to prevent Wall Street perversions rooted out in the investigations conducted by the Senate Committee on Banking and Currency from 1932 to 1934. Given its landmark status and current attention, one would expect it to be available in a flick of a keystroke on any search engine.

The for-profit on-line law repositories offer only what’s left of the Act in the U.S. Code after its bones were picked clean by the Gramm- Leach- Bliley Act (also known as the Financial Services Modernization Act of 1999). Case law offers a few sentences dealing with the separation of securities firms and national banks. Wikipedia has no link to the text of the legislation, clearly because its editors couldn’t find one. The FDIC, created under the Act, says on its web site you can drop in to its Library in Washington, D.C. if you’d like to look at the legislation. Cornell Law’s massive on-line library has this to say when you click on the Law:

Unfortunately, public sources of the Statutes at Large leave a lot out. The Library of Congress has mounted volumes 1-18 (to 1874) as part of its American Memory collection. The Government Printing Office took responsibility for the Statutes in 1875, but has only made electronic versions available from 1995 onward (volumes 109 and up).

The National Archives offers a digital copy of the first and last page of the document. (I sensed a tad of condescension in the suggestion that Americans can be placated with a title page and a signature page while the guts of our legislation are reserved for the lobbyists.) I sent an email to the National Archives asking for the full legislation. The following response arrived a few days later from an archivist , Jane Fitzgerald:

“We have just received your email inquiry regarding digital images of
the rest of the Banking Act of 1933. Unfortunately, the Banking Act of 1933 (Public Law 73-66 of June 16, 1933) consists of a total of 45 pages in length and we currently only have existing images of the first and signature pages.

“Black and white scans of the remaining pages may be ordered for $35.00 a page…”

To get a copy of public legislation from a publicly funded institution would cost $35.00 x 43 pages or $1505.00. Welcome to the new reality of wealth, privilege and access in America. I responded with another email requesting that the full document be made immediately available to the public at no charge, noting that:

“The text of the Banking Act of 1933…will help shine the light forward for our current Congress. That's what historical documents are for: to guide us toward a future devoid of the horrific mistakes of the past. Locking away this document and charging $35 a page insults the mandate of the National Archives. In fact, it is abhorrent to a participatory democracy.”

Thus far, I have not heard back from the National Archives. After four days of web searching, phone calls, and emails with no results, I had an epiphany. I remembered where I had once accessed rare documents from the 1930s. I located the full legislation on line with no charge involved for printing the document or downloading it. I copied it from the site and will be happy to email the Act to anyone who sends me an email with the subject line, “Save Glass-Steagall From Extinction.” (I hesitate to give out the web location for fear the repository that has given the legislation a home will suffer a buyout by Wall Street shortly upon the news leaking out. I say this only half jokingly.)

What’s in this legislation that’s worthy of vanquishing it from the annals of history? Each section reveals how Congress had to police with new laws a Wall Street functioning as organized crime on steroids. And it leads a direct path of inquiry to the 12,000 pages holed up in the National Archives where the Senate Committee on Banking and Currency took two years of testimony under oath from 1932 to 1934 from the captains of illicit finance, received 1375 completed questionnaires from stock exchange members, subpoenaed cancelled checks from members of the financial press who had been bribed by Wall Street players, and obtained “preferred lists” where public office holders were routinely bribed with hot stock offerings.

In other words, it highlights the type of in-depth investigation our current Congress has not done as it stumbles around in the dark writing reform legislation with no evidentiary support for what it needs to reform.

Wall Street honchos who want the Federal Reserve to remain as their coddling regulator particularly fear public attention to Section 20 of the Glass-Steagall Act. This is a verbatim quote from that hard-to-locate original legislation:

“After one year from the date of the enactment of this Act, no member bank shall be affiliated in any manner described in section 2(b) hereof with any corporation, association, business trust, or other similar organization engaged principally in the issue, flotation, underwriting, public sale, or distribution at wholesale or retail or through syndicate participation of stocks, bonds, debentures, notes, or other securities.” [Italic emphasis added.]

This pesky passage might now renew questions as to whether the Federal Reserve Board broke the law in 1998 when it approved the merger of a massive securities firm (Travelers/Salomon Smith Barney) with a member bank holding insured deposits (Citibank). That institution is now a welfare ward of the taxpayer. Salomon was an investment bank engaged in underwriting all the kinds of securities forbidden by Glass-Steagall to become affiliated with a member bank; Smith Barney was a brokerage firm engaged in the public sale of the securities not allowed under Glass-Steagall to be affiliated with a member bank. The Fed blew off these serious matters with the following statement in its letter approving the merger:

“…Travelers controls several domestic subsidiaries that cannot be affiliated with a Bank under Section 20 of the Glass-Steagall Act (12 U.S.C. 377). These companies engage in securities underwriting and dealing activities, distributing shares of open-end mutual funds, and controlling open-end mutual funds. Travelers has committed to conform the activities of these companies to the requirements of the Glass-Steagall Act and the Board’s orders and interpretations there under, including the limitations on the amount of revenue derived from securities underwriting and dealing activities, on consummation of the proposed transaction in accordance with the requirements of this order.”

The Federal Reserve approved the merger on September 23, 1998. Glass-Steagall was not repealed until November 12, 1999. In between, Smith Barney’s army of stockbrokers did not stop selling securities to the public and the firm’s proprietary mutual funds continued to be distributed to the public.

If the Federal Reserve brazenly and knowingly ignored the law in acquiescence to a serial misfeasor, why should Americans trust it to have any role whatsoever in bank regulation and, especially not appropriate, a Consumer Financial Protection Agency housed under the Fed as envisioned by Senator Dodd’s proposed legislation.

Last November, Senator Dodd called the Fed an “abysmal failure” in terms of its regulation of banks and consumer protection. His draft bill at that time correctly stripped the Fed of banking and consumer oversight. Today, Senator Dodd’s bill elevates the “abysmal failure” Fed to trusted guardian of the largest and most dangerous banks in the country alongside oversight of a consumer protection agency. Senator Dodd had his facts impeccably correct in November. Who or what changed Senator Dodd’s mind in the ensuing four months?

Once the Travelers/Citicorp merger created Citigroup, other Wall Street firms had to buy insured depositor banks in order to compete against the massive pools of money housed under the Citi umbrella as it was allowed to gobble up bank after bank. The Fed set this doomsday machine in motion and the taxpayers are now footing the crushing bill to shore up zombie securities firms on top of staggering investment losses, job losses, foreclosures and growing homelessness. Consumers were promised one-stop shopping at these behemoths; they ended up in the role of busboys at the predator’s ball.

In 1998 when the barbarians were charging the wall, 425 individuals testified in person or in writing to the Federal Reserve on the application by Travelers and Citicorp to merge to create Citigroup. A small number correctly predicted this financial calamity would result. That same small number wasn’t getting cash from Citicorp or Travelers. The majority of politicians and nonprofits who testified in favor of the proposal were recipients of largesse from one or the other of the corporations.

Why was the Federal Reserve Board conducting hearings on a proposal that was patently illegal under existing law? To mute public outrage over the brazenness of that detail alone, the press was fed the following story line: don’t focus on the bold violations of law under the Glass-Steagall Act, focus instead on the Bank Holding Company Act which allows a two-year window for Travelers to divest its insurance subsidiaries; an eventuality that Citigroup correctly bet would be moot if it could get its Washington insiders like Treasury Secretary Robert Rubin to muscle through repeal of Glass-Steagall before the two-year deadline arrived.)

The Federal Reserve may have also felt empowered by the stunning editorial in the New York Times on April 8, 1998, putting white hats on the pirates and dubbing financial concentration and repeal of investor protection law a good thing that “could actually protect na├»ve investors.” The New York Times had not only sipped the Citigroup Kool Aid and found it pleasing, it was adding new flavors of its own to the packaging:

“Congress dithers, so John Reed of Citicorp and Sanford Weill of Travelers Group grandly propose to modernize financial markets on their own. They have announced a $70 billion merger -- the biggest in history -- that would create the largest financial services company in the world, worth more than $140 billion… In one stroke, Mr. Reed and Mr. Weill will have temporarily demolished the increasingly unnecessary walls built during the Depression to separate commercial banks from investment banks and insurance companies.”

“Increasingly unnecessary walls?” Citibank had a history of money laundering for dictators. Salomon Smith Barney was the successor firm responsible for rigging the two-year Treasury note auction and “yield burning,” another illegal maneuver involving Treasury securities and municipal bonds. Those walls were all that stood between one criminal culture with insured deposits merging with more creative criminals. Fused together, they took their widow and orphans’ passbooks and conjured up rigged research, subprime mortgage securitizations, credit default swaps, auction rate securities, Dr. Evil trades, and Enron off-balance-sheet debt bombs.

The New York Times continues:

“Some consumer advocates oppose the merger because, they fear, financial behemoths inevitably threaten ordinary consumers. But one-stop financial shopping could actually protect naive investors. Under current laws such investors can be pulled in contradictory directions by bankers offering retirement accounts, insurance agents offering annuities and securities dealers offering mutual funds. An institution that sells all these products can steer customers toward the product that best serves their needs…A collapse in the company's securities and insurance operations could drag down its commercial bank. But that will happen only if Federal regulators fall sound asleep.”

Did the Federal Reserve fall sound asleep? Or was it compromised to begin with? As for steering customers toward the product that best serves their needs, for the last eight decades Wall Street has incentivized through its broker commission structure its goal of selling what it needs to dump on the public irrespective of what best serves the public’s needs. The only hope of changing that reality is a regulator with teeth and a mighty wall that separates speculation and risk taking from savings earmarked for safety.

The similarity of the dynamics of the 1929 crash and the 2008 crash is reflected in this passage from the Senate Committee on Banking and Currency in 1934, Report No. 1455:

“The Banking Act of 1933, enacted on June 16, 1933, was promulgated to effect a complete severance of the commercial and investment banking functions and to eradicate many of the abuses disclosed at the hearings before the Senate subcommittee…The hearings disclosed, on the part of many bankers, a woeful lack of regard for the public interest and a proper conception of fiduciary responsibility. Personages upon whom the public relied for the guardianship of funds did not regard their position as impregnated with trust, but rather as a means for personal gain. These custodians of funds gambled and speculated for their own account in the stock of the banking institutions which they dominated; participated in speculative transactions in the capital stock of their banking institutions that directly conflicted with the interest of these institutions which they were paid to serve; participated in and were the beneficiaries of pool operations;… availed themselves, as directors of private corporations, of inside information to aid them in transactions in the securities of these corporations; caused to be paid by the banking institutions to themselves excessive compensation; had voted to themselves participations in management funds and substantial pensions; and resorted to devious means to avoid the payment of their just Government taxes…Far from having a detrimental, subservice effect upon the banking institutions of the country, the investigation performed the wholesome function of exposing the ills and evils of banking conditions and the perpetrators of these wrongs, with a view to the elimination of both the undesirable practices and personalities.”

Senator Dodd, members of Congress, you know what you have to do. Put back the wall, then on to real Senate investigations under oath.

Senate Republicans refuse to work past 2 p.m.

Original Link:

By Ezra Klein

"There is a little-known rule in the Senate stating that hearings can’t happen after 2:00 p.m. each day without unanimous consent," explains Amanda Terkel. "However, every day, at the start of business, the Senate generally agrees, by unanimous consent, to waive this rule and continue with the necessary business of holding hearings."

Every day, that is, until now. Republicans angry about the passage of health-care reform are invoking the dreaded half-day maneuver. Terkel explains:

Today, during a Senate Homeland Security Subcommittee hearing on transparency, Sen. Tom Carper (D-DE) announced that he had to stop the proceedings because of Republican blocks. ... The AP also reported today that Sen. Mark Udall (D-CO) had a hearing on the bark beetle canceled today “after Republicans angry over the passage of health insurance reform legislation blocked it by using an obscure Senate rule requiring a unanimous consent to hold hearings scheduled after 2 p.m.”

I could imagine a lot of smart ways to begin obstructing the chamber and making life miserable for Democrats. But declaring that you won't work after 2 p.m? Do Republicans really think the average American is going to rally to that battle cry?

Update: My colleague Paul Kane notes that this isn't specifically a 2 p.m. rule. Rather, the Senate needs unanimous consent to continue work two hours after it's gaveled into sessions. So it could be earlier than 2 p.m. And it turns out to be an old minority trick that Democrats have used too. This is further evidence, I think, that it's long past time to clean the Senate rulebook and get rid of the minority's ability to throw these procedural tantrums.

The Party of Cruelty

Original Link:

By James Howard Kunstler

It was amusing to see the Republican party inveigh against health insurance reform as if they were a synod of Presbyterian necromancers girding the nation for a takeover by the spawn of hell. This was the same gang, by the way, who championed the Medicare Prescription Drug Improvement and Modernization Act of 2003, then regarded as the most reckless giveaway of public funds in human history. Along the way, they enlisted an army of nay-sayers representing everything dark, disgraceful, and ignorant in the American character. If the Republicans keep going this way, they'll end up with something worse than Naziism: a party that hates everything but believes in absolutely nothing.

The most striking elements of so-called health care in America these days is how cruel and unjust it is, and in taking a stand against reforming it the Republican party appeared to be firmly in support of cruelty and injustice. This would be well within the historical tradition of other religious crusades which turned political--such as the Spanish Inquisition and the seventeenth century war against witchcraft. Whatever else the Democratic party has stood for in recent history, it has tended to oppose institutional cruelty and injustice, and notice that it has also been the party for keeping religion out of government.

Now a health care reform act has passed and there's some reason to hope that insurance companies will be prevented from doing things like canceling the coverage of policy-holders who have the impertinence to actually get sick, which has been their main device for revenue enhancement, and we'll see how they cope with the idea that being alive in a treacherous world is the fundamental pre-existing condition.

I surely don't know if the nation can afford to pay for what this law requires, but then can we really afford to pay for anything?--including the salaries, retirement benefits, and health insurance of congressmen, not to mention two wars, bailout life support for banks, rising unemployment benefits, shovel-ready stimulus projects, et cetera, blah blah? Probably not.

My guess is that the health care "industry" will unravel in the years ahead under the weight of its own hypercomplexity just as all the other hypercomplex systems of normal American life (such as it is) groan and collapse under their own unworkable immensities--and I speak here of industrial-style farming, Big Box "consumerism," Happy Motoring, too-big-to-fail finance, centralized public education, and the pension racket. All the activities of daily life in this country have poor prospects for continuing in their current form.

At least this once a workable majority in the government has stood up to the forces of cruelty and injustice, and whatever else happens to us in the course of this long emergency, it will be a good thing if the party of fairness and justice identifies its adversaries for what they are: not "partners in governing," or any such academical-therapeutic bullshit, but enemies of every generous impulse in the national character.

I hope that Mr. Obama's party can carry this message clearly into the electoral battles ahead, painting the Republican opposition for what it is: a gang of hypocritical, pietistic sadists, seeking pleasure in the suffering of others while pretending to be Christians, devoid of sympathy, empathy, or any inclination to simple human kindness, constant breakers of the Golden Rule, enemies of the common good. In fact, the current edition of the Republican party has achieved something really memorable in the annals of collective bad intentions: they have managed to create a sense of the public interest whose main goal is the destruction of the public interest.

This is exactly what the Republican majority on the Supreme Court did earlier this year by deciding that corporations--which are sociopathic by definition in being answerable only to their shareholders and nothing else--should enjoy the same full privileges in election campaign contributions as human persons, who are assumed to have obligations, duties, and responsibilities to the common good (and therefore to the public interest). This shameful act by the court majority only underscores the chief defining characteristic of Republicans in their current incarnation: an inability to think. And so, naturally Republicans gravitate toward superstition and the traditional devices of improvident religious authorities--persecution of the weak, torture, denial of due process, and dogmas designed to spread hatred.

I hope the American public begins to understand this, because they have been manipulated in their own pain and hardship by these dark forces, and their thrall to the likes of John Boehner, Sarah Palin, Glenn Beck, Rush, Hannity, and the rest of these vicious morons could easily increase as their economic hardships deepen. We're facing a comprehensive contraction of wealth and economy that is going to challenge every shared virtue in our national soul, and we're not going to meet these difficulties successfully without a sense of mutual obligation and sympathy for each other. The Republican party is just itching to turn a giant thumbscrew on the US public--that is, before they try to start burning their enemies at the stake. We understand that the Health Care Reform Act is a first stand against that.

Corporations Already Outspend The Parties

Original Link:

By Marc Ambinder

For the first time in recent history, the lobbying, grassroots and advertising budget of the U.S. Chamber of Commerce has surpassed the spending of BOTH the Republican National Committee and Democratic National Committee.

This is significant. It means that the Great Transition has already begun. In the days following the decision in Citizens United, campaign finance experts predicted that the decision would open the floodgates of money for trade associations like the Chamber of Commerce. The influx of corporate money, according to some, would weaken the power of the political parties and candidates and lead the political parties to become less important. Republican lawyer Ben Ginsberg went so far as to say that the parties would be "threatened by extinction." And Ginsberg supports the CU decision!

As it turns out, the surge of contributions into the U.S. Chamber has already caused its budget on lobbying, grassroots and advertising to surpass that of both the Republican National Committee and the Democratic National Committee for the first time in recent memory. According to The Center for Responsive Politics, the U.S. Chamber of Commerce and its national subsidiaries spent $144.5 million in 2009, far more than the RNC and more than double the expenditures by the DNC.

The Chamber spent much of its money in 2009 on campaigns that worked -- it scared the Senate away from considering a version of the Waxman-Markey cap-and-trade legislation, and an argument can be made that its cutting ads on health care (with money taken from some insurance companies) helped to undercut support for the legislation.

Included in the U.S. Chamber amount are expenditures of about $1 million each in Virginia and Massachusetts on electioneering in off-year contests in those states, and sizeable spending on advertising campaigns in key states and districts aimed at defeating health care, climate change and financial reform legislation.

The U.S. Chamber's expenditures this year even exceeded expenditures of many committees in 2008.

That year, the DCCC spent $142.9 million, the DSCC spent $136.5 million, the NRSC spent $73.9 million, and the NRCC spent $72.7 million. Finally, it's worth noting that none of the contributions that made up this $145 million were subject to disclosure. Ginsberg also believed that this would be a factor in the expected flood of contributions, noting that 501c6s -- the section of the tax code under which the Chamber is organized -- were "[l]ikely to emerge as the biggest players in the 2010 and 2012 elections, ideological groups and trade associations also have been granted the ability to engage much more robustly in the political process. Meager disclosure requirements of their donors will make them a favorite repository of funds for independent expenditures."

Aristocrats at the tea party

Original Link:

By Nicole Colson

RIGHT-WING lunacy seemed to burst out all over in February, with the tea party movement conference held in Nashville earlier in the month, followed last week by the annual Conservative Political Action Conference in Washington, D.C.

According to a poll by CNN and the Opinion Research Corporation, some 11 percent of Americans say they've engaged in "active support" for the tea party movement--a vaguely defined label applied to anti-tax, anti-"Big Government," pro-"patriotic" agitation. Only 5 percent of people claim to have "attended a rally or meeting held by any organization associated with the tea party movement"--a relatively small number, especially considering that polls tracking "activism" have a record of inflating such numbers.

But you'd never know that from the media. To hear them tell it, America is being swallowed under by a right-wing tidal wave.

Since the tea party "movement" broke onto the scene last year--inspired by the supposedly spontaneous rant by CNBC reporter Rick Santelli on the floor of the Chicago Board of Trade against Barack Obama's modest "mortgage relief plan"--the mainstream media in general, and right-wing Fox News in particular, have lavished attention on the Tea Partiers.

With Fox News pundit Glenn Beck and former vice presidential candidate Sarah Palin leading the way as the cultural heroes of the tea partiers, the media has spun a fairy tale image of the movement as representing grassroots, populist discontent.

"My only goal is to support the grassroots activists who are fighting for responsible, limited government--and our Constitution," Palin wrote in USA Today about her decision to speak at the recent National Tea Party Convention.

Of course, the $100,000 speaking fee that made its way into Palin's pocket probably didn't hurt.

It's hard to understand how any movement claiming to be "populist" and "grassroots" could charge $549 for admission--as the organizers of the National Tea Party Convention did. More importantly, it raises the question of just who was shelling out the cash to hear the former Alaska governor read notes about "hope" and "change" off her hand.

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ALREADY UNDERGOING a series of splits, the tea party movement is made up of disparate groups that include everything from neighborhood clubs to well-funded organizations capable of carrying off big protests and demonstrations.

The Web site of the "Tea Party Patriots"--which claims to be the "official home of the American Tea Party movement"--states that "The impetus for the Tea Party movement is excessive government spending and taxation. Our mission is to attract, educate, organize and mobilize our fellow citizens to secure public policy consistent with our three core values of Fiscal Responsibility, Constitutionally Limited Government and Free Markets."

Likewise, the Web site of the "Tea Party Nation," which sponsored the recent National Tea Party Convention, declares: "We believe in Limited Government, Free Speech, the 2nd Amendment, our Military, Secure Borders and our Country!"

Aside from a fondness for capitalization, such groups appear to share a small-business, libertarian mindset.

But among these rugged "individualists"--the Tea Party Patriots Web site proudly co-opts the language of grassroots movementism, declaring "Tea Party Patriots knows who the Tea Party leaders are...It's YOU!"--when you scratch the surface, you discover that many of the key players are firmly allied with standard pro-corporate, Washington interests.

Take National Tea Party Convention organizers Judson Phillips and Mark Skoda.

Phillips has described himself as a "small-town lawyer" and former prosecutor, and appears to have specialized in personal injury and DUI cases. According to the watchdog Web site, "during the past decade he has had three federal tax liens against him, totaling more than $22,000." No wonder why he might be part of an anti-tax movement.

Skoda, according to his bio on the National Tea Party Convention Web site, has "held executive positions with United Parcel Service, Federal Express and Penske Logistics...He currently serves as a Vice President for One Network Enterprises, a Dallas-based technology company." Not exactly the image of the small businessman being railroaded by "Big Government" that the tea party movement wants to portray itself as representing.

Skoda gave a glimpse into his personal mentality at the Nashville convention, when he told the crowd: "Have we grown so much into socialist culture that people criticize a for-profit event? We put thousands of our dollars into the Gaylord Hotel and the Nashville economy. We didn't ask for a tax benefit, or tax break, or subsidy. Just because this is grassroots doesn't mean I have to dress in cloth and beg for alms...I shouldn't be punished just because I choose to be successful."

There you have it. Success is a "choice." It just so happens that this "choice" seems to come more easily to the wealthy elite who pull the strings in the tea party movement.

Phillips and Skoda in particular have taken heat, even from some tea partiers, for their announcement earlier this month of the formation of the "Ensuring Liberty Corporation" and the "Ensuring Liberty PAC." The organizations will be used to further the tea party cause, but, they announced, will accept corporate money...and perhaps money from Washington lobbyists as well--something that is supposedly verboten to the tea party movement.

While the Ensuring Liberty PAC will be subject to laws requiring financial disclosure, the Ensuring Liberty Corporation won't be legally required to disclose its donors. The goal for 2010, say Phillips and Skoda, will be to raise and spend $10 million on this year's midterm elections--but where all that money comes from will remain a mystery.

As National Public Radio reported, "a more complete description of the fundraising rules for a 501(c)(4) like the Ensuring Liberty Corporation would go like this: It can raise as much as it can get--no limits--from wealthy donors and from corporations. And there's no disclosure. No possible blowback against the Ensuring Liberty Corporation for taking the money, or against a corporate donor for giving it."

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THE TRUTH is that lobbyists and corporate interests are already well entrenched in the tea party movement.

While the tea partiers may champion a broadly "populist" philosophy--government can't solve our problems; Washington is corrupt--those actually funding the nascent movement are the furthest thing from being "anti-Washington." On the contrary, their professional lives have been built around advocating government action to further the cause of the wealthy and the elite. Among them are some of the most prominent Washington insiders of the past several decades.

As New York Times columnist Paul Krugman noted last year:

[I]t turns out that the tea parties don't represent a spontaneous outpouring of public sentiment. They're AstroTurf (fake grassroots) events, manufactured by the usual suspects. In particular, a key role is being played by FreedomWorks, an organization run by Richard Armey, the former House majority leader, and supported by the usual group of right-wing billionaires. And the parties are, of course, being promoted heavily by Fox News.

Armey's FreedomWorks has pushed the tea party movement, boasting in a press release on its Web site last year that it:

helped to organize "Taxpayer Tea Party" protests around the country, in the wake of Rick Santelli's (CNBC) call for a "Chicago Tea Party" to protest the ridiculous economic policies of President Barack Obama. These protests were a huge success around the country! Thousands of Americans showed up and made their voices heard.

FreedomWorks was one of the main forces behind last year's April 15 tea party anti-tax and anti-Obama rallies that took place in several cities across the U.S. At those rallies, virulent racism was often on display--encouraged by organizers--as well as nasty slurs against Obama for supposedly being a Muslim, and even occasional threats of violence.

Since then, FreedomWorks has taken credit for organizing "hundreds of Taxpayer Tea Parties across the country, from Santa Barbara, California to Amarillo, Texas, and all the way to Philadelphia, Pennsylvania."

FreedomWorks is far from a struggling grassroots organization. According to SourceWatch, in 2008 alone, the group reported $4,346,782 in total revenue. Armey's FreedomWorks salary in 2008 was reported as $250,000--for 18 hours of work per week--plus $300,000 from related organizations.

In addition to Armey, Steve Forbes--the son of wealthy publisher Malcolm Forbes--also sits on the FreedomWorks Foundation Board. Then again, Forbes has sat on the boards of plenty of other right-wing foundations in the U.S., including the American Enterprise Institute and the National Taxpayers Union, and his name has been associated with the pro-imperialist Project for the New American Century.

Living a sheltered life as part of one of America's richest families, Forbes has displayed a stunning ability to stick his foot in his mouth. While running for president, he complained, "My father once spent $5 million on a birthday party for himself in Tangiers. Why can't I spend a few more running for president?"

According to an expose of Forbes on the Web site, this behind-the-scenes supporter of "tea party populism":

fired his secretary of 13 years, Ann Barton, just before her 65th birthday, and has written editorials in favor of allowing forced retirement at that age. When she sued him for age discrimination, he responded viciously, giving a long deposition attacking her competence and attitude, even though she had been his personal secretary for 13 years.

Americans For Prosperity is another lobbying group that helped orchestrate last year's tea party tax-day rallies--writing press releases and planning events in several states, including New Jersey, Arizona, New Hampshire, Missouri and Kansas.

According to, "Americans for Prosperity is run by Tim Phillips, who was Ralph Reed's former partner in the lobbying firm Century Strategies. The group is funded by Koch family foundations--a family whose wealth is derived from the oil industry. Indeed, Americans for Prosperity has coordinated pro-drilling 'grassroots' events around the country."

Phillips and Reed's former group Century Strategies made headlines when it was discovered that now-convicted lobbyist Jack Abramoff had laundered money through it to oppose legislation that his clients wanted to defeat.

As noted, Americans for Prosperity is well-practiced in creating fake populist "front groups" around a variety of issues. In addition to its involvement in tea party groups, it also created "Patients United" to oppose health care reform:

Patients United follows a familiar pattern AFP has used for their other front groups: create a new stand-alone Web site, fill it with lines like "We are people just like you" to give the site a grassroots feel, and then use the new group to recruit supporters and run deceptive advertisements attacking reform. This "astroturfing" model has been used by AFP to launch groups pushing distortions against other progressive priorities:

-- The "Hot Air Tour" promoting global warming skepticism and attacking environmental regulations.

-- "Free Our Energy," a group promoting increased domestic drilling.

-- The "Save My Ballot Tour," a group that pays Joe the Plumber to travel around the country smearing the Employee Free Choice Act.

-- "No Climate Tax," a group dedicated to the defeat of Clean Energy Economy legislation.

-- "No Stimulus," a group launched to try to stop the passage of the Recovery Act.

As Jane Hamsher of the liberal blog FireDogLake put it last year: "Before any media covering these [Tea Party] events accept the idea that this is just a grassroots outpouring of populist sentiment, they ought to take a look behind the curtain--where Dick Armey is laughing and counting his cash."

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WHILE PEOPLE like Dick Armey may be attempting to harness the tea party movement for their own ends (Armey has said that the tea partiers "represent that massive block of swing votes that can determine the outcome of an election"), it's important to note that the on-the-ground ranks of the tea partiers are different.

Though they are whiter, wealthier and more rural overall, as the New York Times' David Barstow pointed out in a recent profile of the movement:

The ebbs and flows of the Tea Party ferment are hardly uniform. It is an amorphous, factionalized uprising with no clear leadership and no centralized structure. Not everyone flocking to the tea party movement is worried about dictatorship. Some have a basic aversion to big government, or Mr. Obama, or progressives in general. What's more, some tea party groups are essentially appendages of the local Republican Party.

But most are not. They are frequently led by political neophytes who prize independence and tell strikingly similar stories of having been awakened by the recession. Their families upended by lost jobs, foreclosed homes and depleted retirement funds, they said they wanted to know why it happened and whom to blame.

In other words, some in ranks of the tea party movement are expressing very real frustrations at a government that has failed to do anything to help ordinary working people who are losing jobs, homes and retirement savings in the midst of the worst economic crisis since the Great Depression.

Instead, actions like the bank bailout--in which trillions was poured directly into the pockets of Wall Street--have rightly led to discontent with the Democratic Party.

It's into this void--the deep-seated feeling of disgust that many people feel about the Washington system--that the Tea Party movement hopes to insert itself. That anger is completely legitimate--but in a vacuum, with no political alternative put forward, it can be turned towards organizations run by figures who have quite different aims in mind.

The real challenge to the tea partiers will come when working people unite to build a movement that challenges the priorities of a free-market system that puts the profit and power of people like Dick Armey before everything else.

Saturday, March 27, 2010

Documents Reveal Anthem Blue Cross Manipulated Data to Justify Massive Rate Hike

Original Link:

By Jason Leopold

Internal documents show one of the country's largest for-profit health insurers, in an effort to maintain profits, manipulated data to justify a rate increase on individual premiums in California this year by as much as 39 percent.

At a closely watched Congressional hearing Wednesday, Rep. Henry Waxman, the Democratic chairman of the House Energy and Commerce Committee, blasted WellPoint Inc. executives for publicly stating that the country's economic turmoil and rising health care costs was the reason its Anthem Blue Cross subsidiary intended to move forward with a massive rate increase in California when the company's own documents say otherwise.

Waxman said the company "may have manipulated its actuarial assumptions to keep its medical loss ratio (MLR), a key measure reviewed by California regulators, 'flat.'"

"WellPoint says the rate increases are a result of medical inflation and healthier policyholders dropping coverage," Waxman (D-California) said. "But the thousands of pages of WellPoint documents we have reviewed tell another story ... WellPoint says that its rate increases have nothing to do with increasing company profits. But an internal company e-mail says that its rate increase would 'return CA to target profit of 7 percent.'"

The email Waxman referred to was sent October 7, 2009, by WellPoint executive Barry Shane to Cynthia Miller, the company's executive vice president, chief actuary and integration management officer. It says:

Re CA rate filing ... I will try to keep you better informed re: key increases. Average increase is 23 percent and is intended to return CA to target profit of 7 percent (vs 5 percent this year). Still have another 1-2 weeks of discussion before we get finalized. Also, this has been a collaborative rate development process [with another executive] and his team fully engaged and encouraging a higher rate increase (while being aware of the risk associated).


Last month, it was revealed that Anthem Blue Cross notified thousands of its 800,000 customers in California who hold individual plans that they would be affected by a rate hike as of March 1. The increase has been delayed by two months pending an independent review launched two weeks ago at the behest of California Insurance Commissioner Steve Poizner.

Poizner, a GOP gubernatorial candidate, said he "instructed" an outside actuary "to review the rates with a fine-tooth comb" to determine if the rate hikes are excessive and ensure that Anthem Blue Cross is spending 70 cents of every dollar on premium medical care as required by state law.

If the actuary finds "that these rate increases were unwarranted, I will immediately take action to get Anthem Blue Cross to follow the law and lower their rates," he said.

When news of the rate hike broke, it resulted in a major backlash against the health insurer and underscored the urgency of passing legislation to reform the industry.

Wednesday's hearing was chaired by Rep. Bart Stupak (D-Michigan) and comes a day before Republican and Democratic leaders gather at the White House for a hotly-anticipated bipartisan health care summit that will be broadcast live on C-Span.

The meeting will be led by President Barack Obama and is intended to get both parties to agree on provisions to be included in a health care bill, the cornerstone of Obama's domestic agenda. Obama has cited the Anthem Blue Cross rate hike several times in recent weeks in an effort to rally lawmakers behind his health care proposal.

Last week, the Department of Health and Human Services released a report, Insurance Companies Prosper, Families Suffer: Our Broken Health Insurance System, that identified how other for-profit health insurance companies were planning massive rate increases in Connecticut, Maine, Michigan, Oregon, Rhode Island, and Washington.

The timing of Wednesday's hearing was not lost on some Republican lawmakers, such as Congressman Michael Burgess (R-Texas), who said it was a political ploy scheduled to promote Obama's "six-hour photo op."

Burgess, a doctor, defended WellPoint's rate hike, stating it could be due to a variety of factors, and "any number, no matter how big, may be acceptable."

But Stupak said the committee's probe "discovered internal documents that suggest a closer relationship between the proposed premium increases and WellPoint profits."

"The documents reveal that WellPoint sought inflated premium increases as a negotiating tool with the California Department of Insurance," Stupak said.

One such document released by the committee last week called into question recent claims by WellPoint to justify Anthem Blue Cross's rate increase in California. The company pointed out that healthy individuals had decided to drop their coverage. But according to data the company submitted to the National Association of Insurance Commissioners, in 2009 enrollment actually rose by more than 7 percent, from 583,967 individual policyholders at the end of 2008 to 627,082 individual policyholders at the end of the third quarter of 2009.

Cooking the Books?

California law requires WellPoint, as well as other health insurers, to spend 70 percent of its premium costs on medical care.

According to the committee's investigation, "to meet this requirement, WellPoint reported to the California Department of Insurance that its anticipated medical loss ratios for each plan as of March 2010 ranged from 72.0% to 78.9%, with one outlier of 144.8%."

"One factor that can have a great impact on medical spending is the number of healthy people, who are relatively inexpensive to insure and chose to leave a particular plan. This is known as 'adverse selection,'" according to the committee's analysis of internal WellPoint documents.

"If a company projects that a large number of healthy people will exit a plan, the estimated spending on medical care for the remaining sicker population is expected to rise and result in a higher medical loss ratio," the committee's analysis concluded. "Even if premium increases generate more revenue for a particular plan, if the pool of policyholders for that plan becomes more expensive to insure, the medical loss ratio will appear higher."

WellPoint uses the concept of "adverse selection" to justify its premium increases, according to the documents. During discussions WellPoint executives had with Energy Committee staff last year, the company disclosed that as much as seven percentage points of the average 25 percent increase in premiums is due to "adverse selection."
According to internal e-mails obtained by the Energy Committee WellPoint "may have manipulated its adverse selection projections to achieve a desired medical loss ratio."

In a September 3, 2009 email, David Shea, WellPoint's vice president for individual pricing, proposed for health plans regulated by the California Department of Insurance to “add 1.0% to margin for adverse selection to ultimately keep MLR flat.”

In the same e-mail, he also proposed for health plans regulated by the California Department of Managed Care to “[a]dd 2.0% to projected claims for adverse selection to lower the margin to flat.”

The medical loss ratio is the proportion of premium revenues that a health insurance plan uses to pay down medical claims. The rest of the money is booked as profit and also used for other expenses, such as marketing and administrative costs and executive compensation.

According to documents obtained by the committee, WellPoint put together a 12-point plan to reduce its medical loss ratio.

In a document titled "WellPoint Individual Business 2010 Plan 1st Pass," the company identified "[o]pportunities (not reflected in forecast/Plan). Under the "Risk Management" heading, the plan indicates that WellPoint's medical loss ration "should improve as we eliminate subsidies and other Risk Management Initiatives.”

That was followed by 12 risk initiatives followed, which included:

“Application for those with prior coverage will be dated no earlier than the day after receipt.”
“Pre-existing waiting periods have been adjusted to be the either 12 months or the legal maximum if less.”
“Reinstatements will only be allowed for a period of 60 days post termination and will require underwriting and payment of back premiums.”

WellPoint executives also identified key issues confronting the individual market in California that helps to better explain why it was targeted with a double-digit rate increase.
"Lack of attention to risk management, decreased ability to use pre-existing claim denials and rescind policies, and maternity policies have led to first year loss ratios climbing from less than 50% five years ago to over 65% today," the company's 12-point plan document says.


WellPoint Chief Executive Angela Braly testified Wednesday that the rate increase in California, filed last November, was reviewed by an "independent actuarial firm" that concluded the company's "methodology was reasonable.
"Raising our premiums was not something we wanted to do--but we believe this was the most prudent choice given the rising cost of care and the problems caused by many younger and healthier policyholders dropping or reducing their coverage during tough economic times," Braly said, adding that the company "clearly" understands "that rate increases create a challenge for many of our members."

"However, it is important to know that many of our members often have a choice of coverage," she said. Still, WellPoint "determined that a rate increase averaging approximately 25 percent (excluding aging) was necessary."
Braly said she "was very disappointed to see the health reform debate change . . . to an attack on the health insurance industry, specifically pointing to our profits and citing this as the primary reason for premium increases, which is very misleading."

But Waxman wasn't buying any of it and he again pointed to the company's own internal documents, which he says show the health insurer's reasons for hiking rates are purely profit-driven.

In a November 2, 2009, email, Bryan Curley, WellPoint's regional vice president and actuary, wrote: "Note: we are asking for premiums that would put us $40 [million] favorable. Just a week earlier, Curley told Brian Sassi, president and chief executive of WellPoint's consumer business, that "[i]f we get the increases on time, we will see an op gain upside of $30 [million] after downgrades and rate caps."

The committee also took issue with Braly's statement that "raising our premiums was not something we wanted to do" noting that other documents "suggest that WellPoint padded its rate increase by five percentage points to counteract anticipated concessions to [California] state regulators concerning the size of its premium increases."
In an internal email dated October 24, 2009, Shane, WellPoint's vice president of consumer actuary, told Sassi, that WellPoint executives needed to "reach agreement on a filing strategy quickly - specifically in the area of do we file with a cushion allowed for negotiations/margin expansion, or do we file at a lower level that maintains margin, but does not allow for negotiation."

"It appears that WellPoint elected to file with 'a cushion,'" according to the Energy Committee's review of WellPoint's internal documents. "In an October 21, 2009, presentation to the WellPoint Board of Directors, Mr. Sassi identified the 'Key Assumptions' in pricing for the individual market in 2010. This slide differentiated the '2010 Rate Ask' from the '2010 Plan Rate Increase.' According to the slide, WellPoint's 'Rate Ask' would be 25 percent to 26 percent, while the 'Rate Increase' the company assumed in its '2010 Plan' was just 20.4 percent."
Watered Down Coverage

Other documents showed that WellPoint sought to reduce benefits coverage and place some of its California customers affected by the rate increase into less than generous plans.

WellPoint's strategy for shifting consumers into reduced benefit plans has three parts.

First, according to the committee's review of documents, WellPoint’s highest rate increases "seem to apply to their most comprehensive insurance plans."

For example:

Maternity care is a marker for a more comprehensive package of benefits. A chart of proposed rates shows that WellPoint’s highest rate increases apply to the only two product families regulated by the Department of Insurance with maternity coverage. The chart also shows that for the most part, WellPoint proposed lower increases within specific product lines for the versions with higher deductibles than for the versions with lower deductibles.
Second, WellPoint is developing new products, called “downgrade options,” to promote to consumers facing the high rate increases. In one e-mail, David Shea, the Vice President for Individual Pricing, states: “Jim has asked Bryan to price 5-6 downgrade options to be made available in conjunction with the upcoming rate action.” In another internal e-mail, Mr. Curley, the Regional Vice President and Actuary, proposed that WellPoint “create 5-6 CA look-alike plans for CA with a benefit or two removed to create a downgrade option upon renewal.”

WellPoint also introduced a completely new product line called CoreGuard, advertised to have “some of our lowest monthly rates” and a “higher percentage of member cost-sharing in exchange for lower premiums.” One of the CoreGuard plans has a $20,000 deductible for a family for in-network services and a separate $20,000 deductible for non-network services. On top of that, a family can spend an additional $15,000 for co-payments for non-network services. Enrollees can be liable for another $4,500 in prescription drug costs. This adds up to a potential $59,500 out-of-pocket maximum for a family, who are still liable for the cost of drugs not on the formulary and maternity services.

Third, company officials discussed scaling back benefits for existing plans. Indeed, in an October 2, 2009, email Shea sent to Curley and James Oatman, another executive, Shea wrote: "During our Plan review this morning Brian was mentioning that, in CA in the past, we mitigated rate increases by introducing product changes for existing members. We brought up the introduction of new products but he wanted to pursue existing product changes."
In another e-mail, Curley described different scenarios that would result in 6 to 10 percent reductions in benefits for four plans, such as raising deductibles in three of the four plans and adding 25 percent coinsurance payments.
Waxman said "actively developing...'downgrade options,' effectively reduces benefits for its policyholders."
"This 'purging' process cuts coverage for WellPoint policyholders when they need it most: when they get sick," he added.

The committee also heard testimony from three of Anthem Blue Cross's individual policy holders. Lauren Meister testified that she was notified that WellPoint will increase her rates by 38.6 percent this year. She said that WellPoint offered her an alternative plan that does not cover the brand name medication she needs to treat a chronic condition. Meister said WellPoint told her that the alternative plan would require her to pay $5,000 out of pocket before the insurance kicks in.

And Jeremy Arnold testified that he has experienced rate increases on his WellPoint policy totaling 74 percent between 2009 and 2010. Anthem has proposed to raise his rates by 38 percent this year.
Corporate Getaways

Waxman and other Democratic lawmakers on the Energy Committee criticized WellPoint for spending tens of millions of dollars on retreats for top executives and doling seven-figure salaries.

"One question we asked is where does all of this money go?" Waxman asked in his opening statement. "We have learned that in 2008, WellPoint paid 39 senior executives over $1 million each. And the company spent tens of millions of dollars more on expensive corporate retreats. During 2007 and 2008, WellPoint spent $27 million on 103 executive retreats. One retreat in Scottsdale, Arizona, cost over $3 million."

"Corporate executives at WellPoint are thriving, but its policyholders are paying the price," Waxman said. "WellPoint executives may get richer, but our nation's health is suffering."
The committee included photographs of the luxurious five-star hotels, such as the Four Seasons in San Diego and Hawaii, that corporate executives stayed at during their getaways.

WellPoint generated $4.75 billion in earnings last year and its profit margin soared to 7.8 percent, compared with 4.1 percent in 2008. Over the past 12 months, the company's share price increased by 50 percent. According to BusinessWeek, WellPoint shares rose 90 cents, or 1.5 percent, to $59.91 Wednesday in New York Stock Exchange composite trading.