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Thomas Jefferson’s view of equality under siege



By Harold Meyerson, Published: July 3, 2012

On the 236th anniversary of our nation’s birth — squalling to the world in our very first utterance that all men were created equal and endowed with unalienable rights — the essence of our politics remains who exactly are those men who are self-evidently equal and inherently vested with those rights. Over the subsequent two-plus centuries, we’ve invoked the spirit of our primal shout every time we’ve expanded our definition of equal men — when we moved to popular elections, abolished slavery, gave women the vote, enacted civil rights legislation and today, when gays and lesbians are winning the equal status and unalienable rights that heterosexual Americans take for granted.

But the author of our founding declaration was concerned with more than legal equality. Thomas Jefferson envisioned a nation of yeoman farmers (and, to be sure, slaveholders like himself) and wanted it to remain chiefly rural to avoid the concentration of wealth and power that would come if the nation urbanized and if finance grew into a dominant sector. His great rival Alexander Hamilton feared that the nation would remain a backwater absent cities, finance and manufacturing. As Treasury secretary, Hamilton used the powers of the nascent republic to foster industry and development. As the United States grew into the world’s dominant economy, the concerns that Jefferson voiced grew more acute. How could the United States retain its formal equality and civic virtue in the face of towering economic inequality that enabled the rich to dominate our political system?

In the first half of the 20th century, both Roosevelts and their allies devised reforms to restore some of Jefferson’s egalitarianism in what was, by then, Hamilton’s America. Progressive taxation, the establishment of wage and labor standards and the legalization of unions reduced economic inequality, while the prohibition of corporation donations to political campaigns diminished, somewhat, the wealthy’s sway over government.

But that, as they say, was then. The war that the American Right and corporate elites have waged against the Roosevelts’ Jefferson-Hamilton synthesis for the past 40 years has largely prevailed. Taxes have grown radically less progressive, the minimum wage has declined as a percentage of the median wage and unions’ legal protections to organize in the face of employer opposition have eroded. In consequence, wages are at their lowest level [ http://www.washingtonpost.com/opinions/an-economic-recovery-that-leaves-workers-further-behind/2012/04/10/gIQA75h78S_story.html ] since the end of World War II [ http://www.nytimes.com/2011/11/26/business/for-companies-the-good-old-days-are-now.html ] as a share of the national income, and U.S. median household income is at roughly the same level it was 20 years ago [ http://www.statista.com/statistics/200838/median-household-income-in-the-united-states/ ]. The nation is richer and more productive than it was 20 years ago, but all that added income and wealth has gone to the top 10 percent, and disproportionately to the richest 1 percent [ http://voxeu.org/article/fixing-american-inequality ].

The growing concentration of wealth has led to a growing concentration of political power as well. The Supreme Court’s 2010 decision [ http://www.supremecourt.gov/opinions/09pdf/08-205.pdf ] in Citizens United v. Federal Election Commission struck down 100 years of legal restraints on corporations’ ability to fund campaigns and buy elected officials. The court permitted unions to dip into their treasuries to fund campaigns too, but, as I noted last week, its decision [ http://www.washingtonpost.com/opinions/harold-meyerson-class-war-at-the-supreme-court/2012/06/26/gJQAuffO5V_story.html ] last month in Knox v. Service Employees International Union, Local 1000 — issued by the same five conservative justices who promulgated Citizens United — created a legal double standard between unions and corporations. By virtue of Knox, a union must ask its members’ permission to spend on political campaigns, but a corporation need not ask its shareholders [or employees, or customers].

So how is our foundational assertion of equality faring on this July Fourth? As to social parity, it has seldom looked more robust. As to economic equality and the political equality with which it is inextricably intertwined, the picture is bleak. The mega-banks that plunged us into deep recession have had the political power to forestall their breakup. A handful of billionaires [ http://www.washingtonpost.com/blogs/the-fix/post/sheldon-adelson-giving-10-million-to-mitt-romney-super-pac/2012/06/13/gJQAb3z5ZV_blog.html ] continues to donate unprecedented sums to election campaigns. The share of national income and wealth that goes to the vast majority of Americans continues to decline. The Republican Party — and the five Republican appointees to the Supreme Court — are committed to doctrines that will make these disparities more glaring. The recent exception to this trend is the health-care-reform act, which partially extends the Declaration’s assertion of equal rights to the realm of medical access. That’s no small achievement, but, with that single exception, on this July Fourth, Jefferson’s vision of equality is clearly in peril.

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© 2012 The Washington Post

http://www.washingtonpost.com/opinions/harold-meyerson-thomas-jeffersons-view-of-equality-under-siege/2012/07/03/gJQA4W6dLW_story.html [with comments]


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Report: Adelson to donate $10 million to Koch political efforts

By Justin Sink - 06/29/12 02:25 PM ET

Casino mogul Sheldon Adelson — who famously bankrolled the super-PAC supporting Newt Gingrich's presidential campaign — will reportedly give $10 million to the billionaire Koch brothers' political organizations during the 2012 political campaign, according to a report in the Washington Post [ http://www.washingtonpost.com/blogs/the-fix/post/sheldon-adelson-giving-10-million-to-kochs/2012/06/29/gJQAwDArBW_blog.html ].

The pairing of two of the biggest conservative donors is a significant development in the money race that has enveloped the presidential campaign. Combined, the three billionaires have said they plan to spend around $500 million on the election.

It's not clear where the $10 million Adelson donation — made during a retreat hosted by the Kochs in San Diego last weekend — will go, but the brothers do help fund the Americans for Prosperity, a major player already in the presidential ad wars. On Thursday, Americans of Prosperity announced a new $9-million ad campaign targeting repeal of the Affordable Care Act after the Supreme Court upheld the legislation as constitutional.

Adelson has already pledged $10 million in additional funds to Crossroads GPS, and advocacy organization helmed by former Bush adviser Karl Rove, and another $10 million to two separate groups backing House GOP candidates. Including donations to Newt Gingrich's campaign, the casino billionaire has spent more than $70 million on the 2012 race already, the Huffington Post reports.

Some of that money could be coming back, though. According to the June filing from Winning our Future, the super-PAC supporting Gingrich's effort, the committee is refunding $5 million to Adelson's wife, Miriam. Gingrich exited the presidential race in May.

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Related

Top Dem says bidding open for ‘United States of Adelson’
http://thehill.com/video/campaign/232777-top-dem-says-bidding-open-for-united-states-of-adelson-

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© 2012 Capitol Hill Publishing Corp., a subsidiary of News Communications, Inc.

http://thehill.com/blogs/ballot-box/fundraising/235663-report-adelson-to-donate-10-million-to-koch-political-efforts [with comments]


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Citizens United

Editorial
Published: June 25, 2012

The Supreme Court examined the Arizona immigration law in minute detail, but when it came to revisiting the damage caused by its own handiwork in the 2010 Citizens United case, it couldn’t be bothered. In a single dismissive paragraph [ http://www.supremecourt.gov/opinions/11pdf/11-1179h9j3.pdf ] on Monday, the court’s conservative majority refused to allow Montana or any other state to impose limits on corporate election spending and wouldn’t even entertain arguments on the subject.

It is not as if those five justices could be unaware of the effects of Citizens United, and of the various court and administrative decisions that followed it. They could hardly have missed the $300 million in outside spending that deluged the 2010 Congressional elections or the reports showing that more than $1 billion will be spent by outside groups on Republican candidates this year, overwhelming the competition.

They might also have seen that many of the biggest donations are secret, given to tax-free advocacy groups in defiance even of the admonition in Citizens United that independent contributions should be disclosed.

If the justices were at all concerned about these developments, they could have used the Montana case to revisit their decision and rein in its disastrous effects. The only conclusion is that they are quite content with the way things worked out.

The court’s five conservative justices struck down [ http://www.nytimes.com/2012/06/26/us/supreme-court-declines-to-revisit-citizens-united.html ] a Montana law that prohibited corporate spending in elections — a law passed in 1912 not out of some theoretical concern about money corrupting elections but to put an end to actual influence-buying by copper barons.

State officials told the court that fighting corruption required them to maintain limits on corporate election spending. A series of friend-of-the-court briefs [ http://brennan.3cdn.net/4a227751fead4a38e4_7am6ib9cr.pdf ] urged the justices to allow other states to impose similar laws, citing the out-of-control spending unleashed since 2010.

Those pleas were summarily rejected by the court’s majority, which refused to hear arguments on the issue. “There can be no serious doubt” that Citizens United applies to Montana, the court said.

That’s true, in the literal sense that Supreme Court decisions apply to the states. But the frustration of the dissenters, led by Justice Stephen Breyer, was clear. He said grave doubt had been cast on the majority’s belief, expressed in Citizens United, that independent expenditures do not give rise to corruption or even give the appearance of corruption. But he said the majority had made it plain that it hasn’t the slightest interest in reconsidering or altering its decision.

Congress can — and should — require disclosure of secret donations. The Internal Revenue Service should crack down on political organizations that pose as tax-exempt “social welfare” organizations to avoid current disclosure rules.

But, for now, the nation’s highest court has chosen to turn its back as elections are bought by the biggest check writers.

© 2012 The New York Times Company

http://www.nytimes.com/2012/06/26/opinion/the-court-citizens-united.html


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California: Cigarette Tax Defeated

By IAN LOVETT
Published: June 22, 2012

Voters narrowly rejected a proposed $1-a-pack tax increase on cigarettes. On Friday, trailing by about 28,000 votes with just over 100,000 ballots left to count, proponents of the statewide tax conceded defeat. The vote had remained too close to call since polls closed on June 5. California has not raised the tax since 1998, and proceeds from the tax would have financed cancer research. Opponents of the tax spent nearly $50 million, largely from the tobacco industry, to defeat the measure.

© 2012 The New York Times Company

http://www.nytimes.com/2012/06/23/us/california-cigarette-tax-defeated.html


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Corporate Profits Just Hit An All-Time High, Wages Just Hit An All-Time Low

Henry Blodget | Jun. 22, 2012, 8:55 AM

In case you need more confirmation that the US economy is out of balance, here are three charts for you.

1) Corporate profit margins just hit an all-time high. Companies are making more per dollar of sales than they ever have before. (And some people are still saying that companies are suffering from "too much regulation" and "too many taxes." Maybe little companies are, but big ones certainly aren't).


Business Insider, St. Louis Fed

2) Fewer Americans are working than at any time in the past three decades. One reason corporations are so profitable is that they don't employ as many Americans as they used to.


Business Insider, St. Louis Fed

3) Wages as a percent of the economy are at an all-time low. This is both cause and effect. One reason companies are so profitable is that they're paying employees less than they ever have as a share of GDP. And that, in turn, is one reason the economy is so weak: Those "wages" are other companies' revenue.


Business Insider, St. Louis Fed

In short, our current system and philosophy is creating a country of a few million overlords and 300+ million serfs.

That's not what has made America a great country. It's also not what most people think America is supposed to be about.

So we might want to rethink that.

Meanwhile, if you want to know more about what's wrong with the economy, flip through these charts:

Okay, Folks, Let's Put Aside Politics And Look At The Facts...
http://www.businessinsider.com/politics-economics-facts-charts-2012-6

Copyright © 2012 Business Insider, Inc.

http://www.businessinsider.com/corporate-profits-just-hit-an-all-time-high-wages-just-hit-an-all-time-low-2012-6 [with comments]


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ADAM SMITH: Our Record-High Profit Margins Are A Sign The U.S. Is "Going To Ruin"



Henry Blodget | Jun. 25, 2012, 9:32 AM

Last week, we pointed out one of the defining characteristics of our imbalanced economy [ http://www.businessinsider.com/corporate-profits-just-hit-an-all-time-high-wages-just-hit-an-all-time-low-2012-6 (just above; source of the charts next below)]:

- Corporate profit margins just hit a record-high


- Wages just hit a record-low


The juxtaposition of these two facts perfectly illustrates the fundamental problem with the U.S. economy.

What's the fundamental problem? The fundamental problem is that businesses are doing great, as exemplified by those record-high profit margins. But this corporate-and-owner prosperity is not flowing through to average Americans, as exemplified by the record-low wages.

This state of affairs, sadly, is completely unsustainable. Average Americans spend most of the money spent in this economy, and consumer spending accounts for 70% of the overall economy. So the higher profit margins go, and the lower wages go, the more top-heavy the economy becomes. And eventually, if this trend continues, the revenue-growth--and profit margins--of the companies will collapse. And that will be as bad for "the 1%" as it is for everyone else.

Henry Ford famously elected to pay his workers more than he needed to, with the goal of enabling them to buy the company's cars. This idea would be heresy in today's boardrooms, where the emphasis is on paying employees as little as you possibly can--and, thereby, driving every penny possible to the bottom line. Hopefully, soon, more companies will see the wisdom of Henry Ford's thinking and begin to share their unprecedented wealth with their employees.

In any event, some people persist in viewing today's record-high profit margins as a great thing.

They will perhaps be interested to know that Adam Smith, the progenitor and demi-god of free markets, actually thought precisely the opposite.

Check out this Smith quote from "Wealth of Nations [ http://books.google.com/books?id=8k_K8rf2fnUC&pg=PA106&dq=But+the+rate+of+profit+does+not,+like+rent+and+wages,+rise+with+the+prosperity,+and+fall+with+the+declension+of+the+society.+On+the+contrary,+it+is+naturally+low+in+rich,+and+high+in+poor+countries,+and+it+is+always+highest+in+the+countries+which+are+going+fastest+to+ruin.&hl=en&sa=X&ei=bF7oT96QJOr50gHF6pXyCQ&ved=0CDkQ6AEwAQ#v=onepage&q=But%20the%20rate%20of%20profit%20does%20not%2C%20like%20rent%20and%20wages%2C%20rise%20with%20the%20prosperity%2C%20and%20fall%20with%20the%20declension%20of%20the%20society.%20On%20the%20contrary%2C%20it%20is%20naturally%20low%20in%20rich%2C%20and%20high%20in%20poor%20countries%2C%20and%20it%20is%20always%20highest%20in%20the%20countries%20which%20are%20going%20fastest%20to%20ruin.&f=false ]," which was sent over by writer Moe Tkacik (follow her here [ https://twitter.com/#!/moetkacik ]):

"But the rate of profit does not, like rent and wages, rise with the prosperity, and fall with the declension of the society. On the contrary, it is naturally low in rich, and high in poor countries, and it is always highest in the countries which are going fastest to ruin."

Got that?

The rate of profit is the highest in countries that are going to hell in a handbasket.

Today's record-high profit margins won't stay record-high forever. They'll correct themselves eventually, either because the US economy will just completely collapse...or, because, finally, corporations will realize that great companies do more than drop every penny possible to the bottom line.

Specifically, great companies create three kinds of value:

- Value for customers

- Value for employees

- Value for shareholders

Our recent corporate religion, in which we have come to believe that the sole purpose of companies is to create value for shareholders, is not just contributing to the shocking inequality that has developed in our country [ http://www.businessinsider.com/new-charts-about-inequality-2011-11 ]. It has become so pervasive (and misguided) that it could destroy us in the end.

Copyright © 2012 Business Insider, Inc. (emphasis in original)

http://www.businessinsider.com/adam-smith-our-record-high-profit-margins-are-a-sign-the-us-is-going-to-ruin-2012-6 [with comments]


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Ford CEO: Middle Class ‘Getting Squeezed’, Should Concern All Americans

By Morgan Korn | Daily Ticker – Wed, Jun 27, 2012 8:37 AM EDT

CEO Alan Mulally has high hopes for Ford Motor Company (F). The company's seven U.S. assembly plants continue to churn out gleaming new cars and trucks and the No. 2 automaker in the U.S. plans to hire an additional 12,000 U.S. workers to build its cars over the next few years.

Mulally won't let his sanguine view on the company's future be tempered by prolonged economic weakness in the U.S. and abroad, two factors that threaten to disrupt Ford's storied turnaround. The automaker reclaimed its iconic blue logo last month, a significant achievement for a company that gave up its 109-year-old logo six years ago as collateral for nearly $24 billion in loans. Ford's life-saving decision in 2006 was risky — the company put up other prized assets to secure the much-needed funds — but it provided Ford with enough capital to dodge a government bailout, which its American auto rivals General Motors (GM) and Chrysler were forced to accept.

Ford's comeback has resulted in a leaner, more agile company and a more profitable one too. But a recession in Europe and an uneven economic recovery in the U.S. could cause Ford sales to grow at a tepid rate, threatening the progress Ford has made up to now. Mulally sat down for an interview with The Daily Ticker at Ford headquarters in Dearborn, MI to discuss his ongoing vision for Ford and how the company has adapted to the current economic challenges.

Ford posted strong North American sales in May, moving 216,267 vehicles versus 192,102 in May of 2011, and the company plans to build 690,000 vehicles in North America next quarter, a 5 percent jump from the same period last year. The increase in sales can be attributed to several factors: Ford's new lineup of fuel efficient vehicles; a positive image with consumers after thousands of Toyota (TM) recalls and GM/Chrysler bailouts; and industry-wide demand for new cars.

But Ford's sales in 19 Western European countries faltered last month, declining 0.2 percent to 8.1 percent year-over-year on total sales of 102,100 vehicles. Year-to-date, Ford's market share is down 0.1 percent compared with the first five months of 2011 and the company reported a $149 million pre-tax operating loss for its European business in the first quarter of 2012. The European debt crisis has shrunk Europe's overall car market from 18 million cars sold in 2007 to 15.3 million cars purchased in 2011. Ford remains the No. 2 best-selling European auto brand both in May and year-to-date while its competitors have experienced deeper losses and shrinking market share.

Mulally says Ford assembly plants have ramped up production to meet consumer demand, and some of its plants — such as the Flat Rock Mustang plant in Michigan — have workers on the assembly line six days a week to keep up with orders. Ford's strategy to increase sales from 5.3 million vehicles to 8 million vehicles a year by 2015 could be hampered by a slowdown in global growth — an outcome Ford has prepared for by sizing and adjusting the scale of its manufacturing output.

Mulally concedes that consumers in the U.S. and Europe are both "being squeezed" and the decline of the middle class at home is "something all of us in the U.S. should be concerned about."

Henry Ford, the revolutionary industrialist who forever changed the auto industry and the lives of millions of working-class Americans, bucked industry trends when he started producing his Model-T car in 1909. The Model-T was built for Americans of all socioeconomic classes, which was possible because Ford believed in fair, living wages that gave Americans the means to buy a car — a luxury only the wealthy could afford at the time.

To Mulally, the only way the nation can address the shrinking of the middle class today is "to get the economic engine growing again."

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SEE ALSO:

Bailouts of GM, Chrysler Were Good for Ford Too: Alan Mulally
Jun 26, 2012
http://finance.yahoo.com/blogs/daily-ticker/bailouts-gm-chrysler-were-good-ford-too-alan-113859133.html

Ford To Add 12,000 Workers: An All-American Comeback Story
Jul 2, 2012
http://finance.yahoo.com/blogs/daily-ticker/ford-add-12-000-workers-american-comeback-story-121822365.html

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Copyright © 2012 Yahoo! Inc.

http://finance.yahoo.com/blogs/daily-ticker/ford-success-rests-upon-strong-middle-class-says-123707507.html [with comments]


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June auto sales point to best year since 2007


Workers place tires on the 2011 Ford Explorer and other vehicles at the Ford assembly plant in Chicago, Illinois, December 1, 2010.
Credit: Reuters/Frank Polich

By Bernie Woodall and Ben Klayman
Tue Jul 3, 2012 5:24pm EDT

(Reuters) - New auto sales in June raced past expectations on lower gas prices and still-generous incentives, and are on track to score their best year since 2007.

The surprisingly strong June in which sales rose 22 percent from a year ago helped ease fears that weaker-than-expected results in May would suggest a slowdown in demand.

June's annualized sales rate of 14.1 million vehicles, according to Autodata Corp, beat analysts' average estimate of 13.9 million.

Before the economy sank into recession, annual auto sales tallied 16.1 million in 2007. They plunged to 13.2 million in 2008 and a 27-year low of 10.4 million in 2009, before beginning a slow recovery. Last year, U.S. auto sales totaled 12.8 million.

Shares of General Motors Co jumped more than 6 percent on Tuesday as the No. 1 U.S. auto maker posted a 16 percent increase in vehicle sales from the previous year and said June was its best performing month since September 2008. Sales by Ford Motor Co, the second-largest U.S. automaker, climbed 7 percent and its shares rose 3 percent.

Of the major automakers reporting U.S. sales on Tuesday, Toyota Motor Corp posted a 60 percent gain, to 177,795, that still fell short of analysts' expectations. The strong rebound by the third-biggest automaker based on U.S. sales followed a low point after the Japanese earthquake and tsunami last year.

Sales of industry No. 4 Chrysler rose 20 percent to 144,811 vehicles, slightly topping analyst expectations. It was the 27th consecutive month that Chrysler sales topped those from the previous year, and its best June sales since 2007.

No. 5 Honda Motor Co fell just short of several analysts' targets, while posting a 49 percent hike in June sales, to 124,808.

Auto sales are an early sign of consumer spending and have been one of the bright spots in the economy for much of the year, although they trailed analysts' expectations in May, when the annual pace was around 13.7 million.

On average, analysts surveyed by Reuters had expected a 13.9 million annualized sales rate in June.

In the first half of 2012, some 7.27 million new cars and trucks were sold in the United States, indicating full-year sales of 14.5 million.

Deteriorating European markets have led industry executives to worry about possible contagion spreading to North America. On Monday, data from the Institute for Supply Management showed manufacturing shrank in June for the first time in nearly three years, a sign of a slowdown in the economic recovery.

Ford chief economist Ellen Hughes-Cromwick said falling gas prices are "acting like a tax cut for consumers (and) helping to boost discretionary incomes for households.

GM said its vehicle sales in June totaled 248,750. All four of GM's U.S. brands - Buick, Cadillac, Chevrolet and GMC - showed sales increases for the month.

Michelle Krebs, senior analyst with Edmunds.com, said sales were underpinned by pent-up demand. She said buyers were encouraged by low interest rates, merchandising promotions such as zero-interest loan offers and price incentives.

Ford U.S. sales chief Ken Czubay said sales markedly gained strength in the last 7 to 10 days of the month. He said those sales will not detract from July's figures.

Ford sales climbed to 207,759 vehicles, according to the automaker, with strong sales of sedans, utility vehicles and pickup trucks.

Hyundai Motor Co and its affiliate Kia Motors Corp had combined U.S. sales of 115,139 vehicles in June, up 10 percent from a year ago. Each brand set company a record for that month.

Nissan showed a 28 percent sales gain, to 92,237 new vehicles. The Nissan brand had record June sales of 81,801, up 25 percent, while the luxury Infiniti brand showed a 66 percent sales rise to 10,436.

Bill Fox, owner of four dealerships in upstate New York that sell Chrysler, Toyota, Honda and Subaru brands, as well as GM's Chevrolet, said the sales increase in his area can be linked mainly to aging cars.

"With the recessions of '08, 09 and into '10, people stayed out of the market," said Fox. "Up here, we are Rust Belt - we don't have people with lots of discretionary income buying BMWs up here. People who buy cars are doing so because their old ones wore out.

"Consumers are very much on edge about the economy and their jobs, but they still need a new car when their old one has 150,000 miles on it."

(Reporting by Ben Klayman and Bernie Woodall in Detroit; Editing by Gerald E. McCormick, Maureen Bavdek, Sofina Mirza-Reid, Andrew Hay and Richard Chang)

Copyright 2012 Reuters

http://www.reuters.com/article/2012/07/03/us-usa-autosales-idUSBRE86218L20120703 [with comment]


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The Sharp, Sudden Decline of America's Middle Class


Janis Adkins lives in her van at the Goleta Community Covenant Church in Santa Barbara.

Read more: http://www.rollingstone.com/culture/news/the-sharp-sudden-decline-of-americas-middle-class-20120622#ixzz1zkFx2T22

They had good, stable jobs - until the recession hit. Now they're living out of their cars in parking lots.

By Jeff Tietz
June 25, 2012 11:45 AM ET

Every night around nine, Janis Adkins falls asleep in the back of her Toyota Sienna van in a church parking lot at the edge of Santa Barbara, California. On the van's roof is a black Yakima SpaceBooster, full of previous-life belongings like a snorkel and fins and camping gear. Adkins, who is 56 years old, parks the van at the lot's remotest corner, aligning its side with a row of dense, shading avocado trees. The trees provide privacy, but they are also useful because she can pick their fallen fruit, and she doesn't always­ have enough to eat. Despite a continuous, two-year job search, she remains without dependable work. She says she doesn't need to eat much – if she gets a decent hot meal in the morning, she can get by for the rest of the day on a piece of fruit or bulk-purchased almonds – but food stamps supply only a fraction of her nutritional needs, so foraging opportunities are welcome.

Prior to the Great Recession, Adkins owned and ran a successful plant nursery in Moab, Utah. At its peak, it was grossing $300,000 a year. She had never before been unemployed – she'd worked for 40 years, through three major recessions. During her first year of unemployment, in 2010, she wrote three or four cover letters a day, five days a week. Now, to keep her mind occupied when she's not looking for work or doing odd jobs, she volunteers at an animal shelter called the Santa Barbara­ Wildlife Care Network. ("I always ask for the most physically hard jobs just to get out my frustration," she says.) She has permission to pick fruit directly from the branches of the shelter's orange and avocado trees. Another benefit is that when she scrambles eggs to hand-feed wounded seabirds, she can surreptitiously make a dish for herself.

By the time Adkins goes to bed – early, because she has to get up soon after sunrise, before parishioners or church employees arrive – the four other people who overnight in the lot have usually settled in: a single mother who lives in a van with her two teenage children and keeps assiduously to herself, and a wrathful, mentally unstable woman in an old Mercedes sedan whom Adkins avoids. By mutual unspoken agreement, the three women park in the same spots every night, keeping a minimum distance from each other. When you live in your car in a parking lot, you value any reliable area of enclosing stillness. "You get very territorial," Adkins says.

Each evening, 150 people in 113 vehicles spend the night in 23 parking lots in Santa Barbara. The lots are part of Safe Parking, a program that offers overnight permits to people living in their vehicles. The nonprofit that runs the program, New Beginnings Counseling Center, requires participants to have a valid driver's license and current registration and insurance. The number of vehicles per lot ranges from one to 15, and lot hours are generally from 7 p.m. to 7 a.m. Fraternization among those who sleep in the lots is implicitly discouraged – the fainter the program's presence, the less likely it will provoke complaints from neighboring homes and churches and businesses.

The Safe Parking program is not the product of a benevolent government. Santa Barbara's mild climate and sheltered beachfront have long attracted the homeless, and the city has sometimes responded with punitive measures. (An appeals court compared one city ordinance forbidding overnight RV parking to anti-Okie laws in the 1930s.) To aid Santa Barbara's large homeless population, local activists launched the Safe Parking program in 2003. But since the Great Recession began, the number of lots and participants in the program has doubled. By 2009, formerly middle-class people like Janis Adkins had begun turning up – teachers and computer repairmen and yoga instructors seeking refuge in the city's parking­ lots. Safe-parking programs in other cities have experienced a similar influx of middle-class exiles, and their numbers are not expected to decrease anytime soon. It can take years for unemployed workers from the middle class to burn through their resources – savings, credit, salable belongings, home equity, loans from family and friends. Some 5.4 million Americans have been without work for at least six months, and an estimated 750,000 of them are completely broke or heading inexorably toward destitution. In California, where unemployment remains at 11 percent, middle-class refugees like Janis Adkins are only the earliest arrivals. "She's the tip of the iceberg," says Nancy Kapp, the coordinator of the Safe Parking program. "There are many people out there who haven't hit bottom yet, but they're on their way – they're on their way."

Kapp, who was herself homeless for a time many years ago, is blunt, indefatig­able, raptly empathetic. She works out of a minuscule office in the Salvation Army building in downtown Santa Barbara. On the wall is a map encompassing the program's parking lots – a vivid graphic of the fall of the middle class. Kapp expects more disoriented, newly impoverished families to request spots in the Safe Parking program this year, and next year, and the year after that.

"When you come to me, you've hit rock bottom," Kapp says. "You've already done everything you possibly could to avoid being homeless. You maybe have a teeny bit of savings left. People are crying, they're saying, 'I've never experienced this before. I've never been homeless.' They don't want to mix with homeless people. They're like, 'I'm not going over to those people' – sometimes they call them 'those people.' So now they're lost, they're humiliated, they're rejected, they're scared, and they're very ashamed. I'm worried about the psychological damage it does when you have a place and then, all of a sudden, you're in your car. You have to be depressed just from the fall itself, from losing everything and not understanding how it could happen."

*

One evening last spring, I visit Janis Adkins in her parking lot at the Goleta Community Covenant Church. When I turn into the driveway, the sun has fallen to the horizon. The other residents haven't arrived yet, and Adkins' van, at the far corner of the lot, seems almost metaphysically solitary, drawn to the parcel of greenery at the asphalt's edge.

Because the night is chilly and the van shell seems to draw the cold inward, Adkins has already tucked herself in, reclining against pillows and a rolled sleeping bag at the back corner of the van, beneath blankets and layers of piled-up fleece clothing. For privacy, Adkins has put silver sunshades in the front windshield; a row of clean shirts and blouses suspended on hangers obscures the lot-facing side window. By the light of a little LED bulb in a camping headlamp, she is reading a novel called The Invisible Ones, whose main characters are gypsies.

Adkins has tousled blond-gray hair and the kind of deep, unaffected tan that comes from working outdoors. She grew up in a middle-class family in Santa Barbara, but eventually took off to become a river guide in Utah. Adkins engages you frankly, her manner almost practiced in its evenness: few gesticulations, steady intonation. Across the ceiling of the van she has affixed a silken red-and-gold banner that spells out a Buddhist chant of compassion. She practices yoga and meditation and believes in the Buddhist concept of equanimity; she takes comfort in the parable of the Zen ox herder, who tries and fails, day after day, to break a raging ox. When a friend calls to ask how she's doing, she often says, "Still riding the ox."

But the rigors of homelessness – the sudden loss of the signifiers of her selfhood – regularly breach the protection of detachment; the trick for her is regaining it quickly. "When negative thoughts come, it's important to be able to say, 'It's just a thought,'" she tells me. "'Just let it go.' When I get really down, I try to look at a worse-case scenario, like the pictures of the Haiti earthquake. I go, 'What could I do to help?' Things like that drive me forward." She also reminds herself to be grateful: to Starbucks for free cups of hot water, to the YMCA for her discounted membership, to the Safe Parking program. Gratitude snuffs out self-pity.

Before the financial crash decimated the value of her home and her customer base, Adkins had been contemplating selling her nursery, High Desert Gardens, and going to work for a humanitarian or environmental organization. But the suddenness and violence of the recession took her by surprise. The nursery specialized in drought-tolerant plants and offered more than 100 species of trees. Over the years, she had developed a deep base of horticultural knowledge, and people came from long distances to seek her advice. Business was good enough that she could leave her employees in charge of the nursery and travel for a month or so every summer to escape the harsh Moab heat.

Within two years of the crash, sales had dropped by 50 percent and the value of her land had fallen by more than that. Four banks refused to help her refinance. "Everyone was talking about bailouts," she recalls. "I said, 'I'm not asking for a bailout, I'm asking you to work with me.' They look at you, no expression on their faces, saying, 'There's nothing we can do.'" She had to shut the nursery down and sell everything she could to avoid foreclosure: "I was practically giving stuff away just to try to make some money. Started selling everything that wasn't permanent. I was going to sell the doors, the windows, the gates if I could, but they told me I couldn't." She decided not to file for bankruptcy: It would have cost her thousands of dollars and require her to give up her van, which she was determined to keep. When she had nothing left to sell to make her mortgage payments, she was forced to put her home on the market, clearing only $4,000 on the sale.

"I was spinning out of control," she says. "I was starting to lose my wits. It's very surreal being at a level of depression where it's easier to think about suicide and dying than it is to bend over and pick something up you're stepping over. It was getting bad enough that my friends started looking at me, going, 'You better get out of here.' The only functional thing I could figure out was to just go. I thought I would go travel and figure out what I wanted to do next. So some friends packed up my house and we converted my van so I could have as much stuff in there as possible, and I just left."

However long it takes to lose everything, to get to the point where you're driving away from your repossessed home, the final unraveling seems eye-blink fast, because there is no way to imagine it. Even if you've been unemployed for a year and are months-delinquent on your mortgage, you still won't have a mental category for your own homelessness; it's impossible to project yourself into the scenario. The reality, when it occurs and endures, seems to have sprung from nowhere.

Without reflection, Adkins drove to a wildlife refuge she knew about in Arizona. She thought perhaps she could get a volunteer job there, something to keep her busy, but she soon realized that the plan would leave her with no way to make ends meet. "I went to a place by this lake and I just stayed there for 10 days and cried and slept. I was so bad." Eventually she headed to Santa Barbara. She hoped that old connections might help her find work, but it wasn't long before she began running out of money.

Sitting in her van, we chat a bit about High Desert Gardens and the gypsy book and her volunteer work at the wildlife shelter. Eventually I ask how she gets by. She says that a cousin in town gives her food and cash when she can, and a woman at the church arranges informal gardening work for her. Various people she knows give her their recycling so she can redeem the cans and bottles, and she borrows money from friends and acquaintances, like the manager of the wildlife shelter. Having maxed out her borrowing capacity, though, she is increasingly unable to pay what she owes to places like the YMCA, where she goes to shower. She wouldn't be adverse to dumpster­diving – "I hear there's good food" – but she's not strong enough to climb the sides.

"I actually tried panhandling a couple months ago," she says. "I was so broke. I had, like, a dollar. And I didn't know what else to do, so I went to the library and Googled 'effective panhandling.'"

"Really?" I ask.

"I wouldn't make that up," she says, laughing. "There were a lot of different strategies. One site said do not dress up, dress down. Look sad. Don't be negative in your signs. Say thank you constantly. Be humble for real, don't be phony-humble."

Adkins couldn't bring herself to look dirty. Then she remembered that after the stock market imploded, guys in business suits had walked through New York's financial district wearing sandwich boards with their résumés on them. "People read them because it's so ridiculous, it's effective," she says. So she picked a strategic thoroughfare in Santa Barbara, dressed for a job interview, and spent her last money making copies of her résumé, laminating one so that drivers could handle it without getting it dirty. She found a four-foot-tall piece of cardboard at a grocery store and wrote on it:

I'D RATHER BE WORKING
HIRE ME IF YOU HAVE A JOB

Then she stood alongside the road and held up the sign. The day was so windy it was hard to hold on to. "I was like, 'Please hire me,' and everybody's flying by, trying to ignore you, but this one guy drives up, looks at my résumé, looks at me and goes, 'Very effective. I'll take one of those.' I said, 'Thank you, I really appreciate that,' but I never heard from him. And then a homeless guy came up to me and goes, 'Wow. That ain't gonna work.' I didn't want to talk to him about it. I just wanted to stick my sign out there – I didn't have any more cardboard. And about halfway into it, I just started crying and I couldn't stop. I was so embarrassed. It was incredibly humiliating. You know how a lot of women hold their hand over their mouth when they cry? I started doing that, and that's when I raked in the money. I was sort of scared because there were so many cars that I was boxed in, and I was holding this gigantic sign and I was saying, 'I'd rather work, I'd rather you take my résumé, please help,' and I'm crying and the dollars just started coming out of the windows." But finally she cried herself out, and people stopped giving. She made $12 in three hours, all of it drawn by tears.

"And then I went out the next day and didn't get squat," she says. "I was trying to figure out, 'Should I start crying on purpose?' But how do you cry on purpose?"

*

Curtis and Concita Cates spent the better part of a year sleeping in their Nissan Titan pickup with their 13-year-old son, Canaan, in the parking lot of the Santa Barbara Community Church. The pickup was one of five authorized vehicles in the lot, which is three miles east of the church where Adkins parks. To the north rise the low peaks flanking San Marcos Pass, and an overflow lot across the street offers a view of the outspread city and the ocean beyond it. The Cateses had met Nancy Kapp by chance at the Salvation Army, where they'd gone in search of food. She'd given them a white permit for the front window of their pickup. When they arrived at the church, they found a Safe Parking porta-potty at the corner of the lot.

The Cateses ended up in the Safe Parking program after losing their jobs almost simultaneously. Curtis installed and repaired fire sprinklers in Phoenix; Concita worked as a pharmacy technician. Their combined income averaged $60,000 a year. Before the Great Recession, they had never been jobless. They lost their home after exhausting their available cash and the money in Curtis' medical savings account. Their oldest child was in college, and they were able to send their next oldest to live with his aunt. With Canaan, they drove to California to stay with relatives. When they arrived, however, they found that another family, also recently homeless, had already moved in. There were now 11 people, all but one of them unemployed, sharing a single small house.

"A bunch of us slept all piled up in a room," Curtis recalls.

"Everyone had their own sleeping habits," Concita says.

"And in the kitchen, you're trying to figure out, 'OK, this is my food. Do I share it?'" Curtis says. "It gets down to little things like that. You would buy milk and have it there for the kids and someone else would take it. It got to the point where people would take our cooler and hide it in their room and save it for their own people."

The situation became unbearable, and the Cateses left without knowing exactly where they were going. "We had some friends, and we'd park in their driveways," Concita says. "Or the side of the road by their house, in case we had to go to the bathroom."

When I visit Concita and Curtis, they have just moved into an apartment subsidized by a federal program known as Section 8. The unit is in a stucco apartment building about a block from Highway 101 and the Union Pacific line that parallels it, on a street marked by modest dilapidation: a listing wooden fence broken by tree roots, a few anarchic yards, a beat-up Chevy Aveo mirroring a beat-up Dodge Stratus. The apartment is clean and relatively spacious, but still mostly empty.

Curtis, thickset and goateed, welcomes me at the door dressed in jean shorts and a yellow Arizona State T-shirt. Concita, small and soft-voiced, wears a pink sweatshirt and white sneakers. The living room walls are bare, save for an oversize decorative clock, but it is the one room in the apartment close to being furnished: two couches, two easy chairs, a shaded table lamp on a stand, a coffee table. As I look around, Curtis and Concita tell me where everything came from, seeming a little surprised by how good they've become at acquiring things without money.

"That couch, someone was throwing out," Curtis says, pointing at the one opposite me. "A lady Nancy knows gave us these two chairs and this light."

"We found that little stand over there – someone was throwing it out," Concita says. "And I found that mirror in the dumpster – I was like, 'I'll take that.'"

Curtis points sequentially at items: "Got that from the trash, that from the trash. The TV was given to us by that lady Nancy knew." The TV has a large screen, but its anachronistic bulk is almost jarring. In their place in Phoenix, they'd had a 50-inch LG flatscreen and a Blu-ray player.

When they first arrived in Santa Barbara, both Curtis and Concita were receiving unemployment benefits, but that was the only income they had, and it didn't cover expenses. They had three mouths to feed and no kitchen to cook in; gasoline was more than $4 a gallon; they had to make a truck payment; they had cellphone and auto-insurance bills; they had to do laundry. When they went to apply for social services, they learned that their unemployment benefits made them ineligible­ for additional aid. Curtis, who had worked construction jobs most of his life, started to haunt building sites. Once in a while he would find a few days' work. "But there's the rock and the hard spot," he says. "If you take the job, you lose your unemployment. You have to reapply, and the money doesn't equal the lost benefits." He was better off collecting cans.

Nancy Kapp describes the moment when formerly middle-class people like the Cateses are forced to turn to social welfare systems as "the beginning of the demise. These systems don't just fail people – they degrade and humiliate people. They're not solutions. They're Band-Aids on wounds that are pusing and bleeding out."

Government-aid agencies and private charities demand that applicants show a bundle of identifying documents: Social Security card, birth certificate, driver's license. Many people don't have all of the required documents; homeless people often have none. The Cateses were lucky – Concita has a good organizational mind and quickly put together a packet of the necessary documents. But at the aid agencies where they applied, they saw many people – poor, hungry, sick – denied basic services for lack of paperwork.

The next thing welfare applicants must do is disclose every possession and conceivable source of income they have. "I can't tell you how many people come to my office and say, 'I couldn't get food stamps because my car is worth too much,'" Kapp tells me. "OK, you have a car. But you've lost everything – your house, your job, your pride – and all you have left is that car and all of your belongings in it. And they say, 'You still have too much. Lose it all.' You have to have nothing, when you already have nothing."

Janis Adkins hadn't been back in Santa Barbara long before she needed to apply for government assistance. She had never asked for aid before. At the California Department of Social Services, she filled out the form for emergency food stamps.

"I didn't wear my best clothes, but I wore a light blouse and jeans, and I guess I was just a little too dressed up," she recalls. "Because the woman just looked at me and said, 'Are you in a crisis? Your application says you're in a crisis.' I said, 'I'm living in a van and I don't have a job. I have a little bit of money, but it's going to go fast.' The woman said, 'You have $500. You're not in a crisis if you have $500.' She said anything more than $50 was too much."

If Adkins had filled her tank with gas, done her laundry, eaten a meal, and paid her car insurance and phone bills, it would have used up half of everything she had. But emergency food stamps, she was told, are not for imminent emergencies; they're for emergencies already in progress. You can't get them if you can make it through the next week – you have to be down to the last few meals you can afford.

"The money's for my phone, it's for gas, it's for my bills," Adkins said.

"Why are you in a crisis," the woman asked, "when you have a phone bill?"

"I need the phone so I can get a job. You can't look for a job without a phone."

"Why do you have bills?" the woman asked. "I thought you didn't have a place to live."

"I live in my van," Adkins said. "I have insurance."

"You have a 2007 van," the woman said. "I think you need to sell that."

"Please, I need a break," Adkins said. "I need some help. I need to take a shower."

"Why didn't you have a shower?"

"I live in a van."

The woman told Adkins to come back when she really needed help.

"I was going into shock," Adkins recalls. "I'm crying and I'm shaking my head: 'No, no. I need to talk to somebody else.' They told me no." By then Adkins was screaming and begging. "I'm surprised they didn't call the cops," she tells me.

When welfare applicants finally prove that they exist, and show their material worth to be nothing, they usually receive far less than they need to live on. That's what happened to Curtis and Concita Cates. The maximum amount of aid that a single adult is eligible for in Santa Barbara, they learned, is $291 per month – $200 in food stamps, $91 in cash assistance. The waiting time for Section 8 housing, if you have priority status, is six months to a year. If you belong to the vast majority who don't have priority status – if you're not elderly, disabled or a veteran with dependents – the wait is between four and eight years.

Most of the social-service systems in the United States function not to help people like Curtis and Concita Cates get back to where they were, to a point of productive stability, but simply to keep them from starving – or, more often, to merely reduce the chances that they will starve. Millions of middle-class Americans are now receiving unemployment benefits, and many find themselves compelled by the meagerness of the assistance to shun opportunity and forgo productivity in favor of a ceaseless focus on daily survival. The system's incoherence and contempt for its dependents fluoresce brilliantly in the wake of a historic event like the Great Recession. When floodwaters cover our homes, we expect that FEMA workers with emergency checks and blankets will find us. There is no moral or substantive difference between a hundred-year flood and the near-destruction of the global financial system by speculators immune from consequence. But if you and your spouse both lose your jobs and assets because of an unprecedented economic cataclysm having nothing to do with you, you quickly discover that your society expects you and your children to live malnourished on the streets indefinitely. That kind of truth, says Nancy Kapp, "really screws with people's heads."

*

When Curtis and Concita were living in the parking lot of the Santa Barbara Community Church with Canaan, they used constant forward motion to evade despair. "I just wanted to wake up every morning, see the sunrise and be like, 'Let's go!'" Curtis says. Getting on the road was normalizing: using the truck as it was intended to be used, entering into conventional routines. The family would shower at a friend's or relative's house before dropping Canaan off at school. In the afternoons, he had sports, followed by activities at the Boys & Girls Club. "Spend as much time as you can in school and playing sports," his parents urged. "Wear yourself out."

"My son's a good pretender," Curtis says. "He has a knack for finding used clothes at stores and putting things together. All the kids at school thought he had money because he always dressed nice. He never had any gadgets or anything, but he always tried to make himself presentable."

"But there would be times he would ask for stuff," Concita is moved to say. "And I'm like, 'Do you even realize that we're homeless and living in a car? You want me to go buy you new shoes and clothes?'"

While Canaan was in school, Curtis and Concita would head to the local Employment Development Office to search for jobs online. They applied so diligently that they had to wait for new openings to pop up on job sites. The process was dismally impersonal, and their homelessness cast a pall over the search. Many employers demanded a permanent address – "that was the number-one thing we needed," Curtis says. In job interviews, they tried to hide the fact they were homeless, which often proved impossible. The interviewers assumed – Curtis and Concita could read it on their faces – that there were other causes of their homelessness: mental-health issues, drug addiction, a criminal past.

"You're trying to tell somebody, 'Listen, I'm just the person I was,'" Curtis says. "'I was working, things didn't end up the way they should have, and now I'm homeless. I'm not a dirtbag, I'm not a drug user.' But a lot of times people look at you and give you that vibe." Clothes could also be a problem. Once, sitting in an interview in a dress shirt and dollar tie he'd picked out at a thrift store, Curtis realized he'd forgotten to take the tag off the back of the shirt.

They learned where the free food was. One charity had a weekly farmer's market, so they would line up for fresh produce. For hot meals, which become tremendously valuable when you're on the street, they'd go to a charity called Casa Esperanza. I ask whether they generally had enough to eat.

"Not really," Concita says. "I'm glad my kid did, because he gets free lunches at school, free breakfast. But you don't have anywhere to warm up your food. You buy crackers. Dinner, we improvised and did what we could. A lot of the charity places, it's the same stuff over and over. 'Here's some dry beans and dry rice.' We didn't have anywhere to cook it. Or you would get the same bread; you have the same meal every night, in different forms. For plates and silverware, we'd just use the packaging, or sometimes I'd get it from McDonald's or Taco Bell."

The truck payment – $424 a month – was always a problem. "Without it, we don't have shelter, we don't have transportation, we don't have a way of getting to job interviews," Curtis says. When they got their unemployment benefits, much of the money went straight to the truck payment. "My thinking was, as long as I'm throwing them money every freaking week, maybe it'll keep the repo guy off of us," he says. "And we dodged that, too – we didn't let anyone know where we were at."

Curtis asked people if they needed their houses cleaned or lawns mowed. He offered the services of his pickup. He learned to collect cans and bottles and redeem them at recycling centers. One sunny Monday, he was in a park picking cans out of recycling bins. He looked around and noticed several other homeless men doing the same thing. "Yeah, I'm homeless," he thought.

When the family got back to the church parking lot in the evenings, they didn't want to talk to anybody. "I just wanted to pull up, drop the seats, go to sleep," Curtis says. There was an electrical outlet outside the church, and they had a DVD player and an extension cord, so they could watch movies. They didn't need curtains because "all the breathing steams up the windows." The truck had an extended cab; Curtis and Concita reclined in the front seats and gave the backseat to Canaan: They wanted to make sure he slept well.

It was odd to be confined in such a small space. "Sometimes it was a little too intimate," Curtis says. There were times when Concita wanted to give up. "I'm going to take my son and go back home to my brothers and sisters, and you stay here," she'd tell Curtis. They'd fight, but Curtis would say that they needed to stay together, and ultimately Concita would agree. "I always wanted to be with my family," she says.

The worst moments came when they felt immobilized, indefinitely tethered to the lot. "That's when you really feel like you're going crazy," he says. "You feel the pressure of everything: 'I'm not doing anything. I'm not being productive. I'm not making anything happen.' So any friends we had anywhere, we'd offer to cook and clean for them if we could crash that night. This is how it went every night: 'Let me call so-and-so.' 'Hey, can we crash at your pad?'"

Sometimes, through odd jobs and recycling, they saved enough for a night at a Motel 6.

"That was an 'ahhh' moment," Curtis recalls.

"Just to take a shower and lay in a bed," adds Concita. "But then you have to carry all your personal stuff."

"You have to bring all your clothes and everything you have with you," Curtis says. "You carry your life with you."

"Every day I'd pack everything up, make sure everything's secure and then go off and do everything again," Concita says.

"We were battling depression," Curtis says.

"I was," Concita says. "I'd cry all the time for stupid little things. At the time, it probably wasn't stupid, but I can't think about it – I'm going to cry now." She pauses but doesn't cry.

"It takes a lot of your pride," Curtis says. "It's humiliating to be begging for help. I can see how someone can get discouraged and give up, because I felt that way at times, and I'm a motivated person. I have goals in life. I can honestly see how someone that has maybe other issues could just say: 'I don't even want to deal with this.'"

Things have eased up a bit since their Section 8 apartment came through. Curtis is still collecting unemployment, but Concita found a part-time job at a grocery store. I ask whether they celebrated when they spent their first night in the new apartment. They look at each other. "I think we just collapsed," Curtis says.

"We put air in the mattress and just slept," Concita says. It was a queen-size mattress, and they all slept on it together.

"And for the first two or three weeks, we all still slept in the living room as a family," Curtis says. "No one wanted to go in their rooms. We were so used to being stuck together that we all stayed together. After a while, we started venturing off."

"My son, every now and then, he'll say, 'Mom, can you lay down with me?'" Concita says. "And I'll go in his room until he falls asleep."

For the first month after getting the place, she says, "I didn't want to go anywhere. I didn't want to talk to anybody. I just wanted to be in this house."

"She wouldn't leave," Curtis says.

I am reminded of something Nancy Kapp told me. "Homelessness gets in your bloodstream," she said, "and it stays there forever."

*

"Self-possession of mind, bro – that's the only way I got through being homeless," the ex-soldier tells me. We're sitting in his brand-new Section 8 apartment, which resembles the Cateses' in its interior spareness and stucco insubstantiality. Until recently, Sean Kennan – he doesn't want his real name used – spent seven months sleeping in a 1971 Winnebago in the parking lot of the First Presbyterian Church. He had his four-year-old son and five-year-old daughter with him. (Out of respect, Kennan tells me, he doesn't want to discuss the children's mother.) He has agreed to show me the short-radius circle in which poverty had confined him while he and his kids were living in the Winnebago. He's wearing a camo field hat and black army fatigues.

"I put this outfit on for you," he says, "because this was how I rolled when I was in the RV. Combat uniform, black boots. Serious. The seriousness of it. I had three sets of these. I looked at it like I was on duty. I was on duty for my kids."

Kennan is 34 and quite short, with a long biker beard, a silver fleck of a nose stud and, almost always, a Wildhorse cigarette in one hand. Edgy energy keeps him in motion; he describes himself as "a very overanalytical individual."

Desperate to get his kids out of a homeless shelter after he lost his job in San Francisco, Kennan heard about the Safe Parking program from a friend. He saved his cash assistance for two and a half months and used the $700 to buy the RV, then waited two weeks until the rest of his welfare money came in to get it registered. "I basically plunged all the funds I had into the vehicle and then coped with just food stamps," he says. He and the kids named the RV Big Bertha. The First Presbyterian lot, which sits on a hillside in central Santa Barbara, has five spots in the Safe Parking program. Kennan received a spot at the edge of the lot. "When I rolled in that first night, I was so freaked out – never been to this town, don't know anybody," he says. "On the street, you run into crazy people everywhere. But there were two cop cars in the parking lot – it's a central location, and they were just sitting there waiting for calls. I was superstoked. You got your Safe Parking sticker on your windshield so they never bother you. It was comforting – very, very comforting."

After high school, Kennan knocked around the country for a while and then went to work for a relative in Florida as a vintage-boat restorer. September 11th inspired him to enlist in the army. He'd completed basic training and part of jump school when his back gave out, and he received a discharge. After moving to San Francisco with his kids, he struck up a child care arrangement with a friend and got a job in the packaging department at the U.S. Mint. It was a good job, but the Treasury Department was cutting back in the wake of the economic collapse, and Kennan couldn't get enough hours to get by. Around the same time, his child care arrangement fell apart, making it difficult to look for work, let alone hold down a full-time job.

The RV now sits on the street, in front of his new apartment. We stop to look at it on the way out. Kennan has pulled off its roof and walls and begun reframing it. He wants to both work and to care for his kids, he says, and the only way to do that is to have his own business. He'd like to get back to the kind of vintage-boat restoration he did in Florida.

"In essence, what you see out here has a lot of meanings," he says. "Because it's one, a prototype, and two, a backup plan." When the RV is fully rehabbed, he says, it will serve as a mobile advertisement for his restoration business. "There's a lot of people around here who have the money for toys," he says. The backup plan involves the fortification of the RV, survivalist style: waterproofing, solar panels, all-climate functionality. The Winnebago had been in rough shape when he lived in it with his kids, and Kennan had vowed that they would never again have to rely on such dicey shelter.

"Big Bertha has a lot of meaning to my family," he says. "She took care of us, now we're taking care of her."

I ask Kennan if he'll drive my car so I can take notes. As we pull away from the apartment, he says, "Man, I haven't driven a car in so long. This is weird, this is really weird. Just being in a car, period. So low. You're so low." We take Highway 101 northwest, beginning a tour of the world he and the kids inhabited after leaving the homeless shelter and striking out in Big Bertha. "The shelter was almost like those reality-TV shows where you get dropped into a situation," he tells me. "I'd never been on welfare before. I had no clue. I'd just heard people talk about it. What do you do? Die, kill yourself, or turn to drugs – and I do none of that. I got food stamps and cash aid for the kids. I got an old bike with a kid cart so I could get from point A to point B, because I had no transportation. I had a little cover for the cart in case it was raining."

We get off the highway and head down a commercial through street called De la Vina. Once he got the RV, he discovered that the roof leaked, so he bought a tarp and bungee cords to cover the holes. He ripped out the foul carpet ("It was so nasty, bro. It freaked me out to where I thought my kids were going to get sick"), and he strapped the bike and the kid cart to the roof.

"But now, what are you gonna do to shower your children?" he asks. "The very first thing was, 'How do I shower my kids?'" The weather was too cold for a camping shower. When he signed up for the Safe Parking program, Nancy Kapp told him about discounted memberships at the YMCA, and he began showering his kids there.

From De la Vina, we turn in to a strip mall. Kennan pulls into one of the spots where he used to park the RV after he finished shopping at Ralphs Grocery, a nearby supermarket. He often cooked something for the kids here, which sometimes drew complaints from the owners of a Chinese restaurant and a pizza place in the mall.

Getting out of the car, we take a short walk to Mission Creek, which runs under De la Vina and connects the strip mall to Oak Park, where Kennan and the kids would spend the better part of their days after leaving the First Presbyterian lot each morning at dawn. The creek runs clean, between stands of old oaks, with no trash in the bed – a hallmark of Santa Barbara. One of their favorite activities was to walk from Oak Park up the streambed on the way to Ralphs.

"We called it our Journey," Kennan says. "I'd say, 'Hey, who wants to get fruit? Who wants to get vegetables?' We'd go all the way down the creek to Ralphs to get food. The kids loved it." Along the way, they'd carefully clear clumps of sticks and leaves lodged between rocks in the creek bed. Kennan told the kids they needed to do this so "the water could flow properly." This became a serious undertaking, and the regularity of the Journey steadied their lives.

Returning to the car, we drive down to Oak Park. At its edge, a road winds through a little wood; we turn onto it and find the parking spot they occupied most mornings, deep in oak shade and just above Mission Creek. Being here leaves Kennan thoughtful; as if to preclude sentiment, he abruptly pulls out, and we drive along the length of the park: a broad, oak-canopied lawn along the creek, a spacious playground, a wading pool for kids, bathrooms. Kennan points to a public tap near the stream.

"This park has everything, bro, everything you could want," he says with the tenderness, almost wonderment, that people in the Safe Parking program express when talking about any public amenity that affords comfort: clean water, electrical outlets, showers, a safe green space, a good playground.

From Oak Park we turn right onto a road leading back to Highway 101, Kennan excruciatingly conscious of the road's steep grade. He'd run out of gas a few times trying to make it up the hill – the RV's gas gauge was broken – and had to carefully roll downhill to get as close to the nearest gas station as he could. "The major issue was always gas," he says. "The RV was really guzzling gas bad – to the point of over $300 a month just for the small circle we would do around here." The First Presbyterian lot was partway up a steep hill, and every night, the ascent burned a ton of gas: "It sucked, bro." Big Bertha was also bedeviled by electrical issues. O'Reilly Auto Parts offered free battery charging, and Kennan took them up on it every week. "They got kinda tired of it," he says.

We get off the 101, and after a few turns pull into the YMCA parking lot. Kennan used to park at the very edge of the lot, to minimize conspicuousness. The Y is a big, modern, glassy facility, built around a courtyard. With the familiar note of thankful wonder, Kennan says, "They got so much cool stuff in there, bro. So much cool stuff."

We head toward the parking lot at First Presbyterian. The basic routine was to leave the church lot at 7 a.m. for Oak Park, where they would play and hike until about 3 p.m. Then they'd drive to the Y for more activities and a shower. Then errands – battery charging, welfare paperwork, grocery shopping – and finally back to the church lot.

The First Presbyterian Church, ensconced in a neighborhood of mountain views and landscaped mission-style homes, is a large, red-roofed, cream-sided­ building with stained-glass insets. The smooth parking lot forms a hilltop plateau dotted by a few islands of fit palms; past it, the hill descends to a little valley of tile roofs and treetops. We park in Kennan's former spot, at the back of the lot, and get out. The land falls away just past a chain-link fence. A few weathered blue plastic chairs stand next to a Safe Parking porta-potty.

"We used to sit in those chairs at night and look at the stars," Kennan says. They could hear owls hooting after dark, visible sometimes as shadowy forms in the moonlight. The lot was mostly empty, and Kennan kept to himself. "My kids are my best friends and they consume all my time," he says. "When I parked, that was it. The blinds were drawn, the sun goes down. 'Love you, kids, time to go to sleep.' Seven, 7:30, they were out. I would relax for a few minutes, play card games or something on my cellphone, and then I would go down too." Each day had been filled with peril.

"It was a complete disconnection from everything that people are technically connected to," Kennan says. "Under the circumstances that you're in, if you don't have the mind frame to understand that every day is beautiful, you can become bogged down and break. It was six and a half months before I really hit my breaking point." He had applied for Section 8 housing, but nothing had come through. "I was very close to going back to the shelter if the RV broke down," he says. "It was just a baby step up."

He'd already headed for the desert, in search of a cheap trailer park, when he decided to call one last time about the Section 8 housing. "Your name is still on the list, sir," he was told, "but there's nothing available." Later that day, though, he got a call – an apartment had unexpectedly come open. "I almost started to cry, I'll be honest with you," he says.

At first, when the family moved into the apartment, they almost never left. "We hibernated for about a month," Kennan says. "We'd go to the grocery store, but that was about it. We'd watch movies constantly. We just hung out, ate a lot of fruits and vegetables. I'd make a big salad, and everybody got a fork, and we'd just hang out and watch movies and eat. We got over it eventually."

Kennan lights a cigarette and tells me an elaborate story he'd made up for his kids while they were in the homeless shelter. The lights there didn't go out until 9 p.m., and the kids were in the upper bunk, so they couldn't fall asleep before then. He'd climb up and tell them stories until the lights were turned off. Soon it was just variations on one story, about a guy named Hippie Bob, who lived on a beach in Hawaii and made bonfires and rode sharks. When the kids asked what the shark's name was, "Jabber Jaws" popped into Kennan's head. Hippie Bob would ride out to a buoy on Jabber Jaws, put on his scuba gear, which was stored there, and Jabber Jaws would take him down to the land of the Snorks, who gave Hippie Bob all the gold they'd amassed from sunken pirate ships. Hippie Bob didn't need the gold, but they insisted he take it, so whenever he visited the Snorks, he brought them beautiful rocks and minerals. Before long, Kennan and his kids made up a theme song to go with the story: "Come along with the Snorks!/So happy to be when we're under the sea..." Now, whenever Kennan begins to talk about Hippie Bob, his kids immediately go silent.

*

One chilly, rainy morning, I meet Janis Adkins shortly after she's woken up outside the Santa Barbara Community Church – the church to which Curtis and Concita Cates had been assigned. Adkins had parked in the overflow lot on the sly, as she sometimes does, to enjoy the view of the mountains. Wearing a purple shawl and blue Patagonia fleece vest over a fleece shirt, she was beginning to straighten the back of the van. It had been so cold she'd had to sleep in her clothes, and I express surprise that they are unwrinkled. She laughs. "Fleece doesn't wrinkle," she says. It was a valuable trait.

She suggests that I sit in the driver's seat while she finishes getting ready. "What's a common denominator for all of us is we can't use the passenger seat, because it's so full of stuff," she says. I climb in. A shoulder bag holding her résumés is slung over the headrest. Scattered across the front seats: a CVS "Interdental Brush and Toothpick," a bottle of Wellness Formula, a bottle of Wellness Herbal Resistance Liquid, a bright-orange plastic box with a snap lid that reads "Homeopathic Emergency Kit Remedy List" and a nylon pouch full of more supplements and remedies.

She nods at all the homeopathic stuff. "It's hell getting sick in a car," she explains. "So I have an arsenal of things to keep me healthy." The homeopathic emergency kit had been sent by a friend, whom Adkins calls whenever she feels like she's coming down with something.

She begins to brush her teeth, excusing herself a few times to go spit at the edge of the lot. When I ask about water, she says, "Because I was a river guide, you really get used to brushing your teeth without water – you have enough saliva in your mouth."

The weather clears momentarily, and a half-rainbow appears over the hills. I ask if she uses a camp stove. "No," she says. "I'm very afraid of fire – paranoid of fire. I'm scared to use it in the van. And outside – there's no table for it." Because she doesn't cook, she relies almost exclusively­ on three places for a full, hot afternoon meal: Panda Express, In-N-Out Burger and Taco Bell. They're the only sufficiently cheap places, and to save gas, she goes to whichever is closest.

"I had a cooler, but I needed block ice, and there's only two places to get it," she says. "Cube ice is more expensive and doesn't last long. Block ice lasts two or three times longer, but the gas to drive to get it is expensive. It's all a balancing act. Everything is done on faith and trust – and that's not a religious thing. You know that you're a heartbeat away from the bush. I have to be able to say to myself, 'OK, you're on "E," you have $5 in food stamps, and you have a dollar. You're OK.' I have to trust that if I lose 50 pounds I'll still be OK. Something happened to me when I was a little kid and I started saying, 'I'll be OK, I'll be OK.' And I've said it ever since. It's constant in my head."

I get out of the driver's seat and climb into the back. Adkins gets behind the wheel and we head south, to Whole Foods, which has a breakfast bar that can be exploited. "Having a hot meal early is essential when it's this cold," she says. On the way, a sudden anxiety seizes her. "If we see a cop, you lie down," she says sharply – the only time I would hear this tone in her voice. Tickets for seat-belt violations in California start at $142 – the equivalent of about 28 meals.

"Shit, I might have to stop and get some gas," she says. "The cheapest gas I can find is down the road. I try not to drive anywhere past this area if I don't have to. Yesterday I had to go downtown, and it took a lot of gas."

We pull into a gas station. At the moment, regular gasoline is $4.35 a gallon. Adkins gets out her wallet and looks at the few bills in it and then looks at a mini­calendar on the center console. She has $23. "Ten dollars in the tank, and $10 for me for cash," she says. I stand with her while she pumps. "I'm getting a whopping 2.29 gallons. That's supposed to get me 40 miles. That should last me until Tuesday." She grins. "I live near where I park."

As we turn into the Whole Foods lot, she says, "In my mind right now, I know I'm going to use the bathroom to wash myself, wash my face. And I park far away from the store because I hate having people look in my car. I don't think anyone's going to steal anything in the Whole Foods lot, but... it's embarrassing. I'd rather people not know."

We walk into the illuminated, multihued splendor of Whole Foods, briskly passing everything that stands between us and the breakfast bar. Adkins looks a little more careworn than the other customers, but in her sheepskin boots and Patagonia fleece, she doesn't look out of the ordinary. She could be the successful nursery owner she once was, stopping for a healthy breakfast on her way to work.

"It's all by weight, so you get the lightest thing," Adkins says. "Stuff without water. They have this really nice burrito that's really light. I get bacon, and it's less than $4." For her that's not cheap, but it's workable; she can go without another full meal the rest of the day if necessary.

At the register, Adkins pays with a fistful of coins. The cashier patiently counts pennies, nickels, dimes and quarters. Adkins asks for a cup of hot water. We stop at the condiments stand, where she gets utensils and puts honey in the water in advance of the tea bag she has in the van.

As we climb in, I realize the van smells faintly of slept-on sheets. Adkins is a clean person – she showers and does laundry regularly – but vehicle dwellers live in spaces too small to easily dissipate quotidian odors.

Driving back up to the church lot would burn gas unnecessarily, but the view there is restorative. "Keeping my spirits up is important," she says, almost to herself. "And I can also finish the chores in my car, like packing up the trash, without being looked at."

The lot is empty when we arrive. "Do you want a sea view or a mountain view?" Adkins asks. I choose the mountain view because of the rare snow. She drops a bag of Yogi Vanilla Spice tea into her cup of hot water and eats her breakfast quietly, using the plastic fork she'd picked up at Whole Foods.

As she finishes up, she tells me she'd recently applied for a sales position at REI and had been turned down. She'd gotten to the second round, a group interview, and had gone in thinking it would be ridiculous if she didn't get the job, given her qualifications. "But I was cocky in the group interview," she says. "I should have left my ego outside. Ego is good for getting some things done, but not when it leads to arrogance. And I was probably more nervous than I realized." It must be psychically wrenching, I think, to be at once so impeccably qualified and so helplessly destitute. In any event, more than 200 people had applied for the position.

She pauses, then says, "It's weird. When people find out I'm homeless, it changes how they feel about me. I get declined for jobs. As soon as they learn I live in a van, I'm a thief."

Responding to a job listing online, she had spoken with a woman who wanted to exchange pet care for rent on a trailer she owned. But during the interview, the woman asked where she lived, and Adkins could only evade the question for so long.

"What?" the woman responded. "How old are you? And you have no money?" Adkins tried to caution her against judging homeless people, but she knows that as soon as she has to make that kind of appeal, she's already lost.

Another time, she got an interview for a job as a dog walker. The potential employer was a young woman in her twenties, and Adkins thought she'd be open-minded, so she didn't hide her situation. The woman's face changed instantly. Adkins looked at her and took hold of her hand and gave it a squeeze. "It doesn't change who I am," she told the woman. "I'm still the same person. I'm honest, I've always worked hard and I'll work hard for you." But the woman had already withdrawn, and the next day she reposted the ad.

Curtis Cates, looking back on the time he spent living in his pickup, recognized the impossibility of convincing people that he was still "just the person I was." Sean Kennan recognized that the demands of homelessness create a "complete disconnection" between those living on the streets and the rest of society. Janis Adkins, unable for the moment to see a way out of her homelessness, doesn't have the benefit of hindsight. She would rather not give up on the possibility of being treated normally. "I try to not have the van factor into anything I do," she says. "It's where I live – it's just smaller."

*

The Great Recession cost 8 million Americans their jobs. Three years after the economy technically entered recovery, there are positions available for fewer than one out of every three job seekers. In this labor market, formerly middle-class workers like Curtis and Concita Cates and Janis Adkins and Sean Kennan cannot reliably secure even entry-level full-time work, and many will never again find jobs as lucrative and stable as those they lost. Long-term unemployment tarnishes résumés and erodes basic skills, making it harder for workers to regain high-paying jobs, and the average length of unemployment is currently at a 60-year high. Many formerly middle-class people will never be middle-class again. Self­identities derived from five or 10 or 40 years of middle-class options and expectations will capsize.

I last see Janis Adkins in the off-leash area of Tucker's Grove Park, near the lot where she parks her van. She takes her dog, Jojo, here several times a week. Jojo is a shaggy, shambolic border collie, 16 years old and blind and deaf and nearly toothless. Life in the van recently became too hard for him, and a woman Adkins met at the Wildlife Care Network found someone willing to take him in.

The day is mild, and Adkins is wearing the sandals that she's worn almost exclusively in nice weather for two years. We sit on a bench as Jojo snuffles around gimpily. The off-leash area, an ample lawn perforated by gopher holes, forms part of a meadow that ends in green hillsides, with low mountaintops behind – surplus gorgeousness typical of Santa Barbara.

When she returned to the city, Adkins tells me, she went to a plant nursery where she'd worked as a teenager and asked her old boss if he needed help. He said he was letting people go, not hiring them, but she'd gone back three more times; the last time, a few weeks earlier, he'd said, "You still haven't found a job? Come on," and gave her two eight-hour shifts a week at $10 an hour. Later, she'd added two more shifts, but the day before, her manager had warned her that unless business picked up, he would have to let her go.

"I wonder whether that was just an out, in case they want to fire me," Adkins says. She pauses. "I've lost a ton of confidence in the last year and a half," she concedes. "It just takes a wedge out of you."

The staff at the plant nursery treat her like an entry-level salesperson. Not so long ago, they might have been her employees. "You learn to let go of the concept of identity, of what 'I' means," she says. "That's a concept people really have trouble with. But it's been important for me. I've let go of my ego – or I'm trying to let go: I could be the dishwasher, I could be the janitor. I'm trying to re-form, trying to allow the job to become me. And I keep referring back to the fact that a lot of people would not allow it. They would hold on to their identity – hard."

Adkins has just gotten her first paycheck from the nursery, but expenses and debts have evaporated it right away. She went to the YMCA to take care of her outstanding balance of $80, but she could only afford to pay it down by $20. The young woman behind the desk balked, indignant. Not long afterward, the manager of the Y called her to talk about the balance. He appreciated her payment, he told Adkins. "Why don't we just make it a clean slate?" he proposed.

Adkins stops talking. I look over at her. She has her head in her hands; her shoulders are shaking. Finally, she looks up and wipes her eyes.

"I don't know what happened there," she says. "I think what got me was the recognition that I'm trying. He saw I was trying. He saw I was a responsible person." She pauses. "Because," she says, her voice breaking, "I always have been."

Copyright ©2012 Rolling Stone

http://www.rollingstone.com/culture/news/the-sharp-sudden-decline-of-americas-middle-class-20120622 [with comments]


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Ex-Walmart Greeter Jan Sullivan Loses Job, Home After Being Attacked By Customer



By Harry Bradford
Posted: 07/02/2012 12:47 pm Updated: 07/03/2012 1:14 pm

Violence at Walmart on Black Friday [ http://www.huffingtonpost.com/2011/11/25/black-friday-wal-mart-violence_n_1113401.html ] isn't rare. One New York woman was arrested last year after punching a Walmart greeter on Black Friday [ http://www.huffingtonpost.com/2011/12/26/jacquetta-simmons-arrested-punched-walmart-employee_n_1169984.html ]. Likewise, a Los Angeles woman pepper-sprayed 20 people [ http://www.huffingtonpost.com/2011/11/25/walmart-pepper-spray-black-friday_n_1112548.html ] in an effort to improve her chances of getting deals on electronics on the same day in 2011.

One former employee is being forced to completely rearrange her life after another Black Friday altercation.

Jan Sullivan, 73, of St. Augustine, Florida, is moving into a mobile home after being fired from her job as a greeter at Walmart [ http://www.tampabay.com/features/humaninterest/article1237349.ece ] over an altercation with a customer on Black Friday last year, the Tampa Bay Times reports. Sullivan was fired from the employer she called her "home" and "family" for 22 years, three days after she reportedly grabbed a customer's sweater in response to the customer shoving her.

After sending out dozens of unsuccessful job applications, Sullivan has been forced to sell her home. Making matters worse, she’s not entitled to unemployment benefits either because she was fired for “misconduct.”

This is far from the only instance of dubious treatment by Walmart toward its employees. In fact, the world's largest retailer faced the biggest class action lawsuit ever in the U.S. when 1.5 million female Walmart employees [ http://www.supremecourt.gov/opinions/10pdf/10-277.pdf ] led by greeter Betty Dukes alleged sex discrimination [ http://www.huffingtonpost.com/2012/02/04/walmart-women-sex-discrimination_n_1253056.html ] by their employer. That case may have stalled after an unfavorable Supreme Court decision [ http://www.huffingtonpost.com/2012/06/20/betty-dukes-walmart-supreme-court_n_1613305.html ] last year, but, in May, the Labor Department fined Walmart $4.8 million [ http://www.huffingtonpost.com/2012/05/02/walmart-overtime-labor-department-settlement_n_1470543.html ] in back wages over unpaid overtime.

Sullivan's story is also reminiscent of that of Girshriela Green, who found herself battling Walmart for disability [ http://www.huffingtonpost.com/2012/03/21/la-walmart-girshriela-green_n_1365758.html ] after injuries sustained on the job made it impossible to work. As of March, Green was getting by on California food stamps and welfare, while teaming up with Walmart employee labor group OUR Walmart in the hopes of being fully reinstated.

Copyright © 2012 TheHuffingtonPost.com, Inc.

http://www.huffingtonpost.com/2012/07/02/jan-sullivan-walmart_n_1643109.html [with comments]


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After Years of False Hopes, Signs of a Turn in Housing


A house in San Francisco that has been sold. Pending home sales are increasing along with sale prices, and construction companies are clearing lots and raising frames for new homes.
Justin Sullivan/Getty Images

Graphic
Some Positive Housing News
Many housing figures released this week indicated improvement.
http://www.nytimes.com/interactive/2012/06/28/business/some-positive-housing-news.html

By BINYAMIN APPELBAUM
Published: June 27, 2012

WASHINGTON — Announcements of a housing recovery have become a wrongheaded rite of summer, but after several years of false hopes, evidence is accumulating that the optimists may finally be right.

The housing market is starting to recover. Prices are rising. Sales are increasing. Home builders are clearing lots and raising frames.

Joe Niece, a real estate agent in the Minneapolis suburb of Eden Prairie, said he recently concluded a streak of 13 consecutive bidding wars over homes that his clients wanted to buy. Each sold above the asking price.

“I just had a home that wasn’t supposed to go on the market for two weeks sold before it even went on the market,” Mr. Niece said. “It’s definitely a lot different than what we saw” during the last few summers.

Like the economic recovery that began three years ago, what happens next is likely to prove a little disappointing. The pace of recovery will probably be slow, and the prices of many homes will continue to decline.

Millions of people remain underwater, owing more on their homes than the homes are worth, and unable to sell. Millions of families still face foreclosure [ http://topics.nytimes.com/top/reference/timestopics/subjects/f/foreclosures/index.html ]. And a setback in the still-fragile economic recovery could easily reverse the uptick in housing prices, too.

But roughly six years after the housing market began its longest and deepest slide since the Great Depression [ http://topics.nytimes.com/top/reference/timestopics/subjects/g/great_depression_1930s/index.html ], a growing number of experts and people who actually put money into housing believe the end has come.

“Our sense is that the market is recovering, and we’re extremely confident that it’s not going to get worse,” said Ronnie Morgan, a San Diego real estate professional who recently created a $10 million partnership to buy foreclosed homes. The group, Alegria Real Estate Funds, already has bought about 20 homes in suburban communities, most of which they plan to hold as rental properties.

“It feels very much like we’ve hit a bottom and we’re starting to come off of that bottom,” said Stuart Miller, chief executive of Lennar, a major national home builder based in Miami. The company said Wednesday that second-quarter profits [ http://phx.corporate-ir.net/phoenix.zhtml?c=65842&p=irol-newsArticle&ID=1709272&highlight= ] were higher than expected, and orders for new homes rose 40 percent.

“I’m a little nervous,” Mr. Miller quickly added in a conference call with analysts, “about saying the word ‘recovery.’ ”

The trend is clear in the data. The widely respected S.&P./Case-Shiller index reported earlier this week [ http://www.standardandpoors.com/servlet/BlobServer?blobheadername3=MDT-Type&blobcol=urldocumentfile&blobtable=SPComSecureDocument&blobheadervalue2=inline%3B+filename%3Ddownload.pdf&blobheadername2=Content-Disposition&blobheadervalue1=application%2Fpdf&blobkey=id&blobheadername1=content-type&blobwhere=1245335808401&blobheadervalue3=abinary%3B+charset%3DUTF-8&blobnocache=true ] that sales prices for existing homes rose in April for the first time this year. Several other measures, including a seasonally adjusted version of the index, show that price increases began in February. The pace of housing construction has increased. And the National Association of Realtors [ http://topics.nytimes.com/top/reference/timestopics/organizations/n/national_association_of_realtors/index.html ] said Wednesday [ http://www.realtor.org/news-releases/2012/06/pending-home-sales-up-in-may-continue-pattern-of-strong-annual-gains ] that pending home sales climbed to the highest level since the end of a federal tax credit for first-time buyers in September 2010.

This is the fourth consecutive year that the housing market has shown signs of revival, and each previous episode ended with prices renewing their downward slide.

But with each passing year, an eventual recovery has grown more likely. Prices have continued to fall, and the economy has continued to recover, a combination that has expanded the pool of potential buyers. The population has continued to grow while few new homes have been built.

Basic indicators of market health that bulged during the bubble, like the ratio of housing prices to income, have returned to more normal levels.

Government efforts to help homeowners have intensified, allowing more borrowers to refinance or avoid foreclosure.

“All bets are off if anything happens to the economy, but apart from that, I think the fundamentals look better than they’ve looked in 17 or 18 years,” said Richard K. Green, a professor of real estate at the University of Southern California.

Professor Green cited the combination of rising rents and low mortgage rates as a powerful inducement to potential buyers, both renters who would prefer to own and investors who want to become landlords.

“Compared to a lot of other investments right now this looks pretty good,” he said.

The influx of investors is a major reason that the market is looking stronger. Mr. Morgan, 56, built apartments before the housing crash. In 2010, seeing a new opportunity, he and some friends started bidding at the foreclosure auctions then held on the steps of the San Diego County Courthouse.

At first they bought properties to renovate and resell. Now they are focused on potential rental properties in the kinds of gated, planned communities in suburban San Diego that once were populated almost exclusively by people who owned their homes. Some of their tenants are former homeowners.

And competition has increased. The auctions were moved from the courthouse steps last year because the crowds had grown too large.

“There’s not a whole lot of other places to put your money,” Mr. Morgan said.

There are still reasons for caution. An unusually warm winter seems to have given a temporary and misleading boost to a range of economic indicators.

The pace of economic growth remains slow and fragile, shadowed by the risk that politicians in Europe and Washington will fail to address looming problems.

And the rise in prices is happening despite the vast number of vacant houses awaiting buyers, up to two million more than the normal level, with several million more houses still at risk of being foreclosed.

But this “shadow inventory” is not distributed uniformly, according to a new analysis by Goldman Sachs. Even within metropolitan areas like Phoenix, the vacant houses are clustered in less desirable neighborhoods, while buyers are seeking homes in areas where there are few vacancies.

Under these circumstances, the researchers concluded, “It is possible for us to see both house price increases and excess housing supply at the same time.”

Indeed, in a growing number of areas demand for homes is outstripping supply.

The number of homes for sale has been falling for more than a year, according to the National Association of Realtors [ http://www.realtor.org/news-releases/2012/06/existing-home-sales-constrained-by-tight-supply-in-may-prices-continue-to-gain ]. Some owners are waiting for prices to rise; some of them must wait because they are underwater.

Mr. Niece, the Minnesota real estate agent, said he and his partner had seen their book of listings decline from about 120 properties to 70 properties, about 45 of which already are under contract.

“I have buyers every single day complaining that they can’t find houses,” he said.

Driving through a neighboring suburb last week, Mr. Niece said that he passed a sign outside another real estate office that read, “The market is great. We’ve sold all of our inventory. We need listings.”

*

Related

Home Prices Rose a Third Month in April (June 27, 2012)
http://www.nytimes.com/2012/06/27/business/economy/home-prices-rose-a-third-month-in-april.html

*

© 2012 The New York Times Company

http://www.nytimes.com/2012/06/28/business/economy/new-indications-housing-recovery-is-under-way.html [with comments]


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Romney's critiques of Europe raise some questions


People in Madrid enter an unemployment registry office. Europe's economic crisis has become a popular motif on the U.S. presidential campaign trail.
(Alberto Di Lolli, Associated Press / June 30, 2012)

He has accused President Obama of 'taking us down a path towards Europe' with his economic tactics. But critics say Romney's plans to shrink government could bring about comparable problems.

By Michael Finnegan, Los Angeles Times

June 29, 2012, 4:45 p.m.
BRUNSWICK, Ohio — It is Republican tradition to portray Europe as a socialist haven where high taxes and extravagant public spending on healthcare and retirement benefits show the folly of Democrats' big-government agenda.

But few have used the tactic as aggressively as Mitt Romney. For years, Republican crowds have applauded his scathing critique of Europe. As Europe's fiscal turmoil has posed a growing threat to the global economy, Romney has made it one of his main lines of attack against President Obama.

"He's taking us down a path towards Europe," Romney told supporters at aFather's Daybreakfast in this Cleveland suburb. "He wants us to see a bigger and bigger government, with a healthcare system run by the government. He wants to see people paying more and more in taxes."

The road to Europe, Romney said, leads to chronic high unemployment, low wage growth and massive debts that can trigger fiscal calamity.

But Romney's presentation ignores aspects of the European crisis that critics see as an illustration of how his own plans to shrink government could threaten the sputtering U.S. recovery. In Greece, Spain, Ireland and other Eurozone nations, unemployment has soared amid steep government cutbacks under austerity measures championed by Germany.

In Britain, critics of Conservative Prime Minister David Cameron blame the country's recent slide back into recession on his austerity agenda of scaling back government.

Obama has rejected austerity, calling instead for new federal spending on short-term stimulus measures, such as road construction and state aid to stop layoffs of teachers and other public workers, followed by long-term budget cuts to reduce the deficit once the economy recovers.

Facing diplomatic constraints, the president has avoided comparing European austerity to Romney's economic plans.

Former President Clinton, however, has been blunt about drawing political lessons from Europe — saying that Romney's vision of smaller government would kill jobs, both private and public.

"Who would have ever thought that the Republicans would embrace the austerity and jobless policies of what they used to derisively call old Europe?" Clinton told Obama campaign donors at a fundraising dinner with the president June 4 in New York City.

"I never thought I'd live to breathe and see, here they are, saying, 'Let's do the Eurozone's economic policy. They got 11% unemployment. We can get up there if we work at it.'"

The U.S. unemployment rate, which peaked at 10% in October 2009, dropped to 8.1% in April, then bumped back up to 8.2% last month.

Romney's digs at Europe are not just economic; they are also cultural. A December 2006 blueprint for his first presidential campaign, disclosed by the Boston Globe, featured Romney attacks on "European-style socialism" — aimed especially at France, even though Jacques Chirac, the French president at the time, was a conservative.

Foreseeing a race against Democrat Hillary Rodham Clinton, the PowerPoint blueprint included Romney saying the European Union wanted to "drag America down to Europe's standards," adding: "That's where Hillary and Dems would take us. Hillary = France."

Romney has used attacks along those lines ever since. Having lived in France as a Mormon missionary for 2 1/2 years in the 1960s, Europe is delicate turf for Romney. As head of the organizing committee for the 2002 Winter Olympics in Salt Lake City, he spoke French for two minutes in a video to welcome volunteers. "Bonjour, je m'appelle Mitt Romney," he began.

In March, Romney mocked Europeans at a rally in Wisconsin. He accused Obama of blocking oil, coal and natural gas projects, saying, "That's of course so that you can have the applause of the Europeans for all of the wind and solar that you're using."

Other Republicans have tried to keep the debate over austerity from muddying the party's political narrative on Europe.

In a recent speech at the Reagan Presidential Library in Simi Valley, House Budget Committee ChairmanPaul D. Ryan of Wisconsin said Democrats were overspending with borrowed money, just as he said European nations had.

Ryan's calls for deep tax and spending cuts, which Romney has embraced, are premised on a need for immediate steps to reduce debt — just as European austerity policies are. Yet Ryan distanced himself from the word "austerity" as he laid out his fiscal plans.

"We must avoid European-style austerity — harsh benefit cuts for current retirees and large tax increases that slow the economy to a crawl," Ryan said, noting that tax increases, too, are part of Europe's controversial debt reduction plans. "But too many in Washington are repeating Europe's mistakes instead of learning from them."

Like Ryan, Romney argues that tax cuts — and smaller government — will spur business investments that create jobs. When questioned on whether austerity might worsen unemployment, Romney has conceded that slashing government spending too fast would slow the economy.

But his emphasis remains on what he describes as the excessive spending and borrowing at the root of Europe's crisis.

"You know how many people are unemployed in Spain?" Romney asked the crowd in Ohio. "Twenty-five percent of the population. That's where European-style policies lead. I don't want to transform America into Europe."

[e-mail]

Copyright © 2012, Los Angeles Times

http://www.latimes.com/news/nationworld/nation/la-na-europe-campaign-20120630,0,1745453.story [with comments]


===


In Case You Were Wondering Why Everyone Wants To Work On Wall Street...

Henry Blodget | Jun. 27, 2012, 2:09 PM

Everyone hates Wall Street these days.

But everyone also wants to work on Wall Street.

And you can't blame them!

Wall Street is so important to our country that even after Wall Street helped nearly destroy the economy a few years ago, the country felt compelled to bail Wall Street out. (Car companies were allowed to go bankrupt. With the exception of Lehman Brothers [ http://www.businessinsider.com/blackboard/lehman-brothers-1 ], banks weren't.)

And Wall Street remains so important to our country that even now, four years after the financial crisis, the country is still subsidizing Wall Street--even though Wall Street is again making money hand over fist.

In fact, there was only a brief period in which Wall Street wasn't making money hand over fist. That was 2009, when Wall Street basically went bankrupt, nearly taking the economy down with it. But the country made sure that Wall Street didn't go bankrupt, and now, with zero-percent interest rates, interest-on-excess-reserves, and a host of other government subsidy tools, the country is making certain that Wall Street keeps making money hand over fist.

And while this perpetual taxpayer-funded profit infusion may be annoying to the other 90% of the economy (where's our subsidy?), it helps explain why millions of rational people are still desperate to work on Wall Street.

Now, one might justifiably argue that, given how much money Wall Street is making, the government should stop subsidizing it. But if one argued that, one would presumably be met with blank, incredulous stares by the likes of Ben Bernanke [ http://www.businessinsider.com/blackboard/ben-bernanke ] and Tim Geithner [ http://www.businessinsider.com/blackboard/tim-geithner ], whose mission in life appears to be to subsidize Wall Street.

So making the argument that we should stop subsidizing Wall Street would basically be like talking to yourself in a closet.

But in case you still don't quite appreciate just how much money Wall Street makes, here are some charts.

First, a reminder about how few Americans are fortunate enough to work on Wall Street.

The blue line in the chart below is the total number of employees in private industry in the U.S. (i.e., not government employees). The red line is the number of employees in the "financial services" industry, which includes Wall Street. The green line is the number of employees in the securities industry (e.g., Wall Street).


Business Insider, St. Louis Fed

And now let's look at how much profit those employees produce.

Here's a chart of profits-per-employee in the overall financial services industry. (Yes, the financial services industry encompasses a lot more than Wall Street. But it's not bank tellers and clerks who produce--or get paid for--that profit. And people don't flock to Wall Street because they want to be clerks).


Business Insider, St. Louis Fed

How does that profit per employee compare to the profit per employee in other industries?

Let's take a look!

Here's the profit-per-employee in the financial services industry (red) compared to the profit-per-employee in all other US industries (blue):


Business Insider, St. Louis Fed

See why everyone wants to work on Wall Street?

In fact, Wall Street is so fantastically profitable that financial-services industry profits now account for a staggering 45% of all the profits in our economy. 45%! And that's after the financial collapse.


Business Insider, St. Louis Fed

So, now you know why everyone wants to work on Wall Street.

And now you also know how positively outrageous it is that our government is still subsidizing Wall Street.

When is enough enough?

Copyright © 2012 Business Insider, Inc.

http://www.businessinsider.com/wall-street-profits-2012-6 [with comments]

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Financial Giants Are Moving Jobs Off Wall Street


From right, Garry Douyon and his partners in a biofuels company: Baldev Duggal, Chris Percival and Eric Leaphart. Mr. Douyon left RBS after his job moved to Salt Lake City.
Michael Falco for The New York Times

By NELSON D. SCHWARTZ
Published: July 1, 2012

New York’s biggest investment houses are shifting jobs out of the area and expanding in cheaper locales in the United States, threatening the vast middle tier of positions that form the backbone of employment on Wall Street.

The shift comes even as banks consider deeper staff cuts here, which could undermine the state and city tax base long term.

“Places like New York or London will remain financial centers, but most of the players are taking a much harder look and asking whether they can move large numbers of jobs,” said James Malick, a partner at the Boston Consulting Group who advises banks on relocation. In addition to higher taxes in the New York region, employers face real estate and labor costs significantly above the national average.

Consultants say they have seen a sharp pickup in this trend, known as near-shoring, as opposed to offshoring overseas. Goldman Sachs [ http://topics.nytimes.com/top/news/business/companies/goldman_sachs_group_inc/index.html ], during a presentation to investors in late May, even boasted of the cost savings that relocating jobs can bring.

“Some functions need to stay in the United States, but they don’t need to be in New York City or near the client,” Mr. Malick said. And with most investment giants facing anemic revenue and more stringent regulation that cuts into trading revenues, relocation is more tempting than it was before the financial crisis.

Low-level jobs have already migrated to call centers and back offices overseas, while top-end traders and bankers are secure in the New York area, experts say. Instead, services like accounting, trading and legal support, and human resources and compliance are being shifted to places like Salt Lake City, North Carolina and Jacksonville, Fla.

Garry Douyon enjoyed his job helping process trades and working with clients and traders at RBS in Stamford, Conn., earning nearly $100,000 a year, but when the firm decided last fall to move his team to Salt Lake City with a salary of $60,000, he said he really didn’t have much of a choice.

“I didn’t even consider moving,” said Mr. Douyon, who founded a biofuels [ http://topics.nytimes.com/top/reference/timestopics/subjects/b/biofuels/index.html?inline=nyt-classifier ] company, All-City Clean Energy, in Brooklyn with four partners. “I liked RBS but I have my roots here, I have a home, I have kids in school.” A few members of his team decided to go, he added, but most chose to stay in the New York area.

The potential shift has profound implications for New York’s tax base and economy because of Wall Street’s outsize financial profile. Last year, the industry contributed 14 percent of New York State’s tax revenue.

After peaking at 213,000 in August 2007, securities industry jobs in the state fell more than 15 percent in the wake of the financial crisis, according to the Bureau of Labor Statistics. Since then they have risen nearly 12,000, but at 191,200, employment is well below pre-crisis levels. By contrast, over the same period, Delaware gained 1,300 securities jobs while Arizona picked up 2,600.

The federal government does not specifically track securities jobs in Utah, North Carolina or Florida, popular locations for near-shoring. But data from firms illustrates the trend.

Since the end of 2009, Deutsche Bank [ http://topics.nytimes.com/top/news/business/companies/deutsche_bank_ag/index.html ]’s work force in the New York area has fallen to 6,900 from 7,400 even as its staff in Jacksonville rose to 1,000 from 600. Credit Suisse’s staff in the New York region has dropped by 500 in the past four years, but the firm has added 450 positions in North Carolina’s Research Triangle, in the area of Raleigh, Cary, Durham and Chapel Hill. And last year, Bank of New York Mellon cut 350 jobs in New York City while hiring 150 people in Lake Mary, Fla.

New York’s status as a financial capital is not likely to fade, and the state’s share of securities jobs in the United States has held steady at about 24 percent in recent years. “Even as the securities industry goes through a difficult time, New York remains the financial capital of the world and I don’t see that changing anytime soon,” said Thomas P. DiNapoli, the New York State comptroller.

But regional offices perform more and more of the sophisticated work usually associated with Wall Street and nearby trading hubs like Jersey City and Stamford. This parallels a shift in some technology jobs away from Silicon Valley to Portland, Ore., and cities in Texas, said Michael Shires, a professor at the School of Public Policy at Pepperdine, who prepares an annual ranking [ http://www.newgeography.com/best-cities-job-growth-2012 ] of the best cities for employment.

“I expect to see an acceleration,” he said, noting that while these middle-tier jobs may lack the salaries and glamour usually associated with Wall Street, “these are the support people that actually make the stuff work.” What’s more, there are many more positions in the middle of the jobs pyramid at Wall Street firms than at the top.

Deutsche Bank’s office in Jacksonville started out in 2008 as a back-office service center, according to bank officials. Since then, technology workers, legal and compliance staff members, and trading support jobs have been added. More recently, some traders who deal directly with clients are being located there. Lower costs and taxes are behind the moves, the officials said.

J. Keith Crisco, the North Carolina secretary of commerce, visits New York three to five times a year, meeting with executives from firms already in North Carolina, like Credit Suisse, while reaching out to prospects. Another trip is planned this month.

North Carolina provided Credit Suisse with roughly $14 million in incentives to bring it to the state.

Delaware, which announced in April it had lured up to 1,200 JPMorgan Chase jobs to the state, is set to pay the giant bank $10.1 million in cash incentives. Alan Levin, director of the Delaware Economic Development Office [ http://dedo.delaware.gov/ ], estimates the typical salary for those jobs at $78,000 a year.

“These jobs will be here for a long time,” he said. “We want to create not just jobs but careers.”

The erosion of middle-tier jobs in the financial sector is not limited to New York. In a presentation to analysts [ http://www.goldmansachs.com/investor-relations/presentations/bernstein-presentation-remarks-2012.pdf ] in late May, the president of Goldman Sachs, Gary Cohn, described what he called the firm’s “high-value location strategy.” By looking outside hubs like New York, London, Tokyo and Hong Kong, he said, the firm could save 40 percent to 75 percent on job-related expenses.

Over a third of Goldman hires in 2011 and 2012 have been in cities like Bangalore in India, Salt Lake City, Dallas and Singapore, Mr. Cohn said. Utah, with looser regulation and lower taxes than New York, has been a particular area of growth for Goldman.

While Goldman’s work force in the New York area has been flat since the end of 2009 at just over 10,000, full-time employees in Salt Lake City have doubled to 1,400, making that office Goldman’s sixth-largest globally. In addition to its technology and operations staff, Goldman has expanded activities like research and investment management there.

These days, Mr. Douyon is building a refinery at the Brooklyn Navy Yard that aims to make biodiesel [ http://topics.nytimes.com/top/reference/timestopics/subjects/b/biofuels/index.html ] from waste products like vegetable oil and grease from restaurants. While he says it is a more flexible way of life and, he hopes, more lucrative, he still feels the tug of the trading floor.

“To be honest, I miss working on Wall Street,” he said.

Jessica Silver-Greenberg contributed reporting.

© 2012 The New York Times Company

http://www.nytimes.com/2012/07/02/business/finance-jobs-leave-wall-street-as-firms-cut-costs.html [ http://www.nytimes.com/2012/07/02/business/finance-jobs-leave-wall-street-as-firms-cut-costs.html?pagewanted=all ] [with comments]


===


Bankers constantly lying, defrauding; most still not in jail


(Credit: martellostudio via Shutterstock)

Barclays, JPMorgan and the rest of the megabanks reach new heights in malfeasance, suffer few consequences

By Alex Pareene
Monday, Jul 2, 2012 06:45 AM CDT

Has there ever been a better time to be a disastrously inept banker? Well, probably — over the course of human civilization it’s almost always been a pretty good time to be a banker — but today’s finance titans seem uniquely immune to punishment of any sort.

Remember how JPMorgan Chase accidentally lost $2 billion in a “hedge”-slash-huge stupid bet placed by a guy in the Chief Investment Office? Funny story, it will actually end up being closer to $6 billion [ http://www.reuters.com/article/2012/06/29/us-jpmorgan-loss-idUSBRE85R1HZ20120629 ], or maybe like $9 billion [ http://dealbook.nytimes.com/2012/06/28/jpmorgan-trading-loss-may-reach-9-billion/ ] — who can be sure, math is pretty complicated, it’s all imaginary money anyway — as the bank attempts to extricate itself from the insanely complex losing trade made by the office that is supposed to manage the bank’s risk.

Funnier story: Remember when Mr. Jamie Dimon, the head of JPMorgan Chase and the World’s Sagest Banker, was asked to sit before the Senate Banking Committee and be repeatedly complimented and praised? And remember how he kept mentioning “claw-backs,” the weird bank term for taking bonuses away from people who screw up? Turns out Ina Drew, the former head of the Chief Investment Office — the one who lost somewhere between more money than you’ll ever see in your entire life and more money than God has ever seen in His entire life — will not have any of her money clawed back [ http://blogs.reuters.com/felix-salmon/2012/06/29/what-happened-to-ina-drews-clawback/ ].

Here’s Felix Salmon explaining how the job creators of high finance successfully created one really good job in this particular instance:

Drew wasn’t fired; she was allowed to resign. As a result, she gets to keep, for herself, a whopping great slew of unvested stock and options. Understand: the whole point of vesting is as a retention device. You hand out stock which doesn’t vest for four or five years, as a way of ensuring that the employee in question hangs around for that long: they know that if they leave prior to the vesting date, that element of their compensation is worthless.

Unless, it seems, you work for JPMorgan: Drew had $17.1 million in unvested restricted shares and about $4.4 million in options, and all of them seem to have vested as of May 14, when she resigned. They were meant to incentivize her to work hard; instead, they have turned into a lovely farewell gift from the bank.

This is the most important rule of finance: It really doesn’t matter how badly you screw up; if you’re an important enough person you will never face any real negative consequences, besides a bit of bad press.

It doesn’t even really matter if you attempt to defraud most of the Western world. British megabank Barclays — New Yorkers may know it as the naming rights sponsor of the new Brooklyn Nets NBA stadium and the Atlantic Ave.-Pacific St. subway station — was fined 290 million pounds (chump change [ http://www.guardian.co.uk/business/2011/feb/14/barclays-bonuses-tax-activists ]!) after it was revealed that it spent years attempting to manipulate Libor: the rate, based on the price banks charge to lend to one another, that determines the prices of financial transactions, interest rates and loan terms across the U.K. and Europe. (They weren’t alone! The Royal Bank of Scotland did it too [ http://in.reuters.com/article/2012/06/29/libor-barclays-idINL6E8HT00K20120629 ]. Everyone else probably also did it, but not as dumbly as Barclays, where they all wrote emails to each other [ http://ftalphaville.ft.com/blog/2012/06/27/1062301/libor-manipulation-done-for-you-big-boy/ ] about how cool Libor-rigging was.) Plus just about the entirety of Great Britain’s financial industry — Barclay’s, Lloyds, HSBC, the Royal Bank of Scotland — just received slaps on the wrist for selling insanely complex interest rate “products” to “unsophisticated” small-business customers with misinformation and deception [ http://www.bloomberg.com/news/2012-06-29/u-k-banks-to-compensate-clients-improperly-sold-swaps-fsa-says.html ]. There are different words for this sort of thing — most of us would say “fraud” is one of them — when non-banks do it. So far no one is in jail for this, natch. Because laws don’t work on this crowd [ http://www.eschatonblog.com/2012/06/stealing-on-massive-scale.html ]! They’re just too smart to follow the “laws” we invent, according to experts.

Barclays head Bob Diamond — the “apology time is over [ http://www.telegraph.co.uk/news/8252771/Bob-Diamond-Bankers-should-stop-apologising.html ]” guy — will not be resigning [ http://www.bbc.co.uk/news/business-18638357 ], thank you very much, because he is vitally important to the continued success of Barclays, and he’s obviously a fantastic chief executive, and he also had no idea this extensive rigging was going on so you can’t blame him for it. (The best managers know how to delegate large-scale theft and fraud.) And if you ended up losing money because of the interest rate-rigging scam, well, you will not be seeing any of those pounds they were fined [ http://www.ft.com/intl/cms/s/0/2d345e04-c1e2-11e1-b76a-00144feabdc0.html ]. But personal responsibility is alive and well among the financier class: Mr. Diamond says he won’t take a bonus this year! It’s not dramatically poisoning yourself in a courtroom [ http://nymag.com/daily/intel/2012/06/michael-marin-wall-street-trader-poisons-himself-in-court.html ], but I guess it’s a start. (Oh, hey, he’s hosting a dinner for Mitt Romney sometime this month [ http://www.telegraph.co.uk/news/worldnews/us-election/9360144/US-election-2012-Mitt-Romney-to-attend-London-fundraising-dinner-hosted-by-Barclays-boss-Bob-Diamond.html ]. Bet that’ll be fun!)

Also, Basel says almost every large financial institution is constantly lying about its own finances [ http://www.bloomberg.com/news/2012-06-28/banker-to-the-bankers-knows-the-numbers-are-lying.html ], but, again, no one is going to jail for publishing false financial statements, because it’s not like these people did something really bad — like attempt to videotape a cop or sit in a lower Manhattan park overnight or something.

Copyright © 2012 Salon Media Group, Inc. (emphasis in original)

http://www.salon.com/2012/07/02/bankers_constantly_lying_defrauding_most_still_not_in_jail/ [with comments]

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Robert Diamond, Disgraced Barclays Banker, Pulls Out Of Romney Fundraiser


Mitt Romney's London fundraiser will no longer be co-hosted by Robert Diamond, now the former CEO of Barclays.

Ryan Grim
Paul Blumenthal
Posted: 07/03/2012 11:00 am Updated: 07/03/2012 1:04 pm

WASHINGTON -- A disgraced London banker has rescinded an offer to co-host a high-dollar fundraiser for Mitt Romney, sparing the GOP hopeful the difficulty of appearing at a lavish event with a man embroiled in scandal.

Romney's plan to hold a fundraiser in London this summer with Barclays CEO Robert Diamond was reported June 28 by the London Telegraph. The cost of the dinner seemed to shock the British paper, which noted that "the price of invitations dwarfs the amounts paid for such fund-raisers in British politics."

On Tuesday, Diamond resigned from Barclays after his bank was fined more than $450 million by British and U.S. authorities for attempting to manipulate the Libor rate [ http://www.bankrate.com/rates/interest-rates/libor.aspx ] (London interbank offered rate), a key global metric used to set everything from credit card to mortgage interest rates.

Before resigning, Diamond had already offered to sacrifice his bonus, but it wasn't enough to salvage his job, as pressure mounted for him to fall on his sword. The bank's stock was up on the news.

A spokeswoman for Romney referred HuffPost to comments in the Financial Times, which reported Tuesday that Diamond had proposed to excuse himself from the fundraiser even before he resigned. The fundraiser will go on with other hosts, as Romney will be in London for the Summer Olympics.

“Mr Diamond decided to step aside as a co-host for the upcoming London reception to focus all his attention on Barclays. We respect his decision,” Romney spokeswoman Andrea Saul told [ http://www.ft.com/intl/cms/s/0/10bcca1e-c48e-11e1-a98c-00144feabdc0.html ] the Financial Times.

Guests must pay between $25,000 and $75,000 for a seat at the meal with Romney, according to the Telegraph.

Even before Diamond was set to co-host the lavish event, Barclays was a big source of money for the Romney campaign. According to the Center for Responsive Politics, employees of the international bank have contributed $234,650 to Romney, making them the ninth biggest donor to the presumptive Republican nominee.

The campaign is also closely tied to the bank through Barclays' chief lobbyist, Patrick Durkin, who leads the campaign's fundraising efforts within the financial industry. In that role, Durkin has raised $927,160 for the campaign from other donors. He has also been featured at numerous roundtable events during which donors can talk to Romney advisers about policymaking in a future Romney administration.

The Wall Street Journal [ http://online.wsj.com/article/SB10001424052702304299704577503974000425002.html ] reports that Barclays' upper ranks are in turmoil:

The scandal is tearing through Barclays's top ranks. Two people close to the bank said Tuesday that Jerry del Missier, the chief operating officer, is likely to step down from his role. Monday, the bank said Chairman Marcus Agius would resign.

Mr. Agius will remain chairman while Barclays searches for his replacement -- and for a new chief executive, the bank said. Mr. Diamond will leave the bank immediately.

Copyright © 2012 TheHuffingtonPost.com, Inc.

http://www.huffingtonpost.com/2012/07/03/robert-diamond-fundraiser-mitt-romney-barclays_n_1646007.html [with comments]


===


Mitt Romney’s Bain problem



By E.J. Dionne Jr., Published: July 1

While the Supreme Court’s upholding of the health-care law [ http://www.washingtonpost.com/politics/supreme-court-to-rule-thursday-on-health-care-law/2012/06/28/gJQAarRm8V_story.html ] was last week’s most important event in historical terms, it will not be the decisive event of the 2012 election. In the long run, polling in swing states suggesting that Mitt Romney’s tenure at Bain Capital is hurting him could have larger implications for where this campaign will move.

It’s certainly true that had the court knocked down President Obama’s signature domestic achievement, the defeat would have been woven into a narrative of ineffectual leadership and mistaken priorities. Instead, the president found vindication not only from the court’s liberals but also from Chief Justice John Roberts.

But precisely because the decision saved the president from disaster on health care, it only reinforced the importance of the economic argument Obama and Romney have been having for months. And here is where Romney’s Bain problem kicks in.

As Democrats, mostly from Washington and New York, debated the efficacy of attacks on Romney’s role in Bain, an entirely different conversation was being driven in the swing states, courtesy of ads broadcast by the Obama campaign [ http://www.politico.com/blogs/burns-haberman/2012/06/new-antibain-ad-my-own-coffin-127072.html ] and especially by Priorities USA Action, the pro-Obama super PAC. The ads portray highly sympathetic workers who lost their jobs and companies that collapsed even as Bain’s principals made substantial profits.

An NBC News/Wall Street Journal poll [ http://www.washingtonpost.com/blogs/plum-line/post/the-morning-plum-the-race-to-define-mitt-romney/2012/06/27/gJQAmq0X6V_blog.html ] last week provided surprisingly dramatic evidence of how much these commercials are wounding Romney.

In the country as a whole, 23 percent said they viewed Romney more positively because of his experience “managing a firm that specializes in buying, restructuring and selling companies,” while 28 percent said this made them view Romney more negatively. But in this year’s 12 battleground states [ http://online.wsj.com/article/SB10001424052702303640804577490964112343348.html ], many of which have gotten a heavy run of the anti-Bain ads, only 18 percent viewed Romney’s business experience positively; 33 percent viewed it negatively. Obama led Romney by three points nationally but by eight in the battlegrounds.

This is disturbing news for Romney, who hoped his business experience would be an unalloyed asset. The numbers also underscore voter resistance to the core conservative claim that job creation is primarily about rewarding wealthy investors and companies through further tax cuts and less regulation. Americans are not anti-business, but they are skeptical that everything that is good for corporations is also good for their employees, and for job creation itself.

The Bain ads have done double-duty, specifically undermining Romney but also serving as a parable for how aspects of the current financial system hurt workers and local communities. Profits and productivity can rise even as real wages stagnate or fall, and jobs can be offshored and outsourced. The Romney campaign’s response to a recent Washington Post story [ http://www.washingtonpost.com/business/economy/romneys-bain-capital-invested-in-companies-that-moved-jobs-overseas/2012/06/21/gJQAsD9ptV_story.html (at http://investorshub.advfn.com/boards/read_msg.aspx?message_id=76864213 )] describing Bain’s record on outsourcing — the campaign sought to “differentiate between domestic outsourcing versus offshoring [ http://www.washingtonpost.com/blogs/the-fix/post/romney-response-to-bain-story-outsourcing-vs-offshoring/2012/06/22/gJQAMWVXvV_blog.html ]” — sounded more like bureaucratic gobbledygook than an effective answer. Obama picked up on the story immediately, calling Romney an “outsourcing pioneer [ http://www.washingtonpost.com/business/economy/mitt-romney-shifts-focus-from-post-article-on-bain-to-health-care-law/2012/06/27/gJQATkwr7V_story.html ].”

But can the Obama campaign turn the argument over Romney and Bain into a broader challenge to the Republican claim that the only thing government can do to spur job creation is to get out of the way? “Jobs” will remain the Romney battle cry for the rest of the campaign, but the success of the anti-Bain offensive points to an opportunity for Obama to engage in a kind of political jujitsu. He can argue that Romney’s primary interest is not in job creation at all but in low-tax and deregulatory policies he would favor whether the economy was soaring or flat.

In a recent talk at the Center for American Progress, Stefan Löfven, the new leader of the Swedish Social Democratic Party, outlined a way to turn the debate around, arguing that job creation worldwide should be the focus of center-left parties. New policies on job creation should also be concerned with the quality and conditions of the jobs, how quickly the unemployed can be moved to new work and how the unemployed are treated and assisted toward new opportunities.

Here are the questions voters should be encouraged to ask in 2012: Should government focus directly on innovative approaches to creating good jobs in a new economy? Or should it be relegated to a position of powerlessness in which its only option is to concede ever more benefits to those — including the financial wizards at Bain — who are already doing very well indeed?

[e-mail]

© 2012 The Washington Post

http://www.washingtonpost.com/opinions/ej-dionne-jr-mitt-romneys-bain-problem/2012/07/01/gJQA3oFqGW_story.html [with comments]


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America Doesn't Need an Outsourcing Pioneer in the Oval Office

Published on Jun 24, 2012 by BarackObamadotcom

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According to a June 21, 2012 Washington Post article:

"Bain...owned companies that were pioneers in the practice of shipping work from the United States to overseas call centers and factories...specialized in relocating jobs done by American workers to new facilities in low-wage countries like China and India."

http://www.youtube.com/watch?v=LCZM19l6lVQ


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President Obama on Mitt Romney's Outsourcing of American Jobs

Published on Jun 22, 2012 by BarackObamadotcom

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"We can reform our tax code in a way that is fair and responsible. Which by the way means let's stop giving tax breaks to businesses that ship jobs and factories overseas let's reward companies that create jobs and manufacturing right here in the United States of America.

Now, Mr. Romney disagrees with this, you know today it was reported in The Washington Post that the companies his firm owned were "pioneers" in the outsourcing of American jobs to places like China and India. Pioneers!

Let me tell you Tampa, we don¹t need an outsourcing pioneer in the Oval Office. We need a President who will fight for American jobs and fight for American manufacturing.

That¹s what my plan will do. That's why I'm running for a second term as President of the United States."

http://www.youtube.com/watch?v=kTYwdN6g_V8


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Obama For America TV Ad - "Believes"

Published on Jul 3, 2012 by BarackObamadotcom

Learn More: http://OFA.BO/1udRXM

What a president believes matters.

Mitt Romney's companies were pioneers in outsourcing US jobs to low-wage countries. He supports tax breaks for companies that ship jobs overseas.

President Obama believes in insourcing.

He fought to save the US auto industry, and favors tax cuts for companies that bring jobs home.

Outsourcing versus insourcing. It matters.

http://www.youtube.com/watch?v=I1pPFlcGav4


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Mitt Romney's America

Uploaded by prioritiesUSAaction on Nov 1, 2011

Mitt Romney has a vision.

Wall Street... UNREGULATED
Main Street... ISOLATED
The Middle Class... DECIMATED
American jobs... RELOCATED
Supreme Court... STACKED
Social Security... PRIVATIZED
Medicare... DISMANTLED
Planned Parenthood... DEFUNDED
Global Warming... IGNORED
College Aid... SLASHED
Health Insurance Reform... REPEALED

Mitt Romney's America is not our America.

http://www.prioritiesusaaction.org/

http://www.youtube.com/watch?v=Oz1aLR05eb8


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Mitt Romney: In the tank for Big Oil.

Published on Apr 24, 2012 by prioritiesUSAaction

http://www.prioritiesusaaction.org/donate

He's the two hundred million dollar man, and Big Oil's fingerprints are all over him.

Big Oil has pledged $200 million to help Mitt Romney, and Romney's pledged to protect their profits and billions in special tax breaks.

So when you fill up your tank, remember who's in the tank for Big Oil:
Mitt Romney: The $200 Million Man.

(Priorities USA Action and LCV Victory Fund are responsible for the content of this advertising)

http://www.youtube.com/watch?v=wEYnREP3wW0


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Romney's World View

Published on Apr 16, 2012 by prioritiesUSAaction

Mitt Romney paid less taxes than many middle-class families last year. Now he wants to cut services to pay for a new $150,000 tax cut for the one percent. Are these your priorities?
http://www.prioritiesusaaction.org/donate

http://www.youtube.com/watch?v=6Vzg9CsqLQA


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Loris and Ampad

Published on May 22, 2012 by prioritiesUSAaction

Mitt Romney and Bain Capital drove a profitable company into bankruptcy. They made more than $100 million profit.

If Mitt Romney wins, the middle class loses.

(Priorities USA Action is responsible for the content of this advertising)

http://www.youtube.com/watch?v=414qXn66t3I


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Donnie

Published on Jun 10, 2012 by prioritiesUSAaction

If Mitt Romney wins, the middle class loses.

(Priorities USA Action is responsible for the content of this advertising)

http://www.youtube.com/watch?v=Fg0FW8N_8_Y


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Priorities USA Action: "Overseas"

Published on Jun 14, 2012 by prioritiesUSAaction

As CEO, Mitt Romney made millions even as New Hampshire families lost everything.

http://www.www.prioritiesusaaction.org

http://www.youtube.com/watch?v=7CMsMFJ-Obc


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Romney and Stage Stores: "Every Layoff Counts"

Published on Jun 19, 2012 by prioritiesUSAaction

Romney and his firm made $175 million while Stage Stores was driven to bankruptcy.

Stores in WI, OH, PA, MI, and IA were closed. Nearly 6000 workers lost their jobs.

http://www.prioritiesusaaction.org

http://www.youtube.com/watch?v=f9srDDQ0qUI


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Stage

Published on Jun 23, 2012 by prioritiesUSAaction

If Mitt Romney wins, the middle class loses.

http://www.youtube.com/watch?v=oLo0Jwj03JU


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Priorities USA Action: "Briefcase"

Published on Jun 28, 2012 by prioritiesUSAaction

http://www.prioritiesusaaction.org/donate

Mitt Romney made an average $92 million per company driven into bankruptcy, while workers lost jobs and benefits. Is this the kind of leader we want as President?

http://www.youtube.com/watch?v=6uMlsQ9HiFo


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Bain Attacks Make Inroads for President
June 30, 2012
Graphic
Who’s Running the Ads, and Where
http://www.nytimes.com/interactive/2012/06/30/us/election-news/who-s-running-the-ads-and-where.html
http://www.nytimes.com/2012/07/01/us/politics/bain-attacks-make-inroads-for-president.html [ http://www.nytimes.com/2012/07/01/us/politics/bain-attacks-make-inroads-for-president.html?pagewanted=all ] [with comments]


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A Tour of the Self-Contained, Design-Happy City of Obamaland

Jun 29 2012
http://www.theatlantic.com/politics/archive/2012/06/a-tour-of-the-self-contained-design-happy-city-of-obamaland/259145/ [with comments]


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Slain jobs is real story of Romney at Bain Capital


Thomas Monaghan, founder of Domino's Pizza, left, and Mitt Romney, then-managing director of Bain Capital, sign an agreement for Monaghan to sell a 'significant portion' of his stake in the company to Bain Capital in New York in 1998.
Scott Gries/ASSOCIATED PRESS

John Young
Published: 7:00 p.m. Friday, June 29, 2012
Updated: 7:23 p.m. Friday, June 29, 2012

These days you just don't know which story line to believe.

Take the new movie that portrays Abraham Lincoln's role as a vampire killer. I don't know. That doesn't match any of my previous reading.

Then we have the narrative from Mitt Romney — job creator, economic prince on a white steed. It sounds plausible. He certainly dresses the part.

Ah, but now we come to understand the extent to which that claim is fiction — how instead of creating U.S. jobs in his past corporate life, Romney slew them.

This story line comes not from minds of Hollywood but from The Washington Post.

We're not talking about just a few jobs, a handful of shops shut down here, firms downsized there. We're talking about thousands of jobs lost through outsourcing.

For better (investors) or ill (your neighbors), Romney's company, Bain Capital, was absolutely a huge player in employing the fine people of India.

Not Indiana. India.

With Romney at the wheel, Bain was a giant in outsourcing, a trailblazer, a goliath, a veritable General Motors or Ford, except that the latter have tended to employ Americans.

Bain was a "pioneer," the Post reports, "when the departure of jobs from the United States was beginning to accelerate."

This is a trend that has, as Carl Sagan might have intoned, moved "billions and billions" of dollars worth of paychecks abroad.

Now, we all know that outsourcing boosts corporate profits, and lowers prices for services or products. Of course, the same can be said for illegal immigration. It's all part of the global economy to which we are all shackled. Love it or leave it — the globe, that is.

As for Romney, shall we blame him for lassoing the American dream in such spectacular fashion? Some, particularly depending on their own lofty earnings levels, will say, "Of course not." Who am I to say?

One thing to say about the type of business that made Romney drip with wealth while so many tread water is that it reflects an economy whose course is increasingly difficult to change.

Take big-box retailers. Bain Capital is credited with helping office-supply giant Staples, among others, get through rough times. Retailing behemoths are a way of life for Americans today. At the same time, they arguably are the biggest reason why the U.S. economy is so hard to steer anew when things go awry. Our nation has much bigger, and many fewer, retail employers than in previous generations.

Two massive factors — outsourcing and oppressive big-ness — tie policymakers' hands when they try to do something about the economy. And both factors have made a lot of money for a few in the moneyed — Romney-ed — set.

Now we add another factor about what continues to vex our nation while benefiting a very few, including Bain's once-leading light. While the U.S. government tries to balance its books, offshore corporations and people with the means of sheltering their wealth deprive the Treasury of those dollars, though they benefit from the "land of the free" in every way.

Romney is one such player, parking millions of dollars away from the IRS's reach in the Cayman Islands.

So, when pointing out that President Barack Obama has had difficulty stoking the economy and dealing with the deficit, Romney knows three good reasons for it. He's had a hand in each.

Republicans are fond of saying that Obama never created a job before he became president. True. Then again, he had no experience either in killing U.S. jobs. Apparently this is a good thing to have on one's résumé these days.

Obama, in the face of a do-nothing Congress, has done just enough to avert a second Great Depression. Decide for yourself if that is significant.

Meanwhile, mega-corporations and tax-sheltered millionaires continue to thrive in ways akin to the bloodsuckers to which Honest Abe is taking a hatchet in theaters near you.

Longtime Texas newspaperman John Young lives in Colorado; [e-mail].

Copyright © 2012 Austin American-Statesman

http://www.statesman.com/opinion/young-slain-jobs-is-real-story-of-romney-2406906.html


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Where the Money Lives


BURIED TREASURE Grand Cayman, where Bain Capital maintains at least 138 funds. Inset, Mitt Romney tries to spot his La Jolla home from the campaign plane.
© Ruth Tomlinson/Robert Harding World Imagery/Corbis (beach); by Justin Sullivan/Getty images (inset).

For all Mitt Romney’s touting of his business record, when it comes to his own money the Republican nominee is remarkably shy about disclosing numbers and investments. Nicholas Shaxson delves into the murky world of offshore finance, revealing loopholes that allow the very wealthy to skirt tax laws, and investigating just how much of Romney’s fortune (with $30 million in Bain Capital funds in the Cayman Islands alone?) looks pretty strange for a presidential candidate.

By Nicholas Shaxson
August 2012 [issue of]

A person who worked for Mitt Romney at the consulting firm Bain and Co. in 1977 remembers him with mixed feelings. “Mitt was … a really wonderful boss,” the former employee says. “He was nice, he was fair, he was logical, he said what he wanted … he was really encouraging.” But Bain and Co., the person recalls, pushed employees to find out secret revenue and sales data on its clients’ competitors. Romney, the person says, suggested “falsifying” who they were to get such information, by pretending to be a graduate student working on a proj­ect at Harvard. (The person, in fact, was a Harvard student, at Bain for the summer, but not working on any such proj­ects.) “Mitt said to me something like ‘We won’t ask you to lie. I am not going to tell you to do this, but [it is] a really good way to get the information.’ … I would not have had anything in my analysis if I had not pretended.

“It was a strange atmosphere. It did leave a bad taste in your mouth,” the former employee recalls.

This unsettling account suggests the young Romney—at that point only two years out of Harvard Business School—was willing to push into gray areas when it came to business. More than three dec­ades later, as he tried to nail down the Republican nomination for president of the United States, Romney’s gray areas were again an issue when he repeatedly resisted calls to release more details of his net worth, his tax returns, and the large investments and assets held by him and his wife, Ann. Finally the other Republican candidates forced him to do so, but only highly selective disclosures were forthcoming.

Even so, these provided a lavish smorgasbord for Romney’s critics. Particularly jarring were the Romneys’ many offshore accounts. As Newt Gingrich put it during the primary season, “I don’t know of any American president who has had a Swiss bank account.” But Romney has, as well as other interests in such tax havens as Bermuda and the Cayman Islands.

To give but one example, there is a Bermuda-based entity called Sankaty High Yield Asset Investors Ltd., which has been described in securities filings as “a Bermuda corporation wholly owned by W. Mitt Romney.” It could be that Sankaty is an old vehicle with little importance, but Romney appears to have treated it rather carefully. He set it up in 1997, then transferred it to his wife’s newly created blind trust on January 1, 2003, the day before he was inaugurated as Massachusetts’s governor. The director and president of this entity is R. Bradford Malt, the trustee of the blind trust and Romney’s personal lawyer. Romney failed to list this entity on several financial disclosures, even though such a closely held entity would not qualify as an “excepted investment fund” that would not need to be on his disclosure forms. He finally included it on his 2010 tax return. Even after examining that return, we have no idea what is in this company, but it could be valuable, meaning that it is possible Romney’s wealth is even greater than previous estimates. While the Romneys’ spokespeople insist that the couple has paid all the taxes required by law, investments in tax havens such as Bermuda raise many questions, because they are in “jurisdictions where there is virtually no tax and virtually no compliance,” as one Miami-based offshore lawyer put it.

That’s not the only money Romney has in tax havens. Because of his retirement deal with Bain Capital, his finances are still deeply entangled with the private-equity firm that he founded and spun off from Bain and Co. in 1984. Though he left the firm in 1999, Romney has continued to receive large payments from it—in early June he revealed more than $2 million in new Bain income. The firm today has at least 138 funds organized in the Cayman Islands, and Romney himself has personal interests in at least 12, worth as much as $30 million, hidden behind controversial confidentiality disclaimers. Again, the Romney campaign insists he saves no tax by using them, but there is no way to check this.

Bain Capital is the heart of Romney’s fortune: it was the financial engine that created it. The mantra of his campaign is that he was a businessman who created tens of thousands of jobs, and Bain certainly did bring useful operational skills to many companies it bought. But his critics point to several cases where Bain bought companies, loaded them with debt, and paid itself extravagant fees, thereby bankrupting the companies and destroying tens of thousands of jobs.

Come August, Romney, with an estimated net worth as high as $250 million (he won’t reveal the exact amount), will be one of the richest people ever to be nominated for president. Given his reticence to discuss his wealth, it’s only natural to wonder how he got it, how he invests it, and if he pays all his taxes on it.

*

Ironically, it was Mitt’s father, George Romney, who released 12 years of tax returns, in November 1967, just ahead of his presidential campaign, thereby setting a precedent that nearly every presidential candidate since has either willingly or unwillingly been subject to. George, then the governor of Michigan, explained why he was releasing so many years’ worth, saying, “One year could be a fluke, perhaps done for show.”

But his son declined to release any returns through one unsuccessful race for the U.S. Senate, in 1994, one successful run for Massachusetts governor, in 2002, and an aborted bid for the Republican Party presidential nomination, in 2008. Just before the Iowa caucus last December, Mitt told MSNBC, “I don’t intend to release the tax returns. I don’t,” but finally, on January 24, 2012—after intense goading by fellow Republican candidates Newt Gingrich and Rick Perry—he released his 2010 tax return and an estimate for 2011.

These, plus the mandatory financial disclosures filed with the Office of Government Ethics and released last August, raise many questions. A full 55 pages in his 2010 return are devoted to reporting his transactions with foreign entities. “What Romney does not get,” says Jack Blum, a veteran Washington lawyer and offshore expert, “is that this stuff is weird.”

The media soon noticed Romney’s familiarity with foreign tax havens. A $3 million Swiss bank account appeared in the 2010 returns, then winked out of existence in 2011 after the trustee closed it, as if to remind us of George Romney’s warning that one or two tax returns can provide a misleading picture. Ed Kleinbard, a professor of tax law at the University of Southern California, says the Swiss account “has political but not tax-policy resonance,” since it—like many other Romney investments—constituted a bet against the U.S. dollar, an odd thing for a presidential candidate to do. The Obama campaign provided a helpful world map pointing to the tax havens Bermuda, Luxembourg, and the Cayman Islands, where Romney and his family have assets, each with the tagline “Value: not disclosed in tax returns.”

*

Romney’s personal tax rate is a particular point of interest. In 2010 and 2011, Mitt and Ann paid $6.2 million in federal tax on $42.5 million in income, for an average tax rate just shy of 15 percent, substantially less than what most middle-income Americans pay. Romney manages this low rate because he takes his payments from Bain Capital as investment income, which is taxed at a maximum 15 percent, instead of the 35 percent he would pay on “ordinary” income, such as salaries and wages. Many tax experts argue that the form of remuneration he receives, known as carried interest, is really just a fee charged by investment managers, so it should instead be taxed at the 35 percent rate. Lee Sheppard, a contributing editor at the trade publication Tax Notes, whose often controversial articles are read widely by tax professionals, is nonplussed that the Obama campaign has been so listless on the issue of carried interest. “Romney is the poster boy, the best argument, for taxing this profit share as ordinary income,” says Sheppard.

In the face of such arguments, Romney’s defense is that he never broke the rules: if there is a problem, it is in the laws, not in his behavior. “I pay all the taxes that are legally required, not a dollar more,” he said. Even so. “When you are running for president, you might want to err on the side of overpaying your taxes, and not chase every tax gimmick that comes down the pike,” says Sheppard. “It kind of looks tacky.”

The assertion that he broke no laws is widely accepted. But it is worth asking if it is actually true. The answer, in fact, isn’t straightforward. Romney, like the superhero who whirls and backflips unscathed through a web of laser beams while everyone else gets zapped, is certainly a remarkable financial acrobat. But careful analysis of his financial and business affairs also reveals a man who, like some other Wall Street titans, seems comfortable striding into some fuzzy gray zones.

*

The Caped Avoider!

One might perhaps accept an explanation by Romney’s campaign spokeswoman, Andrea Saul, that the candidate’s failure to include his Swiss account in earlier financial disclosures was merely a “trivial inadvertent issue.” But deeper questions do emerge.

All the assets on Mitt’s financial disclosures are in blind trusts or retirement accounts held by him and Ann. Blind trusts are designed to avoid conflicts of interest for those in public office by having politicians’ assets managed by independent trustees. The Romneys’ blind trust was created when Mitt was elected governor of Massachusetts. Curiously, the Romneys appointed Bradford Malt as their trustee. It’s certainly true that under Malt the trusts don’t appear to be as blind as they might be: for instance, in 2010 the Romneys invested $10 million in the start-up of the Solamere Founders Fund, co-founded by their eldest son, Tagg, and Spencer Zwick, Romney’s onetime top campaign fund-raiser; Solamere is now in the Ann Romney blind trust. Malt has said he invested in Solamere without consulting Mitt or Ann and explained he liked Solamere because of its diversified approach and because he knew the founders and had confidence in them.

Likewise, the Romneys were reported to have invested at least $1 million in Elliott Associates, L.P., a hedge fund specializing in “distressed assets.” Elliott buys up cheap debt, often at cents on the dollar, from lenders to deeply troubled nations such as Congo-Brazzaville, then attacks the debtor states with lawsuits to squeeze maximum repayment. Elliott is run by the secretive hedge-fund billionaire and G.O.P. super-donor Paul Singer, whom Fortune recently dubbed Mitt Romney’s “Hedge Fund Kingmaker.” (Singer has given $1 million to Romney’s super-pac Restore Our Future.)

It is hard to know the size of these investments. Romney’s financial disclosure form lists 25 of them in an open-ended category, “Over $1 million,” including So­lamere and Elliott, and they are not broken down further. Romney hides behind a disclaimer that the fund managers “declined to provide such information” about their underlying assets. Many of these funds are set up in tax havens such as the Cayman Islands, where a confidentiality law states that you can be jailed for up to four years just for asking about such information.

Andrea Saul said of these investments, “Everything … was reported correctly.” Joseph Sandler, a Democratic lawyer who has worked with candidates on disclosures for more than two dec­ades, is skeptical. “The law is the law,” Sandler says. “[Romney] says, ‘Well, you know, they won’t tell me.’ But when you run for office in the U.S. and are not prepared to comply with disclosure requirements, you should either divest yourself of the assets or don’t run.” The Washington Post summarized the opinions of experts across the political spectrum by saying Romney’s disclosures were “the most opaque they have encountered.”

*

Mysteries also arise when one looks at Romney’s individual retirement account at Bain Capital. When Romney was there, from 1984 to 1999, taxpayers were allowed to put just $2,000 per year into an I.R.A., and $30,000 annually into a different kind of plan he may have used. Given these annual contribution ceilings, how can his I.R.A. possibly contain up to $102 million, as his financial disclosures now suggest?

The Romneys won’t say, but Mark Maremont, writing in The Wall Street Journal, uncovered a likely explanation. When Bain Capital bought companies, it would create two classes of shares, named A and L. The A shares were risky common shares, to which they would assign a very low value. The L shares were preferred shares, paying a high dividend but with the payoff frozen, and most of the value was assigned to them. Bain employees would then put the exciting A shares in their I.R.A. accounts, where they grew tax-free. With all the risk of the deal, the A shares stood to gain a lot or collapse. But if the deal succeeded, the springing value could be stunning: Bain employees saw their A shares from one particularly fruitful deal grow 583-fold, 16 times faster than the underlying stock.

The Romneys won’t tell us how, or even if, they assigned super-low values to the A shares, but there are a couple of ways to do it. One is to use standard options models to price the shares—then feed inappropriate assumptions into those models. Romney could alternatively have used a model called liquidation valuation, which Kleinbard says would have been “completely inappropriate.” Without seeing the assumptions used on Romney’s tax returns from the years when those lowball A shares were squirted into his I.R.A., we cannot know how he did it. Whatever methods he used, however, the valuations were, according to Andrew Smith, of Houlihan Capital in Chicago, “pushing the envelope.” (Andrea Saul retorts, “Why should successful investments be criticized?”)

Mitt’s and Ann’s I.R.A.’s have also been receiving profit interest from (mostly Cayman Island–based) Bain Capital funds that were set up long after he had left the company, in 1999. For example, the 2010 return reveals a profits interest in a Cayman-based fund called Bain Capital Partners (AM) X LP, which was transferred to the Ann D. Romney trust in October 2010. An attachment to the return says the Ann D. Romney trust is “performing services” to the partnership, which is boilerplate language for these kinds of filings. Her blind trust could receive lightly taxed income from Bain Capital for years to come, well into the presidential term her husband hopes to win.

But administrative guidance says you can do this kind of thing only if the compensation is in recognition of past services you have provided. “This should not mean retired from the mother ship 10 years out and getting profits you had nothing to do with,” Sheppard says, adding that Romney can get away with it because of excessive “administrative indulgences” that have allowed a “perversion of the law in favor of a small class of overcompensated investment managers.”

*

Romney’s I.R.A. also appears to have invested in so-called blocker corporations in the Cayman Islands and elsewhere. U.S. pension funds, foundations, and even I.R.A.’s routinely use offshore blocker corporations to avoid something called the Unrelated Business Income Tax, which was designed to keep nonprofits from competing with ordinary companies in areas outside their core purpose: if you invest directly you get hit with the tax, but if you invest in a blocker, which then invests in the U.S. business, you escape it. Romney’s I.R.A. appears to have employed this lawful escape route, and his campaign has used language suggesting that it has. But that would mean the Romney camp’s claim that Mitt’s tax consequences of investing via the Cayman Islands is “the very same” as it would have been had he invested directly at home is simply not true. (Romney spokesperson Andrea Saul says Romney “gets the same benefit anyone would get from an I.R.A.,” but she did not respond to questions on whether his I.R.A. had used blockers or avoided taxes by investing via tax havens.)

*

A Deutsche Bank analysis of 68 Bain deals Romney was involved in calculated an internal rate of return—a standard private-equity benchmark—at a staggering 88 percent annually (though after fees and inflation, investor performance may have been little more than half that). It is substantially on this stellar rec­ord that Romney is now running for president. His work at Bain was unquestionably good for himself and for Bain, but was it also good for the businesses he acquired, for their workers, and for the economy, as he claims?

A report by Bain and Co. itself, looking at the period from 2002 to 2007, concluded that there is “little evidence that private equity owners, overall, added value” to the companies they took over: nearly all their returns are explained by broad economic growth, rising stock markets, and leverage. Josh Kosman, who researched the subject of private equity for his book The Buyout of America, singles out Bain Capital in particular. “They take pride in pushing the leverage envelope [i.e., use of borrowed money, which magnifies returns, while off-loading the risks onto others] more than their peers,” he says. “I have heard that from limited partners in Bain’s funds. I have heard that from bankers who lend money to finance their leveraged buyouts. Bain always prided itself on ‘We’ll push leverage more than the others.’ They brag about that, behind closed doors.”

*

Dade Behring is a cause célèbre for Romney’s and Bain’s critics, and it illustrates the leverage problem clearly. In 1994, Bain bought Dade International, a medical-diagnostics company, then added the medical-diagnostics division of DuPont in 1996 and a German medical-testing company called Behring in 1997. Former Dade president Bob Brightfelt says the operation started well: the Bain managers were “pretty smart guys,” he recalls, and they did well cutting out overlap, and exploiting synergies.

Then brutal cost cutting began. Bain cut R&D spending to an average of 8 percent of sales, a little more than half what its competitors were doing. Cindy Hewitt, Dade’s human-resources manager, remembers how the firm closed a Puerto Rico plant in 1998, a year after harvesting $7.1 million in local tax breaks aimed at job creation, and relocated some staff to Miami, then the company’s most profitable plant. Based on re­a­ssur­ances she had received from her superiors, she told those uprooting themselves from Puerto Rico that their jobs in Miami were safe for now—but then Bain closed the Miami plant. “Whether you want to call it misled, or lied, or manipulated, I do not believe they provided full information about what discussions were under way,” she says. “I would never want to be part of even unintentionally treating people so poorly.”

Bain engaged in startling penny-pinching with the laid-off employees. Their contracts stipulated that if they left early they would have to pay back the costs of relocating to Miami—but in spite of all that Dade had done to them, it refused to release the employees from this clause. “They said they would go after them for that money if they left before Bain was finished with them,” Hewitt recalls. Not only that, but the company declined to give workers their severance pay in lump sums to help them fund their return home.

In 1999, generous pensions were converted into less generous benefits, wages were cut, and more staff members were laid off. Some employees contacted Norman Stein, then the director of the pension-counseling clinic at the University of Alabama law school, with a view to challenging the conversions. Stein says the employees were “extraordinarily nervous,” so fearful, in fact, that they refused to let lawyers even make copies of pension documents. “I have been dealing with pensions issues for over 25 years and I never saw anything like this,” recalls Stein. The spooked employees did not go to court. Stein says that, while breaking pension contracts like this was not unheard of, the practice at that time was “questionable,” adding that Dade may have saved $10 to $40 million from converting its pensions.

The beauty—or savagery—of leverage is that it can magnify any and all cash-flow boosts, such as this one. Take $10 to $40 million squeezed from a pension pot, then use that to create new, rosier financial projections to borrow several times that amount, and then pay yourself a big special dividend from the borrowed funds, many times the size of the pension savings. That is just what Bain Capital did: the same month it converted the pensions, it created new financial projections as a basis to borrow an extra $421 million—from which Bain, its co-investor Goldman Sachs, and top Dade management extracted $365 million in dividends. According to Kosman, “Bain and Goldman—after putting down only $85 million … made out like bandits—a $280 million profit.” Dade’s debt rose to more than $870 million. Romney had left operational management of Bain that year, though his disclosures show that he owned 16.5 percent of the Bain partnership responsible for the Dade investment until at least 2001.

Quite soon, however, a fragile Dade faced adverse conditions in the currency markets, and it had to start in effect cannibalizing itself, cutting into the core of its business. It filed for bankruptcy in August 2002 and Bain Capital departed. When Dade emerged from bankruptcy, its new owners invested in long-term R&D, and it flourished again.

Nor was this an isolated incident: Kosman lists five other “formerly healthy” companies—Stage Stores, Ampad, GS Technologies, Details, and KB Toys—Bain helped drive into bankruptcy, while making big profits. (Despite numerous entreaties from Vanity Fair to Bain Capital to address on the record points in this article with which it might disagree, the firm refused to do so and instead provided this statement: “When politics overwhelm fact, some will distort or cherry-pick our record and launch unfounded allegations and insinuations. The truth and the full record show that Bain Capital operates with high standards of integrity and excellence in compliance with all laws. Any suggestion to the contrary is baseless.”)

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Tax Haven U.S.A.

The term “financialization” describes two interlocking processes: a disproportionate growth in a country’s deregulated financial sector, relative to the rest of the economy, and the rising importance of financial activities with a focus on financial returns among industrial and other non-financial corporations, often at the expense of real innovation and productivity.

Some see the rising influence of finance and financial models in epochal terms. Author of Financialization and the U.S. Economy Özgür Orhangazi summarizes academic literature that sees financialization “as one of the indicators of the decline of the heg­e­mon­ic power”: imperial Venice, Genoa, Holland, and Britain all saw their power rise on the back of productive industrial capitalism, followed by domination by the financial sector, which eventually began to cannibalize the productive sector in pursuit of financial returns—a process that ended in weakness and collapse.

Little noticed in the academic discussions of financialization is the role of offshore tax havens, one of the big reasons the financial sector has become so powerful. In 1966, Michael Hudson, a young Chase Manhattan balance-of-payments economist, was in a company elevator when he was handed a memo by a former State Department operative. The memo came from the U.S. government, and Hudson was tasked with figuring out how much foreign money the U.S. might attract. “They were saying, ‘We want to replace Switzerland,’?” Hudson explains. “All this money will come here if we make this the criminal center of the world. We wanted foreign criminal money, which was patriotic, but not American criminal money.”

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In the years since then, almost unknown to most Americans, the United States has turned itself into a giant tax haven for foreigners, just as the memo suggested. Federal and state tax laws have been deliberately shaped to give foreigners special tax exemptions unavailable to Americans, plus financial secrecy and exemptions from regulatory restraints. “We have criticized offshore tax havens for their secrecy and lack of transparency,” said Senator Carl Levin. “But look what is going on in our own backyard.”

In this grand scenario, tax havens such as the Caymans serve as feeders of foreign savings into Tax Haven U.S.A. from abroad, providing foreign investors with additional ways to skip around tax, disclosure, and regulatory requirements that they might trigger if they invested directly.

The money sucked into Tax Haven U.S.A., often via the “feeder” tax havens, is frequently tax-evading and other criminal foreign money, in the spirit of Hudson’s 1966 memo, and it is predominantly channeled not into productive investment but into real estate and financial business.

One cannot properly understand Wall Street’s size and power without appreciating the central role of offshore tax havens. There is absolutely no evidence that Bain has done anything illegal, but private equity is one channel for this secrecy-shrouded foreign money to enter the United States, and a filing for Mitt Romney’s first $37 million Bain Capital Fund, of 1984, provides a rare window into this. One foreign investor, of $2 million, was the newspaper tycoon, tax evader, and fraudster Robert Maxwell, who fell from his yacht, and drowned, off of the Canary Islands in 1991 in strange circumstances, after looting his company’s pension fund. The Bain filing also names Eduardo Poma, a member of one of the “14 families” oligarchy that has controlled most of El Salvador’s wealth for decades; oddly, Poma is listed as sharing a Miami address with two anonymous companies that invested $1.5 million between them. The filings also show a Geneva-based trustee overseeing a trust that invested $2.5 million, a Bahamas corporation that put in $3 million, and three corporations in the tax haven of Panama, historically a favored destination for Latin-American dirty money—“one of the filthiest money-laundering sinks in the world,” as a U.S. Customs official once put it.

Bain Capital has said it did everything required by the U.S. government to check that the investors were not associated with unsavory interests. U.S. law doesn’t require Bain to enforce the tax laws of its investors’ home countries, but the presence of Swiss trustees, Bahamas trusts, and Panama corporations would raise red flags with any tax authority.

Many Americans might react with a shrug to the idea of shady foreign money such as Robert Maxwell’s being invested here. But, says Rebecca Wilkins, of the Washington, D.C.–based nonprofit Citizens for Tax Justice, “It is shocking that a presidential candidate should think that is O.K.”

*

RELATED

Inside Box 438, the British Virgin Islands’ Tax-Friendliest Address (Rita Healy, July 2012)
http://www.vanityfair.com/online/daily/2012/07/virgin-islands-box-438-taxes

FROM THE ARCHIVE

The Bain of Romney’s existence (Michael Kranish and Scott Helman, February 2012)
http://www.vanityfair.com/politics/2012/02/mitt-romney-201202

Bush’s tax gauntlet (Joseph E. Stiglitz, December 2007)
http://www.vanityfair.com/politics/features/2007/12/bush200712

Election 2012: the parties reverse roles (Todd S. Purdum, June 2012)
http://www.vanityfair.com/politics/2012/06/democrats-republicans-role-reversal-divided

Public consequences of private equity (Michael Wolff, May 2007)
http://www.vanityfair.com/politics/features/2007/05/wolff200705

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Vanity Fair © Condé Nast Digital

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Mystery Bermuda-based company and other undisclosed Romney assets hint at larger wealth



By Associated Press, Published: July 4, 2012

WASHINGTON — For nearly 15 years, Republican presidential candidate Mitt Romney’s financial portfolio has included an offshore company that remained invisible to voters as his political star rose.

Based in Bermuda, Sankaty High Yield Asset Investors Ltd. was not listed on any of Romney’s state or federal financial reports. The company is among several Romney holdings that have not been fully disclosed, including one that recently posted a $1.9 million earning — suggesting he could be wealthier than the nearly $250 million estimated by his campaign.

The omissions were permitted by state and federal authorities overseeing Romney’s ethics filings, and he has never been cited for failing to disclose information about his money. But Romney’s limited disclosures deprive the public of an accurate depiction of his wealth and a clear understanding of how his assets are handled and taxed, according to experts in private equity, tax and campaign finance law.

Sankaty was transferred to a trust owned by Romney’s wife, Ann, one day before he was sworn in as Massachusetts governor in 2003, according to Bermuda records obtained by The Associated Press. The Romneys’ ownership of the offshore firm did not appear on any state or federal financial reports during Romney’s two presidential campaigns. Only the Romneys’ 2010 tax records, released under political pressure earlier this year, confirmed their continuing control of the company.

The mystery surrounding Sankaty reinforces Romney’s history of keeping a tight rein on his public dealings, already documented by his use of private email and computer purges as Massachusetts governor and his refusal to disclose his top fundraisers. The Bermuda company had almost no assets, according to Romney’s 2010 tax returns. But such partnership stakes could still provide significant income for years to come, said tax experts, who added that the lack of disclosure makes it impossible to know for certain.

“We don’t know the big picture,” said Victor Fleischer, a University of Colorado law professor and private equity expert who urged corporate tax code reforms during congressional testimony last year. “Most of these disclosure rules are designed for people who have passive ownership of stocks and bonds. But in this case, he continues to own management interests that fluctuate greatly in value long after his time with the company and even the end of his separation agreement. And the public has no clear idea where the money is coming from or when it will end.”

Named for a historic Massachusetts coastal lighthouse, Sankaty was part of a cluster of similarly named hedge funds run by Bain Capital, the private equity firm Romney founded and led until 1999. The offshore company was used in Bain’s $1 billion takeover of Domino’s Pizza and other multimillion-dollar investment deals more than a decade ago.

Romney’s campaign declined to answer detailed questions from AP about Sankaty. Romney aides have said in the past that some disclosures were not required because those assets were valued by his financial advisers at less than $1,000 — below the minimum threshold under federal rules set by the U.S. Office of Government Ethics. A financial snapshot of Sankaty in Romney’s 2010 tax returns showed the holding with almost no value at the time— with $10,000 in both assets and liabilities.

“Everything on the filings is reported as required,” campaign spokeswoman Andrea Saul said in a brief statement. “If OGE has an issue with any filings, they would let us know.” The agency declined to comment.

While Sankaty no longer plays an active role in Bain’s current deals, private equity experts said such holdings could provide significant income to Romney under his 10-year separation agreement from Bain, which expired in 2009. Investment funds typically churn “carried interest,” profit shares due to the managers of the funds that often range as much as 20 percent of a fund’s annual profit — known as “the carry.” Even after investment funds are exhausted, profit shares and other late earnings from those stakes can continue to stream, arriving as lucrative “tails,” tax experts say. In some circumstances, the analysts added, offshore companies like Sankaty could also offer limited tax deferral advantages.

The implications of Romney’s Bain profit-sharing became clear last month when his trust reported that one rarely disclosed asset had posted a $1.9 million payout. The income was described as a “true-up” payment, catch-up income that made up for unpaid earnings owed to Romney as part of his Bain separation agreement.

Such sizable earnings are possible “depending on the terms of the agreement,” said tax law expert Michael Kosnitzky, an attorney at the New York firm of Boies, Schiller & Flexner. The Romney campaign acknowledged recently that it could not rule out more large future payments.

The use of offshore companies such as Sankaty is allowed under U.S. tax laws. They are typically set up as shell corporations by private equity and hedge funds to route investments from large foreign and institutional investors, such as large pension plans, into corporate takeovers. The money is used to provide equity and buy up debt. In turn, the investors gain U.S. tax advantages by passing their funds through the offshore “blocker” corporations, avoiding a high 35 percent tax on earnings that the Internal Revenue Service describes as “unrelated business income.”

Set up in Bermuda in 1997, Sankaty served as Romney’s partnership stake in Bain’s Sankaty group, which invests in bonds, bank loans and corporate debt instruments. That first wave of Sankaty funds managed more than $100 million in investments in the late 1990s and early 2000s, according to a corporate analyst familiar with the funds. The analyst insisted on anonymity because the analyst was not authorized to discuss the funds publicly.

Since late 2003, Romney has left his financial decisions to what his campaign describes as a “blind trust” overseen by lawyer R. Bradford Malt, a longtime Boston legal associate. The trust was set up under Massachusetts law, but it’s not a federally qualified blind trust — which Romney plans to use if he wins the presidency. Romney does not oversee his investments under his current trust, but its general composition is made public and Malt invests according to Romney’s political positions.

Romney’s 2010 tax returns show him and his wife as sole owners of Sankaty. A 2011 Bermuda legal document lists Malt as Sankaty’s president. Michael F. Goss, currently Bain Capital’s chief operating officer, is listed as vice president, and Quorum Corporate Ltd., a Bermuda law firm, as secretary. Malt deferred questions about Sankaty to the Romney campaign; Bain Capital and Quorum declined to comment.

The candidate’s 2010 tax returns listed at least 20 investment holdings besides Sankaty that had not been previously disclosed on federal reports. At least seven were foreign investments. Bain Capital Inc., the holding that posted the $1.9 million earning, was listed on Romney’s state ethics reports in 2001 and 2002, when he ran for governor, but was missing from any annual ethics report until Romney’s trust included it last month on his 2012 financial statement.

Sankaty is the only offshore holding in the Romneys’ portfolio under their full control. On his 2010 taxes, Romney’s blind trust filed an IRS form identifying Sankaty as a “controlled foreign corporation.” That filing is required for any U.S. taxpayer who owns more than 50 percent of a foreign company. Romney’s 2010 tax returns indicate that he and his wife control all 12,000 shares.

Several U.S. Securities and Exchange documents from the late 1990s and 2000s depicted Romney as Sankaty’s owner at the time, but when he ran for Massachusetts governor in 2001 and 2002, Romney did not list the company on annual disclosure forms required by the Massachusetts State Ethics Commission.

The ethics commission would not comment on the omissions. Boston College law professor R. Michael Cassidy, who was a member of the commission at the time, said that if Romney “owned this business before he signed his ethics disclosure, then he was obliged to report it.” The state’s disclosure rules also allow a $1,000 minimum threshold. A six-year statute of limitations covering Romney’s ethics reports has since expired.

Bermuda legal documents show that on Jan. 1, 2003, the day before Romney was sworn in as governor, his wife’s trust acquired 12,000 shares of Sankaty. The transfer was not made public. The month before, Romney had placed his assets in the state-approved trust overseen by Malt. The move legally allowed the trust to describe Romney’s holdings in 2003 only as “various investments and securities” — without providing details. The trust filed similar disclosures between 2004 and 2007, the last year of Romney’s term.

Romney’s use of Sankaty as his partnership stake in Bain deals is documented in several U.S. Securities and Exchange Commission reports between 1998 and 2000. The company controlled 50,000 shares of Global-Tech Appliances Inc., a Chinese appliance firm that Bain briefly invested in. Sankaty was also used to manage 385,000 shares in the 1999 takeover of Domino’s, as well as the $75 million investment into the Stericycle waste disposal firm and a $150 million investment in the US LEC telecommunication firm.

Romney was named as sole owner and president of Sankaty in several of those documents. Though no longer active at Bain by then because he had left to head Salt Lake City’s Olympic Games bid, Romney remained a participant because of his partnership stake.

Even though Sankaty is no longer used for Bain investments, several tax analysts said its legal offshore status still could be used by Romney to defer some taxes on some of the “carried interest” income related to the Bain deals.

Romney has said he gets no tax break. He told an audience at a Maine town hall appearance in February that “I have not saved one dollar by having an investment somewhere outside this country.”

But the lack of disclosure over the years, private equity experts said, makes it impossible to tell.

“Without knowing more about an offshore’s history and how it was used,” Fleischer said, “you’re left in the dark.”

Associated Press writer Josh Ball in Hamilton, Bermuda, contributed to this report.

Copyright 2012 The Associated Press

http://www.washingtonpost.com/politics/mystery-bermuda-based-company-and-other-undisclosed-romney-assets-hint-of-larger-wealth/2012/07/04/gJQAbU1SMW_story.html [with comments]


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Romney's Quiet Rooms: Where All the Money's Hidden?

Mike Lux
Posted: 07/03/2012 6:12 pm

The incredible new Vanity Fair piece [ http://www.vanityfair.com/politics/2012/08/investigating-mitt-romney-offshore-accounts (second item above)] on Romney's secretive off shore tax accounts and business practices at Bain immediately made me think of one of my favorite video clips of 2012, this one where Romney is talking about how issues related to the concentration of wealth should only be discussed in "quiet rooms [ http://www.youtube.com/watch?v=ismksjp10q0 ]":

Mitt Romney undeniably likes his secrets, especially when it comes to money, and I have to admit that the revelations in Vanity Fair gave me a different take on the "quiet rooms" quote. I had always assumed it was just Mitt being Mitt, doing his classic Thurston Howell III imitation, another in a long line of Mitticisms (I like being able to fire people, I know a couple of Nascar team owners, did I tell you the funny story about how my dad laid off a bunch of people, etc.) reminding us how cluelessly out of touch Mitt was. It was also the ultimate in big money Republicanism: we don't talk about these issues in public because we don't want people to get mad and start a class war. But now it occurs to me what Mitt was really trying to guard in his quiet rooms: all the millions he has secretly stashed away.

What Mitt, with his offshore accounts and his secretive business practices and his endorsement of the Ryan budget which gives even more advantages to Wall Street tycoons like himself, is trying to preserve is the ability to play by a different set of rules than the rest of us. He wants a world where the wealthy have all these advantages and loopholes and secret deals and lower tax rates, precisely because that was his entire business model at Bain Capital. He wants a world where he doesn't have to pay taxes on his accounts in Bermuda and the Caymans and Luxembourg and Switzerland. He wants a world where he can recruit any sleazebag overseas investor to invest in Bain [ http://thinkprogress.org/politics/2012/07/02/509624/three-controversial-bain-decisions-that-happened-before-romney-left/ ]. As Alex Seitz-Wald at Salon.com [ http://www.salon.com/2012/07/03/romneys_offshore_tax_havens/ ] puts it: "This pattern of elusiveness is hardly confined to Romney's finances, but rather defines his public life."

Mitt's entire career is defined by the secrets he has, and the fact that he didn't have to play by the same rules as everyone else except for a few other well-connected Wall Street guys. The way Mitt made his money is exactly the kind of thing we should be talking about in this presidential campaign -- and not only because it relates directly to Romney's character, experience, and values. We should be talking about this because we should be debating as a country whether we want a country whose economic system is structured primarily to benefit a small number of wealthy, well-connected insiders operating behind closed doors, manipulating the tax code and financial markets to become more and more wealthy; or whether we want a country where businesses make money the old-fashioned way, by manufacturing and selling quality products, and playing by the same rules everyone else has to play by. By and large, with only occasional exceptions where Bain actually created real new jobs, the way Romney became wealthy was to make other people poorer -- manipulating the financial markets and tax code, off-shoring jobs, cutting wages and benefits, laying off people, driving companies into bankruptcy while still getting huge fees from them. He also ripped off the rest of us taxpayers through the outrageous carried interest loophole, through loading up companies with debt and then writing it off, and through taking advantage of the taxpayer-backed Pension Benefit Guarantee Corporation's obligation to pay off pensions when Bain's companies went bankrupt. I guess it is not surprising that having made most of his money that way, he decided to keep so much of that money invested in secret overseas accounts.

No wonder Mitt Romney wants to keep this discussion confined strictly to "quiet rooms". I would too if I had stashed so many of the millions I made from off-shoring jobs and all these other revolting business practices into secret off-shore accounts. But it is time for America to have this discussion -- and not just in quiet rooms.

Copyright © 2012 TheHuffingtonPost.com, Inc.

http://www.huffingtonpost.com/mike-lux/mitt-romney-offshore-accounts_b_1647386.html [with comments]


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Romney’s first July 4 flub

How a young Mitt embarrassed his dad by admitting the family celebrated America's birth in Canada


Mitt Romney
(Credit: AP/Charles Dharapak)

By Alex Seitz-Wald
Wednesday, Jul 4, 2012 07:00 AM CDT

Mitt Romney is celebrating the Fourth of July today by marching [ http://abcnews.go.com/Politics/OTUS/fourth-july-perfect-campaign-holiday/story?id=16699685 ] in a parade in Wolfeboro, N.H., where he owns a vacation home and has been relaxing for the past few days. He’ll be honoring the holiday by competing in the “Romney Olympics [ http://www.washingtonpost.com/politics/mitt-romneys-summer-vacation-full-of-competitive-sports-and-family-meetings/2012/06/30/gJQAsDFDEW_story.html ],” a grueling test of athletic prowess that includes hammering nails into boards and hanging onto poles. Romney brings his entire family to New Hampshire these summers, but he hasn’t always spent his Independence Days in the Granite State, or even the U.S.

Growing up, Romney actually spent [ http://www.thestar.com/news/world/article/1114630--does-mitt-romney-s-long-love-affair-with-canada-still-have-heat ] most of his Fourths in Canada, at his family’s cottage on Lake Huron where they would light off their own fireworks. George Romney, Mitt’s father and the former governor of Michigan, jokingly called himself a “Summer Canadian.” Campaigning for his father in 1962, a 15-year-old Mitt told a Fourth of July gathering in Michigan, “It’s really fun to be here in the United States for the Fourth of July for the first time!”It didn’t go over well. In August of 2006, he told the Boston Globe of that remark, “That wasn’t a great line.” He added, “[It] happened to be true, but it wasn’t exactly what the campaign folks were looking for … Yeah, I was not particularly adept at my communications with the media.”

The Canadian cabin would cause another communications snafu years later — it was the destination [ http://politicker.com/2012/01/did-mitt-romneys-dog-seek-asylum-in-canada/ ] to which the Romneys were heading when Mitt strapped the family’s Irish setter, Seamus, to the roof of the car for the 12-hour drive from Massachusetts.

In 2004, Massachusetts rang in Independence Day by denying smokers the liberty to light up inside restaurants. The state becomes the sixth state in the nation to ban smoking inside public places after the state Legislature overwhelmingly approved it and Romney signed the ban into law the year before, according to a Globe story from July 4 of that year. The law went into effect one minute after midnight on July 5, upsetting some late-night revelers. While there are obviously tremendous public health benefits to smoking bans and Romney should be commended for leading the way here, the timing is perhaps a bit ironic.

And last year, Romney had an awkward moment on the Fourth when he ended up in the same parade [ http://abcnews.go.com/blogs/politics/2011/07/mitt-romney-and-jon-huntsman-to-march-in-same-4th-of-july-parade/ ] as his then-opponent for the GOP nomination, Jon Huntsman. They came “face-to-face for the first time as presidential candidates” during the parade in Amherst, N.H. The two former governors (and their families) have a rivalry going back to at least 2002 when Romney was picked over Huntsman to lead the 2002 Olympics in Salt Lake City.

Copyright © 2012 Salon Media Group, Inc.

http://www.salon.com/2012/07/04/romneys_first_july_4_flub/ [with comments]


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