Monday, April 7, 2008

Over the Top Fed Actions Feed Conspiracy Thinking

Over the Top Fed Actions Feed Conspiracy Thinking

By Scott Thill

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Given the fact that it is the target of more than a few conspiracy theories since it was created in 1913, the Federal Reserve System, more commonly known as the "Fed," in media and finance parlance, could be acting with a bit more prudence during these dark economic times. But no, it's gone ahead and damned the depression by doing what the New York Times described as the "unthinkable": bailing out Bear Stearns while giving away hundreds of billions to banks and other institutions whose labyrinthine securitization of our debt economy started this whole mess in the first place.

In other words, rewarding the criminals and screwing the victims.

That kind of behavior is only going to make the conspiracy theorists even cozier. When you already think the Fed has made a serious living from doing everything from transferring public wealth to private hands to signing off on the assassination of John F. Kennedy, you're not going to start thinking better of them when they offload billions onto Bear Stearns, which is a securities firm and not a bank at all. You're not going to get the opposition to stop parroting the usual party lines about the Fed being a privately owned bank that screws Americans by charging interest or compromises the overall interests of the United States by unconstitutionally printing up money like it was going out of style. You're only going to further invigorate them.

That, my friends, is known as reality.

Which is something the Fed doesn't seem to be connected to anymore, judging by how it has, in the words of Bloomberg's Craig Torres, "thrown out four decades of monetary history" in favor of not only bailing out obvious criminals, but also taking on their worthless debt as collateral. The move makes zero sense to anyone outside of those who understand the back channels of America's tangled financial networks, which are beginning to look more and more like Ponzi schemes by the minute. The fact that the Fed has taken on America's prodigious debt, and the already drowning Fannie Mae and Freddie Mac have loosened their capital requirements to do the same, there's nowhere to go but down, down, down for the economy, no matter how many billions of dollars -- or "liquidity" -- the Fed or their partners in crime manage to inject. In other words, to mangle Shakespeare, the Fed's recent actions are full of money and fury, signifying nothing.

"The Fed is trying to encourage more reckless borrowing and spending," argues Peter Schiff, president of Euro Pacific Capital and a longtime caller of bullshit on the irrational exuberance that debt securitization. "Obviously, its bailout of Bear Stearns creditors means that Americans are going to absorb their losses. The Fed is monetizing the mess and spreading out the losses among those who own dollars, whether in their savings or income. They're the ones being asked to shoulder the burden."

What kind of burden? It depends on who you ask. I'm not alone in arguing to anyone within earshot that the recession we're in -- and if you don't think you're in one, I'll have what you're smoking -- will rival if not outdistance the Great Depression. Others, like the Bush administration, who kick-started this recession with a program of easy money, batshit spending and rampant militarism, seem to think, as the president laughably asserted, that "our financial institutions are strong and that our capital markets are functioning efficiently and effectively." But that suspiciously rosy estimation could not be further from the truth.

"We've never had this type of this crisis before," Schiff adds by phone, on the way to a television appearance where he no doubt delivered the same doom prophecy, "and we never had this type of Fed trying to hold onto the economy. Why is it up to the Fed to stop this from happening? If recession is what we need, then postponing it won't help. We've got to restore order to the economy, and the Fed doesn't want to process that short-term pain, so its replacing the pain with one that will hurt even worse later."

"Where are we?" asks Danny Schechter, award-winning producer for CNN and ABC, graduate of the London School of Economics and the man behind the prescient debt economy documentary In Debt We Trust. "We're in a disaster zone. It's like bird flu in the financial system. Buyers overseas who bought all of these securities have found out that they've been scammed. No one knows how to value this stuff. The Fed has unsuccessfully injected hundreds of billions into the system as well as slashed rates. But it hasn't solved the problem."

Why? If the Fed is just a bunch of highly credentialed money wonks rather than the dark-hearted star chamber that conspiracy theorists make it out to be, then why wasn't it smart enough to realize that just throwing money at the wall wouldn't stick? After slashing rates down as low as 2.25 percent and handing out billions in duffel bags like Wall Street was Baghdad, how is it possible that the collective economic genius of the Fed hasn't been able to make a single noticeable dent in the oncoming depression? How could so many smart people be so stupid?

The answer is as boring as you think: greed.

"Nobody ever wants to upset the apple cart," Schiff explains. "No one wants to tell taxpayers that they've stumbled on a new get-rich-quick scheme where home ownership takes the place of hard work and savings, especially since they're making a lot of money. We've learned nothing from the past at this point. What we've done to ourselves with this attitude is create a situation where there is no way to postpone the unbearable destruction."

Yet destruction and creation come in one package. In other words, while Ma and Pa Kettle are losing equity like Britney's losing listeners, some are commanding interstellar earnings.

"If you're one of the 2 million American families losing your house this year, it's a depression," argues Greg Palast, BBC investigative journalist, author of Armed Madhouse and onetime student of neoconservative privatization guru Milton Friedman. "If you're a mortgage shark, happy days are here again. The difference between the Great Depression and this one is that, back then, everyone was in it. Now, it's a selective mangling. Exxon's profit hit $40 billion, the highest of any corporation since the pharaohs. So how can you say the economy is going down? For whom?"

Palast's point is well taken, even as it is ignored by everyone from the Bush administration to the financial (which is to say, entertainment) media and all the way to homeowners who ignorantly refinance so they can buy that new Hummer: Your life may suck ass, but others around you are sucking you dry. And most importantly, they're crushing the dollar on their way out the door to Dubai, or wherever suits hide in the New World Order's afterlife.

"Regardless of what the Fed does, the dollar is going to keep going down," Schiff agrees. "If the Fed keeps doing what it is doing, it won't make it out of this as a functioning currency."

"I'm sorry to tell you this," Palast adds, "but higher oil prices and weak dollars is not a failure of policy. That is the policy. Clinton had a strong dollar policy and Bush hated it. The weak dollar is a way to temporarily hike exports to create short-term pretend juice for the economy. But the weak dollar also made it easier for foreigners to buy up U.S. assets. The capitalists are cashing out of America. They're keeping condos in New York, Palm Beach and Malibu, but their investments are where the returns are fatter: Malaysia, China, India. A weak dollar helps the transfer of capital ownership."

And that is where this depression gets scarier than any we have survived so far, in America's comparatively short history. With the onset of global warming about to throw huge parts of the United States into environmental disarray, and melting ice about to create a gold rush of insane proportions in parts northward, America may have entered the beginning of a phase of its existence that has no parallel to any yet experienced. With the Bush administration and its friends in the energy, banking, housing, finance and real estate sectors cashing out what remains of American solvency and offloading its debt onto the public, the future has become one giant question mark. And it won't matter who takes the reins of the United States going forward if the newly crowned candidate doesn't start coming up with some serious resolutions.

We are entering uncharted territory on a variety of fronts, although the economic one is hitting most Americans where it hurts at the moment. But that throbbing pain has barely subsided behind our previous ills, from our rampant, expensive militarism in the Middle East to tornadoes or floods that seemingly come out of nowhere to destroy our cities, crops and futures. And if that doesn't scare you, I have a house I need to flip your way, no questions asked.

"No one is going to come out of this unscathed," concludes Schechter. "This is a disaster. It's a 50-state Katrina, and then some."

Scott Thill runs the online mag Morphizm.com. His writing has appeared on Salon, XLR8R, All Music Guide, Wired and others.

Fed Up: Bernanke joins G-7 to Stem Global Financial Meltdown

Fed Up: Bernanke joins G-7 to Stem Global Financial Meltdown

By Mike Whitney

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In a recent interview with the New York Times, former Secretary of the Treasury Paul O' Neill, was asked how the problems with subprime mortgages could lead to a financial crisis of global proportions. O' Neill said,

“If you have 10 bottles of water, and one bottle has poison in it, and you don't know which one, you probably won’t drink out of any of the 10 bottles; that’s basically what we’ve got here.”

Bulls-eye. O' Neill's answer is the best yet for explaining a complex situation in simple terms. The term “subprime” is a red herring; it is used by the media to minimize what is really going on. The meltdown in financing extends across the entire range of mortgage-security products. No loan-type has been spared. The wholesale market for anything connected to mortgages is frozen and the details are being intentionally withheld from the public. Two years ago, more than 65 percent of all mortgages were converted into securities and sold off to Wall Street. No more. That scam unraveled in July when two Bear Stearns hedge funds blew up and their were no takers for billions of dollars of mortgage-backed junk. Since then, bankers and hedge fund managers have been scrambling to conceal the facts about what mortgage-backed securities (MBS) are really worth; nothing. The fear is that when the public finds out what is really going on, they'll draw the logical conclusion that the banking system is bankrupt, which it probably is. Just look at these eye-popping losses which appeared in Bloomberg News on April 1 The financial ship is listing, and the mainstream media is doing its best to keep the public in the dark.

So for the last eight months, a simple matter of “price discovery” on publicly traded securities has been a nonstop game of hide-n-seek. That's no way to run a free market. The recent collapses of Bear Stearns and Carlye Capital are just the latest additions to this ongoing farce. Carlyle was a $22 billion hedge fund that couldn't scrape together a measly $400 billion to meet a margin call. Why? Every analyst who wrote on the topic noted that the fund was loaded up with high-quality Triple-A and GSE (Fannie Mae) bonds. So what were they offered for their MBS? That question was never answered because Fed chief Ben Bernanke rode to the rescue and created a new $200 billion auction facility and –Whoosh---Carlyle's mortgage-backed junk disappeared down a black hole. How convenient; another Fed bailout to hide the damning evidence that trillions of dollars of MBSs are utterly worthless and devouring the financial system from the inside.

Bernanke's myriad auction facilities (four, so far) are ostensibly designed to remove these mortgage-backed stinkers from the banks' balance sheets so they can start lending again. But there's another reason, too. The Fed thinks they can simply put these MBSs in cold-storage for a while and then re-thaw them when the market bounces back. But the market for MBSs won't bounce back. This is biggest housing bust in US history and prices have a long way to go. Who is going to invest in mortgage-backed bonds when the underlying asset is losing value every day? Besides, as Paul O' Neill points out; one of the bottles contains poison and investors don't like poison. So, Bernanke is stuck trying to treat with the symptoms rather than the disease. As a scholar of the Great Depression, he's been rifling through his bag o' tricks to mitigate the damage, but without success. The rate-cuts and auction facilities have been a complete flop. The situation is worse now than it was in July; much worse. In fact, the develeraging of financial institutions is accelerating at a pace that no one expected threatening some of Wall Streets' biggest players and putting $500 trillion in counterparty agreements at risk. And it all began with eliminating the basic standards for issuing loans to credit-worthy applicants; the straw that broke the camel's back. Now the whole system is crumbling and an ominous sense of doom pervades trading floors across the planet. Everyone is just waiting for the next shoe drop.

Pimco's Bill Gross said, “What we are seeing is the collapse of the modern day banking system”. American-style capitalism is in crisis-mode and the outcome is far from certain. The Fed's interventions show that the long held belief that markets are self-correcting has vanished. Laissez-faire is out; regulation is in.




Bloomberg News summed it up like this:

“It is no coincidence that the crisis of 2007 and 2008 had its origin in unregulated financial products traded in unregulated markets. Ever since the Great Depression, the government has tried to limit the leverage available to the public in the American stock market. But regulators, led by Alan Greenspan, the former chairman of the Federal Reserve, thought it would hamper innovation, and drive financial activity overseas, if there were any attempts to impose limits on leverage in the unregulated markets.
To avoid a super-bubble in the future, (the) banks must control their own borrowing. They must also curtail lending to clients such as hedge funds by demanding greater collateral and margin requirements on loans.” (Bloomberg News)

In Henry Liu's latest article in Asia Times, “A Panic-stricken Federal Reserve”, Liu makes this observation on the Fed's auction facilities which provide hundreds of billions of dollars in 28 day loans in exchange for dubious mortgage-backed collateral:

"Since the Fed cannot retire loans made via TAF and its repo program without adding to those 'elevated pressures', the loans should be considered an equity infusion, because they’ll be repaid at the convenience of the borrower rather than on a schedule agreed with the lender." What Waldman did not say was that the Fed had ventured into a broad nationalization of the prime dealers on Wall Street by being an equity investor. (Quote,Steve Randy Waldman of Interfluidity; Henry Liu, “A Panic-stricken Federal Reserve”)

Does the Fed realize that it is effectively monetizing the debt by issuing loans that may not be repaid or is this just a clever way to trick foreign investors into believing that the Fed won't print its way out of a crisis? The bottom line is, whether the nation is headed into a deflationary spiral or not; all of the Fed's tools are inflationary. Rate cuts, auction facilities or covert monetization all weaken the currency and levee an unfair tax on savers and people on fixed incomes. Unfortunately, these people have no voice in government, so we can't expect their interests to be fairly represented.


Since housing peaked in 2005, 240 independently-owned mortgage lenders have filed for bankruptcy. Wholesale funding sources have dried up and foreclosures are on the rise. Now, more than 75 percent of mortgages are funded by Fannie Mae or Freddie Mac while another 10 percent are underwritten by FHA. The real estate industry has been nationalized; another knock-on effect of Greenspan's low interest monetary policy. Presently, the Fed and the Secretary of the Treasury, Henry Paulson, are pushing to expand Fannie's and Freddie's balance sheets so they can absorb bigger and riskier mortgages. This is lunacy. Fannie Mae is already perilously under-capitalized and, if it defaults, taxpayers will be on the hook for $2.2 trillion. That doesn't seem to bother Paulson who is determined to reflate the equity bubble so the profits keep rolling in to Wall Street's coffers. Still, even if the plan goes forward, it's unlikely that Paulson and Bernanke will be able to re-energize the real estate market or ignite another housing boom. Public attitudes have changed dramatically in the last few months. The myth that “housing prices never going down” has been dispelled and high levels of personal debt have forced many to reassess their spending priorities. The American consumer has never been so over-extended.

According to Bloomberg:


Consumers fell behind on car, credit-card and home-equity loans at the highest level in 15 years, another sign the U.S. economy is slowing, according to the American Bankers Association's quarterly survey. Payments at least 30 days past due increased across all eight categories of loans tracked during the fourth quarter, the Washington-based group said today in a statement. Late loans in the quarter climbed 21 basis points to 2.65 percent of all accounts in a consumer-loan index created by the group.


The American consumer is tapped-out. What he needs is a raise, not another loan. Bush's $500 per person Stimulus Package will do nothing to reverse the effects of 30 years of anti-labor legislation and class-oriented monetary policy.

Another indication that attitudes towards spending have changed, showed up in a survey conducted two weeks ago by USA Today/Gallup. The poll released showed that 76 percent of Americans believe that the country is now in recession and 59 percent think the US will slide into a depression that will last for several years. Despite the media's attempts to convince us that these are “the best of times”; the public knows otherwise. Their pessimism is expressing itself through curtailed spending. There's nothing the Fed can do to change the prevailing mood of the country. Working people are hurting. The spending spree is over.

The housing market will be dead for a generation. That means the MBS market will falter and the multi-trillion dollar derivatives monolith will continue to unwind. It will take emergency measures to address the credit avalanche which is just now hitting the broader economy.

The Bear Stearns bailout is a prime example of the extent to which the Fed is willing to go to stop a meltdown. By approving the $30 billion dollar deal with JP Morgan, the Fed arbitrarily went beyond its mandate of providing liquidity to the markets and usurped Congress' authority to appropriate funds. It was a power-grab engineered under shaky pretenses. The Fed isn't authorized to prevent privately-owned businesses that are recklessly leveraged at 30 to 1 from defaulting. More importantly, the Federal Reserve is not Congress, although they have now assumed those constitutional duties. Speaker of the House Pelosi has said nothing so far.

Paulson has used the Bear fiasco as a platform for his blueprint for “broad market reforms”; a 200-plus page document that removes Congress from its role of overseeing the financial markets. According to the New York Times:

“President Bush was preparing to issue an executive order soon to expand the membership and reach of an interagency committee called the President’s Working Group on Financial Markets. (aka; The Plunge Protection Team) The group was created after the stock market plummeted in 1987. The group is also expected to consider ways to broaden the authority of the Federal Reserve to lend money to nonbanks as needs arise. (Ed. note: To authorize more Bear Stearns type bailouts with consulting Congress).....Elements of the plan are clearly deregulatory. The plan proposes, for instance, to reduce the enforcement authority of the S.E.C. in a variety of ways and hand that authority instead to industry groups. The plan recommends that investment advisers no longer be directly regulated by the commission, but instead be supervised by an industry regulatory organization.

The Treasury Department’s blueprint is designed to boost Wall Street’s competitiveness, not Main Street investor protection,” said Karen Tyler, president of the North American Securities Administrators Association and the securities commissioner of North Dakota.” (New York Times)

Congress is being muscled out of financial market supervision by a troop of venal banksters and corporate picaroons who are threatening to finish-off the already-defanged SEC. That will put the Fed in the driver's seat for good. Paulson wants to police the world's most complex markets on the “honor system”. It's crazy. His blueprint is an obvious attempt to consolidate market-related functions under a central authority that is accountable to private industry alone. That way, the Fed can bailout whomever it chooses without congressional approval. Paulson's press conference was just a polite way of informing the American people that the seat of power has shifted from Washington to Wall Street. It's a banker's coup.

So, where do we go from here? Pimco's Bill Gross gives us some indication in this recent quote:

"In my opinion, the private credit markets have forfeited their privileged right to operate relatively autonomously because of incompetence, excessive greed, and in minor instances, fraudulent activities. As a result, the deflating private market’s balance sheet is being re-nationalized in some cases with increased regulation, in others with outright guarantees and agency lending. Ultimately government programs which support private credit market assets may be required in order to prevent an asset deflation of significant proportions. Authorities must act quickly, with a shot of adrenalin straight to the heart of the problem: home prices. Since homes are the most highly levered and monetarily significant asset that American consumers own, if they decline much further they will drag the rest of the economy with them."

“Re-nationalized”; is that what it is? No one authorized the Fed or Paulson to re-nationalize anything. These over-leveraged banking behemoths need to fail. Let the market work. 28 million Americans are on food stamps, tent cities are sprouting up across the country, discretionary spending is down, food and energy prices are skyrocketing, and wages have been frozen for a generation. Where's the bailout for the working man? Instead, the government's largess is showered on a throng of unctuous fat-cat banksters so they can keep the larder on Martha's Vineyard topped off with Godiva truffles and Cuban cigars. Paulson has to go. Bernanke too.

An article in last week's New York Times, “Leveraged Planet”, provides a great description of the Fed's activities during the weekend of the Bear Stearns fiasco. Journalist Andrew Sorkin recreates the frantic phone calls and panicky deal-making that went on behind the scenes while the stock market was preparing for a Monday morning blow-out:

“JUST before JP Morgan-Chase announced its initial $2-a-share deal to buy Bear Stearns, Ben Bernanke, the chairman of the Federal Reserve, held an extraordinary impromptu conference call. The participants on the Sunday night call, who got a preview of the deal, were Wall Street’s biggest power brokers: Lloyd Blankfein of Goldman Sachs dialed in from home. John Mack of Morgan Stanley rushed to the office to listen on speakerphone. Richard Fuld of Lehmann Brothers, who had been directed to return home from a business trip in New Delhi by none other than Henry Paulson, the Treasury secretary, was patched in, too, among others.

The half-hour call was a rallying cry for support of Bear Stearns — and more broadly, the financial markets, which, as it was described on the call, were on the verge of a major meltdown if not for the pre-emptive steps that the Fed and JPMorgan took. “It was much worse than anyone realized; the markets were on the precipice of a real crisis,” said one participant. Given that Bear held trading contracts with an outstanding value of $2.5 trillion with firms around the world, “we were talking about the possibility of a global run on the bank.” ( Andrew Sorkin, “Leveraged Planet” New York Times)

Typical of the Times, the reader is left feeling that the wild and destabilizing activities of one unregulated market participant, like Bear, is as natural as a spring rain. There's not the slightest hint that Bears' transgressions may have emerged from years of kicking down regulatory doors and feeding campaign contributions into a corrupt political system. That's way beyond the Times' range of analysis. Instead, the heroes of this financial kabuki are none other than the ashen-faced palatines at Fed and the Treasury who deftly donned their Haz-mat suits long enough to battle the flames of the banking inferno with a stream of taxpayer money. So much for moral hazard.

If Bear had been properly policed; it would have been better capitalized with considerably less leverage. Its $2.5 trillion of derivatives contracts would have been regulated by government officials to make sure that they posed no threat to the broader system. Sorkin's recap just proves that the present stewards of the system are bunglers who are out of their depth. After years of serial bubble-making, they are finally begin to realize that their neoliberal Golden Calf was built on a foundation of pure quicksand. In fact, the sirens are already wailing as the yields on 3 month Treasuries continue to plummet, which is the bond market's way of perching itself atop the highest building in downtown Manhattan and screaming, “FIRE!” There's no telling when the stock market will get the message, but it shouldn't be too long.

CODE RED; Emergency planning now underway

So, what is to be done? New York Fed chief Timothy Geithner says that capital markets are still “substantially impaired” and policy makers and financial industry leaders must “act forcefully” to stem the crisis.

“What we were observing in U.S. and global financial markets was similar to the classic pattern in financial crises,'' Geithner said in his prepared testimony to the Senate Banking Committee. He cited ``a self-reinforcing downward spiral'' of asset sales, ``higher volatility, and still lower prices.” (Bloomberg News)

If Geithner's predictions of “a self-reinforcing downward spiral'' sound scary; so do the remedies. The Financial Times outlined the radical strategies that are now under consideration by the G-7 powers for dealing with challenges of the rapidly-expanding credit crisis. These include “the temporary suspension of capital requirements, taxpayer-funded recapitalisation of banks and outright public purchase of mortgage-backed securities.” Everything is on the table.

Representatives from the main western central banks are also discussing whether to force a number of the larger banks to disclose their financial positions so they can objectively determine the weaknesses on their balance sheets.

Other recommendations include boosting capital requirements, “conserving financial resources”, and utilizing public funds. The group is also deciding whether to “suspend capital and reporting rules that tie prudential requirements to market values of securities.” That way the banks can avoid letting shareholders know the true downgraded value of their assets. This is clearly an attempt to deceive the public about the real financial condition of the banks.

“Emergency liquidity support”, reductions in capital requirements, concealing the true value of collateral, relaxing regulations, suspending accounting rules for assets; it sounds a lot like panic. These are the signs of a system so dilapidated that the pilings shake and the scaffolding wobbles with the slightest breeze. A system that's held together with the frayed strands of collective fear; bankers angst. Strike a match and the whole thing will go up like a Roman candle.

Job winners and losers in hard time

Job winners and losers in hard times

By MARTIN CRUTSINGER

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Hospitals, schools and the assembly line at an airplane factory look like pretty good places to be with a recession looming and unemployment rising. Construction workers, real estate agents and auto workers aren’t expected to fare as well.

The startling news that the economy lost 80,000 jobs last month and nearly a quarter-million over the last three months is the starkest signal yet that the country has probably fallen into a recession, with things on the job front expected to get worse.

"All the indicators suggest that we will see even larger job declines in coming months. Businesses are getting nervous and pulling back," said Mark Zandi, chief economist at Moody’s Economy.com.

While the downturn is expected to be short and mild, economists are still forecasting the unemployment rate, which jumped to 5.1 percent in March, will climb much higher before the nation’s job engine sputters back to life.

Economists are forecasting a jobless rate that will peak at around 6 percent, but probably not until early next year, several months after the recession is expected to end. Analysts said as many as 2 million people could lose their jobs in the current downturn.

In an environment of a sluggish economy and rising unemployment, analysts said there will be some safe harbors where job demand will keep growing. First and foremost in this group will be health care, where the demographics of an aging population mean the demands for medical care will keep rising.

Also a bright spot in a generally bleak jobs picture will be education, again driven by the demographics of a rising population of school-age children and students attending colleges, community colleges and trade schools.

Outside of those areas, the falling value of the dollar against many foreign currencies is helping to power an export boom, which is benefiting farmers and some segments of manufacturing, particularly airplane makers and factories producing various types of heavy machinery where the United States enjoys a competitive edge.

But other segments of manufacturing are not faring nearly as well. Domestic automakers have been laying off workers in the face of slumping sales as the weak economy and soaring gasoline prices cut into demand. General Motors and Chrysler reported U.S. sales were down 19 percent in March compared with a year ago, while sales at Ford fell by 14 percent.

Other manufacturers, such as appliance and furniture makers, have been hurt by the deep downturn in housing. In all, manufacturing lost 48,000 jobs in March, with half of those cuts coming in autos and auto parts.

Construction, decimated by the housing slump, shed 51,000 jobs, the ninth straight month that construction jobs have declined. Hiring has also fallen in related industries such as real estate agents and mortgage brokers, as well as at the Wall Street firms that have declared billions of dollars in losses from bad investments on securities backed by subprime mortgages.

In general, hiring is expected to hold up in areas where consumers will keep spending money regardless of the health of the economy, such as at grocery stores, gasoline stations and repair shops. But companies selling discretionary services — such as various segments of the tourism industry, from airline travel to hotels to restaurants — are likely to experience more layoffs.

"Anything that people can defer, like a vacation or buying a new car, tends to suffer," said David Wyss, chief economist at Standard & Poor’s in New York. "The basics like food and medicine tend to do pretty well."

Small businesses, which generate the bulk of the country’s new jobs, are decidedly more pessimistic. William Dunkelberg, chief economist at the National Federation of Independent Businesses, said hiring plans had plummeted, with the number of firms saying they planned to hire new workers exceeding those planning job cuts by just 3 percent in March, down from 11 percent in the group’s February survey.

Government employment generally holds up during a recession because of increased demand for services, although some states are warning of cutbacks due to falling tax revenues. Federal, state and local governments added 18,000 jobs in March, according to Friday’s jobs report.

Bernard Baumohl, managing director of the Economic Outlook Group, said the new jobs report showed a number of other labor market strains, including the sixth straight monthly increase in the number of workers taking part-time jobs because they could not find full-time positions. That figure now stands at its highest level in 14 years.

Nigel Gault, chief U.S. economist at Global Insight, said he believed the overall economy, as measured by the gross domestic product, fell by a small 0.1 percent at an annual rate in the January-March quarter this year, and would drop at a larger 0.7 percent rate in the current quarter. By one classic definition, a recession occurs when GDP is negative for two consecutive quarters.

Gault said he expected a mild recession that will end when tax rebate checks are spent this summer. He said he wasn’t looking for as big a rise in unemployment as the 2001 downturn because companies have not added as many workers to their payrolls during the current expansion.

"We think companies are starting from a leaner position so they won’t have to lay off as many people," he said.

Huge Job Losses Set Off Recession Alarms

Huge Job Losses Set Off Recession Alarms

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Washington - It's no longer a question of recession or not. Now it's how deep and how long. Workers' pink slips stacked ever higher in March as jittery employers slashed 80,000 jobs, the most in five years, and the national unemployment rate climbed to 5.1 percent. Job losses are nearing the staggering level of a quarter-million this year in just three months.

For the third month in a row total U.S. employment rolls shrank - often a telltale sign that the economy has jolted dangerously into reverse.

At the same time, the jobless rate rose three-tenths of a percentage point, a sharp increase usually associated with times of deep economic stress.

The grim picture described by the Labor Department on Friday provided stark evidence of just how much the jobs market has buckled under the weight of the housing, credit and financial crises. Businesses and jobseekers alike are feeling the pain.

"It is now very clear that the fat lady has sung for the economic expansion. The country has slipped into a recession," said Stuart Hoffman, chief economist at PNC Financial Services Group. Indeed, there is widening agreement that the first recession since 2001 has arrived. Even Ben Bernanke, in a rare public utterance for a Federal Reserve chairman, used the "r" word, acknowledging for the first time this week that a recession was possible.

Job losses were widespread last month, hitting workers at factories, construction companies, retailers, banks, real-estate firms and even temporary-help agencies. Also mortgage brokers, hotels, computer design shops, accounting firms, architecture and engineering companies, legal services, airlines and other transportation as well as telecommunications companies.

Those cuts swamped employment gains elsewhere, including at hospitals and other heath-care sites, educational services, child day-care providers, bars and restaurants, insurance companies, museums, zoos and parks. And the government, which is almost always up.

In fact, private employers have shed jobs for four straight months, though December showed an overall gain for the economy because the government increase outweighed the private loss.

March's losses were the most since the same month in 2003, when companies were still struggling to recover from the last recession. Adding to the angst: Revised figures showed losses were actually deeper than first reported for both January and February.

All told, the economy now has lost 232,000 jobs in the first three months of this year.

On Wall Street, investors took the weak employment figures in stride. The Dow Jones industrials lost just 16.61 points, while other indexes edged higher.

All the economy's problems are forcing people and businesses to hunker down, crimping spending and hiring, a vicious cycle.

"Across the board, businesses have become very, very conservative," said Joel Naroff, president of Naroff Economic Advisors. More downbeat about their own sales prospects because of cautious consumers, employers are cutting back. "It only makes sense for them to run leaner if we are going into a recession or already in one" as Naroff now believes.

The new employment figures were much weaker than economists were expecting. They were anticipating a drop of 50,000 payroll jobs.

Michael Gregory, senior economist at BMO Capital Markets Economics, said the employment report was "emitting recession signals."

The national unemployment rate of 5.1 percent, relatively modest by historical standards, is nonetheless the highest since September 2005, following the devastating blows of the Gulf Coast hurricanes.

Some groups are feeling more of the strains from the economy's current woes. The unemployment rate for Hispanics, for instance, jumped to 6.9 percent in March, the highest in over four years. The rate for blacks climbed to 9 percent, a two-month high.

With the public on edge, Congress, the White House and presidential contenders are scrambling to come up with their own relief plans to stem record-high home foreclosures and stabilize housing - even as they engage in a political blame game.

Democrats want more economic assistance, including extending unemployment benefits. The Bush administration has resisted, saying the government's $168 billion stimulus package of tax rebates for people and tax breaks for businesses will be sufficient once it kicks in.

"We don't like to see one job lost, let alone 80,000," Commerce Secretary Carlos Gutierrez said in an interview with The Associated Press. "These are challenging times," he said. Gutierrez was hopeful the economy would turn around in the second half of this year, given the relief efforts by the government and the Federal Reserve. "We'll get through this."

Democrats were skeptical of the administration's efforts.

"Our economy is spiraling downward," said presidential contender Hillary Rodham Clinton. "It is time for this administration to put ideology aside and get serious about stemming this crisis."

Barack Obama said, "Instead of doing nothing for out-of-work Americans, we need a second stimulus that extends unemployment insurance and helps communities that have been hit hard by this recession."

Republican John McCain said the unemployment news "underlines the need to focus on innovation, which grows the economy and creates an urgent need for effective worker retraining."

Given the worsening employment situation, the Federal Reserve probably will lower a key interest rate, now at 2.25 percent, later this month.

The Fed has taken a number of extraordinary actions recently - slashing interest rates, providing financial backing to JP Morgan's takeover of troubled Bear Stearns and opening an emergency lending program for big investment houses. All the actions were aimed at limiting damage to the national economy.

With the pace of hiring slowing, the number of unemployed people increased to 7.8 million in March.

Workers with jobs saw modest wage gains. Average hourly earnings for jobholders rose to $17.86 in March and are up 3.6 percent over the past 12 months. With lofty energy and food prices, workers may feel like their paychecks are shrinking. If the job market continues to falter, wage growth probably will slow, too, making consumers even less inclined to spend, which would further hurt the economy.

Many analysts believe the economy shrank in the first three months of this year and could still be ebbing now. The government will release its estimate of first-quarter economic growth later this month. Under one rough rule, if the economy contracts for six straight months it is considered in a recession. When a determination is made by a panel of experts about when a recession has started and ended - it is usually done well after the fact.

Bernanke and the Bush administration are hopeful the economy will improve in the second half of this year. Even so, Bernanke predicted this week that the unemployment rate would rise further. Some analysts say it could climb to 5.75 percent or higher this year.

Advises Hoffman: "If you've got a job, hang on to it the best you can."

Foreclosure Machine Thrives on Woes

Foreclosure Machine Thrives on Woes

NOBODY wins when a home enters foreclosure — neither the borrower, who is evicted, nor the lender, who takes a loss when the home is resold. That’s the conventional wisdom, anyway.

The reality is very different. Behind the scenes in these dramas, a small army of law firms and default servicing companies, who represent mortgage lenders, have been raking in mounting profits. These little-known firms assess legal fees and a host of other charges, calculate what the borrowers owe and draw up the documents required to remove them from their homes.

As the subprime mortgage crisis has spread, the volume of the business has soared, and firms that handle loan defaults have been the primary beneficiaries. Law firms, paid by the number of motions filed in foreclosure cases, have sometimes issued a flurry of claims without regard for the requirements of bankruptcy law, several judges say.

Much as Wall Street’s mortgage securitization machinery helped to fuel questionable lending across the United States, default, or foreclosure, servicing operations have been compounding the woes of troubled borrowers. Court documents say that some of the largest firms in the industry have repeatedly submitted erroneous affidavits when moving to seize homes and levied improper fees that make it harder for homeowners to get back on track with payments. Consumer lawyers call these operations “foreclosure mills.”

“They get paid by the volume and speed with which they process these foreclosures,” said Mal Maynard, director of the Financial Protection Law Center, a nonprofit firm in Wilmington, N.C.

John and Robin Atchley of Waleska, Ga., have experienced dubious foreclosure practices at first hand. Twice during a four-month period in 2006, the Atchleys were almost forced from their home when Countrywide Home Loans, part of Countrywide Financial, and the law firm representing it said they were delinquent on their mortgage. Countrywide’s lawyers withdrew their motions to seize the Atchleys’ home only after the couple proved them wrong in court.

The possibility that some lenders and their representatives are running roughshod over borrowers is of increasing concern to bankruptcy judges overseeing Chapter 13 cases across the country. The United States Trustee Program, a unit of the Justice Department that oversees the integrity of the nation’s bankruptcy courts, is bringing cases against lenders that it says are abusing the bankruptcy system.

Joel B. Rosenthal, a United States bankruptcy judge in the Western District of Massachusetts, wrote in a case last year involving Wells Fargo Bank that rising foreclosures were resulting in greater numbers of lenders that “in their rush to foreclose, haphazardly fail to comply with even the most basic legal requirements of the bankruptcy system.”

Law firms and default servicing operations that process large numbers of cases have made it harder for borrowers to design repayment plans, or workouts, consumer lawyers say. “As I talk to people around the country, they all unanimously state that the foreclosure mills are impediments to loan workouts,” Mr. Maynard said.

LAST month, almost 225,000 properties in the United States were in some stage of foreclosure, up nearly 60 percent from the period a year earlier, according to RealtyTrac, an online foreclosure research firm and marketplace.

These proceedings generate considerable revenue for the firms involved: eviction and appraisal charges, late fees, title search costs, recording fees, certified mailing costs, document retrieval fees, and legal fees. The borrower, already in financial distress, is billed for these often burdensome costs. While much of the revenue goes to the law firms hired by lenders, some is kept by the servicers of the loans.

Fidelity National Default Solutions, a unit of Fidelity National Information Services of Jacksonville, Fla., is one of the biggest foreclosure service companies. It assists 19 of the top 25 residential mortgage servicers and 14 of the top 25 subprime loan servicers.

Citing “accelerating demand” for foreclosure services last year, Fidelity generated operating income of $443 million in its lender processing unit, a 13.3 percent increase over 2006. By contrast, the increase from 2005 to 2006 was just 1 percent. The firm is not associated with Fidelity Investments.

Law firms representing lenders are also big beneficiaries of the foreclosure surge. These include Barrett Burke Wilson Castle Daffin & Frappier, a 38-lawyer firm in Houston; McCalla, Raymer, Padrick, Cobb, Nichols & Clark, a 37-member firm in Atlanta that is a designated counsel to Fannie Mae; and the Shapiro Attorneys Network, a nationwide group of 24 firms.

While these private firms do not disclose their revenues, Wesley W. Steen, chief bankruptcy judge for the Southern District of Texas, recently estimated that Barrett Burke generated between $9.7 million and $11.6 million a year in its practice. Another judge estimated last year that the firm generated $125,000 every two weeks — or $3.3 million a year — filing motions that start the process of seizing borrowers’ homes.

Court records from 2007 indicate that McCalla, Raymer generated $10.4 million a year on its work for Countrywide alone. In 2005, some McCalla, Raymer employees left the firm and created MR Default Services, an entity that provides foreclosure services; it is now called Prommis Solutions.

For years, consumer lawyers say, bankruptcy courts routinely approved these firms’ claims and fees. Now, as the foreclosure tsunami threatens millions of families, the firms’ practices are coming under scrutiny.

And none too soon, consumer lawyers say, because most foreclosures are uncontested by borrowers, who generally rely on what the lender or its representative says is owed, including hefty fees assessed during the foreclosure process. In Georgia, for example, a borrower can watch his home go up for auction on the courthouse steps after just 40 days in foreclosure, leaving relatively little chance to question fees that his lender has levied.

A recent analysis of 1,733 foreclosures across the country by Katherine M. Porter, associate professor of law at the University of Iowa, showed that questionable fees were added to borrowers’ bills in almost half the loans.

Specific cases inching through the courts support the notion that figures supplied by lenders are often incorrect. Lawyers representing clients who have filed for Chapter 13 bankruptcy, the program intended to help them keep their homes, say it is especially distressing when these numbers are used to evict borrowers.

“If the debtor wants accurate information in a bankruptcy case on her mortgage, she has got to work hard to find that out,” said Howard D. Rothbloom, a lawyer in Marietta, Ga., who represents borrowers. That work, usually done by a lawyer, is costly.

Mr. Rothbloom represents the Atchleys, who almost lost their home in early 2006 when legal representatives of their loan servicer, Countrywide, incorrectly told the court that the Atchleys were 60 days delinquent in Chapter 13 plan payments two times over four months. Borrowers can lose their homes if they fail to make such payments.

After the Atchleys supplied proof that they had made their payments on both occasions, Countrywide withdrew its motions to begin foreclosure. But the company also levied $2,793 in fees on the Atchleys’ loan that it did not explain, court documents said. “Every paycheck went to what they said we owed,” Robin Atchley said. “And every statement we got, the payoff was $179,000 and it never went down. I really think they took advantage of us.”

The Atchleys, who have four children, sold the house and now rent. Mrs. Atchley said they lost more than $23,000 in equity in the home because of fees levied by Countrywide.

The United States Trustee sued Countrywide last month in the Atchley case, saying its pattern of conduct was an abuse of the bankruptcy system. Countrywide said that it could not comment on pending litigation and that privacy concerns prevented it from discussing specific borrowers.

A generation ago, home foreclosures were a local business, lawyers say. If a borrower got into trouble, the lender who made the loan was often a nearby bank that held on to the mortgage. That bank would hire a local lawyer to try to work with the borrower; foreclosure proceedings were a last resort.

Now foreclosures are farmed out to third-party processors who hire local counsel to litigate. Lenders negotiate flat-fee arrangements to try to keep legal bills down.

AN unfortunate result, according to several judges, is a drive to increase revenue by filing more motions. Jeff Bohm, a bankruptcy judge in Texas who oversaw a case between William Allen Parsley, a borrower in Willis, Tex., and legal representatives for Countrywide, said the flat-fee structure “has fostered a corrosive ‘assembly line’ culture of practicing law.” Both McCalla, Raymer and Barrett Burke represented Countrywide in the matter.

Gee Aldridge, managing partner at McCalla, Raymer, called the Parsley case unique. “It is the goal of every single one of my clients to do whatever they can do to keep borrowers in their homes,” he said. Officials at Barrett Burke did not return phone calls seeking comment.

In a statement, Countrywide said it recognized the importance of the efficient functioning of the bankruptcy system. It said that servicing loans for borrowers in bankruptcy was complex, but that it had improved its procedures, hired new employees and was “aggressively exploring additional technology solutions to ensure that we are servicing loans in a manner consistent with applicable guidelines and policies.”

The September 2006 issue of The Summit, an in-house promotional publication of Fidelity National Foreclosure Solutions, another unit of Fidelity, trumpeted the efficiency of its 18-member “document execution team.” Set up “like a production line,” the publication said, the team executes 1,000 documents a day, on average.

OTHER judges are cracking down on some foreclosure practices. In 2006, Morris Stern, the federal bankruptcy judge overseeing a matter involving Jenny Rivera, a borrower in Lodi, N.J., issued a $125,000 sanction against the Shapiro & Diaz firm, which is a part of the Shapiro Attorneys Network. The judge found that Shapiro & Diaz had filed 250 motions seeking permission to seize homes using pre-signed certifications of default executed by an employee who had not worked at the firm for more than a year.

In testimony before the judge, a Shapiro & Diaz employee said that the firm used the pre-signed documents beginning in 2000 and that they were attached to “95 percent” of the firm’s motions seeking permission to seize a borrower’s home. Individuals making such filings are supposed to attest to their accuracy. Judge Stern called Shapiro & Diaz’s use of these documents “the blithe implementation of a renegade practice.”

Nelson Diaz, a partner at the firm, did not return a phone call seeking comment.

Butler & Hosch, a law firm in Orlando, Fla., that is employed by Fannie Mae, has also been the subject of penalties. Last year, a judge sanctioned the firm $33,500 for filing 67 faulty motions to remove borrowers from their homes. A spokesman for the firm declined to comment.

Barrett Burke in Texas has come under intense scrutiny by bankruptcy judges. Overseeing a case last year involving James Patrick Allen, a homeowner in Victoria, Tex., Judge Steen examined the firm’s conduct in eight other foreclosure cases and found problems in all of them. In five of the matters, documents show, the firm used inaccurate information about defaults or failed to attach proper documentation when it moved to seize borrowers’ homes. Judge Steen imposed $75,000 in sanctions against Barrett Burke for a pattern of errors in the Allen case.

A former Barrett Burke lawyer, who requested anonymity to avoid possible retaliation from the firm, said, “They’re trying to find a fine line between providing efficient, less costly service to the mortgage companies” and not harming the borrower.

Both he and another former lawyer at the firm said Barrett Burke relied heavily on paralegals and other nonlawyer employees in its foreclosure and bankruptcy practices. For example, they said, paralegals prepared documents to be filed in bankruptcy court, demanding that the court authorize foreclosure on a borrower’s home. Lawyers were supposed to review the documents before they were filed. Both former Barrett lawyers said that with at least 1,000 filings a month, it was hard to keep up with the volume.

This factory-line approach to litigation was one reason he decided to leave the firm, the first lawyer said. “I had questions,” he added, “about whether doing things efficiently was worth whatever the cost was to the consumer.”

James R. and Tracy A. Edwards, who are now living in New Mexico, say they have had problems with questionable fees charged by Countrywide and actions by Barrett Burke. In one month in 2002, when the couple lived in Houston, Countrywide Home Loans withdrew three monthly mortgage payments from their bank account, Mrs. Edwards said, leaving them unable to pay other bills. The family filed for bankruptcy to try to keep their home, cars and other assets.

Filings in the bankruptcy case of the Edwards family show that on at least three occasions, Countrywide’s lawyers at Barrett Burke filed motions contending that the borrowers had fallen behind. The firm subsequently withdrew the motions.

“They kept saying we owed tons and tons of fees on the house,” Mrs. Edwards said. Tired of this battle, the family gave up the Houston house and moved to one in Rio Rancho, N.M., that they had previously rented out.

Countrywide tried to foreclose on that house, too, contending that Mr. and Mrs. Edwards were behind in their payments. Again, Mrs. Edwards said, the culprit was a raft of fees that Countrywide had never told them about — and that were related to their Texas home. Mrs. Edwards says that she and her husband plan to sue Countrywide to block foreclosure on their New Mexico home.

Pamela L. Stewart, president of the Houston Association of Debtor Attorneys, said she has become skeptical of lenders’ claims of fees owed. “I want to see documents that back up where these numbers are coming from,” Ms. Stewart said. “To me, they’re pulled out of the air.”

An inaccurate mortgage payment history supplied by Ameriquest, a mortgage lender that is now defunct, was central to a case last year in federal bankruptcy court in Massachusetts. “Ameriquest is simply unable or unwilling to conform its accounting practices to what is required under the bankruptcy code,” Judge Rosenthal wrote. He awarded the borrower $250,000 in emotional-distress damages and $500,000 in punitive damages.

Fidelity National Information Services has also been sued. A complaint filed on behalf of Ernest and Mattie Harris in federal bankruptcy court in Houston contends that Fidelity receives kickbacks from the lawyers it works with on foreclosure matters.

The case shines some light on the complex relationships between lenders and default servicers and the law firms that represent them. The Harrises’ loan servicer is Saxon Mortgage Services, a Morgan Stanley unit, which signed an agreement with Fidelity National Foreclosure Solutions. Under it, Fidelity was to provide foreclosure and bankruptcy services on loans serviced by Saxon, as well as to manage lawyers acting on Saxon’s behalf. The agreement also specified that Saxon would pay the fees of the lawyers managed by Fidelity.

But Fidelity also struck a second agreement, with an outside law firm, Mann & Stevens in Houston, which spelled out the fees Fidelity was to be paid each time the law firm made filings in a case. Mann & Stevens, which did respond to phone calls, represented Saxon in the Harrises’ bankruptcy proceedings.

According to the complaint, Mann & Stevens billed Saxon $200 for filing an objection to the borrowers’ plan to emerge from bankruptcy. Saxon paid the $200 fee, then charged that amount to the Harrises, according to the complaint. But Mann & Stevens kept only $150, paying the remaining $50 to Fidelity, the complaint said.

This arrangement constitutes improper fee-sharing, the Harrises argued. Texas rules of professional conduct bar fee-sharing between lawyers and nonlawyers because that could motivate them to raise prices — and the Harrises argue that this is why the law firm charged $200 instead of $150. And under these rules, sharing fees with someone who is not a lawyer creates a risk that the financial relationship could affect the judgment of the lawyer, whose duty is to the client. Few exceptions are permitted — like sharing court-awarded fees with a nonprofit organization or keeping a retirement plan for nonlawyer employees of a law firm.

“If it’s fee-sharing, and if it doesn’t fall into those categories, it sounds wrong,” said Michael S. Frisch, adjunct professor of law at Georgetown University. Greg Whitworth, president of loan portfolio solutions at Fidelity, defended the arrangement, saying it was not unusual for a company to have an intermediary manage outside law firms on its behalf.

The Harrises contend that the bankruptcy-related fees charged by the law firms managed by Fidelity “are inflated by 25 to 50 percent.” The agreement between Fidelity and the law firm is also hidden, according to their complaint, so a presiding judge sees only the lender and the law firm, not the middleman.

Fidelity said the money it received from the law firm was not a kickback, but payments for services, just as a law firm would pay a copying service to duplicate documents. In response to the complaint, Fidelity asserted in a court filing that the Harrises’ claims were “nothing more than scandalous, hollow rhetoric.”

But the Fidelity fee schedule shows a charge for each action taken by the law firm, not a fee per page or kilobyte. And Fidelity’s contract appears to indemnify Saxon if the arrangement between Fidelity and its law firm runs afoul of conduct rules.

Mr. Whitworth of Fidelity said that the arrangement with Mann & Stevens did not constitute fee sharing, because Fidelity was to be paid by that law firm even if the law firm itself was not paid.

He also said that by helping a servicer manage dozens or even hundreds of law firms, Fidelity lowered the cost of foreclosure or bankruptcy proceedings, to the benefit of the law firm, the servicer and the borrower. “Both parties want us to be in the middle here,” Mr. Whitworth said, referring to law firms and mortgage servicing companies.

THE Fidelity contract attached to the complaint also hints at the money each motion generates. Foreclosures earn lawyers fees of $500 or more under the contract; evictions generate about $300. Those fees aren’t enormous if they require a substantial amount of time. But a few thousand such motions a month, executed by lawyers’ employees, translates into many hundreds of thousands of dollars in revenue to the law firm — and the lower the firm’s costs, the greater the profits.

“Congress needs to enact a national foreclosure bill that sets a uniform procedure in every state that provides adequate notice, due process and transparency about fees and charges,” said O. Max Gardner III, a consumer lawyer in Shelby, N.C. “A lot of this stuff is such a maze of numbers and complex organizational structure most lawyers can’t get through it. For the average consumer, it is mission impossible.”

Bankruptcies Jump 30% in March, Led by Housing-Bust States

Bankruptcies Jump 30% in March, Led by Housing-Bust States

By Bill Rochelle and Bob Willis

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The jump in March bankruptcy filings is another indication the U.S. economy is in recession, led by states where the housing boom turned to bust.

The more than 90,000 bankruptcy filings in March were the highest since insolvency laws became more restrictive in October 2005, according to statistics compiled from court records by Jupiter eSources LLC. At a daily rate, filings in March were 30 percent above the pace in 2007.

Rising bankruptcies, together with mounting foreclosures and fewer jobs, are further signs the biggest housing slump in a generation is hurting consumers and businesses. Federal Reserve Chairman Ben S. Bernanke this week for the first time acknowledged the economy may be facing a recession and vowed to act to cushion the slowdown.

``We're seeing fairly high readings in these measures of distress like bankruptcies, foreclosures and mortgage defaults,'' said Chris Low, chief U.S. economist at FTN Financial in New York. The most affected states are ``also where the most housing-related business growth was,'' said Low.

The states most affected by the housing recession, including California, Nevada and Florida, were among those with the largest increases in bankruptcies.

They are also among states where unemployment rates exceed the national average. The jobless rate in California is 5.7 percent and Nevada's is 5.5 percent in February. Nationally, 5.1 percent of workers were unemployed in March, the highest level since September 2005, the Labor Department reported yesterday.

California, Florida

California led the nation with a 42 percent increase in bankruptcy filings at an annual pace in the first quarter, according to Jupiter eSources LLC. Florida had a 35 percent increase and Nevada saw a 32 percent rise, according to the Oklahoma City-based Jupiter's service known as AACER, or Automated Access to Court Electronic Records.

Nevada led the nation with the highest foreclosure rate in February, with filings up 68 percent from a year before, and with one in every 165 households in default or foreclosure, according to RealtyTrac Inc., a seller of foreclosure data.

California had the second-highest rate, with one in every 242 households in default or foreclosure, followed by Florida, with one in every 254, RealtyTrac said March 13.

The housing recession, coupled with weakening consumer spending and mounting credit losses at financial firms, is dragging the economy toward its first recession since 2001.

Payrolls Drop

The economy lost 80,000 jobs in February, the biggest loss since March 2003, following larger than previously reported declines of 76,000 in each of the two prior months, the Labor Department also said yesterday.

Economists surveyed by Bloomberg in the first week of March forecast growth would slow to a 0.1 percent pace in the first quarter, from a 0.6 percent rate in the last three months of 2007. The odds of a recession were even.

Since then, most of the data has indicated deterioration. Retail sales fell 0.6 percent in February, for a second decline in three months. Cars and light trucks sold at an average 15.2 million annual pace in the first three months of the year, the fewest since the third quarter of 1998.

Consumer spending has faltered as record energy prices and falling home values leave Americans feeling less wealthy and with less cash to spend. Spending rose in February at the slowest pace in more than a year, the government said last week.

Business bankruptcies and reorganizations posted gains too. First-quarter filings to liquidate or reorganize in Chapter 11 grew at an annual pace of 16 percent. If that rate were to continue for the rest of the year, 8,100 businesses would be in Chapter 11 compared with 6,240 in 2007.

The jump in filings over the first three months of 2008 reversed a trend from late 2007, when filings shrank.

The number of Americans seeking bankruptcy fell in late 2005 and early 2006 after jumping ahead of the October 2005 law making it harder for people to erase debt.

In the two weeks before the new law, 630,000 Americans sought bankruptcy protection, bringing total filings in 2005 to a record 2.1 million. There were 590,500 filings in 2006 and 827,000 in 2007.

Destroying Public Education in America

Destroying Public Education in America

By Stephen Lendman

Go To Original

Diogenes called education "the foundation of every state." Education reformer and "father of American education" Horace Mann went even further. He said: "The common school (meaning public ones) is the greatest discovery ever made by man." He called it the "great equalizer" that was "common" to all, and as Massachusetts Secretary of Education founded the first board of education and teacher training college in the state where the first (1635) public school was established. Throughout the country today, privatization schemes target them and threaten to end a 373 year tradition.

It's part of Chicago's Renaissance 2010 Turnaround strategy for 100 new "high-performing" elementary and high schools in the city by that date. Under five year contracts, they'll "be held accountable....to create innovative learning environments" under one of three "governance structures:"

-- charter schools under the 1996 Illinois Charter Schools Law; they're called "public schools of choice, selected by students and parents....to take responsible risks and create new, innovative and more flexible ways of educating children within the public school system;" in 1997, the Illinois General Assembly approved 60 state charter schools; Chicago was authorized 30, the suburbs 15 more, and 15 others downstate. The city bends the rules by operating about 53 charter "campuses" and lots more are planned.

Charter schools aren't magnet ones that require students in some cases to have special skills or pass admissions tests. However, they have specific organizing themes and educational philosophies and may target certain learning problems, development needs, or educational possibilities. In all states, they're legislatively authorized; near-autonomous in their operations; free to choose their students and exclude unwanted ones; and up to now are quasi-public with no religious affiliation. Administration and corporate schemes assure they won't stay that way because that's the sinister plan. More on that below.

George Bush praised these schools last April when he declared April 29 through May 5 National Charter Schools Week. He said they provide more "choice," are a "valuable educational alternative," and he thanked "educational entrepreneurs for supporting" these schools around the country.

Here's what the president praised. Lisa Delpit is executive director of the Center for Urban Education & Innovation. In her capacity, she studies charter school performance and cited evidence from a 2005 Department of Education report. Her conclusion: "charter schools....are less likely than public schools to meet state education goals." Case study examples in five states showed they underperform, and are "less likely than traditional public (ones) to employ teachers meeting state certification standards."

Other underperformance evidence came from an unexpected source - an October 1994 Money magazine report on 70 public and private schools. It concluded that "students who attend the best public schools outperform most private school students, that the best public schools offer a more challenging curriculum than most private schools, and that the private school advantage in test scores is due to their selective admission policies."

Clearly a failing grade on what's spreading across the country en route to total privatization and the triumph of the market over educating the nation's youths.

In 1991, Minnesota passed the first charter school law. California followed in 1992, and it's been off to the races since. By 1995 19 states had them, and in 2007 there were over 4000 charter schools in 40 states and the District of Columbia with more than one million students in them and growing.

Chicago's two other "governance structures" are:

-- contract (privatized) schools run by "independent nonprofit organizations;" they operate under a Performance Agreement between the "organization" and the Board of Education; and

-- performance schools under Chicago Public Schools (CPS) management "with freedom and flexibility on many district initiatives and policies;" unmentioned is the Democrat mayor's close ties to the Bush administration and their preference for marketplace education; the idea isn't new, but it accelerated rapidly in recent years.

Another part of the scheme is in play as well, in Chicago and throughout the country. Inner city schools are being closed, remaining ones are neglected and decrepit, classroom sizes are increasing, and children and parents are being sacrificed on the alter of marketplace triumphalism.

Consider recent events under Mayor Richard Daley in Chicago. On February 27, the city's Board of Education unanimously and without discussion voted to close, relocate or otherwise target 19 public schools, fire teachers, and leave students out in the cold. Thousands of parents protested, were ignored and denied access to the Board of Ed meeting where the decision came down pro forma and quick. And it wasn't the first time. For years under the current mayor, Chicago has closed or privatized more schools than anywhere else in the country, and the trend is accelerating. Since July 2001, the city closed 59 elementary and secondary schools and replaced many of them with charter or contract ones.

Nationwide Education "Reform"

Throughout the country, various type schemes follow the administration's "education reform" blueprint. It began with the No Child Left Behind Act of 2001 (NCLB) that became law on January 8, 2002. It succeeded the 1994 Goals 2000: Educate America Act that set eight outcomes-based goals for the year 2000 but failed on all counts to meet them. Goals 2000, in turn, goes back to the 1965 Elementary and Secondary Education Act (ESEA) and specifically its Title I provisions for funding schools and districts with a high percentage of low-income family students.

NCLB is outrageous. It's long on testing, school choice, and market-based "reforms" but short on real achievement. It's built around rote learning, standardized tests, requiring teachers to "teach to the test," assessing results by Average Yearly Progress (AYP) scores, and punishing failure harshly - firing teachers and principals, closing schools and transforming them from public to charter or for-profit ones.

Critics denounce the plan as "an endless regimen of test-preparation drills" for poor children. Others call it underfunded and a thinly veiled scheme to privatize education and transfer its costs and responsibilities from the federal government to individuals and impoverished school districts. Mostly, it reflects current era thinking that anything government does business does better, so let it. And Democrats are as complicit as Republicans.

So far, NCLB renewal bills remain stalled in both Houses, election year politics have intervened, and final resolution may be for the 111th Congress to decide. For critics, that's positive because the law failed to deliver as promised. Its sponsors claimed it would close the achievement gap between inner city and rural schools and more affluent suburban ones. It's real aim, however, is to commodify education, end government responsibility for it, and make it another business profit center.

Last October, the New York Times cited Los Angeles as a vision of the future. It said "more than 1000 of California's 9500 schools are branded chronic failures, and the numbers are growing." Under NCLB, "state officials predict that all 6063" poor district schools will fail and will have to be "restructured" by 2014, when the law requires universal proficiency in math and reading." It's happening throughout the country, and The Times cited examples in New York, Florida and Maryland. Schools get five years to deliver or be declared irredeemable, in which case they must "restructure" with new teachers and principals.

In Los Angeles and around the country, "the promised land of universal high achievement seems more distant than ever," and one parent expressed her frustration. Weeks into the new school year, she said teachers focus solely on what's likely to appear on exams. "Maybe the system is not designed for people like us," she complained. Indeed it's not.

New Millennium Education

That's the theme of Time magazine's December 9, 2006 article on the National Center on Education and the Economy (NCEE). It's on NCEE's New Commission on the Skills of the American Workforce. Time called it "a high-powered, bipartisan assembly of Education Secretaries, business leaders and a former Governor" and the pre-K to 12 education blueprint they released. It's called "Tough Choices or Tough Times," was funded by the (Bill) Gates Foundation, and below is its corporate wish list:

-- moving beyond charter schools to privatized contract ones; charter schools are just stalking horses for what business really wants - privatizing all public schools for their huge profit potential;

-- ending high school for many poor and minority students after the 10th grade - for those who score poorly on standardized tests intended for high school seniors; those who do well can finish high school and go on to college; others who barely pass can go to community colleges or technical schools after high school;

-- ending remediation and special education aid for low-performance students to cut costs;

-- ending teacher pensions and reducing their health and other benefits;

-- ending seniority and introducing merit pay and other teacher differentials based on student performance and questionable standards;

-- eliminating school board powers, all regulations, and empowering private companies;

-- effectively destroying teacher unions; and

-- ending public education and creating a nationwide profit center with every incentive to cut costs and cheat students for bottom line gains; this follows an earlier decades-long corporate - public higher education trend that one educator calls a "subtle yet significant change toward (university) privatization, meaning that private entities are gradually replacing taxpayers as the dominant funding source as state appropriations account for a lower and lower percentage of schools' operating resources;" corporations now want elementary and secondary education control for the huge new market they represent.

The Skills Commission's earlier 1990s work advanced the scheme and laid the groundwork for NCLB. It came out of its "America's Choice: High Skills or Low Wages" report on non-college-bound students. It called them "ill-equipped to meet employer's current needs and ill-prepared for the rapidly approaching, high-technology, service-oriented future." It recommended ending an "outmoded model" and adopting a standards-based learning and testing approach to enforce student - teacher accountability.

Both Commission reports reflect a corporate wish list to commodify education, benefit the well-off, and consign underprivileged kids to low-wage, no benefit service jobs. It's a continuing trend to shift higher-paying ones abroad, downsize the nation, and end the American dream for millions. So why educate them.

School Vouchers

They didn't make it into NCLB, but they're very much on the table with a sinister added twist. First some background.

It's an old idea dating back to the hard right's favorite economist and man the UK Financial Times called "the last of the great (ones)" when he died in November 2006. Milton Friedman promoted school choice in 1955, then kick-started it in the 1980s under Ronald Reagan. He opposed public education, supported school vouchers for privately-run ones, and believed marketplace competition improves performance even though voucher amounts are inadequate and mostly go to religious schools in violation of the First Amendment discussed below.

Here's how the Friedman Foundation for Education Choice currently describes the voucher scheme: it's the way to let "every parent send their child to the school of their choice regardless of where they live or income." In fact, it's a thinly veiled plot to end public education and use lesser government funding amounts for well-off parents who can make up the difference and send their children to private-for-profit schools. Others are on their own under various programs with "additional restrictions" the Foundation lists without explanation:

-- Universal Voucher Programs for all children;

-- Means-Tested Voucher Programs for families below a defined income level;

-- Failing Schools, Failing Students Voucher Programs for poor students or "failed" schools;

-- Special Needs Voucher Programs for children with special educational needs;

-- Pre-kindergarten Voucher Programs; and

-- Town Tuitioning Programs for communities without operating public schools for some students' grade levels.

What else is behind school choice and vouchers? Privatization mostly, but it's also thinly-veiled aid for parochial schools, mainly Christian fundamentalist ones, and the frightening ideology they embrace - racial hatred, male gender dominance, white Christian supremacy, militarism, free market everything, and ending public education and replacing it with private Christian fundamentalist schools.

In March 1971, the Supreme Court ruled in Lemon v. Kurtzman against parochial funding in what became known as the "Lemon Test." In a unanimous 7 - 0 decision, the Court decided that government assistance for religious schools was unconstitutional because it violates the First Amendment's Establishment Clause. It prohibits the federal government from declaring and financially supporting a national religion, and the First Amendment states: "Congress shall make no law respecting an establishment of religion, or prohibiting the free exercise thereof;...."

That changed in June 2002 when the Court ruled 5 - 4 in Zelman v. Simmons-Harris that Cleveland's religious school funding didn't violate the Establishment Clause. The decision used convoluted reasoning that the city's program was for secular, not religious purposes in spite of some glaring facts. In 1999 and 2000, 82% of funding went to religious schools, and 96% of students benefitting were enrolled in them.

The Court harmed democracy and the Constitution's letter and spirit. It also contradicted Thomas Jefferson's 1802 affirmation that there should be "a wall of separation between church and state." No longer for the nation's schools.

Nationwide Efforts to Privatize Education

In recent years, privatization efforts have expanded beyond urban inner cities and are surfacing everywhere with large amounts of corporate funding and government support backing them. One effort among many is frightening. It's called "Strong American Schools - ED in '08" and states the following: it's "a nonpartisan public awareness campaign aimed at elevating education to (the nation's top priority)." It says "America's students are losing out," and the "campaign seeks to unite all Americans around the crucial mission of improving our public schools (by using an election year to elevate) the discussion to a national stage."

Billionaires Bill Gates and Eli Broad put up $60 million for the effort for the big returns they expect. Former Colorado governor and (from 2001 - 2006) superintendent of the Los Angeles Unified School District Roy Romer is the chairman. The Rockefeller (family) Philanthropy Advisors are also involved as one of their efforts "to bring the entire world under their sway" in the words of one analyst. Other steering committee members include former IBM CEO and current Carlyle Group chairman Lou Gerstner; former Michigan governor and current National Association of Manufacturers president John Engler; and Gates Foundation head Allan Golston.

"Ed in '08" has a three-point agenda:

-- ending seniority and substituting merit pay for teachers based on student test scores;

-- national education standards based on rote learning; standards are to be uniformly based on "what (business thinks) ought to be taught, grade by grade;" it's to prepare some students for college and the majority for workplace low-skill, low-paid, no-benefit jobs; and

-- longer school days and school year; unmentioned but key is eliminating unions or making them weak and ineffective.

In addition, the plan involves putting big money behind transforming public and charter schools to private-for-profit ones. It's spreading everywhere, and consider California's "Program Improvement" initiative. Under it, "All schools and local educational agencies (LEAs) (must make) Adequate Yearly Progress (AYP)" under NCLB provisions nearly impossible to achieve. Those that fail must divert public money from classrooms to private-for-profit remediating programs. It's part of a continuing effort to defund inner city schools and place them in private hands, then on to the suburbs with other "innovative" schemes to transform them as well.

Under the governor's proposed 2008 $4.8 billion education budget cut, transformation got easier. As of mid-March, 20,000 California teachers got layoff notices with State Superintendent of Public Instruction Jack O'Connell saying this action puts student performance "in grave jeopardy." Likely by design.

Plundering New Orleans

Nowhere is planned makeover greater than in post-Katrina New Orleans, and last June 28 the Supreme Court made it easier. Its ruling in Meredith v. Jefferson County (KY) and Parents Involved in Community Schools v. Seattle School District effectively gutted the landmark 1954 Brown v. Board of Education decision that affirmed: segregated public schools deny "Negro children the equal protection of the laws guaranteed by the 14th Amendment."

In two troubling 5 - 4 decisions, the Roberts Court changed the law. They said public schools can't seek to achieve or maintain integration through measures taking explicit account of a student's race. They rewrote history, so cities henceforth may have separate and unequal education. Then it's on to George Wallace-style racism with policies like: "segregation now, segregation tomorrow, segregation forever" with the High Court believing what was good for 1960s Alabama is now right for the country.

The Court also made it easy for New Orleans to become a corporate predator's dream, and it didn't take long to exploit it. Consider public schools alone. The storm destroyed over half their buildings and scattered tens of thousands of students and teachers across the country. Within days of the calamity, Governor Kathleen Blanco held a special legislative session. Subject - taking over New Orleans Public Schools (NOPS) that serve about 63,000 mostly low-income almost entirely African-American children. Here's what followed:

-- two weeks after the hurricane, US Secretary of Education Margaret Spellings cited charter schools as "uniquely equipped" to serve Katrina-displaced students;

-- two weeks later, she announced the first of two $20 million grants to the state, solely for these schools;

-- then in October 2005, the governor issued an executive order waiving key portions of the state's charter school law allowing public schools to be converted to charter ones with no debate, input or even knowledge of parents and teachers;

-- a month later in November, the state legislature voted to take over 107 (84%) of the city's 128 public schools and place them under the state-controlled "Recovery School District (RSD);" and

-- in February 2006, all unionized city school employees were fired, then selectively rehired at less pay and fewer or no benefits; it affected 7500 teachers as well as custodians, cafeteria workers and others.

Within six months of Katrina, the city was largely ethnically cleansed, the public schools infrastructure mostly gutted, and a new framework was in place. It put NOPS into three categories - public, charter and the Recovery School District with the latter ones run by the state as charter or for-profit schools.

New Orleans Loyola University law professor Bill Quigley described the plunder and called it "a massive (new) experiment....on thousands of (mostly) African American children...." It's in two halves.

The first half based on Recovery School District's estimated 30,000 returning students in January 2007:

-- "Half of (these children were) enrolled (in) charter schools." They got "tens of millions of dollars" in federal money, but aren't "open to every child....Some charter schools have special selective academic criteria (and can) exclude children in need of special academic help." Others "have special administrative policies (that) effectively screen out many children." This latter category has "accredited teachers in manageable size classes (in schools with) enrollment caps....These schools also educate far fewer students with academic or emotional disabilities (and) are in better facilities than the other half of the children...."

"The other half:"

These students were "assigned to a one-year-old experiment in public education run by the State of Louisiana called the 'Recovery School District (RSD)' program." Their education "will be compared" to what first half children get in charter schools. "These children are effectively....called the 'control group' of an experiment - those against whom the others will be evaluated."

RSD "other half" schools got no federal funds. Its leadership is inexperienced. It's critically understaffed. Many of its teachers are uncertified. There aren't enough of them, and schools assigned students hadn't been built for their scheduled fall 2007 opening. In addition, some schools reported a "prison atmosphere," and in others, children spent long hours in gymnasiums because teachers hadn't arrived. In addition, there was little academic counseling; college-preparatory math; or science and languages; and class sizes are too large because returning students are assigned to too few of them.

Many RSD schools also have no "working kitchens or water fountains (and their) bathroom facilities are scandalous....Hardly any white children attend this half of the school experiment." RSD schools are for poor black students getting short-changed and denied a real education by an uncaring state and nation and corporations in it for profit.

Quigley described a system for "Haves (and) Have-Nots," and race defines it. He also exposed the lie that charter schools are public ones. Across the country, but especially in New Orleans, school officials are unaccountable, can pick and choose their students, and can decide who gets educated and who doesn't.

Separate and Unequal

In his 2005 book "The Shame of the Nation: The Restoration of Apartheid Schooling in America," Jonathan Kozol explains a problem getting worse, not better. Using data from state and local education agencies, interviews with researchers and policy makers, and the Harvard Civil Rights Project, his account is disturbing at a time of NCLB and other destructive initiatives.

Harvard Civil Rights researchers captured the problem in their Brown v. Board of Education 50th anniversary assessment stating: "At the beginning of the twenty-first century, American public schools are now 12 years into the process of continuous resegregation." Desegregation from the 1950s through the late 1980s "has receded to levels not seen in three decades." The percent of black students in majority-white schools stands at "a level lower than in any year since 1968" with conditions worst of all in the nation's four most segregated states - New York, Michigan, Illinois and California. "Martin Luther King's dream is being celebrated in theory and dishonored in practice" by what's happening in inner-city schools. King would be appalled "that the country would renege on its promises," and the Supreme Court would authorize it in their two above cited decisions and an earlier 1991 one:

-- Board of Education of Oklahoma City v. Dowell that ruled for resegregating neighborhood schools mostly in areas of the South where desegregation was most advanced.

According to recent National Center for Education Statistics (NCES) data, blacks and Latinos now comprise about 95% of inner-city students in the nation's 100 largest school systems - accounting for more than one-third of all public school students. Kozol writes about "hypersegregation" with "no more than five or 10 white children (in) a student population of as many as 3000," and this is the "norm, not the exception, in most northern urban areas today." It's "fashionable," he says, to declare integration "failed" and settle for a new millennium version of "Plessey" and its "separate but equal" doctrine that "Brown" repudiated until now.

Despite high-minded political posturing and programs like NCLB, the truth is these youngsters are forgotten and abused. They're warehoused in decrepit facilities, curricula offerings ignore their needs, testing is unrelated to learning, teachers don't teach, the whole scheme is swept under the rug, and "educating" the unwanted is "standardized" to produce good workers with pretty low skill levels for the kinds of jobs awaiting them. Kozol refers to "school reform" as a "business enterprise with goals, action plans, implementation targets, and productivity measures," and above all what marketplace potential there is.

Separate and unequal is the current inner city school standard. Unless it's exposed, denounced and reversed, (and there's no sign of it), millions of poor and minority children will be denied what the "American dream" increasingly only offers the privileged. And no one in Washington cares or they'd be doing something about it.

Disturbing New Dropout Data

A new Editorial Projects in Education (EPE) Research Center report released April 1 is revealing, disturbing but not surprising. It states only 52% of public high school students in the nation's 50 largest cities completed the full curriculum and graduated in 2003 - 2004. This compares to the national average of 70%. Below are some of the findings:

-- 1.2 million public high school students drop out each year;

-- 17 of the 50 troubled cities have graduation rates of 50% or lower; in Detroit it's 24.9%; Indianapolis is 30.5%; Cleveland at 34.1%; Baltimore - 34.6%; Columbus - 40.9%; Minneapolis - 43.7%; Dallas - 44.4%; New York - 45.2%; Los Angeles - 45.3%; Oakland - 45.6%; Kansas City - 45.7%; Atlanta - 46%; Milwaukee - 46.1%; Denver - 46.3%; Oklahoma City - 47.5%; Miami - 49%; and Philadelphia - 49.6%;

-- Chicago barely came in at 51.5%;

-- the data show public education in the 50 largest cities' principal school districts in a virtual state of collapse;

-- dropout rates for blacks and Latinos are significantly higher than for white students;

-- dropouts are eight times more likely to end up in prison; family income is the main problem; in cities most affected, it goes hand in hand with a lack of good jobs and a sub-standard social infrastructure;

-- key to understanding the overall problem nationwide is the gutting of social services, widening income gap between rich and poor, exporting manufacturing and other high-paying jobs abroad, and politicians and business exploiting the needs of the many to benefit the few;

-- NCLB "reform" is called the solution; Democrats and Republicans are complicit in promoting it, and no one in government explains the truth - the report reveals a sinister scheme to end public education, say it causes poor student performance, and privatize it so the "market" can provide it to well-off communities and merely exploit the rest for profit.

Why else would the (Bill) Gates Foundation have funded the study and Colin Powell's America's Promise Alliance have sponsored it. APA is partnered with business, faith-based (Christian fundamentalist) groups, wealthy funders, and organizations like the American Bankers Association, right wing Aspen Institute, Business Roundtable, Ford Motor, Fannie Mae, Marriott International, National Association of Manufacturers, US Chamber of Commerce and many other for-profit ones and NGOs.

Educational Maintenance Organizations

It's a new term for an old idea that's much like their failed HMO counterparts. They're private-for-profit businesses that contract with local school districts or individual charter schools to "improve the quality of education without significantly raising current spending levels." They're still rare, but watch out for them and what they're up to.

An example is the Edison Project running Edison (for-profit) Schools. It calls itself "the nation's leading public school partner, working with schools and districts to raise student achievement and help every child reach his or her full potential." In the 2006-2007 school year, Edison served over 285,000 "public school" students in 19 states, the District of Columbia and the UK through "management partnerships with districts and charter schools; summer, after-school, and Supplemental Educational Service programs; and achievement management solutions for school systems."

Edison Schools, and its controversial charter schools and EMO projects, hope to cash in on privatizing education and is bankrolled by Microsoft's co-founder Paul Allen to do it. The company was founded in 1992, its performance record is spotty, and too often deceptive. It cooks the books on its assessments results that unsurprisingly show far more than they achieve. That's clear when independent evaluations are made.

Kalamazoo's Western Michigan University's Evaluation Center published one of them in December 2000. Miami-Dade County public schools did another in the late 1990s. Both studies agreed. They showed Edison School students didn't outperform their public school counterparts, and they were kind in their assessment.

Even more disturbing was Edison's performance in Texas. It took over two Sherman, Texas schools in 1995, then claimed it raised student performance by 5%. But an independent American Institutes for Research (AIR) study couldn't confirm it because Edison threatened legal action if its results were revealed. It was later learned that AIR's findings weren't exactly glowing and were thus suppressed. However, Sherman schools knew them, and when Edison's contract came up for renewal, the company withdrew before being embarrassed by expulsion.

The city's school superintendent had this assessment. He said Edison arrived with promises to educate students at the same cost as public schools and would improve performance. In the end, the city spent an extra $4 million, and students test scores were lower than in other schools. The superintendent added: "They were more about money than teaching," and that's the problem with privatized education in all its forms - charter, contract or EMOs that place profits over students.

Unless public action stops it, Edison is the future and so is New Orleans in its worst of all forms. It's spreading fast, and without public knowledge or discussion. It's the privatization of all public spaces and belief that marketplace everything works best. Indeed for business, but not people who always lose out to profits.