Tuesday, April 22, 2008

Army, Marines give waivers to more felons

  • Story Highlights
  • Recruits convicted of assault, drug possession, making terrorist threats allowed in
  • Rep. Henry Waxman: Defense Department has month to explain waivers
  • Army granted 511 felony waivers in 2007; Marines granted 350 in 2007
  • Army defended waivers, saying fewer recruits today meet their standards

WASHINGTON (CNN) -- The Army and Marine Corps are allowing convicted felons to serve in increasing numbers, newly released Department of Defense statistics show.

Recruits were allowed to enlist after having been convicted of crimes including assault, burglary, drug possession and making terrorist threats.

The statistics were released by Rep. Henry Waxman, a California Democrat who chairs the House Committee on Oversight and Government Reform.

He has given the Pentagon a month to hand over up-to-date details on the number of waivers granted, reports on how the recruits have performed and information about how the waivers are related to meeting recruitment goals.

Pentagon statistics show the Army granted 511 felony waivers in 2007, just over twice the 249 it granted the year before. The Army aims to recruit more than 80,000 new soldiers a year.

The Marines -- which recruits fewer new service members each year than the Army -- also reported a rise in waivers for felonies, with 350 granted in 2007, compared with 208 in 2006.

"There was a rapid rise in 2007 in the number of waivers the Army and Marine Corps granted to recruits convicted of serious felonies," Waxman said in a letter Monday to David Chu, the under-secretary of defense for personnel and readiness.

"I understand that there can be valid reasons for personnel waivers and recognize the importance of providing opportunities to individuals who have served their sentences and rehabilitated themselves.

"At the same time, concerns have been raised that the significant increase in the recruitment of persons with criminal records is a result of the strain put on the military by the Iraq war and may be undermining military readiness," he charged.

The Army defended its use of waivers as a response to a changing American society, arguing that only three in 10 Americans of military age "meet all our stringent medical, moral, aptitude or administrative requirements."

"Today's young men and women are more overweight, have a greater incidence of asthma, and are being charged for offenses that in earlier years wouldn't have been considered a serious offense, and might not have resulted in charges in the first place," John P. Boyce Jr. of Army Public Affairs said in a statement to CNN.

He said the Army never issues waivers for some types of offenses, including sexual violence, alcoholism and drug trafficking.

But the Pentagon statistics showed the Army allowed 106 convicted burglars to enlist in 2007, up from 36 the year before. It also granted waivers to 43 recruits convicted of aggravated assault that year, up from 33 a year before; and to 130 people convicted of possession of drugs other than marijuana, a rise from 71 in 2006.

It also allowed two people convicted of making terrorist or bomb threats to enlist in 2007, up from one the year before.

The Marines did not immediately respond to request for comment.

The Navy reported a slight decline in felony waivers, from 48 in 2006 to 42 in 2007. The Air Force said it granted no felony waivers in either year.

Monday, April 14, 2008


The New York Times

April 14, 2008

Housing Woes in U.S. Spread Around Globe

DUBLIN — The collapse of the housing bubble in the United States is mutating into a global phenomenon, with real estate prices swooning from the Irish countryside and the Spanish coast to Baltic seaports and even parts of northern India.

This synchronized global slowdown, which has become increasingly stark in recent months, is hobbling economic growth worldwide, affecting not just homes but jobs as well.

In Ireland, Spain, Britain and elsewhere, housing markets that soared over the last decade are falling back to earth. Property analysts predict that some countries, like this one, will face an even more wrenching adjustment than that of the United States, including the possibility that the downturn could become a wholesale collapse.

To some extent, the world’s problems are a result of American contagion. As home financing and credit tightens in response to the crisis that began in the subprime mortgage market, analysts worry that other countries could suffer the mortgage defaults and foreclosures that have afflicted California, Florida and other states.

Citing the reverberations of the American housing bust and credit squeeze, the International Monetary Fund last Wednesday cut its forecast for global economic growth this year and warned that the malaise could extend into 2009.

“The problems in the U.S. are being transmitted to Europe,” said Michael Ball, professor of urban and property economics at the University of Reading in Britain, who studies housing prices. “What’s happening now is an awful lot more grief than we expected.”

For countries like Ireland, where prices were even more inflated than in the United States, it has been a painful education, as homeowners learn the American vocabulary of misery.

“We know we’re already in negative equity,” said Emma Linnane, a 31-year-old university administrator.

She bought a cozy, one-bedroom apartment in the Dublin suburbs with her fiancĂ©, Paul Colgan, in May 2006, at the peak of the market. They paid $575,000 — at least $100,000 more than it would fetch today. “I sometimes get shivers thinking about it,” Ms. Linnane said, “but I’ll let the reality hit me when I go to sell it.”

That reality is spreading. Once-sizzling housing markets in Eastern Europe and the Baltic states are cooling rapidly, as nervous Western Europeans stop buying investment properties in Warsaw, Tallinn, Estonia and other real estate Klondikes.

Further east, in India and southern China, prices are no longer surging. With stock markets down sharply after reaching heady levels, people do not have as much cash to buy property. Sales of apartments in Hong Kong, a normally hyperactive market, have slowed recently, with prices for mass-market flats starting to drop.

In New Delhi and other parts of northern India, prices have fallen 20 percent over the last year. Sanjay Dutt, an executive director in the Mumbai office of Cushman & Wakefield, the real estate firm, describes it as an erosion of confidence.

Much of the retrenchment seems to be following the basic law of gravity: what goes up must come down. With low interest rates helping to inflate housing bubbles in many countries, economists said the confluence of falling prices was predictable, if unsettling.

This is not the first housing downturn to cross borders, but its reverberations have been amplified by the integration of financial markets. When faulty American mortgages end up on the books of European banks, the problems of the United States aggravate the world’s problems.

Consider Britain, which had one of Europe’s most robust housing markets, with less of an oversupply than in Ireland or Spain. Then last summer came the subprime crisis across the Atlantic.

Within two months, mortgage approvals dropped 31 percent, compared with the previous year. And by March, average housing prices had fallen 2.5 percent, the largest monthly decline since 1992.

“The boom in house prices was actually much bigger here than in the U.S.,” said Kelvin Davidson, an economist at Capital Economics in London. “If anything, people should be more worried than in the U.S.”

Britain has one of the most developed home-financing industries, not far behind that of the United States. The amount of outstanding mortgage debt, as a share of total economic output, is higher there than in the United States, according to a study by the International Monetary Fund.

“The U.K. followed the U.S. into never-never land, pushing mortgages out the door, believing that prices would go up forever,” said Allan Saunderson, the managing editor of Property Finance Europe, a newsletter for investors.

Still, the problems in Britain pale next to those of Spain and Ireland. Residential investment accounts for 12 percent of the Irish economy and 9 percent of the Spanish economy, compared with 5 percent in Britain and 4 percent in the United States, according to the I.M.F.

The glut of housing has brought new construction to a standstill, driving up unemployment and dimming the prospects for two of Europe’s stellar performers over the last decade.

“We’re waking up from the property dream and finding ourselves in a situation where prices are falling in Spain for the first time,” said Fernando Encinar, a founder of Idealista.com, a real estate Web site.

In Spain, more than four million homes were built in the last decade, more than in Germany, Britain and France combined. Average house prices tripled in parts of the country, as Spain’s torrid economy attracted immigrants and Northern Europeans snapped up holiday homes along the Costa del Sol.

Now, though, thousands of those houses stand empty. The I.M.F. estimates that property is overvalued by more than 15 percent. With mortgages drying up and prices swooning, speculators who once viewed Spanish property as a no-lose proposition are confronting hard reality.

In 2005, Julian Felipe Fernandez bought three small apartments, as an investment, in a huge development being built outside Madrid. He paid 100,000 euros as a deposit for the units, and now he is eager to sell them to avoid having to taking on a costly mortgage. But with the market stalled, Mr. Fernandez’s asking price is what he paid for them.

“Three years ago, it looked like I would be able to flip them for a nice profit before they were finished,” he said. “I just want to get them off my hands, to get rid of this headache.”

If he unloads them, he will be lucky. Enric Bueno, head of marketing for Ibusa, a real estate company in Barcelona, said his firm was closing six or seven sales a month, compared with 40 a month a year ago.

“Things are really bad,” Mr. Bueno said. “If this goes on for five years, we won’t make it.”

Economists have been busy cutting their growth forecasts for Spain, with a few saying that it may stagnate this summer. BBVA, a leading Spanish bank, forecasts that unemployment will rise to an average of 11 percent this year, from 8.6 percent in 2007.

Such cutbacks are well under way in Ireland, where the taxi drivers complain that their ranks are being swollen by laid-off home builders. The housing collapse has brought an abrupt end to more than a decade of pell-mell growth that earned Ireland the nickname “the Celtic tiger.”

Today, the mood in this country feels like a wake, and not an Irish one. Average house prices fell 7 percent last year, the most in Europe, according to the Royal Institution of Chartered Surveyors, a British real estate group. They are likely to fall by a similar amount this year.

After a 16-year boom that was interrupted only briefly after the Sept. 11 terrorist attacks, Ireland has the most overvalued housing market among developed countries, according to the I.M.F. In its recent economic outlook, the fund calculated that prices are 30 percent higher than they should be, given Ireland’s economic fundamentals.

For many Irish, accepting that reality is like passing through the seven stages of grief. Some homeowners are still in denial, brokers said, asking $5 million for houses worth no more than $4 million. But developers have begun cutting prices for smaller apartments like the one owned by Emma Linnane.

“Last year was our ‘wake up in the middle of the night with sweat pouring down your face’ period,” said David Bewley, a director at the Lisney real estate agency. “Now we’ve grown up.”

Not all the omens are negative. Mr. Bewley said houses were selling again, albeit for 25 percent less. Ireland has not yet suffered widespread incidences of defaulting mortgages or foreclosures in this downturn, in part because lenders have not been as aggressive as those in the United States.

But some worry that the housing meltdown could spoil Ireland’s recipe for success. Like Spain, it attracted lots of foreign workers, many of whom came for well-paying jobs in the construction industry. That fueled the Irish rental market, which has remained buoyant and been a source of income for Ireland’s many real estate speculators.

“If the immigrants go back home, will this hurt the rental market?” asked Ronan O’Driscoll, a director in the Dublin office of Savills, a real estate firm. “If that happens, it would definitely cause foreclosures.”

Saturday, April 12, 2008

Got popcorn?

Largest U.S. Municipal Bankruptcy Looms in Alabama: Joe Mysak

Commentary by Joe Mysak

April 11 (Bloomberg) -- They're talking more about Chapter 9 municipal bankruptcy in Jefferson County, Alabama, the home of the largest city in the state, Birmingham.

Who can blame them?

The county is now being whipsawed by an ill-thought-out debt policy and the collapse of the bond insurers. Credit-rating downgrades all around have triggered a series of events that are no longer in the county's control, leaving it at the mercy of securities firms that have little room for maneuver themselves.

This has produced a steady series of stories in my new favorite newspaper, the Birmingham News, all about how the county is preparing to declare bankruptcy any day.

Perhaps the best article ran on Sunday, April 6. It began: ``Jefferson County officials have laid the groundwork for the largest municipal bankruptcy in the nation's history while publicly saying they have no imminent plans for a filing.''

The one that ran on Wednesday, April 9, was no less compelling: ``Talks on the sewer system's debt crisis aren't making progress, increasing the odds that the county will file municipal bankruptcy, Jefferson County Commission President Bettye Fine Collins said Tuesday.''

This is how it ends for the little county that was going to teach America how to use interest-rate swaps.

Make no mistake. This is a story all about public finance and ``derivatives,'' whose use by states and localities exploded during the past decade.

Orange County

The Jefferson County bankruptcy, if it comes, and it's hard to see how it can be avoided, will eclipse that of the 1994 filing by Orange County, California. ``Derivatives'' are at the center of both death-spirals.

Orange County invested in them -- securities whose value was tied to other securities and markets. The county investment pool, which for years spun off handsome returns for the school districts and local governments that were its participants, found itself holding a bunch of junk when its investors asked for their money back.

Jefferson County played the derivatives game as part of financing a $3.2 billion sewer cleanup. The county engaged in a batch of interest-rate swaps with the banks that helped underwrite the debt, in a strategy designed to save the county and its taxpayers some money. The strategy backfired, demonstrating the speculative, risky nature of swaps.

Two Acts

The bankruptcy will be the biggest in the municipal market's history by virtue of the county's debt load, according to the News. Jefferson County has $3.2 billion in sewer debt; Orange County lost $1.6 billion in its investment pool. I'm sure the matter will be debated. I'm also sure Orange County will be happy to pass the crown to Jefferson County.

There are going to be two acts to this drama.

First, of course, is the actual filing itself. The county seems to think that this will allow it to hold its creditors at bay and proceed in a business-as-usual fashion.

County officials have stated they have no intention of cutting back services or raising taxes or sewer fees. The most the county seems willing to do is to earmark part of a school construction sales tax to pay off its now-overdue debt.

``We are dealing with a virtual immovable force on Wall Street,'' the News quoted Commissioner Collins as saying.

I have a feeling that it's not going to work out precisely this way for Jefferson County and its residents. Every municipal bankruptcy is different, as is everything else in Muniland, but go ask Orange County how Chapter 9 worked. It's not going to be painless, no matter how well it's planned out.

The Bottom

The first act is humiliation. The second is recrimination.

The second act of the Jefferson County bankruptcy is going to focus on Wall Street and all the banks, law firms, advisers and consulting firms that helped put the county where it is today. The county was not well-served, for all the money that changed hands. In this act, the county sues to get some of that money back.

And there was a lot of money, which seems to be at the heart of the Securities and Exchange Commission's inquiry into the county and its infatuation with swaps and derivatives. The agency has said it is looking at pay to play, or bankers and others forking over cash in exchange for jobs.

The SEC's investigation is just part of a larger probe into the reinvestment-of-proceeds business across the municipal market in general. This has been going on for years, but there are signs it will erupt with a barrage of criminal prosecutions.

The stock-market guys say you have to reach a bottom before you can recover, and that a bottom is often signaled by the collapse of some big entity. Many people thought it was Bear Stearns Cos. In reality, it's Jefferson County.

Saturday, April 05, 2008

Scientists find host of antibiotic-eating germs

By Julie SteenhuysenThu Apr 3, 5:48 PM ET

Several strains of bacteria in the soil can make a meal of the world's most potent antibiotics, researchers said on Thursday, in a startling finding that illustrates the extent to which these germ-fighting drugs are losing the war against superbugs.

A study of soil microbes taken from 11 sites uncovered bacteria that could withstand antibiotics 50 times stronger than the standard for bacterial resistance.

"It certainly was very surprising to us," said George Church, a geneticist at Harvard Medical School in Boston, whose research appears in the journal Science.

"Many bacteria in many different soil isolates can not only tolerate antibiotics, they can actually live on them as their sole source of nutrition," Church said in an audio interview on the journal's Web site.

Other researchers have found antibiotic-eating strains of bacteria, but Church's study is among the most systematic. It offers more clues about why bacteria quickly develop resistance to antibiotics, and why drug companies must constantly develop new antibiotics to defeat them.

Church's team initially set out to find organisms in the soil that remove toxins from cellulose, the material that gives plants structure. They took samples from a variety of sites, including a cornfield fertilized by manure from cows that were fed antibiotics.

Microbes taken from these soil samples could easily defeat toxins from cellulose, which they expected. Then the researchers tested the microbes against antibiotics, something they thought would be toxic.

"We were expecting them to grow on cellulose and we weren't expecting them to grow on antibiotics," Church said.

Surprised by how easily the microbes devoured the antibiotics, Church and colleagues did a broader test, exposing hundreds of microbes to 18 antibiotics representing most of the major classes of naturally occurring and synthetic antibiotics, including penicillin and the widely prescribed antibiotic ciprofloxacin.

"We could find ... bacteria that could grow on almost all of them," depending on the bacteria and the source of the soil, Church said.

The bacteria were not known to attack humans, but some were close relatives, such as members of the Burkholderia cepacia complex, a group of bacteria that infect people with cystic fibrosis, and Serratia marcescens, which can cause blood infections in people with compromised immune systems.

Church said the finding underscores the extent to which bacteria have developed resistance to antibiotics, a process that started almost as soon as penicillin was introduced in the 1940s. Overuse and misuse of antibiotics have since fueled the rise of drug-resistant superbugs.

"This is yet another way of looking at resistance," Church said of the study. He said the microbes he found may be using a new way to disarm the antibiotics, but it may take some time to figure that out.

One antibiotic resistant infection, caused by a strain known as methicillin-resistant Staphylococcus aureus, or MRSA, is blamed for killing 19,000 people in the United States in 2005.

Tuesday, April 01, 2008

As Jobs Vanish and Prices Rise, Food Stamp Use Nears Record

March 31, 2008

Driven by a painful mix of layoffs and rising food and fuel prices, the number of Americans receiving food stamps is projected to reach 28 million in the coming year, the highest level since the aid program began in the 1960s.

The number of recipients, who must have near-poverty incomes to qualify for benefits averaging $100 a month per family member, has fluctuated over the years along with economic conditions, eligibility rules, enlistment drives and natural disasters like Hurricane Katrina, which led to a spike in the South.

But recent rises in many states appear to be resulting mainly from the economic slowdown, officials and experts say, as well as inflation in prices of basic goods that leave more families feeling pinched. Citing expected growth in unemployment, the Congressional Budget Office this month projected a continued increase in the monthly number of recipients in the next fiscal year, starting Oct. 1 — to 28 million, up from 27.8 million in 2008, and 26.5 million in 2007.

The percentage of Americans receiving food stamps was higher after a recession in the 1990s, but actual numbers are expected to be higher this year.

Federal benefit costs are projected to rise to $36 billion in the 2009 fiscal year from $34 billion this year.

“People sign up for food stamps when they lose their jobs, or their wages go down because their hours are cut,” said Stacy Dean, director of food stamp policy at the Center on Budget and Policy Priorities in Washington, who noted that 14 states saw their rolls reach record numbers by last December.

One example is Michigan, where one in eight residents now receives food stamps. “Our caseload has more than doubled since 2000, and we’re at an all-time record level,” said Maureen Sorbet, spokeswoman for the Michigan Department of Human Services.

The climb in food stamp recipients there has been relentless, through economic upturns and downturns, reflecting a steady loss of industrial jobs that has pushed recipient levels to new highs in Ohio and Illinois as well.

“We’ve had poverty here for a good while,” Ms. Sorbet said. Contributing to the rise, she added, Michigan, like many other states, has also worked to make more low-end workers aware of their eligibility, and a switch from coupons to electronic debit cards has reduced the stigma.

Some states have experienced more recent surges. From December 2006 to December 2007, more than 40 states saw recipient numbers rise, and in several — Arizona, Florida, Maryland, Nevada, North Dakota and Rhode Island — the one-year growth was 10 percent or more.

In Rhode Island, the number of recipients climbed by 18 percent over the last two years, to more than 84,000 as of February, or about 8.4 percent of the population. This is the highest total in the last dozen years or more, said Bob McDonough, the state’s administrator of family and adult services, and reflects both a strong enlistment effort and an upward creep in unemployment.

In New York, a program to promote enrollment increased food stamp rolls earlier in the decade, but the current climb in applications appears in part to reflect economic hardship, said Michael Hayes, spokesman for the Office of Temporary and Disability Assistance. The additional 67,000 clients added from July 2007 to January of this year brought total recipients to 1.86 million, about one in 10 New Yorkers.

Nutrition and poverty experts praise food stamps as a vital safety net that helped eliminate the severe malnutrition seen in the country as recently as the 1960s. But they also express concern about what they called the gradual erosion of their value.

Food stamps are an entitlement program, with eligibility guidelines set by Congress and the federal government paying for benefits while states pay most administrative costs.

Eligibility is determined by a complex formula, but basically recipients must have few assets and incomes below 130 percent of the poverty line, or less than $27,560 for a family of four.

As a share of the national population, food stamp use was highest in 1994, after several years of poor economic growth, with an average of 27.5 million recipients per month from a lower total of residents. The numbers plummeted in the late 1990s as the economy grew and legal immigrants and certain others were excluded.

But access by legal immigrants has been partly restored and, in the current decade, the federal and state governments have used advertising and other measures to inform people of their eligibility and have often simplified application procedures.

Because they spend a higher share of their incomes on basic needs like food and fuel, low-income Americans have been hit hard by soaring gasoline and heating costs and jumps in the prices of staples like milk, eggs and bread.

At the same time, average family incomes among the bottom fifth of the population have been stagnant or have declined in recent years at levels around $15,500, said Jared Bernstein, an economist at the Economic Policy Institute in Washington.

The benefit levels, which can amount to many hundreds of dollars for families with several children, are adjusted each June according to the price of a bare-bones “thrifty food plan,” as calculated by the Department of Agriculture. Because food prices have risen by about 5 percent this year, benefit levels will rise similarly in June — months after the increase in costs for consumers.

Advocates worry more about the small but steady decline in real benefits since 1996, when the “standard deduction” for living costs, which is subtracted from family income to determine eligibility and benefit levels, was frozen. If that deduction had continued to rise with inflation, the average mother with two children would be receiving an additional $37 a month, according to the private Center on Budget and Policy Priorities.

Both houses of Congress have passed bills that would index the deduction to the cost of living, but the measures are part of broader agriculture bills that appear unlikely to pass this year because of disagreements with the White House over farm policy.

Another important federal nutrition program known as WIC, for women, infants and children, is struggling with rising prices of milk and cheese, and growing enrollment.

The program, for households with incomes no higher than 185 percent of the federal poverty level, provides healthy food and nutrition counseling to 8.5 million pregnant women, and children through the age of 4. WIC is not an entitlement like food stamps, and for the fiscal year starting in October, Congress may have to approve a large increase over its current budget of $6 billion if states are to avoid waiting lists for needy mothers and babies.