Minnesota - Showdown could leave our courts in chaos

Showdown could leave our courts in chaos

By PATRICIA LOPEZ, Star Tribune

February 21, 2009

Supreme Court Chief Justice Eric Magnuson bundled into his car on a recent bitter Sunday, set his satellite radio to a favorite old-time radio serial about a crusading insurance investigator, Johnny Dollar, and headed for Moorhead.

There, he would embark on his own crusade to save Minnesota's justice system as he knows it.

Just seven months into the job, Magnuson is facing off against the man who appointed him, Gov. Tim Pawlenty, over budget cuts.

The clash could be titanic.

Pawlenty proposes a budget, and the Legislature appropriates funds. But Magnuson decides how the court system's money gets spent.

If another budget cut of 5 percent or more comes down, Magnuson will recommend dramatic action -- shutting down conciliation court, cutting hours and suspending prosecution of 21 types of cases, including property damage, harassment, probate, and more than 1 million traffic and parking cases a year.

That last step could interrupt a $200 million flow to local governments.

Magnuson said that shutting down traffic cases is no small move, "but we're running out of choices here, and I will not compromise the prosecution of criminal cases."

What happens when truants, runaways, small-time shoplifters and trespassers realize they won't be brought to court? "That will be a real problem," Magnuson said calmly. "That will be the erosion of the rule of law. That will be the tear in the fabric of society that I'm trying to warn people about."

Other chief justices have not wielded their authority so forcefully. But Senate counsel Peter Wattson said Magnuson would be "perfectly within his rights to make those decisions so long as they're not arbitrary and capricious."

Pawlenty, so far, appears prepared to hold his ground. "The courts are not immune from the economic crisis the country is facing," he said. "So we'll try to adjust our budget to meet some of their concerns if need be, but they're also going to have to be more efficient."

Steady erosion

Magnuson says the courts have streamlined and now are starting to erode. Trial dates are pushed further out. Public counters are closed on some mornings. Jurors who once were paid $30 per day of duty now get $10 -- barely enough to cover parking in Minneapolis.

The courts, Magnuson said, have reached a tipping point where the focus must shift to preserving resources for criminal trials.

"We don't have the option of doing some things less well," he said. Under Pawlenty's recommendations, the courts, with a two-year budget of roughly $103 million in 2008-09, would get $6 million less in the 2010-11 budget period at a time when caseloads and expenses are rising.

Leading a charge

Other chief justices have had to deal with budget cuts, but Magnuson, 57, is the first in recent memory to push back in a very public way, sending a warning letter to Pawlenty about what might come and assembling a coalition of judges, sheriffs, police chiefs, county attorneys, public defenders, labor unions and even the League of Women Voters.

Local members of this Coalition to Preserve Minnesota's Justice System have flanked Magnuson at every stop he's made: Moorhead, Rochester, Mankato and Duluth.

"I'm proud of the way the Supreme Court has stepped up to talk about what's really going on here," said John Stuart, a public defender, on his way back from the Rochester leg.

In Anoka County, District Judge Sharon Hall frets that the day is coming soon when "people won't have their day in court. You'll have a tenant who trashes the apartment, and the landlord can't recover losses. A person who hires someone to pour a new concrete step and the guy never shows, those cases won't get heard."

Chisago County Court Administrator Kathleen Karnowski already does more with less. A staff of 13 processes 11,000 cases a year, spanning the spectrum from small claims to first-degree murder. When she gets really overloaded, nearby Isanti County sends help. "We're looking for every little economy," Karnowksi said.

Hennepin County District Chief Judge James Swenson said that small claims in Hennepin can take six months to be heard and that the time to enter a judgment has increased from two weeks to two and a half months.

Simple message

Why is the normally sedate judiciary going on a veritable barnstorming offensive?

"Sometimes the quiet, reasonable, dispassionate voice speaks loudly," Magnuson said. "And sometimes it gets lost. I'm trying to carry a pretty simple message here. Article One of the [state] Constitution says that the object of government is to ensure the protection and benefit of the people. You have to have a safe, law-abiding environment for the other parts of society to work."

Hennepin County Sheriff Rich Stanek, a former legislator and Pawlenty's first public safety commissioner, said he has witnessed the deterioration firsthand and now sees the results of the cuts he helped implement in the earlier budget crisis of 2003.

"I'm as worried about the future of the judiciary right now as I've ever been," Stanek said.

House Speaker Margaret Anderson Kelliher, DFL-Minneapolis, said she's watching Magnuson's coalition with interest.

"I have to say I've never seen anything quite like this before from a Supreme Court chief justice." If Magnuson had not gone into law, she said admiringly, "he would have made a hell of a community organizer. This is classic community organizing technique."

Rep. Michael Paymar said he has met with Magnuson privately, as have most legislative leaders, and will hear from him publicly when he testifies before Paymar's Public Safety Finance Division this week.

"Some of the threats he's making are designed, how can I say this nicely, in a way to influence the Legislature," Paymar said. "I don't think we can react to that."

Paymar, DFL-St. Paul, said he fully expects Magnuson to follow through on proposals to cut back court functions and court functions could deteriorate. Nevertheless, he said, "I have to applaud him for what he's doing. He has an obligation to articulate the impact and despite his relationship with the governor, he's taking that seriously."

That relationship dates to Pawlenty's time as a young associate at the firm where Magnuson was already managing partner. But just because the tables have turned, Pawlenty shouldn't expect any deference from his old friend.

"I like Governor Pawlenty on a personal level," Magnuson said, smiling. "On a policy level? He has his agenda, and I have mine."

20% in Los Angeles County receive public aid

The figure matches the total at the height of the 2001-03 recession, and officials expect it to rise significantly.

By Garrett Therolf
February 22, 2009

One in five Los Angeles County residents -- nearly 2.2 million people -- are receiving public assistance payments or benefits, a level county officials say will rise significantly over the coming months as the fallout from the recession continues.

The percentage of people on county aid already equals the figure at the height of the 2001-03 recession and far exceeds the one in seven who needed help during the economic downturn in the early 1990s and the one in nine assisted in the collapse of the early 1980s.

The rise in welfare recipients in the county is the first sustained uptick since welfare reform under the Clinton administration imposed strict time limits on benefits in 1996.

County officials warn that tens of thousands of additional frustrated job seekers -- unemployment in the county currently stands at 9.5% -- are expected to seek aid to weather the persistent recession once their other benefits run out.

The total includes those receiving food stamps and general relief as well as other county-administered aid programs, such as in-home healthcare. The cost -- shouldered by the county, state and federal governments -- was $334 million a month by the end of last year, according to the latest report by the county's Department of Public Social Services.

The rising demand has left public assistance offices ill-equipped to deal with the growing multitude of indigent people. In some locations, lines routinely snake hundreds of feet outside entrances.

"We have the highest human service burden of any county in the country in sheer numbers," Supervisor Zev Yaroslavsky said.

"Two million people is the size of some countries; that's how big our problem is," he said.

To have reached the point of receiving county aid, recipients usually have little left.

Qualifying for help most often means they already have run out of unemployment insurance and drained their bank accounts and other assets.

In other cases, low-wage workers or those whose hours have been cut can earn so little that they qualify for Medicaid or food stamps.

The steepest increases in need have been in the Pomona Valley, the Lancaster area, the San Fernando Valley and East Los Angeles.

By June 2010, officials estimate, the number of people participating in the county's general relief program, now at 74,143, will reach 91,000. That would erase 11 years of reductions in the caseload. The program provides $221 monthly to individuals who qualify for no other programs. Roughly 60% of those served are believed to be homeless.

Also by June of next year, the number of people receiving payments through CalWorks, the welfare program for families, is expected to rise to 400,000 from the current 367,173. That would erase three years of reductions.

In a sign of how stressed the economy is, county officials report that just as many applicants are denied as are approved; these denials reflect strict qualifications in place for most programs.

For years, declines in the welfare rolls had been offsetting the costs of steady increases in numbers of people qualifying for healthcare assistance through Medicaid and other programs. The demand for those programs has been driven by a growing number of senior citizens and increasing numbers of people going without employer-based health and disability insurance.

That welfare and healthcare demands are increasing at the same time is worrisome to officials.

In an attempt to halt the increases, Miguel Santana, a county deputy chief executive, said he hopes in the coming months to place general relief recipients in jobs or in federally funded programs that provide cash and medical assistance.

"We need to act more aggressively than ever to stem the tide" in general relief, Santana said.

Many of those getting help say they have done everything they can think of to find work.

In the waiting room at the welfare office in Rancho Dominguez, where late last week even the line for a parking space was dozens of cars long, 32-year-old Erlinda Romero held a rolled copy of the Pennysaver, dogeared on pages listing jobs she pursued.

"I can't get a callback," she said, noting that training last year to become a medical clerk has not yet yielded a job. Meanwhile, she receives Medicaid benefits and $500 in monthly welfare for herself and four children.

Nearby, 50-year-old Ed Baldwin slumped in his chair waiting for his name to be called to renew his food stamps. He has been unemployed for three years, since being laid off from his job as a mechanic for heavy trucks.

"This is getting scary," he said. "There are no jobs."

County officials say they are worried that just as the need for county aid surges, the treasury is dwindling.

Property tax revenue, usually stable, is shrinking for the first time in 13 years.

This comes at a time when the county, the region's largest employer, has ordered a strict hiring freeze that will include the Department of Public Social Services. The department's director, Philip Browning, has been ordered to draft a budget for the next fiscal year that is at least 5% less than the current year's.

Although the federal government is acting to increase food stamp and unemployment insurance benefits, programs that are wholly funded by the county -- including general relief -- remain static.

The monthly benefit of $221 has not increased for more than a decade, and no one is proposing that it increase now.

"We've got to be able to do the basics. We are not going to be able to do it in the same way we have in the past," Yaroslavsky said.

"If the hiring freeze in effect shuts down an office," he said, "we are going to have to look at an exemption. But we do not print money in the basement of the county Hall of Administration."

US bank shares near 17-year lows

US bank shares near 17-year lows

By Francesco Guerrera and Aline van Duyn in New York and Krishna Guha in Washington

Published: February 20 2009 01:03

US bank shares hit a near 17-year low on Thursday on rising fears the government will have to nationalise troubled institutions such as Citigroup and Bank of America, wiping out investors and taking control of a large portion of the financial sector.

Bank of America shares slid 14 per cent to $3.93, their lowest point since 1984. Shares in Citi were down 13.8 per cent, closing at $2.51, their lowest since 1991. The KBW banks index fell to its lowest level since 1992. In the debt markets, Citi’s bonds were trading at distressed levels.

People close to the situation said that some banks were in talks with regulators over plans that would provide them with another capital injection but stopped short of an outright nationalisation.

One option being discussed – at least for Citi – would be to convert some or all of the government’s $45bn holding of preferred shares, as well as the $35bn in preferred shares held by sovereign wealth funds and other investors, into common stock.

The move, which could be coupled with an offering at a discount to the share price, would give Citi much-needed support and fresh capital without forcing it into state ownership. However, it is unclear whether the government would accept such a plan.

The US authorities want to complete their planned “stress tests” of the bank’s financial health before deciding how to treat individual institutions.

The Treasury expects that the tests will indicate most US banks remain viable today although they could potentially be vulnerable in stress scenarios. The government would support such banks by buying convertible preferred stock. However, the authorities also envisage the possibility that stress tests will reveal that some banks are so weak that they would have to be nationalised through the Federal Deposit Insurance Corporation.

The question is whether Citi can persuade the authorities to treat it in the first category rather than the second. Citi was not available for comment.

Other banks were also hit hard on Thursday. Shares in Wells Fargo closed down 8 per cent at $12.01 – its lowest level in a decade. JPMorgan fell a further 4.2 per cent on Thursday to $20.60.

Goldman Sachs bucked the trend, ending 1.5 per cent higher at $10.06.

Additional reporting by Nicole Bullock, Henny Sender and Greg Farrell in New York

Bank debt trades at distressed levels

Bank debt trades at distressed levels

By Nicole Bullock and Aline van Duyn in New York

Published: February 20 2009 00:58

Citigroup and other large, troubled financial institutions came under pressure in credit markets on Thursday as investors considered the possibility of nationalisations.

Under such a scenario, equity investors are likely to be wiped out – concerns that were on Thursday reflected in sharp falls in bank shares.

Some bank debt traded at distressed levels and protection against default in the credit derivatives markets was in demand, as investors considered potential losses in the event of a government seizure of the banks.

“Investors seem to be pricing in more damage up the capital structure for Citi,” said Tim Backshall, chief strategist at Credit Derivatives Research.

Christopher Whalen, managing director at Institutional Risk Analytics, said he expected continued weak performance at Citi to result in losses for bondholders, which have been protected in other financial crises. “Washington will finally be forced to have an adult conversation with the global community as to how much we haircut the bondholders,” Mr Whalen said.

Some investors still expected bondholders would not have to take any losses, even in a nationalisation, because US officials would be too afraid of triggering a repeat of the collapse of the global credit markets that followed the bankruptcy of Lehman Brothers last year, when bondholders lost billions of dollars.

“If the debt is impaired and you see what constitutes default, it would be worse than Lehman because Citigroup and Bank of America are much larger institutions than Lehman, and they have their tentacles in more places,” said Jason Brady, a portfolio manager at Thormburg Investment Management, which owns bonds in both companies.

The cost of default protection on Citi debt rose to the highest level since last November, the second time the US government pumped cash into the bank. A rise in this cost is an indication of heightened default risk in the credit derivatives market. For BofA, credit default swaps hit a record high, according to CMA Datavision.

Citi’s five-year senior bonds were quoted at 680 basis points over Treasuries, while the subordinated debt was trading at close to a full percentage point over Treasuries, a level indicative of distress.

Nationalisation is most likely way out of US banking mess

Nationalisation is most likely way out of US banking mess

By Francesco Guerrera

Published: February 20 2009 20:12

The game is up: within the next few weeks, if not days, the US government will have to step in and nationalise one or more banks.

The likely candidates to the dubious honour of being owned by Washington Inc can be found at the end of a sad trail of credit losses, management mishaps and share price collapses.

Come on down, Citigroup, Bank of America and a motley crew of regional and community banks. Barack Obama, US president, will have to draw on his vast oratorical skills to avoid using the N-word but make no mistake: the authorities are going in.

Why am I so sure? Because, as the US banking guy for the Financial Times, for the past year I have had a ringside seat to the demise of the global banking sector.

The destructive blend of ineptitude, myopia and greed that led to the crisis has made it impossible for piecemeal solutions to work.

When commentators warn that a failure by the latest US rescue plan would lead to a “Japanisation” of the financial sector, they are missing the point. It is too late to worry about banks turning into “zombies” – they already are.

Crushed under a pile of toxic assets, paralysed by wafer-thin balance sheets and deserted by fearful investors, once-mighty institutions such as Citi and BofA are barely able to perform basic functions such as lending and underwriting.

In fact, the only reason they have not joined Lehman Brothers, Bear Stearns and Washington Mutual on the financial scrapheap is that taxpayers have propped them up with more than $500bn in cash injections and guarantees.

At this stage, some form of nationalisation is both a political and financial imperative. On the political front, the concept has won backing from unexpected quarters. This newspaper’s account of Alan Greenspan’s conversion from icon of free-market liberalism to proponent of a temporary nationalisation was mind-boggling.

To couple that with a similar U-turn by Lindsey Graham, a Republican senator who has built a political career out of his love of small government, was just astonishing.

The reality is that even the right wing of the political spectrum realises that banks cannot be left to their own devices while in receipt of federal funds.

From a financial perspective, nationalisation of one or more banks – followed by a public offering once they are cleaned up – need not be a socialist nightmare or, in the words of a memory-challenged American banker, “an idea for fools and Europeans”. (How about AIG, Fannie, Freddie and IndyMac?)

Government control would solve two key problems that have haunted policymakers since the start of the turmoil: pricing of toxic assets and banks’ unwillingness to lend.

Unlike current management, who live in fear of further writedowns, Treasury would have little to lose in marking troubled assets sharply lower. That, in turn, would make it easier to sell them to private equity and hedge fund investors, or run them off.

The reason Citi, BofA and others have failed to unburden their balance sheets is that management have an incentive to hope against all hopes that markets will get better.

A similar paralysis has affected lending decisions. Scared by the prospect of new defaults by maxed-out consumers and businesses, lenders have shut up shop, thus exacerbating the economic hardship they are trying to escape. By contrast, a hands-on approach by government, coupled with its higher tolerance of losses, would direct funds where the economy needs them.

The main question for the administration is how to nationalise stricken banks.

That is where the much-maligned “Geithner plan” offers a solution. For all its lack of detail, Mr Geithner’s outline does say to subject banks to a “stress test”.

Wall Street executives have scoffed at the idea, saying regulators constantly test their financial health. Yet, setting a new hurdle gives the authorities an objective-looking yardstick to sanction a takeover.

Banks will not like it – and Citi, for one, is already agitating for yet another bail-out without nationalisation. But as the financial chain comes under unprecedented strain, the time has come to take out its weakest links.

http://www.ft.com/cms/s/0/0e569820-ff7c-11dd-b3f8-000077b07658.html

Britney May Be Trying to Break Away From Daddy's Control

Ken Baker and Natalie Finn Ken Baker And Natalie Finn – 1 hr 38 mins ago

Los Angeles (E! Online) – Was Britney Spears trying to make a break for it? Or does some avid fan just want her to be able to run free like the wind?

A woman claiming to be Britney left three voice mails last month asking an attorney for help to extricate herself from her ongoing conservatorship, according to audio recordings played to E! News.

On the recordings, the woman says she wants out of the arrangement and indicates that she is at odds with dad Jamie Spears.

In the first message, left at 1:34 a.m. on Jan. 19, she says, in a hushed tone, "Hi, this is Britney Spears. I want Jon Eardley...to represent me as coappointed attorneys for my best interest and best wishes. Goodbye."

A rep for Spears could not be reached for comment, though a source close to the popster says the voice on the recordings is "absolutely not her."

Eardley was the New York-based attorney, supposedly retained by Sam Lutfi, who last year tried to have Britney's conservatorship case transferred to federal court, claiming her civil rights had been trampled on by her parents and the L.A. Superior Court system.

All of his claims were denied, with a judge ruling that, because Spears had been found unfit to hire her own counsel, Eardley had no grounds on which to work on the singer's behalf.

In the second message, left 20 minutes later, the woman, who misstates the date, says, "Hi, this is Britney Spears. It's January 18th. I just want out of this conservatorship....I'm confined, restrained, stripped of my civil rights and I demand the State of California to review this case because I feel it is meaningful. Bye."

Britney's camp obtained a restraining order against Eardley, whom her father and attorneys have accused of being in cahoots with Sam Lutfi to undermine the conservatorship, on Jan. 30. The order is also in place against Lutfi and former Spears' paramour, paparazzo Adnan Ghalib.

In the third message, dated Jan. 21 at 12:29 a.m., the woman says, "Hi, my name is Britney Spears. Um, I called you earlier. I'm calling again because I just wanted to make sure during the process of ending the conservatorship...I just want to be guaranteed that, um, everything will be fine with the process of, um, you guys taking care of everything and...things will be the same as far as...my custodial rights."

In the petition for a restraining order against Lutfi, Eardley and Ghalib, Spears' conservators alleged that the three men had been "working in concert to disrupt the conservatorship." They also attached a letter sent from Eardley to Britney a year ago informing her that "civil rights were violated" and offering his assistance.

··· THEY SAID WHAT? Get today's most commented stories now at www.eonline.com

Your Wasted Girlfriend website

One day I've catched my girlfriend cheating. And then I decided to put her photos to my blog just to revenge her... Now I have a huge archive of EX girlfriends.

XXX Link Here

Don't forget to hit the Submit button at the website & upload your own Ex-Girlfriend's naked photos, ...doesn't really have to be an ex-girlfriend though, these girls look really happy.

If you click on any picture there, it may take you to a different webpage filled with other porno content. I cannot be responsible for what you find there. The internet was made for porn, deal with the internet, not me.
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There appear to be a couple YouTube Celebrity look-a-likes (TheHill88 & Brookers) posted right next to each other on this page (3 rows from the bottom of the Best Galleries Section - bah, it looks like the photos move around a bit with each visit...but they're there right now, click the XXX link below).

Not really them!

Obama warns mayors on spending stimulus money

Published - Feb 20 2009 03:45PM EST

Invoking his own name-and-shame policy, President Barack Obama warned the nation's mayors on Friday that he will "call them out" if they waste the money from his massive economic stimulus plan.

"The American people are watching," Obama told a gathering of mayors at the White House. "They need this plan to work. They expect to see the money that they've earned _ they've worked so hard to earn _ spent in its intended purposes without waste, without inefficiency, without fraud."

In the days since the White House and Congress came to terms on the $787 billion economic package, the political focus has shifted to how it will work. Obama has staked his reputation not just on the promise of 3.5 million jobs saved or created, but also on a pledge to let the public see where the money goes.

His budget chief this week released a 25,000-word document that details exactly how Cabinet and executive agencies, states and local organizations must report spending. It is a system meant to streamline reports so they can be displayed on the administration's new Web site, Recovery.gov.

Using his presidential pulpit, Obama demanded accountability, from his friends in local government as well as his own agencies. He said the new legislation gives him tools to "watch the taxpayers' money with more rigor and transparency than ever," and that he will use them.

"If a federal agency proposes a project that will waste that money, I will not hesitate to call them out on it, and put a stop to it," he said. "I want everyone here to be on notice that if a local government does the same, I will call them out on it, and use the full power of my office and our administration to stop it."

Miami Mayor Manny Diaz, who leads the U.S. Conference of Mayors, said he welcomed Obama's warning.

"Absolutely. We get called out every day at the local level," Diaz said, drawing laughs from other mayors in a gathering with reporters on the White House driveway. "We have plenty of constituents who will be doing that before the president does."

Mayors of both parties said they appreciated the invitation to meet with Obama, Vice President Joe Biden and a handful of Cabinet secretaries. They cautioned, though, that the stimulus plan will only work if leaders at the state level direct the money to their cities in a clear, timely way.

The economic plan will inject a sudden boost of cash into transportation, education, energy and health care. Beyond new spending, it aims to aid people through a package of tax cuts, extended unemployment benefits and short-term health insurance help. The cost will be added to a growing budget deficit.

Obama said government leaders have asked for the "unprecedented trust of the American people."

"With that comes unprecedented obligations to spend that money wisely, free from politics and free from personal agendas," he said.

The president did not specify how, exactly, he would call out one of his own agencies or a local government about wasteful projects.

Beep me if you wanna reach me....

INXS singer says broke, homeless after fired from band

Thu Feb 19, 10:19 pm ET

SYDNEY (Reuters) – The lead singer of Australian rock band INXS, J.D. Fortune, who was picked to replace the late Michael Hutchence in a contest on a reality TV show, said he has been fired without warning from the band.

Fortune, 35, a Canadian rock singer, was living out of his car when he won the CBS network's 2005 reality TV series "Rock Star:INXS."

He became the frontman for the six-man band, taking the place of 37-year-old Hutchence who was found dead in a Sydney hotel room in November 1997 with a coroner ruling he had committed suicide.

With Fortune, INXS released the album "Switch" and went on a world tour in 2006 and 2007 to promote the album that featured the singles "Pretty Vegas" and "Afterglow."

But Fortune told Entertainment Tonight Canada that INXS fired him literally with a handshake at an airport in Hong Kong, leaving the band without a frontman and with a new album on hold.

"I found myself really alone because I had travelled with these guys for 23 months," Fortune told Entertainment Tonight Canada without saying exactly when he was sacked.

He acknowledged that he had been taking drugs including cocaine while with the band but said he had been drug free for two years.

Fortune said he was now back living out of his car and had spent all his remaining money on a solo album called "The Death of a Motivational Speaker."

"From the street to the air back to the street again. It is only me," he said.

A spokeswoman for INXS told the Australian media that she could not comment on Fortune's sacking.

Jobless hit with bank fees on benefits

By CHRISTOPHER LEONARD, AP Business Writer Christopher Leonard, Ap Business Writer 1 hr 2 mins ago

For hundreds of thousands of workers losing their jobs during the recession, there's a new twist to their financial pain: Even as they're collecting unemployment benefits, they're paying bank fees just to get access to their money.

Thirty states have struck such deals with banks that include Citigroup Inc., Bank of America Corp., JP Morgan Chase and US Bancorp, an Associated Press review of the agreements found. All the programs carry fees, and in several states the unemployed have no choice but to use the debit cards. Some banks even charge overdraft fees of up to $20 — even though they could decline charges for more than what's on the card.

"It's a racket. It's a scam," said Rachel Davis, a 38-year-old dental technician from St. Louis who was laid off in October. Davis was given a MasterCard issued through Central Bank of Jefferson City and recently paid $6 to make two $40 withdrawals.

The banks say their programs offer convenience. They also provide at least one way to tap the money at no charge, such as using a single free withdrawal to get all the cash at once from a bank teller. But the banks benefit from human nature, as people end up treating the cards like all the other plastic in their wallets.

The fees are raising questions from lawmakers who just recently voted to infuse banks with taxpayer money to keep them afloat.

Steven Adamske, spokesman for the U.S. House Financial Services Committee, said he wasn't aware of the debit card programs before he was contacted by the AP, but was concerned about card holder fees.

"Our hope ... would be that banks who are getting federal assistance would forgo these kinds of fees as we're trying to help everyone in society deal with this recession," Adamske said.

Some banks, depending on the agreement negotiated with each state, also make money on the interest they earn after the state deposits the money and before it's spent. The banks and credit card companies also get roughly 1 percent to 3 percent off the top of each transaction made with the cards.

Neither banks nor credit card companies will say how much money they are making off the programs, or what proportion of the revenue comes from user versus merchant fees or interest. It's difficult to estimate the profits because they depend on how often recipients use their cards and where they use them.

But the potential is clear.

In Missouri, for instance, 94,883 people claimed unemployment benefits through debit cards from Central Bank. Analysts say a recipient uses a card an average of six to 10 times a month. If each cardholder makes three withdrawals at an out-of-network ATM, at a fee of $1.75, the bank would collect nearly $500,000. If half of the cardholders also dial customer service three times in any given week (the first time is free; after that, it's 25 cents a call), the bank's revenue would jump to more than $521,000. That would yield $6.3 million a year.

Rachel Storch, a Democratic state representative, received a wave of complaints about the fees from autoworkers laid off from a suburban St. Louis Chrysler plant. She recently urged Gov. Jay Nixon to review the state's contract with Central Bank with an eye toward reducing the fees.

"I think the contract is unfair and potentially illegal to unemployment recipients," she said.

Central Bank did not return two messages seeking comment.

Glenn Campbell, a spokesman for Rep. Russ Carnahan, D-Mo., said the congressman would support a review of the debit card programs nationwide.

Another 10 states — including the unemployment hot spots of California, Florida and South Carolina — are considering such programs or have signed contracts. The remainder still use traditional checks or direct deposit.

With the national unemployment rate now at 7.6 percent, the market for bank-issued unemployment cards is booming. In 2003, states paid only $4 million of unemployment insurance through debit cards. By 2007, it had ballooned to $2.8 billion, and by 2010 it will likely rise to $10.5 billion, according to a study conducted by Mercator Advisory Group, a financial industry consulting firm.

The economic stimulus plan signed by President Barack Obama this week will increase federal unemployment benefits by $40 billion this year. Subsequently, there will be more money from which banks can collect fees. The U.S. Department of Labor allows the fees as long as states create a way for recipients to get their money for free, spokeswoman Suzy Bohnert said.

"Beyond that, the individual decides how to manage his drawdowns using the debit card," she said in an e-mail.

A typical contract looks like the agreement between Citigroup and the state of Kansas, which took effect in November. The state expects to save $300,000 a year by wiring payments to Citigroup instead of printing and mailing checks.

Citigroup's bill to the state: zero. The bank collects its revenue from fees paid by merchants and the unemployed.

"If you use your card the right way, you're not going to pay fees at all," said Paul Simpson, Citigroup's global head of public sector, health care and wholesale cards.

But that's not always practical.

Arthur Santa-Maria, a laid-off engineer who lives just outside Albuquerque, N.M., said he didn't pay any fees the first time he was laid off, for several months in 2007. His unemployment benefits were paid by paper checks. He found a new job last year but was laid off again last fall.

This time, he was issued a Bank of America debit card — a "prepaid" card in industry lingo — but he was surprised to learn he had to pay fees to get his money. He asked the bank to waive them. It said no. That's when Santa-Maria called back to ask how to check his account online. He logged on and saw that the call cost him a half dollar. To avoid more fees, Santa-Maria found a Bank of America ATM at a strip mall and withdrew $80 at no charge. When he got back to his car, he decided to take out the rest of his money — $250 — and deposit it in his bank account.

Afterward, Santa-Maria logged on to his account and saw a charge of $1.50 for two withdrawals in one day.

"They're trying to use my money to make money," Stanta-Maria said. "I just see banks trying to make that 50 cents or a buck and a half when I should be given the service for free."

New Mexico authorities bargained with Bank of America to get lower fees for unemployment recipients, said Carrie Moritomo, a spokeswoman for the state Department of Workforce Solutions. The state saves up to $1.5 million annually by switching from checks to debit cards.

Bank of America spokeswoman Britney Sheehan pointed out that the fees charged in New Mexico are similar to those charged in the 29 other states with unemployment debit cards. The bank believes "the fee schedule is reasonable and consistent with similar programs," she said.

Banks could issue unemployment debit cards with no fees for cardholders, but that would likely mean that states would have to pay more of the administrative costs, said Mark Harrington, director of marketing for Citigroup's prepaid card services. If a state demanded no cardholder fees and could pay the difference, Citigroup might enter such a contract.

"We would be open to that," Harrington said. "We're not looking to structure any programs where we would lose money, but we're definitely flexible."

Simpson noted that the cards can save money for jobless workers who have no bank accounts. In the past, these people had to use corner check-cashing shops that charged fees as high as 2 percent, or $6 for a $300 check. Now, they can swipe their cards at McDonald's, Wal-Mart or elsewhere for free.

Kenna Gortler, a laid-off paper mill worker in Oregon, said her union is advising members to avoid the debit cards and sign up to get their benefits through direct deposit. More than 300 of her fellow workers have lost their jobs at the mill in the last three months, and horror stories about ATM fees and overdraft charges are starting to filter back to others who are just now signing up for their benefits.

"It's discouraging," Gortler said. "People have limited funds and they don't need to be giving money to the banks. They need to be keeping that money to feed their families and pay bills."

Huge gamma-ray blast spotted 12.2 bln light-years from earth

Thu Feb 19, 3:58 pm ET

WASHINGTON (AFP) – The US space agency's Fermi telescope has detected a massive explosion in space which scientists say is the biggest gamma-ray burst ever detected, a report published Thursday in Science Express said.

The spectacular blast, which occurred in September in the Carina constellation, produced energies ranging from 3,000 to more than five billion times that of visible light, astrophysicists said.

"Visible light has an energy range of between two and three electron volts and these were in the millions to billions of electron volts," astrophysicist Frank Reddy of US space agency NASA told AFP.

"If you think about it in terms of energy, X-rays are more energetic because they penetrate matter. These things don't stop for anything -- they just bore through and that's why we can see them from enormous distances," Reddy said.

A team led by Jochen Greiner of Germany's Max Planck Institute for Extraterrestrial Physics determined that the huge gamma-ray burst occurred 12.2 billion light years away.

The sun is eight light minutes from Earth, and Pluto is 12 light hours away.

Taking into account the huge distance from earth of the burst, scientists worked out that the blast was stronger than 9,000 supernovae -- powerful explosions that occur at the end of a star's lifetime -- and that the gas jets emitting the initial gamma rays moved at nearly the speed of light.

"This burst's tremendous power and speed make it the most extreme recorded to date," a statement issued by the US Department of Energy said.

Gamma-ray bursts are the universe's most luminous explosions, which astronomers believe occur when massive stars run out of nuclear fuel and collapse.

Long bursts, which last more than two seconds, occur in massive stars that are undergoing collapse, while short bursts lasting less than two seconds occur in smaller stars.

In short gamma-ray bursts, stars simply explode and form supernovae, but in long bursts, the enormous bulk of the star leads its core to collapse and form a blackhole, into which the rest of the star falls.

As the star's core collapses into the black hole, jets of material blast outward, boring through the collapsing star and continuing into space where they interact with gas previously shed by the star, generating bright afterglows that fade with time.

"It's thought that something involved in spinning up and collapsing into that blackhole in the center is what drives these jets. No one really has figured that out. The jets rip through the star and the supernova follows after the jets," Reddy said.

Studying gamma-ray bursts allows scientists to "sample an individual star at a distance where we can't even see galaxies clearly," Reddy said.

Observing the massive explosions could also lift the veil on more of space's enigmas, including those raised by the burst spotted by Fermi, such as a "curious time delay" between its highest and lowest energy emissions.

Such a time lag has been seen in only one earlier burst, and "may mean that the highest-energy emissions are coming from different parts of the jet or created through a different mechanism," said Stanford University physicist Peter Michelson, the chief investigator on Fermi's large area telescope.

"Burst emissions at these energies are still poorly understood, and Fermi is giving us the tools to understand them. In a few years, we'll have a fairly good sample of bursts and may have some answers," Michelson said.

The Fermi telescope and NASA's Swift satellite detect "in the order of 1,000 gamma-ray bursts a year, or a burst every 100,000 years in a given galaxy," said Reddy.

Astrophysicists estimate there are hundreds of billions of galaxies.

The Fermi gamma-ray space telescope was developed by NASA in collaboration with the US Department of Energy and partners including academic institutions in France, Germany, Italy, Japan, Sweden and the United States.

Stock Market crash on 2-20 & 2-23?

CAUTION: October 87 Re-Run On Deck?

California budget plan: Key elements

Lawmakers agree to $12.5 billion in tax hikes and $14.8 billion in spending cuts.

By Times staff writers
8:40 AM PST, February 19, 2009

Key elements of the budget package approved by the Legislature this morning:

• $14.8 billion in spending cuts

• $12.5 billion in tax increases

• $5.4 billion in borrowing

• $7.8 billion in federal stimulus funds

What's next:

Voters will be asked in May to approve restraints on government growth, borrowing against future state lottery revenues, cuts in mental health and early-childhood education programs. In June 2010, they will consider the open primary and restrictions on legislative pay hikes.

The governor may rescind the 20,000 layoff notices recently sent out.

Scheduled Friday furloughs will end, but state workers will be furloughed eight hours a month.

The state ultimately will resume paying all its bills, including tax refunds. But doing so could take weeks.

Stalled public-works projects could restart

Source: California Legislature, Times reporting.

California Legislature finally approves new budget

By Jordan Rau, Evan Halper, Patrick McGreevy and Michael Rothfeld
8:19 AM PST, February 19, 2009

Reporting from Sacramento -- Voting at dawn to end a three-month impasse, the California Legislature passed a budget package that addresses the state's massive deficit with billions of dollars in new taxes and program cuts after Democrats and Gov. Arnold Schwarzenegger reached a deal with a GOP holdout.

Sen. Abel Maldonado of Santa Maria provided the final Republican vote needed to pass a spending plan, which includes more than $12 billion in tax hikes. In exchange, Democrats agreed to rewrite election rules that Maldonado said had allowed the Capitol to become paralyzed by partisanship, leading the state to the brink of financial ruin.

The plan came together after midnight, following seven unsuccessful votes held throughout the day and into the night in the Capitol, which Sen. President Pro Tem Darrell Steinberg (D-Sacramento) had locked down Tuesday, barring senators from leaving. California's financial state had deteriorated to the point where Schwarzenegger ordered layoffs of 10,000 state workers and the suspension of hundreds of public-works projects. Early income-tax refunds have been delayed, and public anger has grown.

"I'm very relieved for the people of California," Steinberg said. "There's not a lot of good news to come out of a $41-billion budget deficit, except that we in fact solved it."

The final plan includes most of the framework of the original budget compromise from Democratic and Republican leaders. There are billions of dollars in cuts to schools, healthcare institutions, higher education and programs for the poor. If signed by Schwarzenegger, who helped devise the package, it also would raise personal income taxes and the state sales tax, although a 12-cent per-gallon increase in gasoline taxes was eliminated in the final hours. The gas tax would be replaced with federal economic stimulus money.

"This is a very difficult budget, but we have turned this crisis into an opportunity to make real, lasting reforms for California," Schwarzenegger said in a statement. He has long been a proponent of the election-law changes included in the final package. "Some special interests may not like this budget -- but like I always say, what's good for the people is not always good for special interests."

Schwarzenegger, who was initially swept into office as an anti-tax crusader, has come under attack from other Republicans for embracing tax hikes to solve the state's fiscal crisis. But despite intense lobbying by the governor, Senate Republicans had continued to hold out.

Soon after the spending plan passed, Schwarzenegger stepped outside his office and dismantled a debt clock he had installed that displayed how much money the state was losing each day the state failed to take action on the deficit.

Democrats initially said Maldonado's call for "open" primaries, in which voters could cross party lines and candidates of all parties would compete in the same primary, followed by a runoff of the top two vote-getters, was too substantial to be pushed through in a budget deal. But Maldonado said the current budget stalemate proved that California could not return to fiscal sanity without fundamental changes in the way it elects its representatives.

"Without an open primary, we're going to be here again and again and again, voting on budgets," he told reporters. "This system is broken and we need to reform it."

Modeled on election rules in Washington state, the change -- if approved by California's voters next year -- would undermine the influence of political parties. It was unpopular with Democrats, but their leaders pressed them to accept it as the price of ending the political logjam.

"My caucus understands we have to do some things we don't like," said Assembly Speaker Karen Bass (D-Los Angeles).

Wednesday had begun in uncertainty, with Dennis Hollingsworth of Murrieta elected as the new Republican leader in the state Senate shortly after a midnight coup unseated Dave Cogdill of Modesto. Hollingsworth promptly insisted that months of negotiations over how to close California's deficit budget talks begin anew and lawmakers abandon the sales, income and gas taxes hikes that were part of the fiscal package Cogdill helped negotiate.

"We should reopen negotiations and we should pass a no-tax budget," Hollingsworth said. "The majority of the Senate Republican caucus said we want to stand for a no-tax budget."

But they ultimately marginalized him and the 10 GOP senators who had already ruled out any new taxes. Democrats and the governor refocused their efforts away from the caucus leadership and on the small group of GOP dissidents who signaled they were prepared to vote for their budget package. Cogdill remained in support of it, as did Sen. Roy Ashburn of Bakersfield.

The Senate convened every few hours Wednesday, but the debate on the chamber floor was unproductive. Democrats read letters from constituents beseeching them to pass the budget so state services could resume. Republicans parried with correspondence from their backers decrying the imposition of higher taxes on already struggling families.

Behind the scenes, negotiators stayed focused on Maldonado and GOP Sen. Dave Cox of Fair Oaks, both of whom had indicated they might be persuaded to cross the aisle and vote with Democrats to pass the budget. Legislative leaders and Schwarzenegger's aides pored over wish lists from both senators.

After lunching on salmon and swordfish with Schwarzenegger at an Italian restaurant a few blocks from the Capitol, Maldonado emerged enthusiastic.

"The governor is on board with my constitutional amendments," Maldonado said, referring to his request that state election law be changed to help moderate politicians such as him and to penalize lawmakers when the state's budget is late.

"If everybody is happy with the drafts, we'll have a budget for the state of California," he said.

Maldonado's proposal did not go down well with many Democrats. Many lawmakers in both parties hold safe seats that would become competitive if Maldonado's request were enacted.

Others said they objected to rewriting California's fundamental rules of democracy in the middle of the night, all to secure a vote to keep the state from financial ruin. They also accused Maldonado, who is in his last term in the Senate, of trying to leverage his budget vote to make a future statewide run easier.

"I'm not here to worry about Abel's political future," said Sen. Gloria Romero (D-Los Angeles).

Maldonado denied such a motive, and the final version appeared to have little use for his aspirations for statewide office in 2010, because it would not take effect until 2012.

Democrats remained dubious.

"I'm open to discussion on the merits of the open primary," said Sen. Joe Simitian (D-Palo Alto). "But I'm hard-pressed to understand what on earth it has to do with solving the state budget deficit."

Sen. Denise Moreno Ducheny (D-San Diego) said Maldonado's suggestion that legislators' pay be docked whenever the state budget was not on time was "particularly offensive" and could give wealthy legislators inappropriate leverage in negotiations.

"You could have rich people telling everyone else, 'Vote now if you want to feed your family.' " Ducheny said. "I think it's unethical . . . to tie your pay to your vote."

Maldonado ultimately agreed to drop that measure out of the package. This morning, Democrats agreed to another provision pushed by Maldonado that would keep legislators from getting pay raises in years when the state ran a budget deficit.

Just before 5 a.m., the Senate approved the open-primary measure. Several Democrats were so resistant to the notion that the Senate had to recess while they were coaxed into giving their support. Near tears, Romero called it "a disgusting process" and "not good government" as she changed her vote to yes.

The sun had risen when the state Assembly passed the tax bill at 6:30 a.m. Assembly GOP leader Mike Villines of Clovis, Roger Niello of Sacramento and Anthony Adams of Hesperia provided the three GOP votes to put the measure over the top.

"Mark our words: There's not going to be any more taxes from this body," Villines said.

Dissenting Republicans -- who have been warning for years that California was spending recklessly -- told their colleagues that this budget also would develop holes.

The deal with Maldonado emerged Wednesday after negotiations with Cox deteriorated. Schwarzenegger and Democrats never agreed to Cox's call to postpone enactment of California's landmark law limiting greenhouse-gas emissions.

That law, which won Schwarzenegger international acclaim, is one of the governor's proudest achievements. But many business groups in California complain that it would be expensive to implement.

Democrats also did not budge on other Cox demands: to give employers more leeway in scheduling meal and rest breaks for their workers, and his insistence that legislators reduce some of the $14.4 billion in taxes contained in the budget package. Maldonado, however, incorporated that latter issue into his demand, and Democrats stripped out the gas taxes, worth about $2 billion.

The final version of the plan would raise the state sales tax by 1% and nearly double the vehicle license fee, to 1.15%. It would also reduce the dependent credit Californians are allowed to claim on their taxes. The package would increase personal income tax rates by 0.25%.

"It's just plain wrong," Hollingsworth said just before the vote.

Ashburn took to the floor to recall Ronald Reagan's decision to raise taxes in 1967 as California governor. "As president of the United States, my hero, my role model, the person who I have looked at for inspiration, raised taxes three times," Ashburn said.

He said his fellow GOP senators had failed to understand the difference between being a politician and being an elected official.

"You know this deficit cannot be solved by cuts alone," he told them as they closed their eyes or looked away. "What would Ronald Reagan do? Ronald Reagan would vote yes."

After his speech, Democratic senators came over and hugged Ashburn, who had negotiated $100 million in tax credits to help home builders and tax breaks for horse-racing tracks.

All the taxes in the budget package would last for two years, but they would be extended another two years if voters approve a permanent spending cap that would be placed on the May 19 ballot as part of the complex deal worked out with Republican leaders over several months. That spending cap would prevent future legislators from hiking state spending when California's treasury is flush and instead deposit that money into a giant rainy-day fund for unexpected deficits. Only when that reserve exceeded an eighth of the state's revenues could legislators dip into it for other purposes.

The open-primary measure would go on the June 2010 ballot, giving opponents plenty of time to work up opposition. The rules would apply not only to state legislators but also to members of Congress, who may tap their ample war chests to defeat it.

Sen. Mark Leno (D-San Francisco) predicted: "It is going to get killed for sport."

Latin Americans fret as Stanford crisis spreads - Depositors turned away from Stanford banks

Wed Feb 18, 2009 6:50pm EST


By Ana Isabel Martinez

CARACAS, Feb 18 (Reuters) - Well-off Mexican pensioners joined middle-class Venezuelans in a frantic quest on Wednesday to track down their savings as the fraud scandal enveloping U.S. broker Stanford Group Co spread to Latin America.

Crowds flocked to Stanford offices in Caracas and Mexico City and telephone lines buzzed as harried Stanford staff fielded calls round-the-clock about frozen accounts. Regulatory authorities moved on the bank's assets in Ecuador and Panama and its Colombian brokerage unit halted stock trading. [ID:nN18432144]

"I heard the news and came straight down," said Caracas resident Josefina Moreno, who said her son had about $10,000 invested. "We've had money here for 2 years, and I want it back."

The U.S. Securities and Exchange Commission (SEC) has accused billionaire Allen Stanford, a high profile cricket promoter, and two Stanford executives of fraudulently selling $8 billion in high-yield certificates of deposit in a scheme that stretched around the world from Texas and Antigua. Venezuelan investors alone could have more than $2 billion invested in the scheme. [ID:nN17381625]

One Venezuelan official familiar with some Stanford Group operations said that Venezuelan investors were mainly middle-class or rich individuals with deposits ranging from $10,000 to tens of millions of dollars.

The SEC civil complaint, filed on Tuesday in federal court in Dallas, Texas, named Stanford International Bank (SIB), based in Antigua with 30,000 clients in 131 countries and $8.5 billion in assets, and the group's Houston-based broker-dealer and investment adviser units. In all, the company claims to oversee $50 billion in assets.

Venezuelan investments account for an estimated third of money in SIB, authorities said. [ID:nN18444225]

Stanford Bank Venezuela sought to calm clients on Tuesday by saying its assets were not linked to SIB, and requested a national banking authority representative to sit on its board. [ID:nN18423175]

SHATTERED SHELTERS

In a region all too familiar with financial turmoil, market meltdowns and frozen bank accounts, the Stanford scandal has panicked investors who were already worried about the effects of the global financial crisis on their jobs and savings.

Many wealthy Venezuelans look to overseas accounts as a way of dealing with tough currency controls, soaring inflation and their concerns that socialist President Hugo Chavez is driving the oil rich nation toward Cuba-style communism.

At Stanford's Mexico City office, middle-aged women carrying Louis Vuitton and Carolina Herrera designer purses fiddled with flashy necklaces as they waited alongside Jewish men in skull caps, switching between Spanish and Yiddish as they spoke on their cellphones.

Stanford staff handed out statements that said Stanford accounts had been frozen and provided wire transfer instructions for clients who wanted to liquidate accounts. Some of those waiting in line wept into their cellphones.

Some said they did not know if their money was in Mexico or Houston or Antigua.

"All my capital is in this bank, and I don't know what I am going to do. They won't attend to us. They are locked inside. They don't want to talk to us," said Karyna Kleinckwort, a widow in her mid-thirties.

BAD NEWS AFTER MIDNIGHT, CONFUSION REIGNS

Stanford Fondos has been licensed to operate in Mexico since 2005. The country's bank regulator said that as of Nov. 2008, Stanford had sold investment stocks worth roughly $45 million to some 3,400 clients in Mexico.

"Yesterday, our advisor called us at 1 a.m. and told us he could not believe it," said Maria Esther Azuela, a housewife in her mid-sixties. "This is a big blow."

In Quito, Ecuador, confusion ruled. After the government announced that it was investigating the operations of two local units of Stanford, Anita Cazar rushed to claim her cash. [ID:nN18454119]

"I don't know what is happening," said Cazar, 50, who joined other investors looking for answers. "I saw it in the newspaper, but I want to get my money out just in case."

The Quito stock exchange suspended Stanford's local brokerage house on Wednesday from operating on that exchange for 30 days. [ID:nN18422837]

Santiago Noboa, head regulator for markets in Quito, said the Stanford units managed a fund and investor portfolios totaling about $15 million, but authorities were yet unaware of other instruments the firm might have sold locally.

In Colombia, a local unit of Stanford halted activities on the Colombian stock exchange. Operations there would be limited to fulfilling commitments and returning funds, officials said. [ID:nN18421308]

Peruvian securities regulator Conasev sent an inspection team to Stanford's broker-dealer office in Lima. Conasev said the unit has net assets in Peru of 6.8 million soles ($2.1 million). [ID:nN18426995]

In Panama, bank regulators seized Stanford's local affiliate, Stanford Bank. Nobody lined up outside the branch in Panama City, but a four-page note pinned to the door told of the banking superintendent's decision to take over the bank because of a threat of a run on its assets. [ID:nN17401186]

"Because of the aforementioned," it read, "the interests of the depositors are at risk and it is necessary to carry out an immediate administration control of Stanford Bank, Panama." (Reporting by Caracas, Mexico City, Quito, Panama, Bogota bureaus; Writing by Patrick Markey; Editing by Toni Reinhold)
******************************************************************************
Depositors turned away from Stanford banks

By BEN FOX, Associated Press Writer Ben Fox, Associated Press Writer – Wed Feb 18, 5:43 pm ET

ST. JOHN'S, Antigua – Panicky depositors were turned away from Stanford International Bank and some of its Latin American affiliates Wednesday, unable to withdraw their money after U.S. regulators accused Texas financier R. Allen Stanford of perpetrating an $8 billion fraud against his companies' investors.

Some customers arrived in Antigua by private jet and were driven up the lushly landscaped driveway of the bank's headquarters, only to be told that all assets have been frozen pending an investigation by Antiguan banking regulators.

"I don't know what to think. I have my life savings here," said Reinaldo Pinto Ramos, 48, a Venezuelan software firm owner who flew in by chartered plane from Caracas Wednesday with five other investors to check on their accounts. "We're waiting to see some light."

Banking regulators and politicians around the region are scrambling to contain the damage after the U.S. Securities and Exchange Commission filed civil fraud charges against the billionaire on Tuesday. Regional Director Rose Romero of the SEC's Fort Worth office called it a "fraud of shocking magnitude that has spread its tentacles throughout the world."

Specifically, U.S. regulators accused Stanford, two other executives and three of their companies of luring investors with promises of "improbable and unsubstantiated" high returns on certificates of deposit and other investments. They asked a federal judge to freeze all three companies' U.S. assets and to seek the repatriation of any of their assets overseas.

That would include the $7.2 billion managed by the Antigua-based Stanford International Bank, which has affiliates in Mexico, Panama, Colombia, Ecuador, Peru and Venezuela. Also frozen were assets of Houston-based Stanford Group Company and Stanford Capital Management.

"The fallout threatens catastrophic and immediate consequences" for the twin-island nation of Antigua and Barbuda, said Prime Minister Baldwin Spencer. It also could rattle the economies of smaller nations throughout the region.

Stanford, 58, has a personal fortune of $2.2 billion, according to Forbes magazine. He owns a home in St. Croix, in the U.S. Virgin Islands, and operates his businesses from Houston and Antigua, where his companies and charity have had such a prominent role that the islands' government knighted him in 2006.

SEC spokesman John Nester said the agency does not know where Stanford is. James Sullivan, the U.S. marshal for the Virgin Islands, said agents are monitoring his "extensive holdings" in St. Croix, including a boat he sometimes he docks there, but could not say whether he is currently in the territory. He does not currently face any charges requiring his presence in court.

"As of right now, all we are doing is an ongoing investigation to monitor his holdings, for lack of better term, and we are not actively pursuing him," Sullivan told The Associated Press.

Stanford also has been a major political player in the U.S., where some congressmen quickly announced they would donate his campaign contributions to charity.

The Stanford Financial Group, through its political action committee and employees, has contributed $2.4 million to political candidates, parties and committees in the U.S. since 1989, with nearly two-thirds going to Democrats, according to the Center for Responsive Politics, a group that tracks campaign spending.

Most of that cash flowed during the 2002 election cycle, when Congress was debating a financial services antifraud bill that would have linked the databases of state and federal banking, securities and insurance regulators. The bill ultimately died in the Senate, where the biggest recipients have been Sen. Bill Nelson, D-Fla. ($45,900); Sen. John McCain, R-Ariz. ($28,150); Sen. Chris Dodd, D-Conn. ($27,500); and Sen. John Cornyn, R-Texas ($19,700). Rep. Pete Sessions, R-Texas also received $41,375.

Stanford and his wife Susan also donated $931,100 of their own money, with 78 percent going to Democrats, including $4,600 to President Barack Obama's presidential campaign last May 31. Records show $2,300 of that was returned on the same day.

Governments across the region took a variety of actions Wednesday to protect local investors who'd deposited money with Stanford-linked institutions.

Colombia suspended the activities of Stanford International Bank's local brokerage Wednesday to protect "clients and investors." Panama occupied Stanford bank branches following a run on deposits, which its banking agency described as an isolated "consequence of decisions adopted by foreign authorities."

Assets at the bank's four Panama branches, which reportedly held $200 million in deposits at year's end, are held largely in liquid, fixed-income investments that can more easily be converted into cash to cover deposits if necessary, the bank said.

In Venezuela, banking regulator Edgar Hernandez said the government was considering a bank request for help after a $26.5 million run on deposits removed about 12 percent of the holdings at Stanford Bank SA in Caracas.

"We suggested an open intervention" by the government, including the possibility of the government or a state-run bank depositing funds to prop up the bank, Hugo Faria, one of the bank's directors, told The Associated Press.

In Mexico, where the Stanford Fondos unit manages about $50 million for some 3,400 clients, a note posted on a shuttered office door in the capital's wealthy Polanco neighborhood announced that all accounts "are temporarily frozen."

"We don't have any other information at this time, you will be contacted in the future with more details," the note said.

Karina Klinckwort, 38, had rushed to the office Wednesday: "Everything I have is with them, everything that my husband, may he rest in peace, invested is with them."

In Antigua, hundreds of depositors lined up outside the Stanford-controlled Bank of Antigua, many clutching portable radios to listen to financial news.

"People have to come to get their money," said electrician Rasta Kente.

Regional regulators warned that panicking will only make things worse.

"If individuals persist in rushing to the bank in a panic they will precipitate the very situation that we are all trying to avoid," said K. Dwight Venner, governor of the Eastern Caribbean Central Bank.

Virgin Islands Gov. John deJongh said he worries the probe will worsen the U.S. territory's flagging economy, potentially costing jobs and investment in local projects. Stanford had pledged to build an office complex next to St. Croix's airport.

Better to declare victory than continue stalemate

George Skelton
Capitol Journal

February 19, 2009

From Sacramento — Any skilled warrior, financier or negotiator knows when to declare victory. A skilled politician plays all three roles.

An astute officeholder will fight for a cause, prioritize public money and negotiate the best deal possible. Then, at the right moment, declare victory before the gain erodes.

Republican state legislators have had a victory ready to be claimed for the last week, but they've sullenly balked. They've wanted a great deal more and have risked losing it all.

As then-Senate Republican leader Dave Cogdill of Modesto told his GOP colleagues, the $41-billion deficit-reduction package negotiated over a six-week span by Gov. Arnold Schwarzenegger and the four legislative leaders -- the so-called Big Five -- was the best deal they were going to get. And it would "keep the state from plummeting off the financial cliff," he said.

The Senate Republican Caucus responded by shooting the messenger. It dumped Cogdill as its leader Tuesday night and replaced him with an ardent anti-tax conservative, Sen. Dennis Hollingsworth of Murrieta. The negotiated deal included $15.1 billion in spending reductions, $14.4 billion in tax increases and $11.4 billion in borrowing.

Cogdill's problem was that he was a leader in name only. He apparently had only one follower willing to vote for a tax increase: Sen. Roy Ashburn of Bakersfield. Cogdill needed at least two out of the 15-member caucus, in addition to himself, for the package to conquer the two-thirds vote hurdle required for passage.

In the Assembly, Republicans have been less rigid. Minority leader Mike Villines of Clovis quickly rounded up the necessary two additional votes required there and probably could have found more if he needed them.

Villines and Cogdill both examined the budget books and realized that the only way to climb out of the historically huge deficit hole was to cut spending and increase taxes.

"There is not much wiggle room," Schwarzenegger told reporters Wednesday as he and Senate President Pro Tem Darrell Steinberg (D-Sacramento) continued to hunt for one more Republican vote. "Anyone that runs around and says that this can be done without raising taxes, I think, has not really looked at it carefully . . . or has a math problem and has to go back . . . and take Math 101."

The deal that Schwarzenegger and legislative leaders struck contained items long on the GOP's wish list -- not everything Republicans demanded, but more than ever would have been achievable had they not been bargaining with potential tax-hike votes.

Foremost is a new spending control and mandatory rainy-day fund. The spending control is key: Budget growth could not exceed a percentage tied to the previous 10-year revenue trend. Any excess revenue would go into the rainy-day fund and be saved for rough times.

The measure must go on the ballot for voter approval. And there's a good chance that because of the overall deal and other bargaining, public employee unions would not oppose the ballot proposition. But support for both the spending control and rainy-day fund would collapse immediately without the budget-tax package.

Another win for the GOP is $1 billion in business tax cuts.

The biggest is a $700-million annual break, beginning in 2011, to encourage nationwide and multinational companies to build facilities and hire employees in California.

Small businesses would earn a $3,000 tax credit for each new employee they hire this year and next, with a cap of $200 million.

And to keep moviemakers in Californians -- a goal of Democratic legislators as well as Republicans -- there would be $100 million in annual tax sweeteners starting in 2011.

Also, there was an after-deal concession to Ashburn to entice his vote: A tax credit of 5% or $10,000, whichever is lower, for people buying a newly constructed home.

"It's a time like this that we need some stimulus," Ashburn said, grinning as he presented the home-buyers bill to the Senate. He apparently was referring to stimulating not only the depressed housing market, but his vote for tax increases.

Normally, there would have been sufficient Senate votes for passage of the budget-tax package last week. Democrats should hold 25 seats, not 24 as they do now -- three short of a two-thirds majority. But Democrat Mark Ridley-Thomas of Los Angeles left his Senate seat last year to become a county supervisor. That seat is still vacant.

And if Democrats and Republicans had not conspired in 2001 to gerrymander a Ventura-Santa Barbara Senate district to make it safe for the GOP, Democrat Hannah-Beth Jackson would have easily won that seat in November. She lost by less than half a percentage point to Republican Tony Strickland, one of the anti-tax leaders.

Proposition 11, approved in November, will create an independent redistricting commission and end that gerrymander foolishness beginning with the 2012 elections.

Meanwhile, many Republicans have acted like they'd rather watch state government go over a cliff than vote for tax increases. Government is always good for ridicule or a laugh. Shut it down. But that didn't work out very well for congressional Republicans and House Speaker Newt Gingrich in 1995.

"I will never let this state go off the cliff," Schwarzenegger repeatedly vowed Wednesday.

Democrats could always resurrect their nuclear weapon: the plan to raise taxes on a simple majority vote by essentially calling them fees. It's legally suspect, but in December it frightened Republican leaders enough to drive them to the bargaining table.

Schwarzenegger vetoed that tax bill. But I doubt he would again -- not with the state he governs sinking into the abyss.

For Republicans, being irrelevant and ignored while a tax bill is enacted on a majority vote would be a huge loss. It's smarter to claim a victory.

GOP senator says he'll vote for budget if it includes constitutional amendments

Sen. Abel Maldonado says he reached a deal with the governor to vote for the budget in exchange for changes in the law to allow open primaries and punish legislators for not meeting budget deadlines.

By Patrick McGreevy and Eric Bailey

February 18, 2009

Reporting from Sacramento — State Sen. Abel Maldonado (R-Santa Maria) says he brokered a deal with Gov. Arnold Schwarzenegger on Wednesday that may position him to break the logjam in Sacramento and cast the final GOP vote needed for budget passage.

But there is a catch -- the agreement could cost some Democratic votes for the bipartisan spending plan that the governor and legislative leaders have put together. And there are none to spare.

Under the deal, Schwarzenegger would support items that Maldonado has demanded from any budget package. They include constitutional amendments, requiring voter approval, that would allow an open primary election, cut legislators' pay if they miss a budget deadline and prohibit pay raises for lawmakers when there are deficits.

"The governor is on board with my constitutional amendments," Maldonado said. "If everybody is happy with the drafts, we'll have a budget for the state of California."

Democrats, however, are skeptical.

"I'm open to discussion on the merits of the open primary," said Sen. Joe Simitian (D-Palo Alto). "But I'm hard-pressed to understand what on earth it has to do with solving the state budget deficit."

Maldonado and the governor discussed the details at a long lunch meeting on the enclosed smoking porch of the posh Spataro Restaurant and Bar a couple of blocks from the Capitol. Afterward there were cigars, including one for the governor's chief of staff, Susan Kennedy.

Aaron McLear, a spokesman for Schwarzenegger, declined to discuss details of the lunch meeting but said the governor has spoken before in favor of an open primary and consequences for legislators who fail to approve budgets on time.

"He has expressed support for both of those ideas in the past," McLear said. "We continue to meet with members of both sides of the aisle to resolve the budget situation."

Schwarzenegger had said this afternoon that GOP lawmakers who insist that the budget could be balanced without new revenue had "a math problem" and that he would not abandon the bipartisan spending plan he helped negotiate, which includes $14.4 billion in tax increases.

The governor's remarks at a Capitol press conference came hours after the newly elected leader of the state Senate's Republicans, who replaced his predecessor in an overnight ouster, said he hoped to kill the existing bipartisan plan to wipe out the state's deficit.

"Anyone who runs around and says this can be done without raising taxes, I think, has not really looked at it carefully or has a math problem and has to go back and take Math 101," Schwarzenegger said.

Senate Republican Leader Dennis Hollingsworth of Murrieta had said this morning that he would like to scrap the agreement Schwarzenegger reached with legislative leaders and renegotiate a package without raising taxes.

"The vast majority of my caucus does not want to see a budget passed with a tax increase," he said. "We don't think it's necessary."

The current plan is one GOP vote shy of passing the Legislature. But Republican opposition to the $14.4 billion in higher taxes that it contains led to the late-night overthrow of Dave Cogdill of Modesto, who as Senate GOP leader helped negotiate the package with Schwarzenegger and other legislative leaders.

For these Republicans, tax increases are heresy

A group of California Senators, most from small towns and rural areas, see their budget fight in near-sacred terms. They're energized -- intimidated, some say -- by talk radio hosts and bloggers.

By Michael Rothfeld and Eric Bailey

8:48 PM PST, February 18, 2009

Reporting from Sacramento — He started out as a champion of their ideals, the leader of a group of conservative Republican state senators devoted to cutting the size of government and blocking tax increases for their rural and suburban constituents.

But over time, state Sen. Dave Cogdill came to see the crisis facing California as bigger than his own closely held views. Then late Tuesday, two former allies walked into his office to deliver the news that his reign was over.

"I don't want to raise taxes, either," Cogdill, a Modesto businessman turned lawmaker, said Wednesday. "It was the hardest decision of my political career, and probably the one that ended it.

"But nonetheless, you know, we're sent here to do a job," he said, "and you don't control the situation. You just have to react to it, stand up for what you believe and make the right decisions."

With the state government and its elected leadership near paralysis, a small group of Republican senators has successfully stymied efforts by Democrats, fellow Republicans in the Assembly and Gov. Arnold Schwarzenegger to plug the state's giant deficit with a plan that includes $14.4 billion in taxes, along with deep program cuts and limits on future spending.

Their near-sacred opposition to taxes ran headlong into a deficit so large that even some within their ranks say it cannot be dealt with by trimming fat from government alone. Still, these true believers have refused to submit, energized -- and intimidated, some say -- by national conservative figures, local talk radio hosts and bloggers.

In this crisis, some senators and their supporters see an opportunity to spotlight a bloated bureaucracy, to make changes to contracting and employment laws that benefit unions and to address other pet peeves that cost the public money.

"That 'chicken in every pot' philosophy is a load of crap,' " a reader, Gregg Palmer, wrote on a conservative blog in response to a note from Cogdill shortly after his late-night ouster. "If the state need(s) to close its doors for a few weeks, so be it. We'll be better off.

"Stand firm," he urged those lawmakers holding out against tax hikes.

Schwarzenegger praised Cogdill on Wednesday for his stand, calling him a man "of great character and a man that you can really trust 100%."

"He did what was right for the people," the governor said. "Maybe not what was right for politics."

Republicans hold only 15 of the state Senate's 40 seats. But they wield significant influence, because two-thirds of lawmakers are need to approve state budgets, and that requires some GOP votes.

The senators tend to hail from the smaller cities and towns of California, where farming and industry drive the economy, cities are often viewed as sinkholes for state tax dollars, and regulations such as environmental restrictions are seen as an impediment to success.

The GOP senators' new leader, Dennis Hollingsworth of Murrieta, was born and raised on a Riverside County dairy farm in a town of 6,000 residents; he worked early on selling frozen bull semen to dairymen and later as a representative for an association of farmers and ranchers.

Hollingsworth, state chairman of a national group that advocates for smaller government, said Wednesday that he would never deviate from his principles. He recalled that four Republican assemblymen who voted for a tax increase in 2001 lost their next election or decided to not to run again.

"It's not as though there are party leaders who are taking actions against members like that," Hollingsworth said. "It's that the people decide that a Republican who raises taxes doesn't usually represent their interests."

Those who defy party orthodoxy, Cogdill said, face derision from "some pretty powerful outside voices" who "crank up" when their elected officials come close to making deals with Democrats.

Local politicians fear the conservative radio hosts of the "John & Ken Show" on KFI-AM (640). And Jon Fleischman, an influential Orange County blogger who publishes "The Flash Report" online, suggested in an interview that Hollingsworth could "buy some time" before new taxes are approved because Democrats might enact deeper cuts "the more dire circumstances become."

"I sure hope he goes over and talks some sense into Mike Villines," Fleischman said, referring to the Assembly GOP leader who supports the tax increases and recently fended off a coup attempt from his own members.

Much has also been made of the anti-tax pledge circulated by Grover Norquist, president of Americans for Tax Reform in Washington. Most of the Republicans in the Legislature have signed it.

Norquist, reached by telephone, compared California Democrats who are upset that Republicans won't authorize new taxes to "the alcoholic who complains someone won't keep buying them liquor."

Not all Republican senators supported the move to change leaders. Sen. Roy Ashburn of Bakersfield, believed to be leaning toward voting for the new tax package, called it "very unwise" to focus on such issues in the middle of a budget crisis.

"The more important thing would be governing the state of California," Ashburn said.

But for others, including Sen. Sam Aanestad (R-Grass Valley), it is a matter of listening to the "hard-working middle-class people" he represents.

"Just yesterday alone, we had 400 telephone calls," he said. "Overwhelmingly, more than 40 to 1, they were saying, 'Please do not raise our taxes.' "

GOP governors consider turning down stimulus money

Published - Feb 18 2009 07:16PM EST

By MELINDA DESLATTE - Associated Press Writer

A handful of Republican governors are considering turning down some money from the federal stimulus package, a move opponents say puts conservative ideology ahead of the needs of constituents struggling with record foreclosures and soaring unemployment.

Though none has outright rejected the money available for education, health care and infrastructure, the governors of Texas, Mississippi, Louisiana, Alaska, South Carolina and Idaho have all questioned whether the $787 billion bill signed into law this week will even help the economy.

"My concern is there's going to be commitments attached to it that are a mile long," said Texas Gov. Rick Perry, who considered rejecting some of the money but decided Wednesday to accept it. "We need the freedom to pick and choose. And we need the freedom to say 'No thanks.'"

U.S. Rep. James Clyburn, D-S.C., the No. 3 House Democrat, said the governors _ some of whom are said to be eyeing White House bids in 2012 _ are putting their own interests first.

"No community or constituent should be denied recovery assistance due to their governor's political ideology or political aspirations," Clyburn said Wednesday.

In fact, governors who reject some of the stimulus aid may find themselves overridden by their own legislatures because of language Clyburn included in the bill that allows lawmakers to accept the federal money even if their governors object.

He inserted the provision based on the early and vocal opposition to the stimulus plan by South Carolina's Republican governor, Mark Sanford. But it also means governors like Sanford and Louisiana's Bobby Jindal _ a GOP up-and-comer often mentioned as a potential 2012 presidential candidate _ can burnish their conservative credentials, knowing all the while that their legislatures can accept the money anyway.

Jindal said he, like Perry and Mississippi Gov. Haley Barbour, is concerned about strings attached to the money even though his state faces a $1.7 billion budget shortfall next year.

Barbour spokesman Dan Turner, for example, cited concerns that accepting unemployment money from the stimulus package would force states to pay benefits to people who wouldn't meet state requirements to receive them.

In Idaho, Gov. C.L. "Butch" Otter said he wasn't interested in stimulus money that would expand programs and boost the state's costs in future years when the federal dollars disappear _ a worry also cited by Jindal and Alaska Gov. Sarah Palin.

A spokesman said Sanford, the new head of the Republican Governors Association, is looking at the stimulus bill to figure out how much of it he can control.

"We're going through a 1,200-page bill to determine what our options are," Spokesman Joel Sawyer said. "From there, we'll make decisions."

But state Democratic Party chairwoman Carol Fowler says Sanford's hesitation is driven by his political ambition rather than the best interests of a state that had the nation's third-highest unemployment rate in December.

"He's so ideological," Fowler said. "He would rather South Carolina do without jobs than take that money, and I think he's looking for a way not to take it."

Not all Republican governors are reticent about using the federal cash.

Florida Gov. Charlie Crist lobbied for the stimulus plan and Georgia Gov. Sonny Perdue has embraced it as he looks to close a $2.6 billion deficit in the state's budget this year. Alabama Gov. Bob Riley has already figured the money into his state's budget.

Pearson Cross, a political scientist at the University of Louisiana at Lafayette, said fiscally conservative governors may be able to give themselves political cover by turning down small portions of the stimulus money, like health care dollars requiring a state match, that they might not fully use anyway.

But in the end, he said, they will likely take most of the available money because their states need it so badly.

"Ideology usually takes second place for governors," he said. "And that's going to mean that most governors are going to go ahead and take the money even though they have misgivings about it."