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Highlights—October 25, 2008

  • Poughkeepsie Journal: Magazine: IBM town site 'Plant of the Year'. By Craig Wolf. Excerpt: IBM Corp.'s Poughkeepsie plant has been named "Assembly Plant of the Year 2008" by the editors of Assembly Magazine, a national publication focusing on manufacturing in America. "This is the first time any IBM factory has won this kind of an award," said Sal Calta, formerly head of all IBM manufacturing and now vice president of business transformation for IBM hardware. More than 600 staff members were called to gather Thursday afternoon at the Bright Horizons at Casperkill facility in the Town of Poughkeepsie, the former IBM Country Club, to hear a surprise announcement of the honor, said Jim King, Poughkeepsie manufacturing plant manager.
  • Detroit Free Press, courtesy of USA Today: Middle-class Americans' retirement at risk. By John Gallagher. Excerpts: Through most of his working life, steelworker Ray West looked toward a secure retirement. His company pension would bring in around $30,000 a year, his union contract guaranteed retiree health coverage and he had 401(k) savings of about $50,000. Three years ago, it unraveled. His company filed for bankruptcy. The collapse reduced his expected pension to around $5,000 a year and canceled his retiree health insurance. And, in three years of unemployment since then, West blew through all the money in his 401(k) as he trained for a new career. ...

    Of all the trends, perhaps the most worrisome is the failure of highly touted 401(k) private savings accounts to replace fast-disappearing traditional pensions. Not only do millions of workers not save enough, or like West drain their 401(k)s well ahead of retirement, but all the risk of making wise investment choices and planning for retirement now falls entirely on workers who have no training to deal with it.

    Possibly the biggest threat to retirees' living standards has been the demise of traditional pension plans in the private sector. For decades a mainstay of retirement, so-called defined-benefit pension plans are those in which employers promise to pay a fixed amount of money to their retirees each month for life. Those plans flourished after the 1940s as big carmakers, steelmakers and other industrial firms needed to build and keep a large, skilled, loyal work force and buy labor peace. Promising lifetime checks to retirees became common. By 1980, about 60% of U.S. workers in private industry were covered by defined-benefit pensions. For millions of workers, having a pension simplified their retirement planning, since all a worker had to do was cash a check each month.

  • New York Times: Argentina Nationalizes $30 Billion in Private Pensions. By Alexei Barrionuevo. Excerpt: Argentina’s government said Tuesday that it would seek to nationalize nearly $30 billion in private pension funds to protect retirees from falling stock and bond prices as the global financial crisis continues.
  • Center for Retirement Research at Boston College: Are Retirement Savings Too Exposed to Market Risk? By Alicia H. Munnell and Dan Muldoon. Introduction: The stock market, as measured by the broad-based Wilshire 5000, declined by 42 percent between its peak in October 9, 2007 and October 9, 2008. Over that one-year period, the value of equities in pension plans and household portfolios fell by $7.4 trillion. Of that $7.4 trillion decline, $2.0 trillion occurred in 401(k)s and Individual Retirement Accounts (IRAs), $1.9 trillion in public and private defined benefit plans, and $3.6 trillion in household non-pension assets.

    This brief documents where the declines occurred. This information is interesting and important in its own right. But the declines also highlight the fragility of our emerging pension arrangements. Today the declines were divided equally between defined benefit and defined contribution plans, but in the future individuals will bear the full brunt of market turmoil as the shift to 401(k)s continues. Much of the reform discussion regarding private sector employer-sponsored pensions has focused on extending coverage. But the current financial tsunami also underlines the need to construct arrangements where the full market risk does not fall on pension participants.

  • Jim Hightower: Billionaires Get Squeezed, Too. Full excerpt: Time for another peek into to the “Lifestyles of the Rich … and Cranky.” Maybe you’re one of the millions of working stiffs who’ve lost their jobs, their homes, and their faith in the system as a result of the losing crap game that Wall Street played with our economy. Well, if so, it’s time for you to stop your whining and show a little concern for the other guy. Yeah, the guys at the economic pinnacle, the high-rollers who made a bundle the last few years in Wall Street’s speculative boom. They’re feeling some pain, too.

    Did you hear, for example, that Louis Gonda had to put two of his jets up for sale? Some years ago, insurance megapower AIG bought one of Gonda’s companies for a ton of cash and a bale of AIG’s high-priced stocks. But, AIG recently tanked, requiring an $85 billion taxpayer bailout to keep from going under. As a result, Mr. Gonda’s AIG stock is now barely worth the paper it’s printed on.

    So, to make ends meet, Louis is selling his Gulfstream V and Gulfstream G550. Total asking price is $108 million, but I’ll bet you could get the pair for a cool $100 million. Also, while Gonda still has luxury homes in California and Manhattan, he had to sell another one for $2.4 million, eating a $300,000 loss on the sale.

    The cruelest blow for Gonda, however, is not in cash, but in prestige. Last year, he was number 286 on the Forbes list of America’s 400 richest people – but with the freefall in AIG’s stock price, he’s been unceremoniously dropped from the list. Oh, bitter gall! Word is, he’s down to his last billion.

    The superrich are being squeezed. For example, instead of ordering four bottles of wine at a thousand dollars each for dinner, many top corporate executives are said to be ordering only two bottles. And you thought you had problems.

  • New York Times: They’re Pinching Hundred-Dollar Bills. By Geraldine Fabrikant. Excerpts: “The superwealthy in America are in a state of shock,” said Ronald Winston, honorary chairman of Harry Winston, the jeweler. “They are not rushing out to buy expensive diamonds. The psychological mind-set of the nation is keyed to the stock market, and in a downturn everybody is psychologically affected.” ...

    Polly Onet, whose company, Ober, Onet & Associates, specializes in planning large parties, said the first signs of a slowdown appeared last summer. One woman recently planning a surprise party for her husband decided not to hire a headliner to perform, which can cost $150,000 to $1 million. The hostess also told Ms. Onet that she wanted a “grunge” look, rather than making the space look elegant. “Is the family hurting or is it scaling back for appearances?” she said. “In many cases it is probably some of both.” And she said that several days ago a hedge fund, which she declined to identify, postponed a January party at the Museum of Natural History.

  • BusinessWeek: Study shows gap growing between rich and poor. By Emma Vandore and Greg Keller. Excerpts: Inequality threatens the "American Dream" of social mobility -- children doing better than their parents, the poor improving their lot through hard work -- which is lower in the U.S. than countries such as Denmark, Sweden and Australia, the report found. ...

    The United States has the highest inequality and poverty in the OECD after Mexico and Turkey, and the gap has increased rapidly since 2000, the report said. France, meanwhile, has seen inequalities fall in the past 20 years as poorer workers are better paid. ...

    "Greater income inequality stifles upward mobility between generations, making it harder for talented and hardworking people to get the rewards they deserve," he said in a statement. "It polarizes societies, it divides regions within countries, and it carves up the world between rich and poor."

News and Opinion Concerning Health Savings Accounts, Medical Costs and Health Care Reform
Minimize
  • Los Angeles Times: An eroding model for health insurance. Working Americans once could rely on employer-based benefits. But more people are being forced into the individual market, where coverage is costly, bare-bones and precarious. By Lisa Girion and Michael A. Hiltzik. Excerpts: Jennifer and Greg Danylyshyn of Pasadena are conscientious parents. They keep proper car seats in their used BMW, organic vegetables in the family diet and the pediatrician's number by the phone. They don't have access to the group medical insurance offered by many employers. She's a stay-at-home mom. He's a self-employed music supervisor in the TV and film industry. So they buy individual policies for each family member. As careful consumers, they shopped for the best deals, weighed premium costs against benefits and always assumed they could keep their family covered.

    Then last spring Blue Shield of California stunned them with a rejection notice. Baby Ava, their happy, healthy 7-pounder, was born with a minor hip joint misalignment. Her pediatrician said it was nothing serious and probably temporary. Still, Blue Shield declared the infant uninsurable. The company foresaw extra doctor visits, "the need for monitoring and an X-ray." Ava's slight imperfection "exceeds . . . eligibility criteria for acceptance," Blue Shield said. "I was enraged, baffled; I just could not understand," recalled Jennifer, 36.

    The family's experience is symptomatic of the nation's healthcare crisis. Ineligible for group insurance, millions of Americans are paying more for individual policies that offer less coverage and expose them to seemingly arbitrary exclusions and denials. The health insurance system has become increasingly expensive and inaccessible. It leaves patients responsible for bills they understood would be covered, squeezes doctors and hospitals, and tries to avoid even minuscule risks, such as providing coverage to a newborn with no serious illness.

    At the heart of the problem is the clash between the cost of medical care and insurers' need to turn a profit.

  • Health Affairs: Myths And Misconceptions About U.S. Health Insurance. By Katherine Baicker and Amitabh Chandra. Abstract: Several myths about health insurance interfere with the diagnosis of problems in the current system and impede the development of productive reforms. Although many are built on a kernel of truth, complicated issues are often simplified to the point of being false or misleading. Several stem from the conflation of health, health care, and health insurance, while others attempt to use economic arguments to justify normative preferences. We apply a combination of economic principles and lessons from empirical research to examine the policy problems that underlie the myths and focus attention on addressing these fundamental challenges.
  • Reuters: Many uninsured kids have parents with insurance. By Will Dunham. Excerpts: More than 2 million children in the United States who have no health insurance of any kind have at least one parent who gets employer-provided medical coverage, researchers said on Tuesday. These parents typically get insurance through work that covers them but cannot afford the extra thousands of dollars that may be needed for a plan that also covers their children, the researchers wrote in the Journal of the American Medical Association.

    "I think there's been a myth that all uninsured children have uninsured parents, and so if we cover the parents we can cover the kids," Dr. Jennifer DeVoe of Oregon Health & Science University, who led the study, said in an interview. "In most cases the parents have insurance through work at reduced rate or no cost, but adding their family is unaffordable," DeVoe added.

  • Wall Street Journal: Health-Care Fixes: Plan vs. Plan. By Anna Wilde Mathews. Excerpt: Forget Joe the plumber. Many Americans are wondering what the presidential candidates' health-care plans would mean for them. Sens. John McCain and Barack Obama have each offered sweeping, and contrasting, prescriptions for how to reform the health-care system. In last week's presidential debate, the two clashed over how their policies would affect the Ohio plumber, whom Sen. McCain has showcased as a sort of Everyman American. But the two health plans would have very different effects on various groups. The impact depends on factors such as your income, health status and what kind of insurance you currently have, if any.
News and Opinion Concerning the U.S. Financial Crisis
Minimize "It is a restatement of laissez-faire-let things take their natural course without government interference. If people manage to become prosperous, good. If they starve, or have no place to live, or no money to pay medical bills, they have only themselves to blame; it is not the responsibility of society. We mustn't make people dependent on government- it is bad for them, the argument goes. Better hunger than dependency, better sickness than dependency."

"But dependency on government has never been bad for the rich. The pretense of the laissez-faire people is that only the poor are dependent on government, while the rich take care of themselves. This argument manages to ignore all of modern history, which shows a consistent record of laissez-faire for the poor, but enormous government intervention for the rich." From Economic Justice: The American Class System, from the book Declarations of Independence by Howard Zinn.

  • New York Times: F.B.I. Struggles to Handle Financial Fraud Cases. By Eric Lichtblau, David Johnston and Ron Nixon. Excerpts: The Federal Bureau of Investigation is struggling to find enough agents and resources to investigate criminal wrongdoing tied to the country’s economic crisis, according to current and former bureau officials. The bureau slashed its criminal investigative work force to expand its national security role after the Sept. 11 attacks, shifting more than 1,800 agents, or nearly one-third of all agents in criminal programs, to terrorism and intelligence duties. Current and former officials say the cutbacks have left the bureau seriously exposed in investigating areas like white-collar crime, which has taken on urgent importance in recent weeks because of the nation’s economic woes. ...

    Since 2004, F.B.I. officials have warned that mortgage fraud posed a looming threat, and the bureau has repeatedly asked the Bush administration for more money to replenish the ranks of agents handling nonterrorism investigations, according to records and interviews. But each year, the requests have been denied, with no new agents approved for financial crimes, as policy makers focused on counterterrorism. According to previously undisclosed internal F.B.I. data, the cutbacks have been particularly severe in staffing for investigations into white-collar crimes like mortgage fraud, with a loss of 625 agents, or 36 percent of its 2001 levels. ...

    In 2004, one senior F.B.I. official, Chris Swecker, warned publicly that a flood of fraudulent mortgage deals had the potential to become “an epidemic.” Yet the next year, as public warnings about fraud in the subprime lending markets began to approach their height, the F.B.I. had the equivalent of only 15 full-time agents devoted to mortgage fraud out of a total of some 13,000 agents in the bureau.

  • New York Times: The Guys From ‘Government Sachs’. By Julie Creswell and Ben White. Excerpts: This summer, when the Treasury secretary, Henry M. Paulson Jr., sought help navigating the Wall Street meltdown, he turned to his old firm, Goldman Sachs, snagging a handful of former bankers and other experts in corporate restructurings. In September, after the government bailed out the American International Group, the faltering insurance giant, for $85 billion, Mr. Paulson helped select a director from Goldman’s own board to lead A.I.G.

    And earlier this month, when Mr. Paulson needed someone to oversee the government’s proposed $700 billion bailout fund, he again recruited someone with a Goldman pedigree, giving the post to a 35-year-old former investment banker who, before coming to the Treasury Department, had little background in housing finance.

    Indeed, Goldman’s presence in the department and around the federal response to the financial crisis is so ubiquitous that other bankers and competitors have given the star-studded firm a new nickname: Government Sachs.

  • Huffington Post: Redistribution: From Joe the Plumber to Robert Rubin. By Dean Baker. Excerpts: Okay, as we all know now that almost everything about Joe the Plumber is a lie. He doesn't own a plumbing business and apparently is not even licensed as a plumber, but he does raise a legitimate concern about "spreading the wealth around." The only problem is that in this country, when the government spreads the wealth around it usually means redistributing it upward.

    That is certainly the case with the hundreds of billions of dollars being used to bail out the banks. The public has a real interest in keeping the banking system functioning. It has zero interest in subsidized the pay checks of wealthy bank executives or enriching the bank's shareholders, which Secretary Paulson is now doing.

    There is no question about what is going on here. The public is providing massive subsidies to the country's major banks. The terms of the bailout were far more generous than what the banks could get from the private market. As a result, banks that might not have survived otherwise, or at least would have been forced to make serious cutbacks, can now keep operating as they had been. This means that their high level executives will continue to draw salaries in the millions or tens of millions of dollars. It also means that the shareholders will continue to receive dividends.

  • Senator Bernie Sanders: Now is the Time. Excerpts: In Bush’s first seven years, the top 400 individuals in America saw an increase in their wealth of $670 billion, so that by 2007 the top 1 percent earned more income than the bottom 50 percent. Tax cuts for the wealthy, unfettered free trade, no-bid contracts, deregulation of every conceivable market and a belief that markets are the best determinant of social policy have together brought about a massive transfer of wealth from the middle class to the very wealthy. The backbone of the American economy for the past 50 years, a strong and prosperous middle class, has been severely weakened by the extremist policies of this administration. The economic future for the next generation looks bleak. ...

    If you could read the e-mails that pour into my office from Vermont and across the country, you would realize how furious the American people are at the greed, incompetence and irresponsibility of the Masters of the Universe on Wall Street who made billions while they drove our financial system to the brink of the abyss. Middle-class citizens of this country do not believe that they, who had nothing to do with causing this financial meltdown and who already have suffered as a result of Bush’s reckless policies, should have to pay for Wall Street bailouts. They are absolutely right. Congress must demand that the cost of any bailout should be paid by those who benefitted financially from Bush’s policies and those who can best afford it. I proposed an income surtax of 10 percent on families earning more than $1 million a year. I will continue to fight so that any bailout is progressively funded.

    In terms of any federal intervention, we need to insist that if the government buys mortgages and mortgage-backed paper – the so-called ‘toxic assets’ – it should be at current market prices, not at the price the lender set at the time of the loan. We should require equity stakes for taxpayers – something a British initiative seems to have forced Secretary Paulson into imitating. We also need to follow the British model of demanding that banks taking taxpayer money put taxpayer interests ahead of corporate profits, executive payouts, and risky investment strategies. Congress, as soon as possible, needs to reverse years of deregulation, and require accountability and transparency in the financial industry. It is beyond insane that tens of trillions of dollars of credit default swaps are circulating with no one knowing who owns these complicated instruments or what role they play in the financial markets. We also must pass new anti-trust legislation to make sure that in the future no entities are “too big to fail.” If a financial institution is too big to fail, it is too big to exist.

  • Truthout: Any Pay Cuts on Wall Street Yet? By Dean Baker. Excerpts: Last week, Treasury Secretary Henry Paulson mailed $150 billion in checks to the big banks. From that point forward, the CEOs and all the other top executives of these banks are now our dependents. They are living off the tax dollars of schoolteachers in Iowa, truck drivers in Montana and even Joe the Plumber.

    It is difficult to understand why we should be taxing people who make $40,000 a year to boost the paychecks of bankers who make more than $1 million a year and in many cases more than $10 million a year. Senator McCain has called Senator Obama a socialist because Obama believes that it is O.K. to impose higher tax rates on rich people than poor people. Senator McCain considers this sort of redistribution unacceptable.

    But, if redistribution from the rich to the rest of the country is socialist, what do you call the upward redistribution that Congress approved in the bailout package? It's hard to justify taxing people who make $40,000 a year to benefit bankers who make more than 100 times as much. ...

    he bailout also did not prevent the banks from paying out dividends to shareholders, as was done in the United Kingdom when they injected capital into their banks. This restriction makes sense not only as a punitive measure but also as a way to help the banks build capital. Every dollar paid out in dividends is a dollar that is not going towards building up capital. Stopping dividend payments should hasten the date at which the banks have sufficient capital without relying on help from the government.

    The failure to seriously restrict executive compensation or prohibit dividend payments, coupled with the relatively generous terms given the banks on the capital obtained from the government, shows that the bailout was not just about keeping the financial system operating. It was also about giving money to the banks' executives and their shareholders.

New on the Alliance@IBM Site
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  • CWA Pushes Economic Recovery Plan for American Families. Excerpt: CWA is joining with other unions, civil rights, community and faith-based groups, student and senior organizations, and others to build support for a recovery plan that addresses the current and longterm needs of American families – especially when it comes to quality jobs, Cohen said. "We've seen an enormous handout for Wall Street, now we need real attention to Main Street. That means the creation of quality jobs by developing alternate energy sources, necessary repairs to our highways, bridges, schools and communities and especially important, investment in the global economic engine for the 21st century, the build out of high speed Internet networks," Cohen said.
  • Job Cuts Status & Comments page
    • Comment 10/22/08: IBM is transitioning the work of about 50-100 people in the security compliance area (SARM - Security Asset and Risk Management) from the US to Hungary. These workers' jobs will be eliminated and they will have to find new jobs inside or outside IBM. This is affecting employees under the management chain of "Carol Rosenberg/Sterling Forest/IBM@IBMUS". -ab101-
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Vault Message Board Posts
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Vault's IBM Business Consulting Services message board is a popular hangout for IBM BCS employees, including many employees acquired from PwC. Some sample posts follow:

  • "GBS Canada" by " j_trang". Full excerpt: Hello I will be joining GBS Canada (in Markham) in a few weeks. I've read a lot of negative stuff about the company and am somewhat surprised as I had a fairly present interview experience (all Managers I met during the interview were great). I am doubting whether I made the right decision or not. Anyone here from GBS Canada who can share their experience, view on career prospects, salary increase, etc? Thanks!
  • "It is what you make of it" by "LSP&SSO". Full excerpt: On this forum negative comments abound about every SI. It is sometimes difficult to separate wheat from chaff. From my observation, compensation is generally competitive, and work conditions are generally comparable to other *large* SI's. It really depends on what you are looking for, what "career prospects" actually means to you, and how you prioritize the various aspects of career advancement.

    People are people; that's right, each one of the 400K+ IBMers around the world is different. It is important that you found a good fit with interviewers, as hopefully these are the people you will work and interact with more than with the remaining 400K+.

    One of the aspects of IBM that make it so different and so unique is that it is not just an SI. It is also a software company, a hardware company, a research organization, etc etc etc. At least in theory, your career opportunities will be richer here than elsewhere.

    Oh, and yes, IBM is a process-driven company. If you enjoy an ad-hoc environment "liberated" from rules and process, GBS might not be for you. If on the other hand you have previously experienced such sheer chaos and have now matured to appreciate process, take heart; IBM does process very well. I kid you not, process can be enjoyable when it actually facilitates getting things done.

If you hire good people and treat them well, they will try to do a good job. They will stimulate one another by their vigor and example. They will set a fast pace for themselves. Then if they are well led and occasionally inspired, if they understand what the company is trying to do and know they will share in its sucess, they will contribute in a major way. The customer will get the superior service he is looking for. The result is profit to customers, employees, and to stcckholders. —Thomas J. Watson, Jr., from A Business and Its Beliefs: The Ideas That Helped Build IBM.

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