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Highlights—December 6, 2008

  • First, a bit of uplifting news for a change... New York Times: Inaugural Gowns for the Threadbare, Too. Excerpts: The inauguration of Barack Obama already feels refreshing for at least two new twists. The first is the president-elect’s order to ratchet back severely on the special-interest money that traditionally floats Washington’s panoply of victory celebrations. Planners have barred lobbyists, corporations, political action committees and well-heeled foreigners from making their usual down payments on access to the new administration.

    The other encouragement is the stroke of generosity by which a Virginia businessman is spending more than $1 million to rent prime hotel rooms and promising that assorted down-and-out citizens — from the poor to the terminally ill to wounded soldiers — will have a perch of privilege on Pennsylvania Avenue for the parade. The Capraesque gesture — dubbed “The People’s Inauguration” replete with two gala balls — is the gift of Earl Stafford, a 60-year-old Air Force retiree who made a fortune founding a military technology company.

    Mr. Stafford is picking up the tab for three nights with meals at the hotel for scores of the normally uninvited and overlooked. He’s even promising gown, tuxedo and hair-dresser costs for those most in need. “We just need to get back to caring about one another,” Mr. Stafford told The Washington Post, paraphrasing the Bible: “To whom much is given, much is required.”

  • CNN/Money: Japanese Union Slams IBM Over Job Cut Ploys. Excerpts: A Japanese labor union Thursday accused U.S. computer giant International Business Machines Corp. (IBM) of coercing workers to quit as part of its efforts to slash about 2,500 jobs in Japan. IBM's Japanese subsidiary circulated a communiqué to its management in October, asking them to ax roughly 15% of the workforce, said Tetsuo Nomoto, a member of the Japan Metal and Information Machinery Workers Union.

    Managers initially encouraged employees to retire, but when that failed they began threatening same-day firings or cutting bonuses, said Nomoto, a manager who has worked for IBM for 37 years. Mid-ranked managers "told workers they would be fired in less than 48 hours, or would place very high goals and then tell them they didn't make the grade," he said. According to news reports, a supervisor even called one employee's wife and told her to push her husband to quit.

    "Many employees are upset at the cowardly way the company has conducted itself and how unimaginably awful it is despite what it advertises about its work environment," said Nomoto.

  • CNN/Money: IBM Introduces a Smarter Way to Manage Talent. Excerpts: IBM today announced the first holistic offering in the talent management marketplace, combining world-class human capital software, consulting services and information technology integration to enable enterprises to implement globally integrated workforce and talent management. The new offering, IBM Workforce and Talent Solutions, will help companies become smarter and more integrated in all aspects of managing the human capital lifecycle to create measurable improvements in people and business productivity. Driving efficiency and effectiveness in people -- one of the largest assets and costs in a business -- is increasingly important to achieving competitive advantage and to manage the effects of the downturn in the global economy. It is a combination of world-class human capital consulting services, IBM software assets: Cognos, Lotus, IBM Research and market leading human capital software: Saba and SuccessFactors. ...

    "IBM Global Business Services is taking what have long been disparate parts of the human capital lifecycle, and we are pulling the pieces together to give our clients an end-to-end capability to access key employee data and manage workforces as a globally integrated talent pool," said Tim Ringo, vice president and global leader, Human Capital Management, IBM. "We add to this solution IBM's award-winning collaboration and social networking software to create the next generation of workforce and talent management, which is truly unique in the marketplace." ...

    IBM Workforce and Talent Solutions offering takes a strategic view of an enterprises' human capital technology and processes. Through our Human Capital Healthcheck tool, IBM human capital experts assess where an organization is on its journey to globally integrated workforce and talent management and defines a strategy, technology and process roadmap for the future. The solution builds on what is already in place in the enterprise and implements the integrated solutions required to create an end-to-end capability to access key employee data and manage workforces as a globally integrated talent pool.

    • Yahoo! IBM Employee Issues message board: "Re: IBM Introduces a Smarter Way to Manage Talent" by "thekanck". Full excerpt: "human capital lifecycle" I think I need a beer...
    • Yahoo! IBM Employee Issues message board: "Re: IBM Introduces a Smarter Way to Manage Talent" by "Neal Watkins". Full excerpt: Until now, how did an organization manage to exist? They worked at it the old-fashioned way....They had managers that managed. People were valued and communicated with. They might have even had a yearly Christmas party...Oooo...that will never work in the 21'st century. You are a number. Period. It is starting to look more like "1984", "Brave New World", and "Fahrenheit 451" all rolled up together and brought to you by big business everywhere.
    • Yahoo! IBM Employee Issues message board: "Re: IBM Introduces a Smarter Way to Manage Talent" by "edpell". Full excerpt: In other words piece work. Piece work to the lowest bidder globally. My co-workers in Egypt with M.S. degrees in Electrical Engineering and consulting experience in Europe, Asia and U.S. work for $20,000 per year. What are you willing to bid the next piece of work for? Oh and by the way do you have on-site experience (3 months, 6 months at a shot) in Europe, Asia and the U.S.?

      p.s. the cost of a college degree in Egypt is $22 per year. No student loans to repay so they can work cheap. And their families back home can live WELL on $20,000 per year.

    • Yahoo! IBM Employee Issues message board: "Re: IBM Introduces a Smarter Way to Manage Talent" by "mr_quarkwrench ". Full excerpt: Sorry, "human capital lube" is no longer an authorized expense. -- Don
  • ScienceBlogs: Another Bad Metric Error: Wages vs. Labor Costs. By Mark C. Chu-Carroll. Excerpts: It's just been a week for metric errors. Via Media Matters comes an impressive list of stories in the media about the automobile companies financial problems, where they cite labor costs as a major issue. So far, so good. But in virtually every story about this, you'll find a statement along the lines of: "union workers make $71 an hour in wages plus benefits".

    In many cases, they even go so far as to specifically compare that figure as wages to other companies. For example, this quote, from a conservative talking head:

    "When you're paying $73.73 an hour to those people with salary and benefits and your competition is paying $48 to its workers, you're going to get your butt kicked in the marketplace unfortunately."

    Here's the problem with that. The roughly $70/hour figure is a statement of labor costs, not wages. What's the difference?

    Let me pull an example from my own experience. The numbers are fudged somewhat - both because I have no interest in telling you what my salary at IBM was; and because I'm afraid IBM would still come after me if I gave up real information about how they charge for employees. The very rough proportions are based on my (imperfect) memory of the real breakdown, but I'm really making this up based on the rough structure of how the figure was computed.

    IBM had an internal figure that it used as my labor cost. For simplicity, let's say that that figure was $100,000. That cost was broken down as:

    1. $40,000 salary and related taxes.
    2. $25,000 benefits. This includes insurance, 401K, etc.
    3. $20,000 office expense. This was their cost for providing me with office space. The rent/operations cost of the building was dividing among the employees, and treated as a labor cost.
    4. $15,000 equipment and technical support. This covered the cost of my computer, network bandwidth, backups, technical support, etc.

    A full third of my "labor cost" had absolutely nothing to do with actually paying me. And that's typical: when you want to make something look expensive, you can find all sorts of ways of transferring costs to it. Never trust the figure that a company cites for what it's workers cost unless you get to see the real, entire balance sheet, and see what costs they're including, and what income they're excluding.

    Let's get back to the auto-workers. How do they get that labor cost figure? The company takes every expense that they can plausible associate with past or present workers: salaries, benefits, insurance, pensions, etc. Then it divides that by the number of hours worked by current active employees. The result is the "per hour labor cost". This is a very artificial number. It's specifically set up to include pension payments to retired workers, while excluding the money that they paid into pension funds. So the entire expense of pensions and benefits for retired workers is added to the "labor cost" of current workers.

  • Associated Press: Workers recall the moment they became jobless. By Adam Geller. Excerpts: Some were called in by the boss and told to close the door behind them. Others received a brisk and impersonal phone call from a manager. Another was asked to come in on his day off to talk about "some people issues." Employers cut the jobs of 533,000 U.S. workers in November — the worst monthly drop in 34 years. For many, the sting of being told they were no longer needed marked the moment the nation's dire economic troubles became their own. In interviews across the nation Friday, workers without work recalled how they found out they were out of a job.

    For two years, Mark McDonald kept a tomato crate under his desk, mindful that he might need to pack up on short notice. He knew that a job with CTG Inc., which supplies contract workers for IBM, came with uncertainty, given the big computer company's reputation for sudden, drastic cuts. But when two managers in the Research Triangle Park, N.C., office stopped by McDonald's work station on the morning of Oct. 17, he was still caught off guard.

    McDonald was checking e-mail and sipping hazelnut coffee. It was four days short of his 40th birthday. The managers had come to tell him that today would be his last day at work. McDonald's first thought was that he had done something wrong. The managers, rather than give reasons in front of the office staff, asked him to join them in the conference room after he had packed.

    As McDonald worked in a fog, an account representative nearby began crying softly. Russ Hemenway, a team leader in the service test group for IBM, came over and put a reassuring hand on his shoulder. "Mark," he said, "if you need help finding another job, use me as a reference right away."

    When he arrived at the brightly lit meeting room with his crate, McDonald was given a couple of forms to sign. One was to cancel his contract; the other informed him he could be rehired if things turn around. In the seven weeks since then, McDonald has had a half-dozen job interviews. He is confident he will find something soon. But he is also sure things will never feel the same. "I worked with a very special, unique group of people, and it just all of a sudden abruptly ended," he said. "I think on my next job, I'm going to be holding my breath."

  • New York Times: A Penny for My Thoughts? By Maureen Dowd. Excerpts: I visited the future, and it was wearing a bow tie and calling itself “Thomas Edison.” The newspaper business is not only crumpling up, James Macpherson informed me here, it is probably holding “a one-way ticket to Bangalore.” Macpherson — bow-tied and white-haired but boyish-looking at 53 — should know. He pioneered “glocal” news — outsourcing Pasadena coverage to India at Pasadena Now, his daily online “newspaperless,” as he likes to call it. Indians are writing about everything from the Pasadena Christmas tree-lighting ceremony to kitchen remodeling to city debates about eliminating plastic shopping bags. ...

    So, he thought, “Where can I get people who can write the word for less?” In a move that sounded so preposterous it became a Stephen Colbert skit, he put an ad on Craigslist for Indian reporters and got a flood of responses. He fired his seven Pasadena staffers — including five reporters — who were making $600 to $800 a week, and now he and his wife direct six employees all over India on how to write news and features, using telephones, e-mail, press releases, Web harvesting and live video streaming from a cellphone at City Hall. “I pay per piece, just the way it was in the garment business,” he says. “A thousand words pays $7.50.”

    I checked in with one of his workers in Mysore City in southern India, 40-year-old G. Sreejayanthi, who puts together Pasadena events listings. She said she had a full-time job in India and didn’t think of herself as a journalist. “I try to do my best, which need not necessarily be correct always,” she wrote back. “Regarding Rose Bowl, my first thought was it was related to some food event but then found that is related to Sports field.” ...

    At first the reaction to covering Pasadena from 8,000 miles away and 13.5 hours ahead was “absolutely brutal,” Macpherson recalled. Journalism professors keened and Larry Wilson, the public editor at The Pasadena Star-News, called it “nutty.” But then in October, Dean Singleton, The Associated Press’s chairman and the head of the MediaNews Group — which counts The Pasadena Star-News, The Denver Post and The Detroit News in its stable of 54 daily newspapers — told the Southern Newspaper Publishers Association that his company was looking into outsourcing almost every aspect of publishing, including possibly having one news desk for all of his papers, “maybe even offshore.”

  • BusinessWeek: Unretired: Retirees are Back, Looking for Work They saved. They planned. Then housing tanked and the markets melted. Now they need jobs, and there aren't any. By Heather Green. Excerpts: An increasing number of people who retired in recent years, confident they had set aside enough to live on comfortably, are finding themselves strapped. The stock market plunge and the housing downturn have affected many Americans, of course. But retirees have been particularly pinched because their homes and investments are the primary assets they depend on for income. As a result, many of the country's elderly are finding themselves in Nelson's situation, low on money and looking for work. "Suddenly the rug has been pulled out from under them," says Alicia H. Munnell, director of the Center for Retirement Research at Boston College. ...

    These aren't just the spendthrifts or sloppy planners you would expect to run into trouble in retirement. Interviews with 35 of The Unretired show that many are people who did everything they were supposed to do—working for decades and regularly socking money away. Floyd McCoy, 67, retired three years ago after working for IBM for 22 years and running his own consulting firm. But his $400,000 in savings has dropped 40% this year, and the value of his Weston (Conn.) house is down by a third. McCoy says he can't afford to keep the house he and his wife built 25 years ago for retirement. "I never knew life could be as challenging as this," he says. ...

    Retirees have been squeezed during past economic downturns, of course. Their stocks tend to get hit, and returns on fixed-income holdings slide as interest rates are cut to stimulate the economy. But there hasn't been this kind of sharp decline in stocks and home prices at the same time since the Great Depression. In addition, more retirees have exposure to the stock market than in the past because companies have moved from traditional pension funds to employee-managed retirement accounts, such as 401(k)s, which tend to include stocks. A Vanguard survey of clients aged 55 to 64 at the end of 2007 found that two-thirds of their retirement funds were in stocks. "A lot of people invest by themselves, and they aren't aware of all the risks," says Benjamin H. Harris, senior research associate at the Brookings Institution.

  • Wall Street Journal: Some Consumers Say Wall Street Failed Them. By Eleanor Laise. Excerpts: With retirement accounts tumbling and millions of homeowners struggling to pay their mortgages, a realization is dawning on many Americans: The banks, brokerage firms, insurance companies and other players in the financial-services industry have failed them.

    Thirty years ago, a typical consumer had a fixed-rate mortgage, a life-insurance policy, a bank account and an employer-paid pension plan. Nowadays, that same consumer may have a payment option adjustable-rate mortgage, a 401(k) retirement-savings plan, a home-equity line of credit and perhaps even a health-savings account instead of traditional employer-sponsored health insurance.

    In the process, risks previously borne by big banks and employers have been placed squarely on the shoulders of consumers. Individuals increasingly bear the risk of interest-rate fluctuations, rising health-care costs, stock-market gyrations and outliving their retirement savings.

    "If I'm going to buy a BMW for anybody, it should be me," says Mr. Gamradt, an information-technology worker. "I wouldn't exactly say the financial-services industry is at war with your average American consumer, but it's d- close." The financial-services industry sold this personal-responsibility revolution by claiming that complex offerings like adjustable-rate mortgages and health-savings accounts would empower consumers to manage their ever-expanding portfolio of risks.

    The new products created billions of dollars in fees that have powered Wall Street's growth -- even in recent years as the stock market stagnated. The financial sector's share of total U.S. corporate profits jumped to 35% in 2007, up from 10% in the early 1980s, according to investment research firm BCA Research. Now, of course, many of the products cooked up by Wall Street are exploding -- and dragging down the financial-services industry with them. Whether the industry will return to record profit levels again is a question mark. If the public veers away from such products, the financial sector could shrink drastically.

  • Washington Post: Labor Dept. Accused of Straying From Enforcement. By Michael A. Fletcher. Excerpt: Labor activists say that focusing so closely on the concerns of employers shortchanges workers and that a shift in emphasis is long overdue. Under President Bush, they say, the pendulum has swung far away from enforcement, leaving workers vulnerable to dangerous workplaces and with little protection from exploitive employers. In July, the Government Accountability Office issued a report alleging that the Labor Department did an inadequate job of investigating complaints by low-wage workers who alleged that their employers were stiffing them for overtime, or failing to pay the minimum wage. That report followed another that found troubling inconsistencies in how the department handled individual worker complaints. Department officials have disputed both reports, calling them inaccurate.
  • Yahoo! Finance: Stocks Are Less of Your Net Worth Than You Think. By Jason Zweig. If you are in or near retirement and can no longer withstand the agony of holding stocks, there is something to consider before you bail out. No matter how much of your portfolio is in stocks, they amount to less of your net worth than you think. Let's assume you have $600,000 in stocks and $400,000 in bonds, even after the market meltdown. You are not 60% stocks, 40% bonds.

    Here's why. Say you are a 65-year-old man; your life expectancy is 17 more years. You earned good money, and now you can expect a monthly Social Security payment of $2,000. At least for now, the U.S. government pledges that you will receive those payments, adjusted for inflation, for as long as you live. Having Social Security is equivalent to holding a bond that should produce $24,000 in today's purchasing power every year.

    This kind of bond has a name: an inflation-adjusted immediate annuity. How big an annuity would match that $2,000 in Social Security each month? With the help of Allan Roth, a financial planner at Wealth Logic LLC in Colorado Springs, Colo., I was able to answer this question. It takes a $327,000 lifetime annuity -- assuming you bought it from Vanguard, an economical provider, at this week's rates -- to throw off $2,000 a month, after inflation, for the rest of your life. ...

    The implicit bond of Social Security makes up about 40% of the total assets of the average household on the verge of retirement, according to Olivia Mitchell, director of the Pension Research Council in Philadelphia. "Having Social Security comprise such a big piece of the typical household's portfolio," says Prof. Mitchell, "makes recent equity-market losses, and home-value losses, relatively less critical."

  • TheStreet.com: H-P Shares Warm Up With Salary Freeze. Excerpt: An H-P spokeswoman confirmed that the company has instituted a temporary suspension of salary increases after Bloomberg reported that the company had placed a hold on pay raises. The only H-P employees who are not affected are those in countries where pay freezes are illegal, according to the news report. "In this difficult macro-economic environment, we believe it is prudent and responsible to reduce costs where possible," wrote the H-P spokeswoman, in an emailed statement. "H-P has a long-standing and disciplined approach to managing costs in order to invest in the company's growth."
  • Australian IT: IBM Asia-Pacific culls 2600 jobs. By Fran Foo. Excerpts: IBM is set to lose over 2500 workers across Asia-Pacific as the economy continues on a downward spiral. The software division will be the hardest hit and the largest casualty list will hail from Japan. IBM told employees that 1000 workers in Japan and 1600 elsewhere across the region would be let go. The software group would have the most redundancies, sources close to the company said. The job losses will affect a variety of roles. ...

    IBM said its operations in Japan was conducting a voluntary retirement scheme. "IBM Japan is conducting a voluntary retirement scheme, which was publicly announced some time ago. The Career Choice Retirement Plan is a financial assistance program for employees who voluntarily retire at the age of 55. "Since this is a voluntary retirement scheme, IBM Japan cannot predict how many employees will be involved," a company spokesperson said.

News and Opinion Concerning Health Savings Accounts, Medical Costs and Health Care Reform
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  • New York Times: When a Job Disappears, So Does the Health Care. By Robert Pear. Excerpts: As jobless numbers reach levels not seen in 25 years, another crisis is unfolding for millions of people who lost their health insurance along with their jobs, joining the ranks of the uninsured. The crisis is on display here. Starla D. Darling, 27, was pregnant when she learned that her insurance coverage was about to end. She rushed to the hospital, took a medication to induce labor and then had an emergency Caesarean section, in the hope that her Blue Cross and Blue Shield plan would pay for the delivery.
  • Los Angeles Times: Consensus emerging on universal healthcare. The prospect of bold government action appears to be accepted among players across the ideological and political spectrum, including those who opposed the idea in the 1990s. By Noam N. Levey. Excerpts: After decades of failed efforts to reshape the nation's healthcare system, a consensus appears to be emerging in Washington about how to achieve the elusive goal of providing medical insurance to all Americans. The answer, say leading groups of businesses, hospitals, doctors, labor unions and insurance companies -- as well as senior lawmakers on Capitol Hill and members of the new Obama administration -- is unprecedented government intervention to create a system of universal protection.

    At the same time, those groups, which span the ideological and political spectrum, largely have agreed to preserve the employer-based system through which most Americans get their health insurance. The idea of a federal, single-payer system patterned on those in Europe and Canada, long a dream of the political left, is now virtually off the table.

  • Washington Post: U.S. 'Not Getting What We Pay For'. Many Experts Say Health-Care System Inefficient, Wasteful. By Ceci Connolly. Excerpt: Talk to the chief executives of America's preeminent health-care institutions, and you might be surprised by what you hear: When it comes to medical care, the United States isn't getting its money's worth. Not even close. "We're not getting what we pay for," says Denis Cortese, president and chief executive of the Mayo Clinic. "It's just that simple."

    "Our health-care system is fraught with waste," says Gary Kaplan, chairman of Seattle's cutting-edge Virginia Mason Medical Center. As much as half of the $2.3 trillion spent today does nothing to improve health, he says. Not only is American health care inefficient and wasteful, says Kaiser Permanente chief executive George Halvorson, much of it is dangerous.

  • Politico: New fault line forms in health care fight. By Chris Frates. Excerpts: A new fault line is forming in the health care reform debate that could prove to be just as bruising as the conservative-vs.-progressive battles: the schism between single-payer and public-private advocates. Both sides are pushing for universal health care, but the more purist single-payer advocates believe that any approach that retains the insurance industry is doomed to fail.

    “Private health insurance is no longer a workable model for health care reform, because the insurance companies sell a defective product and health care costs are so high that even moderate-income families can no longer afford the premiums, co-pays and deductibles,” said Ida Hellander, executive director of Physicians for a National Health Program, a group of 15,000 doctors who support a single-payer system.

    So far, though, groups working to create a public insurance plan that exists alongside tightly regulated private plans have grabbed the political high ground — largely because many deem a single-payer system too easy to demonize as socialized medicine.

  • New York Times: UnitedHealth to Insure the Right to Insurance. By Reed Abelson. For these economically uncertain times, the UnitedHealth Group has a “first of its kind” product: the right to buy an individual health policy at some point in the future even if you become sick. Called UnitedHealth Continuity, the product is not actual medical insurance, but is aimed at people who may have insurance now but are worried they may lose it — and may not be able to obtain replacement insurance on their own. They may expect to retire early, for example, before they qualify for Medicare. Or they are worried about the possibility of losing their job and their health coverage.

    People who are already sick will generally not be eligible for the new product. Those who do pass a medical review, will pay 20 percent each month of the current premium on an individual policy to reserve the right to be insured under the plan at some point in the future.

  • Taking Note: The End of Pharma's Free Ride? By Niko Karvounis. Yesterday Reuters reported that, in comments at a Financial Times conference in London, a top executive at Roche Pharmaceuticals condemned direct-to-consumer advertising as a disaster. “Direct-to-consumer promotion [of drugs] was the single worst decision for the industry," said William Burns, Roche’s head of pharmaceuticals, to conference attendees. "When industry says we're spending all the money on R&D but actually it's spending it on TV advertising to preserve margins, it doesn't get much credibility,” he continued.

    Burns’ despondency is understandable: if ever there was a time that the prescription drug industry needed credibility, it’s now. For the first time in recent memory, drug companies are facing the prospects of an end to their free ride of unregulated profiteering. There are already rumblings that both the Obama Administration and the Democratic Congress want to stack up a series of clean legislative victories by going for “low-hanging fruit”—bipartisan, popular initiatives that will pass easily—and there are few juicier targets than Big Pharma.

  • Los Angeles Times: Insurers propose universal, centralized healthcare. Several consumer groups criticize the early bid by America's Health Insurance Plans, a trade group that fought an overhaul in the 1990s, to take an active role in Obama's effort to revamp the system. By Noam N. Levey. Excerpts: Sharpening the emerging debate over how to reshape the country's healthcare system, the major group representing insurers unveiled a proposal Wednesday for covering all Americans in a more centralized insurance market. The plan offered by America's Health Insurance Plans, a trade group representing companies that together insure more than 200 million people, comes a decade and half after the industry helped kill the last major healthcare reform campaign -- pushed early in the Clinton administration. ...

    Several consumer groups sharply attacked the insurance group's plan on Wednesday. "The health insurance industry's vision of healthcare reform lets them keep charging whatever they want and increase their profits while sticking families and taxpayers with high costs," said Richard Kirsch, national campaign manager for Health Care for America Now.

  • USA Today: Medicare drug criticized as unclear. By Julie Appleby. Excerpt: More than 1 million people in the Medicare drug program next year will pay almost the full price for certain brand-name drugs when they choose them over generics — a move that advocates for patients say is not clearly spelled out by the government nor insurers. For hundreds of targeted drugs, patients will pay a standard co-payment. They also will pay the difference in price between the brand- name medicine and the generic. The practice in Medicare mirrors similar efforts in job-based insurance.
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.

  • Associated Press, courtesy of MS-NBC: Bush administration ignored clear warnings Under pressure from banking industry, U.S. government eased lending rules. Excerpts: The Bush administration backed off proposed crackdowns on no-money-down, interest-only mortgages years before the economy collapsed, buckling to pressure from some of the same banks that have now failed. It ignored remarkably prescient warnings that foretold the financial meltdown, according to an Associated Press review of regulatory documents.

    “Expect fallout, expect foreclosures, expect horror stories,” California mortgage lender Paris Welch wrote to U.S. regulators in January 2006, about one year before the housing implosion cost her a job.

    Bowing to aggressive lobbying — along with assurances from banks that the troubled mortgages were OK — regulators delayed action for nearly one year. By the time new rules were released late in 2006, the toughest of the proposed provisions were gone and the meltdown was under way.

    “These mortgages have been considered more safe and sound for portfolio lenders than many fixed rate mortgages,” David Schneider, home loan president of Washington Mutual, told federal regulators in early 2006. Two years later, WaMu became the largest bank failure in U.S. history.

    The administration’s blind eye to the impending crisis is emblematic of a philosophy that trusted market forces and discounted the need for government intervention in the economy. Its belief ironically has ushered in the most massive government intervention since the 1930s.

  • New York Times: Debt Watchdogs: Tamed or Caught Napping? By Gretchen Morgenson. Excerpts: “These errors make us look either incompetent at credit analysis or like we sold our soul to the devil for revenue, or a little bit of both.” — A Moody’s managing director responding anonymously to an internal management survey, September 2007.

    The housing mania was in full swing in 2005 when analysts at Moody’s Investors Service, the nation’s oldest and most prestigious credit-rating agency, were pressured to go back to the drawing board. Moody’s, which judges the quality of debt that corporations and banks issue to raise money, had just graded a pool of securities underwritten by Countrywide Financial, the nation’s largest mortgage lender. But Countrywide complained that the assessment was too tough.

    The next day, Moody’s changed its rating, even though no new and significant information had come to light, according to two people briefed on the change who requested anonymity to preserve their professional relationships. ...

    That was not the only time Moody’s softened its stance on Countrywide securities. It elevated ratings several times after Countrywide complained, the people briefed on the matter say. Since the subprime mortgage troubles exploded into a full-blown financial crisis last year, the three top credit-rating agencies — Moody’s, Standard & Poor’s and Fitch Ratings — have faced a firestorm of criticism about whether their rosy ratings of mortgage securities generated billions of dollars in losses to investors who relied on them.

    The agencies are supposed to help investors evaluate the risk of what they are buying. But some former employees and many investors say the agencies, which were paid far more to rate complicated mortgage-related securities than to assess more traditional debt, either underestimated the risk of mortgage debt or simply overlooked its danger so they could rake in large profits during the housing boom. ...

    Moody’s current woes, former executives say, were set in motion a decade or so ago when top management started pushing the company to be more profit-oriented and friendly to issuers of debt. Along the way, the firm, whose objectivity once derived from the fact that its revenue came from investors who bought Moody’s research and analysis, ended up working closely with the companies it rated, and being paid by them.

    And in 2000, when Moody’s issued stock to the public for the first time, executives hungry to churn out quarterly profit growth had another incentive to redirect the firm’s focus from low-margin ratings of relatively simple bonds to highly lucrative assessments of much more complex debt securities. As it rode the mortgage wave, Moody’s came to enjoy profit margins that were higher than those of the mightiest of Fortune 500 companies, including Exxon and Microsoft.

  • Jobs with Justice: Call to Action!! People’s Bail-Out Now!! National Week of Action: December 7-13. Excerpt: As many predicted, the Wall Street Bail-out has proven to be the gross give-away to the same financial bigwigs that have been pocketing millions while wrecking the real economy. Little or no benefit has gone to the working people and the real economy, at a time that we face the greatest economic crisis since the 1930s. By the time Obama is sworn in, hundreds of thousands of additional people will lose their jobs, lose their homes and lose their health care.
  • Jobs with Justice: Hold Bank of America Accountable. Excerpt: Only weeks after taking $25 Billion in bailout money, Bank of America is turning its back on hundreds of workers making energy efficient doors and windows in Chicago by refusing to continue credit to Republic Windows and Doors. To make matters even worse than putting 300 people out of work, Bank of America has instructed Republic to refuse to pay workers compensation they are legally entitled to, either earned vacation pay or the severance pay legally required under the WARN Act, in lieu of proper notice of plant closing.

    Like many other 'titans of Wall street,' Bank of America, Key Bank and others are taking their bailout -- supposedly meant to allow credit to get our economy moving again -- and using it to take over other banks, pay bonuses to executives and dividends to shareholders... just about everything except helping businesses continue to employ workers.

New on the Alliance@IBM Site
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  • Job Cuts Status & Comments page
    • Comment 11/30/08: Open Letter to Sam Palmisano: Sam, as you close the 2008 year receiving your $10 million annual salary on top of the millions of dollars in stock options and bonuses you will receive, I want you to think about all the employees you have been screwing by laying them off, cutting their pay, sending their jobs overseas, ruining their holidays, their families, their careers, and their lives. You are a closed minded asshole. Now I know the real Ebenezer Scrooge.. Sam Palmisano. I hope you rot in hell. You are on my bad list. -Santa Claus-
    • Comment 12/01/08: To AnotherBTVer: Where have you been over the last 10 - 15 years? Ever since NY won the contract for the new manufacturing fab in the early 90's BTV has been going downhill. The IBM corporation has not made any significant investment in BTV in over 10 years. The manufacturing tools are old and outdated. The technologies manufactured in BTV are old an no longer leading edge. All new technology development has been transferred to the ASTC in Fishkill. BTV does not make anything for IBM machines anymore. BTV is on its way out. Yes, this was planned by the executives of the IBM corporation. IBM wants to consolidate its operations in NY. When IBM finds a buyer for the BTV facility it will be quickly sold. Get your head out of the sand. Open your eyes and see what is going on. -AnotherBTVerToo-
    • Comment 12/01/08: I'll echo a little bit of what Think and AnotherBTVer are saying. I've been here in BTV for over 25 years. The chip business has always been cyclical. It's very, very bad right now, but it's always been up and down. BTV managed to smooth out those bumps pretty well until this one. What makes BTV vulnerable is that (AFAIK) we make nothing for any IBM products. What makes BTV unique is that there's stuff we do for the Gov't that cannot be done by a non-US company (hush-hush, locked doors and all that). What makes BTV cheap is that it's old technologies, running on old tools, in old buildings. Like AnotherBTVer says, we've been in lows like this in the past. What we've lost is the faith that IBM will hang in there for things to recover. Would IBM sabotage BTV? I don't see that. Would IBM make a decision that looked to us like it was favoring EFK over BTV? Yes, I can see that. We'd never know the whole reason (maybe a deal with NY, maybe a tax deal, maybe a consolidation of resources). -Nuther BTV'er-
    • Comment 12/01/08: Had my exit interview today. Was one of 126 canned in GBS U.S. today. Was in SEA&T sweatshop working minimum 53 hour weeks (and they wanted you to perform "giveback" activities in addition). Layoff as I see it, was due to the fact that I wouldn't live out of a suitcase (travel to External Accounts) or that I got some money from the Rosenberg vs. IBM overtime lawsuit (which was even mentioned in the "resource action" package). Second time I've been "downsized" from IBM - won't be a third....that's for sure. -OutsourceGWB- Alliance reply: Sorry to hear of your job loss. Please send the Alliance a copy of the resource action package (the section that has ages/titles/selected, title page, and the section that mentions the Rosenberg suit.) Our address is on front page of this web site.
    • Comment 12/02/08: OutsourceGWB - I'm in SEA&T and I have to agree that the practice group sucks since they want 48 to 53 hours each week. The group is screwed up with no vision and there is no way to compare yourself with your fellow employees. Everyone is kept in the dark. Managers in this group are complete idiots. The giveback is complete joke but you have to do something otherwise they label you as not being a team player. -SammyIBM-
    • Comment 12/02/08: It would not surprise me at all if BTV is up for sale. IBM has, over the years, followed a pattern of selling any manufacturing entity that produced a commoditized item. US manufacturing facilities for commodities are rarely competitive with their Asian counterparts. Add to that the cost of IBM's hierarchy and you have an unsustainable business model. Look at IBM's history with printed circuit boards (raw and populated), printers, disk drives and PCs. In each case (if memory serves), a plant or business was sold off and the new owner was promised some segment of "guaranteed" revenue from IBM for some time period. It doesn't take a crystal ball to predict what's next for BTV....just a bit of 20:20 hindsight. -Think-
    • Comment 12/03/08: 15 -20 IBM employees were RA'ed on 12/01/2008. These employees were assigned to the Bank of America site in Chicago. All were LONG term bank employees who got hired by IBM as part of ABN-AMRO Bank,NL outsourcing deal of 2005. It has been a continuous RA effort by IBM to RA small groups at a time to avoid a lot of headlines. The total number RA'ed is likely to be in the thousands as group after group has disappeared during the last 3 years. -Anonymous-
    • Comment 12/03/08: Expect to see GTS up for sale in the near future around Feb-March after some more conversion. There has been talk of less China and more into India, Bangalore campus getting spread into other divisions as well. There will be one more round of RA's that we know of by end of year and should be mostly SA/TE/TL's as the PM's are mostly gone or needed only on customer facing and rest are going through the IBM certs at Bangalore. For some projects expect to get callbacks in periods of end of Jan through March as subs to prev IBM'ers and the offer will be a 10-20% less with no benefits as the SDLC starts up with many customer bases. Don't get hopes up, mostly looking for specific skill sets and customer interactions-specific Seibel, SAP, etc are the ones I heard mentioned. -IBM UC'd-
    • Comment 12/04/08: I work as Contractor for IBM Global Services, I have been informed of pay-cut of 15% effective 01DEC08. Received information from various sources about GDF - Global Delivery Framework in Boulder will go live for Wave1 in the 3rd week of Jan'09 -VisionIBM-
    • Comment 12/04/08: Today AT&T announced 12,000 jobs to be cut starting December - 2009. IBM outsourced its entire Network Services division to AT&T in February. Here comes the layoffs. So much for AT&T being a good career move for the IBM network people that moved. More of a move to the bread line! -blue with bluesky-
    • Comment 12/05/08: Hearing rumours in Rochester that all of ISC is to be vendored out. No details yet... -Anonymous-
    • Comment 12/05/08: Approximately 300 from ibm.com, software, and hardware effective Dec 3. Locations all over. Another group scheduled for Dec 10. -Archie Tect-
    • Comment 12/05/08: I am a former IBMer of 10 years back as a contractor. Was notified of pay cut 11/29, and yesterday was told today is my last day. Many other contractors and regulars are losing their jobs this week in IGS/ITD -PW-
  • General Visitor's Comment page
    • Comment 12/01/08: I am due to return to work on Jan 9, 2009 from my Maternity Leave (MLOA). I have been demoted, although my base pay remains the same, however I will be put into a position where I used to TRAIN this team. I will be taking incoming calls & back to the call center status. IBM is pathetic and I plan to resign ASAP. My 11 years with the company seems to have been a complete waste of time, as they are getting rid of the "regs" and moving quickly towards a "contractor/sub" workforce. -IBM Canada Employee-
  • Pension Comments page
  • Raise and Salary Comments
    • Comment 12/03/08: Salary = 80,000; Band Level = 8; Years Service = 3; Hours/Week = 30-40; Used to work 60 until I realized there are no rewards. Message = I came from a startup where working hard and being smart advanced me quickly. In my first year, I worked my tail off, but did not receive raise nor recognition. Now that it is clear that no raise or promotion will come for several years, I don't work as hard and am, frankly, pretty disillusioned. Since the only good thing about working at IBM is the brand name (pay sucks and there is too much process and politics to actually innovate), I plan to take the advice I have read, which is to only stay at IBM 3 years and move on. Stagnant wages hurt me now, but also depress my salary for the rest of my life. Unless something changes, I'll take the next job offer that seems to move my career in the right direction. In IBM, I don't have a career, just a job. -RegrettingThisJob-
    • Comment 12/05/08: To "Regretting This Job": a lot of us are feeling the same way you do. Why work ourselves to death for no recognition and no raise? Some of our colleagues who are slacking off or "cruising" will get the same appraisal rating that we do. I think the IBM execs have completely lost touch with reality and don't realize how they're running this company into the ground... -Anonymous- Alliance Reply: They absolutely DO "realize how they're running this company into the ground..". You could say it's been a part of their plan since the 1990's, to run the USA part of their business into the ground; but build up the rest of it in BRIC and other places. The question is, do you want to do anything about it?
  • PBC Comments
  • International Comments
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:

  • "I suppose it's all context" by "wonderaboutibm". Full excerpt: You got me, in a way. You pointed out an inconsistency, perhaps, in what I wrote. On a purely logical level, the cost cutting has gone absurd because the cutting itself has gotten so minute, so silly that at the margin, it is now counterproductive. It has become a case of saving 5 cents here and losing a quarter elsewhere as a result. For example, when you starve onsite resources in the name of offshoring the work to GR, and then the work doesn't get done for any number of reasons, IBM may end up paying a lot more in penalties, opportunity costs, etc. than what was saved. A more specific example is cell phone expenses. Since IBM won't as a rule pay for cell phone usage anymore, cell phones just aren't used in cases where they could be very effective in speeding work through.

    The IBM financial controls have grown so onerous as to take on a life of their own. They have become major impediments to smooth and efficient operational excellence. Period. No argument. But then again, does IBM management really care if they think US-Europe is no longer a market worth nurturing?

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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