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Highlights—October 23, 2010

  • Associated Press, courtesy of Forbes: IBM to cut 190 jobs in Dublin, move them to China. By Shawn Pogatchnik. Excerpts: IBM Corp. said Wednesday it plans to cut 190 jobs at its Ireland server-manufacturing lines and move them to China. The move is the latest sign of traditional manufacturing operations deserting high-wage Ireland in favor of Eastern Europe and Asia. Such cuts have helped to drive Irish unemployment to 13.7 percent, second-highest in the euro zone after Spain. ...

    In a statement IBM said the transfer of server manufacturing to one of its Shenzhen, China, facilities "will place us closer to our growth markets and suppliers, while providing greater operational efficiency and cost savings."

  • Irish Times: IBM to cut 190 jobs in Dublin. By Ciara O'Brien. Excerpts: Fine Gael Dublin West TD Leo Varadkar described the move as "devastating" for workers and their families. "Alongside the pain these job losses will cause, IBM’s announcement heralds the end of hardware manufacturing in the area," he said. “Ireland should be attracting jobs in these blue-chip, high tech companies but instead workers are seeing them shipped abroad to countries such as India and China. This does not bode well for Fianna Fáil and the Greens attempt to build the ‘smart economy'."

    He called on IBM to provide affected workers with a "generous redundancy package", as the firm had benefitted from low tax rates and Government grants in previous years. IBM is understood to be offering workers a package that includes about five weeks' pay for every year of service.

  • Forbes: IBM Joins Tech Earnings Party, Beats Expectations. Big Blue rides growing emerging market demand to easily top analyst estimates. By Agustino Fontevecchia. Excerpt: IBM posted third-quarter earnings per share of $2.82, 7 cents above analysts' expectations, on revenues of $24.3 billion. Led by their Global Business Services and Systems and Technology divisions, IBM offered further evidence that emerging markets, specifically the BRIC nations (Brazil, Russia, India, China), are setting the pace for worldwide growth.
  • New York Times: I.B.M. Rides Global Focus on Services to Deliver a 12% Increase in Profit. By Steve Lohr. Excerpts: “The success of large corporations that are headquartered in the United States has less and less to do with the success of the American economy,” said Robert B. Reich, a professor of public policy at the University of California, Berkeley. The global stance of many big corporations is contributing to a projected 35 percent jump in profits this year among companies in the Standard & Poor’s 500.

    I.B.M. is at the forefront of the recent wave of globalization. In reporting its third-quarter results on Monday, I.B.M. said it received a lift from strong growth in big emerging markets, led by China, India, Brazil and Russia, where revenue jumped 29 percent. A broader category earmarked by I.B.M. as growth markets, which include South Africa, Vietnam and the Czech Republic, experienced a 16 percent increase in revenue. ...

    The most far-reaching change at I.B.M. has been the global overhaul of its services and software businesses, which now account for 80 percent of revenue. The transformation was partly of necessity — to address the competitive threat posed by low-cost Indian outsourcing companies including Infosys, Wipro and Tata. In services, I.B.M viewed the Indian outsourcers as a challenge unnervingly similar to the one faced by its mainframe business in the early 1990s. In hardware, the new low-cost technology of microprocessors, used in personal computers, disrupted the mainframe business, sending its profits plummeting. ...

    Under Samuel J. Palmisano, who became chief executive in 2002, I.B.M. was determined to move earlier in services. Indian programmers worked for a fraction of the wages of their counterparts in America and Europe. So the company expanded in India. In 2003, it had 9,000 workers in India. Today, it has more than 75,000, analysts estimate. ...

    The transition has not come easily. I.B.M. sets aside about $400 million a year for severance costs and other payments to cut about 8,000 employees annually, analysts estimate. Since 2003, I.B.M. has cut its payroll in the United States by roughly 30,000 workers, to about 105,000.

  • Wall Street Journal: Apple Profit Muscles Past IBM. By Yukari Iwatini Kane and Spencer E. Ante. Excerpts: Apple Inc. posted a 70% surge in quarterly earnings, again eclipsing the profit reported by International Business Machines Corp., in the latest sign that CEO Steve Jobs's gamble on consumer gadgets is paying off. The maker of iPhones and Macintosh computers reported a profit of $4.31 billion in the September quarter, while IBM had earnings in the same period of $3.59 billion, up 12% from a year ago.

    Apple's results—which make it the second-most profitable U.S. technology company after Microsoft Corp.—illustrates how consumers are now driving much of the technology innovation, a flip-flop from when big tech companies such as IBM led the way in developing innovative technology for businesses and then saw those innovations trickle down to consumers. ...

    While the numbers from both companies were robust, the pace of profit and sales growth at Apple compared with IBM underscored the different paths that the two companies have taken.

    While both companies have common roots in the computing business, Apple under Mr. Jobs has built itself into a profit machine through a string of hit consumer electronics products, starting with the iPod digital media player, followed by the iPhone, plus the iPad earlier this year. In May, Apple exceeded Microsoft as the world's most valuable technology company by surpassing its rival's market capitalization.

    Meanwhile, Big Blue under CEO Samuel J. Palmisano shed its PC business in 2004 and has singularly focused on technology for corporations. Among other things, the company has moved more aggressively into offering combinations of business software and technology services that help companies and governments solve knotty problems, such as catching welfare fraud. The strategy has been a hit with investors, with IBM's stock recently reaching an all-time high. ...

    "The upstart renegade Apple has now supplanted corporate IBM in profit generation," said Tim Ghriskey, chief investment officer of Solaris Asset Management in New York, which owns both IBM and Apple shares.

  • InformationWeek: U.S. Chamber Of Commerce Chief Endorses Offshoring. (July 1, 2004). Thomas Donohue sees it as a way to boost the economy and even increase employment in the United States. By Rachel Konrad. Excerpts: U.S. Chamber of Commerce President and CEO Thomas Donohue is promoting overseas outsourcing of jobs as a way to boost the economy and even increase employment--a stance that rankles jobless white-collar workers, particularly in the flagging technology industry. Donohue, speaking Wednesday night to the Commonwealth Club of California, said he believes exporting high-paid tech jobs to low-cost countries such as India, China, and Russia saves companies money that they may use to create new jobs for Americans.

    CEOs from Wall Street to Silicon Valley have embraced the theory, and the pace of offshoring has shocked statisticians and economists. In early June, the Bureau of Labor Statistics downwardly revised projections for white-collar job growth for 2002-2012, based on accelerated job migration. The agency reported that seven of the 10 occupations expected to gain the most ground are low-wage occupations that do not require a college degree. ...

    Technology consulting firm Gartner Inc. estimates that 10 percent of computer services and software jobs will be moved overseas by the end of this year. ...

    Donohue acknowledged the pain for people who have lost jobs to offshoring--an estimated 250,000 a year, according to government estimates. But pockets of unemployment shouldn't lead to "anecdotal politics and policies," he said, and people affected by offshoring should "stop whining." "One job sent overseas, if it happens to be my job, is one too many," Donohue said. "But the benefits of offshoring jobs outweighs the cost."

    Although call-center jobs have been migrating to the Philippines and Malaysia since the 1990s, in the past two years cash-strapped companies have exported high-paying jobs in research and development, software engineering, chip design, and biotechnology startups. Most of those jobs have gone to India and China, whose universities graduate hundreds of thousands of engineers each year.

  • New York Times: Top Corporations Aid U.S. Chamber of Commerce Campaign. By Eric Lipton, Mike McIntire and Don Van Natta Jr. Excerpts: Prudential Financial sent in a $2 million donation last year as the U.S. Chamber of Commerce kicked off a national advertising campaign to weaken the historic rewrite of the nation’s financial regulations. Dow Chemical delivered $1.7 million to the chamber last year as the group took a leading role in aggressively fighting proposed rules that would impose tighter security requirements on chemical facilities.

    And Goldman Sachs, Chevron Texaco, and Aegon, a multinational insurance company based in the Netherlands, donated more than $8 million in recent years to a chamber foundation that has been critical of growing federal regulation and spending. These large donations — none of which were publicly disclosed by the chamber, a tax-exempt group that keeps its donors secret, as it is allowed by law — offer a glimpse of the chamber’s money-raising efforts, which it has ramped up recently in an orchestrated campaign to become one of the most well-financed critics of the Obama administration and an influential player in this fall’s Congressional elections.

    They suggest that the recent allegations from President Obama and others that foreign money has ended up in the chamber’s coffers miss a larger point: The chamber has had little trouble finding American companies eager to enlist it, anonymously, to fight their political battles and pay handsomely for its help. ...

    The chamber’s increasingly aggressive role — including record spending in the midterm elections that supports Republicans more than 90 percent of the time — has made it a target of critics, including a few local chamber affiliates who fear it has become too partisan and hard-nosed in its fund-raising. ...

    These records show that while the chamber boasts of representing more than three million businesses, and having approximately 300,000 members, nearly half of its $140 million in contributions in 2008 came from just 45 donors. Many of those large donations coincided with lobbying or political campaigns that potentially affected the donors.

  • Los Angeles Times: U.S. jobs continue to flow overseas. (October 6, 2010). Though some companies have actually moved operations back to American shores recently, the lure of cheaper labor in China, India and other foreign countries is more irresistible than ever. By Don Lee. Excerpts: In addition, the most recent Commerce Department data show that employment at the foreign subsidiaries and affiliates of U.S. multinational firms grew by 729,000 in two years, to 11.9 million in 2008 from 2006. Over that same period, domestic employment by such firms slipped by 500,000 jobs, to 21.1 million. ...

    The offshoring of American production and jobs has been going on for more than two decades, with service firms more recently pushing the trend. Experts say more offshoring could help U.S. firms better compete in the global economy, thus boosting sales and profits that will sustain them and generate new business. Eventually, stronger, expanding firms could create more opportunities for American workers, though that's not a sure thing. More and more, for example, upscale engineering and development for products manufactured in China are being done in China — not the U.S. — near the centers of production.

    "When companies succeed abroad, people at home succeed," said Mihir Desai, a finance professor at Harvard Business School. Challenger agrees with that logic, but he also said that some companies continue to engage in "pure labor arbitrage," moving overseas simply for cost savings. That kind of rationale may do little for building long-term value in the company or its products and services. ...

    But whatever happens long term, current high levels of offshoring will add to the nation's employment hardships for workers with college training as well as for lower-skilled workers. PwC, the big accounting firm formerly known as PricewaterhouseCoopers, last spring and summer laid off about 125 support staff members in client services, transferring the work to Uruguay. Those positions were considered mid-level. ...

    President Obama has complained that the U.S. tax system encourages companies to invest and hire abroad, but a bill that would have ended certain tax credits and deferrals to companies expanding or moving overseas was voted down in the Senate last week.

  • Yahoo! IBM Retiree Information Exchange message board: "Re: Service Center" by "scall0way". Full excerpt: --- In ibmretiree@yahoogroups.com, "tonyc142" <acannistra@...> wrote: > Can anyone tell me how much IBM saved by moving Customer Service, or the Service Operation to India? Service is a crapshoot. A recent call took 4 times as long as it should have with the impossible translation and repetition required.

    LOL, reminds me of the recent phone conversation I had with a representative from NJ Unemployment office. She wanted to talk to IBM to verify some issues about my former IBM employment, and kept putting me on hold to make calls. Finally came back and said, "I give up. I keep calling, but I keep getting India and I just can't communicate with them. I can't get any answers from them." LOL, I told her, "Gee, yeah, the same thing happened to MY job. It went to India too."

  • IBM reviews. Selected reviews follow:
    • IBM Anonymous in New York, NY: (Current Employee) “IBM is deviant.” Pros: Work from home. Large corporation. Successful company. Cons: No movement. Very bureaucratic. Not enough employment opportunities. Advice to Senior Management Too much offshore operations leads to worse quality
    • IBM Anonymous: (Current Employee) “IBM Global Services is good to work without expecting much pay.” Pros: Brand value of IBM is value add. Cons: Low salary and benefits when compared to IBM. Advice to Senior Management: IBM Global Services pay should match IBM pay.
    • IBM Architect: (Current Employee) “Good but hard.” Pros: The technology and fellow staff members are amazing. Ultimately, IBM succeeds and it is always good to work at a place swimming with success. Cons: It is very hard to make it to the next level in IBM. There is not a real path forward. Advice to Senior Management: None really other than the compensation and award system is really backward. It tends to reward mediocrity and stymie hard work.
    • IBM Anonymous in Auckland (New Zealand): (Current Employee) “Review” Pros: Travel. Variety. Large Corporate Exposure - work with some of the largest companies in New Zealand. Cons: Incompetent management. Bums on seats mentality towards billable resources. Advice to Senior Management: Cut the dead wood in the middle. IBM Global Services has a number of incompetent middle managers.
    • IBM Engineer In Research and Development in East Fishkill, NY: (Current Employee) “Great company, but...”Pros: Good opportunities for personal development, opportunities for advancement if you have what it takes, the people are great - some of the smartest people around work here. Cons: Work-life balance not an option in some areas of the organization Have to deal with internal barriers (aka business processes) to get things done. Employees often do not have the resources to get things done. No conference travel in eons. Average or below average salary and benefits. Advice to Senior Management: Have some respect for the people working for you. Walk the talk. Think about the definition of leadership in this organization. You usually get what you ask for in your leaders. Right now, they are a bunch of disrespectful people that nobody likes to work with. Stop re-organizing - it never helped anything. Get professional help to bring the organization back to health.
    • IBM Senior Consultant in Moscow (Russia): (Past Employee - 2009) “Top company with limited development opportunities.” Pros: Brand, international environment, client are best companies in class. Cons: Bureaucracy/politics, no talent development. If you do your job well, the company is not interested to promote you from your current position, because they will need to search for replacement. Advice to Senior Management: Develop your people, create meritocracy culture
    • IBM Service Delivery Manager in Sarasota, FL: (Past Employee - 2009) “whatever.” Pros: Pay and very little more. Cons: No care about employee welfare and/or growth. All about cost and profit. Treated like a piece of meat. Currently demanding more for less. 65 hour weeks are common. No opportunity to learn about other career paths or open jobs. Advice to Senior Management: This is the 21st century. (DOH) If you won't invest in your employees career growth, don't be surprised when the really good people leave and you are left with only the dead wood who will hang on incompetently, keep their heads down, and desperately hope to keep their job. Most employees have no sense of security. You can be let go for "NO REASON", and if you want to retain your pension, you must sign an agreement which states you will not hold IBM liable for their actions. If you don't sign, Kiss your pension goodbye.
    • IBM Senior Consultant in Herndon, VA: (Past Employee - 2010) “An overall great experience.” Pros: IBM is a very diverse organization. There are so many opportunities to get involved with different projects and different people with lots of opportunities for change. IBM also provides many training opportunities for employees. Cons: As a large corporation, it is sometimes cumbersome to navigate the rigorous evaluation procedures which include multiple deadlines and formal standards for year end reviews, promotions, and the goal-setting process. As a result, all of these processes take an excessively long time to complete. Additionally, as a big corporation, it is possible to feel disconnected from people, even your own manager. I was lucky enough to find strong leadership and a supportive team on the project I was assigned, but if these things are lacking, it is possible to get lost in the shuffle. Advice to Senior Management: I would like to see more processes in place to connect employees with their service area managers. If possible, it would be great to work with service area managers on their projects. As a result, the people who actually have a part in determining your performance review score and your promotion would have a greater connection to you and it would not be so difficult to have your efforts be recognized.
    • IBM Project Manager: (Current Employee) “Employer review.” Pros: Very interesting people to work with, diverse environment, space to develop leadership, ability to work on different projects across many industries. Outstanding support for work/life balance. Good benefit package. Cons: Salary could be better, promotions are hard to come, recognition varies , work can be very stressful. There is no more paid overtime for lower band levels. This makes managing demanding schedules very hard. Advice to Senior Management: Promote your best people, offer recognition, strive to indeed "recruit, motivate and retain the best on the market" Freezing education and expenses (i.e. remote access for mobile employees) it is actually a pay cut.
    • IBM Anonymous: (Past Employee - 2009) “IBM - not the company it was 25 years ago.” Pros: Good compensation and benefits. Great company reputation. Great training opportunities Cons: Always a small fish in a big sea. Very little personal attention to ones career development - though there is a lot of gab about it - for management positions. Must be available for travel 100%. Not the IBM that it was 25 years ago. Advice to Senior Management Take care of your experienced people. A little more personal touch.
    • IBM Anonymous: (Past Employee - 2010) “IBM does not develop, train or motivate employees. The attitude is 'you are lucky to have your job'.” Pros: Good benefits You can work from home. Cons: They expect you to work 12-15 hours a day and have no life to meet unrealistic deadlines. Management does not care how employees feel and tell them "you are lucky to have your job". Everyone is always afraid for their job as their is always another impending future layoff. IBM's long term plan to to lay off more and more US based employees and move those jobs overseas as much as possible. There are essentially no raises anymore and no upward career path. Advice to Senior Management: You have serious morale problems in the US but I am sure you don't care as you plan to eliminate many of those jobs in the future. Ruling by fear and intimidation is not good management.
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  • General Visitor Comments: Due to a lack of membership growth the comment sections will be closed until we see sufficient growth in full membership, associate membership or donations. Many of you that visit our site have not yet joined, but seem to value its existence. The only comment section that will remain open will be Job Cuts Reports. If you have information that you want the Alliance to know about please send to ibmunionalliance@gmail.com. Information of importance will be put on the front page of this web site. To join go here: Join The Alliance! or here: Join The Alliance!
  • Job Cut Reports
    • Comment 10/17/10: Don't Join IBM Dubuque, IA. It is dungeon not an office. People and managers there talk so proud there - still they are putting glossy cream on rotten cake. -Frank-
    • Comment 10/18/10: IBM is looking for help in renovating Watson? So governments are going broke; IBM is reporting record profits, IBM is laying off all over INCLUDING Watson (I know firsthand), and IBM wants a hand-out to improve it's own property? Gee, town council, I want to do some improvements to my house, can I get a tax break? I'm gonna hire come contractors to do the work; I'm gonna buy things at Home Depot... -RAed Jan 09- Alliance reply: You and other IBMers RA'd in the Watson area should write or call the councilman and offer support.
    • Comment 10/18/10: Just received from H.R. The process for documenting all employees 2010 Personal Business Commitments (PBC) and RSM Ranking results is underway. This note will provide information to you regarding the 2010 PBC / Ranking cycle. Beginning in November, first-line managers will meet with their own management to review employees' individual performance against PBC goals. During the meeting they will evaluate impact and relative contribution to reach consensus on which employees are the top and lowest contributors for the year. This exercise, called "team-based decision making," will help IBM to achieve fair and accurate differentiation of performance and pay. It is intended to reinforce IBM’s culture of high performance, strengthen credibility in the process and build trust in relationships between employees and managers.

      In order to prepare your manager for these meetings regarding performance, contributions and accomplishments, you should submit your 2010 PBC results in the PBC tool by November 5, 2010. If you need to modify your objectives, please ask your manager to return your PBC objectives so you can update them in the tool. -Anonymous-

    • Comment 10/18/10: Sorry Folks, Take it from a second line manager who has left the company, the PBC process is a joke in IBM. Upper management already knows who will be RAed by Christmas. It's all based on politics within the organization, not performance reviews. The tool is the political tool. -Ana-
    • Comment 10/18/10: "This exercise, called "team-based decision making," will help IBM to achieve fair and accurate differentiation of performance and pay. It is intended to reinforce IBM’s culture of high performance, strengthen credibility in the process and build trust in relationships between employees and managers." Good grief! Do they actually believe that? Nothing short of new management at the top, and a clear and decisive abandonment of the wholesale offshoring of jobs could possibly do that. -Anonymous-
    • Comment 10/19/10: How did IBM become so evil? EPS? Sam's greed? -wake up world!-
    • Comment 10/20/10: Please know that stealth RA's are still going on. They are like getting snipered, one or two get picked off at a time, and yet no one really notices unless they get selected. Since IBM services (the outsource biz) has disappointed based on 3Q results (signings backlog is still down) one can only expect more RA "drive byes". -Anonymous-
    • Comment 10/20/10: IBM is looking for help in renovating Watson? Why should NYS help IBM out when NY IBM full time employee jobs are still declining? How about a tax break for those that got whacked from IBM? For those who can only get part time contract type work? I'm SICK of corporate welfare and the obscene tax breaks IBM gets. I write NYS reps. but they could not care less now since they are spending 100% of their time trying to get re-elected to this crooked, broke, and corrupt state government. Does IBM pay ANY real taxes? They got billions in profits and still have their hand out for a break. They don't deserve any tax breaks! It's time to get tough with this IBM. Pay your fair share IBM! -taxed-
    • Comment 10/20/10: Software Group - my dept had to submit our PBCs by 10/1. I am currently applying for a job in another dept. My avail date is in January and my manager keeps asking me when I will "know" about the other position, like 10/30? I believe that something will be happening Nov 1. -15YrIBMer-
    • Comment 10/20/10: "In order to prepare your manager for these meetings regarding performance, contributions and accomplishments, you should submit your 2010 PBC results in the PBC tool by November 5, 2010. If you need to modify your objectives, please ask your manager to return your PBC objectives so you can update them in the tool." Be careful what you write. This tool can be used to screw you. Make sure you exaggerate your accomplishments and inflate everything about you. Make sure you make yourself look like Superman. Management will use this tool to kick you out the door. -Clark Kent-
    • Comment 10/20/10: Hi All, I am interested in filing for form for TAA. I was laid off on 03/31/2010. My work originally went to a CDI contractor and an IBMer. However, I heard from the CDI contractor I trained that the IBMer never was involved in the job function, that she had been performing it almost entirely, and then she was laid off w/2 hrs. notice. She stated that my job function did transfer to India, but in this round about way so it would not be obvious to me and others in the dept. I worked in div 07, SDT, Oracle dba group but was involved in management of software (installation, licensing, etc.) which seems to fit the TAA #73593. My work location was Boulder, but I was a WAH employee. I tried to obtain a position as a contractor at $35/hr, no benefits, in Unix system administration. Multiple openings and I was groomed by IBM for 16 yrs. I was shocked to read about the supposed skills mismatch. I'm trained in AIX, willing to work for a lot less money, willing to report to the plant, etc. I am 10 minutes away and they will not hire me. Then I heard the bit about my job being transferred to India. In any event, any assistance on what I can do to contact 2 others, please hook me up! -Anonymous-
    • Comment 10/21/10: to Anonymous, Sorry to hear about your demise. That is unfortunate that you would be willing to work for such a small amount of money. I think the executives know this, that is why they continue this debilitating approach. Someday when things are so bad, people like you will take a stand for what they deserve. It may take some sacrifice of which no one seems to want to give because people are either too greedy to sacrifice a little to gain some respect and stability or people are afraid of taking a risk. My personal opinion, is that if you hang on too tight to what you own, you will lose everything in the process.By the way, I heard a couple of days ago that GTS will be cutting 5%. Merry Christmas from your buddy Sam. -Too-Little-Too-Late-
    • Comment 10/21/10: Answer to TAA question. TAA petition #73593 has been certified (approved). You simply make an appointment to go to a one stop career center. (http://www.servicelocator.org) and apply for TAA using petItion #73593. The process takes about an hour. Who is covered by the certification? Generally the certification covers all members of the worker group who are laid off or threatened with layoff during the three-year period beginning one year before the petition was filed and ending two years after the date of the certification. Each certification specifies the beginning and ending dates. This petition includes WFH employees that reported to Boulder. -I'mDONEw/IBM-
    • Comment 10/21/10: To -wake up world!- A. Gerstner planted a nanochip into Palmisano. Sammy is programmed to get fatter both figuratively and monetarily. Sammy is an IBM cost cut and burn RAing cyborg. -da_facts-
    • Comment 10/21/10: Wasn't it just a few years ago IBM said they were committed to growing business in Ireland due to a vibrant, young, and talented workforce there? Has Palmisano ever visited IBM Ireland? Palmisano has sure visited India though. Just another country IBM along with the USA wants to abandon. Are they calling it a RA there as well? -anonymous-
    • Comment 10/24/10: "Palmisano has sure visited India though." He visited China as well. IBM is planning to treat Ireland just like the USA. So much for the smarter planet. Some countries on the planet are not to be included. -anonymous-
News and Opinion Concerning Health Savings Accounts, Medical Costs and Health Care Reform
Minimize
  • New York Times editorial: Health Care and the Campaign. Excerpts: Republican candidates and deep-pocketed special interests are spreading so many distortions and outright lies about health care reform that it is little wonder if voters are anxious and confused. Here are a few basic facts that Americans need to keep in mind before they go to the polls, and afterward. First, most aspects of the reform do not go into effect until 2014. Second, things are indeed bad out there: The costs of medical care and insurance premiums are (still) rising, and some employers are (still) dropping coverage. But for that, you should blame the long-standing health care crisis and the current bad economy. Health reform is supposed to help with these problems.

    Here is a look at the claims being made on the campaign trail — and the distortions they contain...

News and Opinion Concerning the "War on the Middle Class"
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: From Obama, the Tax Cut Nobody Heard Of. My Michael Cooper. Excerpts: What if a president cut Americans’ income taxes by $116 billion and nobody noticed? It is not a rhetorical question. At Pig Pickin’ and Politickin’, a barbecue-fed rally organized here last week by a Republican women’s club, a half-dozen guests were asked by a reporter what had happened to their taxes since President Obama took office.

    “Federal and state have both gone up,” said Bob Paratore, 59, from nearby Charlotte, echoing the comments of others. After further prodding — including a reminder that a provision of the stimulus bill had cut taxes for 95 percent of working families by changing withholding rates — Mr. Paratore’s memory was jogged. “You’re right, you’re right,” he said. “I’ll be honest with you: it was so subtle that personally, I didn’t notice it.” Few people apparently did.

    In a troubling sign for Democrats as they head into the midterm elections, their signature tax cut of the past two years, which decreased income taxes by up to $400 a year for individuals and $800 for married couples, has gone largely unnoticed. In a New York Times/CBS News Poll last month, fewer than one in 10 respondents knew that the Obama administration had lowered taxes for most Americans. Half of those polled said they thought that their taxes had stayed the same, a third thought that their taxes had gone up, and about a tenth said they did not know. As Thom Tillis, a Republican state representative, put it as the dinner wound down here, “This was the tax cut that fell in the woods — nobody heard it.”

  • New York Times: House Advantage. Banks Shared Clients’ Profits, but Not Losses. By Louise Story. Excerpts: JPMorgan Chase & Company has a proposition for the mutual funds and pension funds that oversee many Americans’ savings: Heads, we win together. Tails, you lose — alone.

    Here is the deal: Funds lend some of their stocks and bonds to Wall Street, in return for cash that banks like JPMorgan then invest. If the trades do well, the bank takes a cut of the profits. If the trades do poorly, the funds absorb all of the losses. ...

    JPMorgan customers, including public or corporate pension funds of I.B.M., New York State and the American Federation of Television and Radio Artists, ended up owing JPMorgan more than $500 million to cover the losses. But JPMorgan protected itself on some of these investments and kept millions of dollars in profit, before the trades went awry. ...

    Some of JPMorgan’s customers say they are disappointed with the bank. “They took 40 percent of our profits, and even that was O.K.,” said Jerry D. Davis, the chairman of the municipal employee pension fund in New Orleans, which lost about $340,000, enough to wipe out years of profits that it had earned through securities lending. “But then we started losing money, and they didn’t lose along with us.” ...

    There are few signs of change in the industry. Some pensions have begun asking banks whether they will agree to share not only potential profits but also potential losses. The Missouri State Employees’ Retirement System, for instance, asked banks if they would promise to cover any such losses. All of the banks that replied declined to do so, according to Christine Rackers, a spokeswoman for that fund.

  • New York Times: Income Inequality: Too Big to Ignore. By Robert H. Frank. Excerpts: People often remember the past with exaggerated fondness. Sometimes, however, important aspects of life really were better in the old days. During the three decades after World War II, for example, incomes in the United States rose rapidly and at about the same rate — almost 3 percent a year — for people at all income levels. America had an economically vibrant middle class. Roads and bridges were well maintained, and impressive new infrastructure was being built. People were optimistic.

    By contrast, during the last three decades the economy has grown much more slowly, and our infrastructure has fallen into grave disrepair. Most troubling, all significant income growth has been concentrated at the top of the scale. The share of total income going to the top 1 percent of earners, which stood at 8.9 percent in 1976, rose to 23.5 percent by 2007, but during the same period, the average inflation-adjusted hourly wage declined by more than 7 percent. ...

    Recent research on psychological well-being has taught us that beyond a certain point, across-the-board spending increases often do little more than raise the bar for what is considered enough. A C.E.O. may think he needs a 30,000-square-foot mansion, for example, just because each of his peers has one. Although they might all be just as happy in more modest dwellings, few would be willing to downsize on their own. ...

    The rich have been spending more simply because they have so much extra money. Their spending shifts the frame of reference that shapes the demands of those just below them, who travel in overlapping social circles. So this second group, too, spends more, which shifts the frame of reference for the group just below it, and so on, all the way down the income ladder. These cascades have made it substantially more expensive for middle-class families to achieve basic financial goals.

    In a recent working paper based on census data for the 100 most populous counties in the United States, Adam Seth Levine (a postdoctoral researcher in political science at Vanderbilt University), Oege Dijk (an economics Ph.D. student at the European University Institute) and I found that the counties where income inequality grew fastest also showed the biggest increases in symptoms of financial distress. For example, even after controlling for other factors, these counties had the largest increases in bankruptcy filings.

  • AlterNet: The Perfect Storm That Threatens American Democracy. The top one-tenth of one percent of Americans now earn as much as the bottom 120 million of us. By Robert Reich. Excerpts: It’s a perfect storm. And I’m not talking about the impending dangers facing Democrats. I’m talking about the dangers facing our democracy. First, income in America is now more concentrated in fewer hands than it’s been in 80 years. Almost a quarter of total income generated in the United States is going to the top 1 percent of Americans. The top one-tenth of one percent of Americans now earn as much as the bottom 120 million of us.

    Who are these people? With the exception of a few entrepreneurs like Bill Gates, they’re top executives of big corporations and Wall Street, hedge-fund managers, and private equity managers. They include the Koch brothers, whose wealth increased by billions last year, and who are now funding tea party candidates across the nation.

    Which gets us to the second part of the perfect storm. A relatively few Americans are buying our democracy as never before. And they’re doing it completely in secret.

    Hundreds of millions of dollars are pouring into advertisements for and against candidates — without a trace of where the dollars are coming from. They’re laundered through a handful of groups. Fred Malek, whom you may remember as deputy director of Richard Nixon’s notorious Committee to Reelect the President (dubbed Creep in the Watergate scandal), is running one of them. Republican operative Karl Rove runs another. The U.S. Chamber of Commerce, a third.

    The Supreme Court’s Citizens United vs. the Federal Election Commission made it possible. The Federal Election Commission says only 32 percent of groups paying for election ads are disclosing the names of their donors. By comparison, in the 2006 midterm, 97 percent disclosed; in 2008, almost half disclosed. We’re back to the late 19th century when the lackeys of robber barons literally deposited sacks of cash on the desks of friendly legislators. The public never knew who was bribing whom.

  • Jim Hightower: Corporations Take Jobs Money...and Run. Full excerpt: The Federal Reserve, which controls America's monetary policy, says it is trying to invigorate job creation in our country by slashing interest rates to the bone. This move allows big corporations to borrow money for next to nothing, so they can expand and start hiring again. Great goal! How's it working out?

    Well, the first step has gone splendidly, with such giants as DuPont, Hertz, IBM, Microsoft, and PepsiCo rushing to grab the windfall. They've borrowed hundreds of billions of dollars at interest rates of less than one percent. However, there's been quite a stumble on step two of the Fed's plan. Rather than putting this enormous stash of cash to work for America, the corporations are simply squirreling it away for their own enrichment, refusing to spend it on the job expansion that our economy desperately needs.

    For example, Microsoft – one of the richest corporations on Earth – amassed nearly $5 billion under this "opportunistic borrowing" scheme, yet has put none of the cheap money into job creation. Instead, it is using a big chunk of it to buy back stock from its own shareholders – a move that merely profits the handful of rich elites who control Microsoft.

    Worse, such corporate powers as Hertz and PepsiCo are using the funds to take over competitors. These consolidations will actually cut jobs, while reducing consumer choices and raising our prices. Indeed, there's no provision in the Fed's program to keep the giants from investing the money in foreign expansion, thus offshoring more American Jobs.

    This is Jim Hightower saying... And there's the rub in nearly all of Washington's indirect job creation efforts – officials blithely dole out billions and even trillions to corporations and banks, with no strings attached. So the big shots and bastards gleefully grab the money and run.

  • Jim Hightower: Wall Street's Connected Lobbyists. Full excerpt: Old Congress critters never die, they just fade away. Into lobbying firms, that is. Take former House speaker Dennis Hastert, former House majority leaders Dick Armey and Dick Gephardt, and former Senate leaders Bob Dole and Trent Lott. The names of these one-time legislative powerhouses aren't mentioned in the news anymore, so perhaps you would assume that they've retired back to the old home place, or even passed away. But, no – they're very much alive and still plying the legislative arts. Only they now do it for million-dollar paychecks as lobbyists for Wall Street financial giants and other corporate interests.

    Hastert, Armey, Gephardt, Dole, and Lott are among a cadre of 73 former members of congress who've been working in recent months to weaken or kill new regulations to rein in the gouging and reckless gambling of the big financial firms. They are not the only former public servants who're now using their insider knowledge and personal connections in Washington to serve the bankers. For example, at least 66 staffers for the House or Senate banking committees have moved from Capitol Hill to the K-Street lobbying corridor, and another 82 staffers for members of those committees also are now lobbyists for the finance industry. Adding even more firepower to this special-interest army of influence peddlers are 42 former officials from the treasury department.

    This is Jim Hightower saying... In an effort to slow down this shameless cashing-in on public service, the watchdog group, Public Citizen, contacted 47 current lawmakers who are retiring this year. The group asked them to pledge not to take a lobbying job for two years with any corporation that had lobbied them. Not a single one took the pledge. To see who the 47 are, and to get behind stricter lobbying rules, contact Public Citizen at www.citizen.org/revolvingdoor.

  • Urban Institute and Brookings Institution's Tax Policy Center: Corporate Income Tax as a Share of GDP, 1946-2009. (Editor's note: This chart is an eye opener!)
  • Slate: What Clayton Knew. The most shocking discovery yet about how the banks hid their toxic mortgages. By Eliot Spitzer. Excerpt: Since the early days of the current economic cataclysm, I have believed that we would, with some investigation, find the Rosetta stone that would demonstrate that the banks knew that the toxic mortgages they were packaging were, in fact, not viable financial instruments. This belief stemmed from my experience as New York state's attorney general. The AG's office had investigated enough subprime lenders to recognize the magnitude of fraud and the ubiquity of bogus credit analysis. Our efforts to expand our inquiry were stymied by the banks—and the Bush administration—which claimed we didn't have jurisdiction to pursue the inquiry into many of the major national banks. (We finally won, in June 2009, in a 5-4 ruling from the U.S. Supreme Court. The ruling was a bit late.)
  • New York Times: Demand Rising for Rentals Among the Ultrarich. By Sarah Kershaw. Excerpts: New York is a city of renters — about 75 percent of us, in fact. And lately, that includes more of the super-rich and the merely wealthy, as rentals of $10,000 to $100,000 per month are on the rise. ...

    At the highest end of the rental market, defined as apartments renting for $10,000 a month or more, the 200 new leases signed in the third quarter amounted to more than double the number at the same time in 2009 — a year in which both sales and rentals in the luxury market were extremely sluggish, according to Jonathan J. Miller, the president of the appraisal firm Miller Samuel and a partner at Condominium Recovery, which invests in real estate. ...

    So what do you get for $100,000 a month? In other words, how does the other 0.0013 percent rent? (That percentage is where a $100,000-a-month apartment ranks among current rents, Mr. Miller says.) At Trump Park Avenue, at Park Avenue and 59th Street, you would get a four-bedroom 6,200-square-foot duplex penthouse where one of the six and a half bathrooms is 400 square feet in size. There are also 1,600 square feet of outdoor terraces. The condo went on the market in 2008 for $51 million, and was also listed for rent at $200,000 a month.

  • The Monster: The Monster: How a Gang of Predatory Lenders and Bankers Fleeced America, and Launched a Global Crisis. Exposing the major players behind the biggest financial hurricane in the history of global capitalism. By Michael Hudson. Excerpts: A few weeks after he started working at Ameriquest Mortgage, Mark Glover looked up from his cubicle and saw a coworker do something odd. The guy stood at his desk on the twenty-third floor of downtown Los Angeles's Union Bank Building. He placed two sheets of paper against the window. Then he used the light streaming through the window to trace something from one piece of paper to another. Somebody's signature.

    Glover was new to the mortgage business. He was twenty-nine and hadn't held a steady job in years. But he wasn't stupid. He knew about financial sleight of hand -- at that time, he had a check-fraud charge hanging over his head in the L.A. courthouse a few blocks away. Watching his coworker, Glover's first thought was: How can I get away with that? As a loan officer at Ameriquest, Glover worked on commission. He knew the only way to earn the six-figure income Ameriquest had promised him was to come up with tricks for pushing deals through the mortgage-financing pipeline that began with Ameriquest and extended through Wall Street's most respected investment houses.

    Glover and the other twentysomethings who filled the sales force at the downtown L.A. branch worked the phones hour after hour, calling strangers and trying to talk them into refinancing their homes with high-priced "subprime" mortgages. It was 2003, subprime was on the rise, and Ameriquest was leading the way. The company's owner, Roland Arnall, had in many ways been the founding father of subprime, the business of lending money to home owners with modest incomes or blemished credit histories. He had pioneered this risky segment of the mortgage market amid the wreckage of the savings and loan disaster and helped transform his company's headquarters, Orange County, California, into the capital of the subprime industry. Now, with the housing market booming and Wall Street clamoring to invest in subprime, Ameriquest was growing with startling velocity. ...

    The wayward behavior didn't stop with drugs. Glover learned that his colleague's art work wasn't a matter of saving a borrower the hassle of coming in to supply a missed signature. The guy was forging borrowers' signatures on government-required disclosure forms, the ones that were supposed to help consumers understand how much cash they'd be getting out of the loan and how much they'd be paying in interest and fees. Ameriquest's deals were so overpriced and loaded with nasty surprises that getting customers to sign often required an elaborate web of psychological ploys, outright lies, and falsified papers. "Every closing that we had really was a bait and switch," a loan officer who worked for Ameriquest in Tampa, Florida, recalled. " 'Cause you could never get them to the table if you were honest." At companywide gatherings, Ameriquest's managers and sales reps loosened up with free alcohol and swapped tips for fooling borrowers and cooking up phony paperwork. What if a customer insisted he wanted a fixed-rate loan, but you could make more money by selling him an adjustable-rate one? No problem. Many Ameriquest salespeople learned to position a few fixed-rate loan documents at the top of the stack of paperwork to be signed by the borrower. They buried the real documents -- the ones indicating the loan had an adjustable rate that would rocket upward in two or three years -- near the bottom of the pile. Then, after the borrower had flipped from signature line to signature line, scribbling his consent across the entire stack, and gone home, it was easy enough to peel the fixed-rate documents off the top and throw them in the trash.

    At the downtown L.A. branch, some of Glover's coworkers had a flair for creative documentation. They used scissors, tape, Wite-Out, and a photocopier to fabricate W-2s, the tax forms that indicate how much a wage earner makes each year. It was easy: Paste the name of a low-earning borrower onto a W-2 belonging to a higher-earning borrower and, like magic, a bad loan prospect suddenly looked much better. Workers in the branch equipped the office's break room with all the tools they needed to manufacture and manipulate official documents. They dubbed it the "Art Department."

  • The Smirking Chimp: How Do You Take Your Tea? With Heaping Spoonfuls of Irony, Of Course. By David Michael Green. Excerpts: It's so great that Americans are finally angry about the state of their country. But it's beyond awful that all the wrong people are beside themselves for all the wrong reasons. When I look at the tea party movement in America today, any number of words come to mind, most of which are not fit for print in a family newspaper. But, above all, I cannot help but be struck by the irony of it all. It's ironic, to begin with, that the ones who are bitching loudest today are precisely the people who created the mess we're in. ...

    Think about it. Economic policy can be divided into a handful of key domains, including taxes, trade, labor relations, regulation, privatization, the budget and the welfare state. In every single one of these areas - with one partial exception - regressive policy choices have entirely predominated over the last generation. Only in the latter case of welfare state spending has that not been true, but even there only partially so.

    Taxes today are a mere hint of what they used to be, just as the right has insisted must be the case. For the rich especially, top marginal income taxes have come down from 91 percent to 35 percent. But, of course, even that doesn't include earnings on capital gains, a giant portion of their income, which is now at 15 percent. Nor does it include the estate tax, which has now disappeared entirely. Nor does it include deductions and write-offs. Put this all together and you can see why Warren Buffett, one of the richest people in the country, was moved to reveal that he paid a 17.7 percent tax rate on his $46 million of taxable income in 2006, while his employees paid an average of 32.9 percent, and his receptionist's tax rate was 30 percent.

    On trade, previously existing barriers and protections for domestic industries have been eviscerated almost completely, so that for much of the world today, it's a single market for products and capital. Labor? Not so much. What a shock, then, that America's good jobs - especially in manufacturing - are now all located in Mexico. Or at least they were, until even those became too expensive and got moved to China and India and Vietnam. Smug Republican white collar workers thought they were immune from wealthy corporate masters cutting their legs off from underneath them. Now, when it's too late, they stand in unemployment lines while someone in Bangalore does their job for a tenth of the pay. So how's that whole free-tradey thing workin' out for you now, people? ...

    The point is this: Add all this up and what you see is regressives winning essentially every economic policy fight of the last generation. Nearly every single one. And where they didn't, the biggest example was a policy advanced by George W. Bush. The result, of course, has been economic devastation far and wide. The rich have gotten massively richer, the rest of us are sinking, the federal debt has skyrocketed, our jobs have been exported to China and India, Wall Street has plunged the global economy into the toilet, corporations like BP do whatever they want without fear of consequence, and the United States is imploding as a great power. These are not coincidences, either. And now here comes the great irony: the same people who have been getting their way on the economy for thirty years now are just absolutely livid about what they themselves have created! They're just completely enraged at the product of their own politics.

    Ah, but that's just the beginning. A second great irony is the extent to which the tea party bozos are being manipulated by elites like the Koch Brothers, Rupert Murdoch and the likes of Dick Armey. The very people who created the public's economic insecurity in order to get rich off of it, are now channeling the resulting rage into support for more of the same. And the folks on the street with their signs and their venom think they are manifesting some sort of spontaneous outpouring of patriotic rage, unaware of who is directing their efforts and who will benefit. ...

    A Paul Krugman column recently reported why: "Howard Gleckman of the nonpartisan Tax Policy Center has done the math. As he points out, the only way to balance the budget by 2020, while simultaneously (a) making the Bush tax cuts permanent and (b) protecting all the programs Republicans say they won't cut, is to completely abolish the rest of the federal government: 'No more national parks, no more Small Business Administration loans, no more export subsidies, no more N.I.H. No more Medicaid (one-third of its budget pays for long-term care for our parents and others with disabilities). No more child health or child nutrition programs. No more highway construction. No more homeland security. Oh, and no more Congress.'"

  • New York Times op-ed: What Happened to Change We Can Believe In? By Frank Rich. Excerpts: President Obama, the Rodney Dangerfield of 2010, gets no respect for averting another Great Depression, for saving 3.3 million jobs with stimulus spending, or for salvaging GM and Chrysler from the junkyard. And none of these good deeds, no matter how substantial, will go unpunished if the projected Democratic bloodbath materializes on Election Day. Some are even going unremembered. For Obama, the ultimate indignity is the Times/CBS News poll in September showing that only 8 percent of Americans know that he gave 95 percent of American taxpayers a tax cut. ...

    No matter how much Obama talks about his “tough” new financial regulatory reforms or offers rote condemnations of Wall Street greed, few believe there’s been real change. That’s not just because so many have lost their jobs, their savings and their homes. It’s also because so many know that the loftiest perpetrators of this national devastation got get-out-of-jail-free cards, that too-big-to-fail banks have grown bigger and that the rich are still the only Americans getting richer. ...

    The latest example is Angelo Mozilo, the former chief executive of Countrywide and the godfather of subprime mortgages. On the eve of his trial 10 days ago, he settled Securities and Exchange Commission charges for $67.5 million, $20 million of which will be footed by what remains of Countrywide in its present iteration at Bank of America. Even if he paid the whole sum himself, it would still be a small fraction of the $521 million he collected in compensation as he pursued his gambling spree from 2000 until 2008. ...

    he much acclaimed new documentary about the global economic meltdown, “Inside Job,” has it right. As its narrator, Matt Damon, intones, our country has been robbed by insiders who “destroyed their own companies and plunged the world into crisis” — and then “walked away from the wreckage with their fortunes intact.” These insiders include Dick Fuld and four other executives at Lehman Brothers who “got to keep all the money” (more than $1 billion) after Lehman went bankrupt. And of course Robert Rubin, who encouraged Citigroup to step up its investment in high-risk bets like Countrywide’s mortgage-backed securities. Rubin, now back as a rainmaker on Wall Street, collected more than $115 million in compensation during roughly the same period Mozilo “earned” his half a billion. Citi, which required a $45 billion taxpayers’ bailout, recently secured its own slap-on-the-wrist S.E.C. settlement — at $75 million, less than Rubin’s earnings and less than its 2003 penalty ($101 million) for its role in hiding Enron profits.

    It should pain the White House that its departing economic guru, the Rubin protégé Lawrence Summers, is an even bigger heavy in “Inside Job” than in the hit movie of election season, “The Social Network.” Summers — like the former Goldman Sachs chief executive and Bush Treasury secretary Hank Paulson — is portrayed as just the latest in a procession of policy makers who keep rotating in and out of government and the financial industry, almost always to that industry’s advantage. As the star economist Nouriel Roubini tells the filmmaker, Charles Ferguson, the financial sector on Wall Street has “step by step captured the political system” on “the Democratic and the Republican side” alike. But it would be wrong to single out Summers or any individual official for the Obama administration’s image of being lax in pursuing finance’s bad actors. This tone is set at the top. ...

    The real tragedy here, though, is not whatever happens in midterm elections. It’s the long-term prognosis for America. The obscene income inequality bequeathed by the three-decade rise of the financial industry has societal consequences graver than even the fundamental economic unfairness. When we reward financial engineers infinitely more than actual engineers, we “lure our most talented graduates to the largely unproductive chase” for Wall Street riches, as the economist Robert H. Frank wrote in The Times last weekend. Worse, Frank added, the continued squeeze on the middle class leads to a wholesale decline in the quality of American life — from more bankruptcy filings and divorces to a collapse in public services, whether road repair or education, that taxpayers will no longer support.

  • New York Times editorial: Fool Me Twice? Excerpts: In 2004, America’s multinational corporations offered Congress a deal: They would repatriate hundreds of billions of dollars in foreign profits — to invest in new plants and create new jobs at home — in exchange for a break from the 35 percent corporate tax rate imposed on overseas profits when they are brought into the country.

    A Republican-controlled Congress leapt at it, passing the Homeland Investment Act, which allowed companies to repatriate some $300 billion in 2005 and pay only 5.25 percent in taxes. As for all of those promised factories and jobs, they did not materialize. Research by three prominent economists, including Kristin Forbes, a former top economic adviser to President George W. Bush, found that between 60 and 92 cents of every dollar brought home found its way into shareholders’ pockets.

    The law required that companies use the repatriated money for productive purposes like research and hiring. That did not matter. Money being fungible, firms could easily claim they were not using “those” dollars on stock buybacks and executive pay.

    American multinationals are at it again. In an op-ed article in The Wall Street Journal, the chief executive of Cisco, John Chambers, and the president of Oracle, Safra Catz, estimated that American companies have about $1 trillion in profits stashed abroad that they could repatriate for the greater good of the American economy if taxes on that money were lowered to about 5 percent.

    Congress should not be fooled again. Tax amnesties are extremely expensive. And what big corporation will ever repatriate profits at the standard rate when every few years it can expect to get another “special” break?

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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