K Street Redux

Stephen Moore writes on the suicidal impulse of corporate America and the strongarm donation solicitation tactics the Democrats are using. It is not a pretty picture.

The late Milton Friedman used to rail against what he called corporate America's "suicidal impulse." By that he meant that the business community continually financed the very politicians who were intent on robbing their profits and slitting their throats.

It's happening again. The latest quarterly Federal Election Commission Report on political giving, released this week, shows the majority of corporate money flowing to the Democrats. Firms like Comcast, General Electric, Federal Express and UPS have shifted campaign giving away from the GOP. Employees of five major defense contractors including Lockheed Martin, Boeing and Northrup-Grumman spent $104,000 on Democratic presidential candidates, versus $88,800 for the Republican field.

Meanwhile, according to FEC data, about 85% of the donations from Roll Call newspaper's top-20 list of corporate lobbyists are helping Ms. Pelosi and Mr. Reid protect and expand their House and Senate majorities. Roll Call calls it a "Democratic donor surge," noting that many of the highest-priced lobbyists already "maxed out"–they've bumped up against the legal limit in how much they are allowed to give the Democrats……..

……… When Republicans were in control, Ms. Pelosi and company denounced the "K Street Project," run by former House Majority Leader Tom DeLay. They protested that corporate lobbyists were allowed to become a fourth branch of government–and in some cases their protests had merit, as Republicans curried favor with money interests.

Meanwhile, Democrats under Rep. Rahm Emanuel and Sen. Schumer have quietly erected their own K Street Project, and employ some of the same strong-arm tactics they once deplored. "I've never felt the squeeze that we're under now to give to Democrats and to hire them," says one telecom industry representative. "They've put out the word that if you have an issue on trade, taxes, or regulation, you'd better be a donor and you'd better not be part of any effort to run ads against our freshmen incumbents."

Why does corporate America go along? The standard excuse is that this is the way the game is played. They've made a calculated decision that Democrats are going to sweep in 2008. Republicans rightly object that corporate interests are making this a self-fulfilling prophecy.

Moore points out what should be obvious: if the corporate donors think the money will somehow save them, they are seriously deluding themselves. The Democrats have already signaled - loud an clear - that corporate taxation will skyrocket, protectionist trade policies will be enacted and that unions will get pretty much whatever they want if the Dems run the table in 2008. The money will just ensure that it happens.

Time For A Niche Electric Car?

Interesting concept, although sales thus far are fairly dismal. A tiny, one-seater electric car with a 30-mile range that is actually pretty zippy (70+ mph). It would be a practical choice for many people who have short commutes and who normally do so all alone in a car designed to hold four or more passengers. It is the Myers Motors NmG - or No More Gas.

TALLMADGE, United States (AFP) - Tired of waiting for big auto to come up with a truly clean car, Dana Myers has developed a tiny solution to the carbon crisis.

Tucked into a corner of his family's factory, behind an industrial crane and giant transformers, sits a fleet of what look like three-wheeled technicolor shoehorns.

Unlike the hybrids currently on offer, his No More Gas runs entirely on electricity. And its engine is powerful enough to zip down the highway.

There is one rather large catch. It has a maximum battery range of just 30 miles (50 kilometres) and room for just the driver and some groceries in the trunk.

Which could be why he's only sold 35 of them.

Dozens of companies have tried, and failed, to switch consumers over to electric cars.

The most spectacular failure was GM's EV1, the subject of award-winning documentary "Who Killed the Electric Car?"

Failures among smaller companies are also legendary, said David Cole, chairman of the Center for Automotive Research.

"The sheer complexity is just overwhelming," Cole said, explaining that while safety regulations are a huge hurdle, the biggest problem is finding drivers willing to compromise on comfort and convenience just to go green.

"It's really tough to do."

The Myers Motors website has a lot of information on the car - and a thoroughly annoying auto-play video (hint - get rid of that and allow people to start it themselves guys.) The video will play whenever you go to the main page. Argh. That aside, the car is interesting and would actually work for a lot of average commuters. But it is going to be a tough sell. The car is almost more of a replacement for a motorcycle, as the annoying video points out, but it has a closed cab, good impact protection, heat and a place to plug in your MP3 player. It's a geek's dream! Reportedly, they are working on extending the range to about 100 miles. They come in some eye-popping colors, too.

The question is, is this the right time for the car to catch on? The cars are built in Ohio and have an MSRP of about $35,000.

Times Up?

Morgan Stanley has dumped every, single share of the New York Times that it owned. 10 million shares or a 7.3% stake of the Times. Share prices plummeted to the lowest level in ten years.

Oct. 17 (Bloomberg) — Morgan Stanley, the second-biggest shareholder in New York Times Co., sold its entire 7.3 percent stake today, according to a person briefed on the transaction, sending the stock to its lowest in more than 10 years.

The person declined to be identified because Morgan Stanley hasn't made the sale public yet. Traders with knowledge of the transaction said Merrill Lynch & Co. brokered a $183 million block trade of 10 million New York Times shares this morning.

Hassan Elmasry, managing director of Morgan Stanley Investment Management, unsuccessfully challenged the Sulzberger family's control of New York Times Co. through super-voting stock that gives them a board majority. Shareholders owning 42 percent of the company, parent of the namesake newspaper and Boston Globe, withheld support for directors at the publisher's April annual meeting.

“This guy has been speaking for a lot of people who are too discreet to speak up and challenge management,'' said Porter Bibb, a managing partner at Mediatech Capital Partners LLC in New York and a former New York Times Co. executive.

New York Times shares slid 54 cents, or 2.9 percent, to $18.37 at 2:51 p.m. in New York Stock Exchange composite trading and fell as low as $18.24, a level not seen since January 1997.

That is one rousing vote of no confidence in the Times or its management. The story goes on to describe how badly many of the big newspapers are doing right now. It is very badly, indeed.

Bogeyman De Jour

Holman Jenkins, Jr. from the Opinion Journal notes the extreme irony of Microsoft leading the antitrust charge against Google in the corridors of Washington, DC. He also points out that Google is heading down the same road that Microsoft did - not that of antitrust violation, but of questionable business decisions.

That Microsoft is leading the lobbying charge against Google's pending acquisition of DoubleClick is ironic for a lot of reasons, particularly this:

"It is difficult to imagine that in an open society such as this one with multiple information sources, a single company could seize sufficient control of information transmission so as to constitute a threat to the underpinnings of a free society. But such a scenario is a realistic (and perhaps probable) outcome."

Those words come from a famous 1995 brief by an imaginative Silicon Valley attorney that kicked off the Microsoft antitrust wars. Though the dread forecast today is the same, the bogeyman has changed. Now it's Google…….

…….What Google and Microsoft do have in common could be called the curse of network effects, namely network costs.

Microsoft continues to pour billions into Windows, adding features most users don't know exist, while spending millions of man-hours to remain "backward compatible" with thousands of aging programs and devices used by ever shrinking numbers of customers.

Google, for its part, spends billions to refine its search engine while adding acres and acres of servers to catalog the world's ever widening surplus of ever less-interesting Web pages.

Combined with DoubleClick, Google could create an ever more compendious record of what users do on the Web. But even given the declining cost of storage, would this mountain really yield commensurate value in helping the company target users with ads they might respond to? Probably not. The devil theory depends on the likely mistaken idea that collecting and storing information on Web users has increasing, rather than diminishing, returns.

The two companies are similar in another way. Like Microsoft, Google has shown a Howard Hughes-like propensity to throw money in every direction in a quest to secure its privileged existence.

In Microsoft's case, think Xbox, the Zune music player, MSNBC, the MSN Internet service, as well as countless startup acquisitions that disappeared into the Redmond maw never to be heard from again. Lately Microsoft has decided the Web business of the future is advertising. Hence the $6 billion aQuantive acquisition.

A lack of realization that both companies were uniquely lucky to be in the right place at the right time with the right product. Both companies are trying to make lightning strike twice and are losing focus in the process. Certainly, Google has considerably less of a lock on its market than Microsoft does. But it is scattering its attention all over the marketplace just as the folks in Redmond have.

Ripple Effect

The Detroit Free Press is also not seeing any silver lining in the UAW strike against GM:

Well, this is just what Michigan needed. And the U.S. auto industry. And the ever-shrinking United Auto Workers union.

For the first time in 31 years, the UAW called a national strike Monday, unable to settle a new contract with General Motors Corp. The UAW has 73,000 members working at 82 GM facilities across the country, and the longer they stay out, the further the ripples will spread, to suppliers, retailers and businesses that count UAW members among their customers. The strike may have caught many unprepared, given the widespread belief that because the industry is in such rough shape, this was not going to be the year for a walkout.

"This is horrible, but we're die-hard union, so we have to," one worker at a Wisconsin GM plant told the Associated Press. "We got a mortgage, two car payments and tons of freaking bills."

I'm thinking that this is not going to turn out well for anyone involved. Least of all the workers.

Party Like It’s !970

Daniel Howes from the Detroit News takes a look at the United Auto Workers strike against General Motors. He thinks that the tactics of 1970 are not going to work in 2007.

But it's not 1970, except here in Michigan. GM doesn't dominate its home market; foreign-owned rivals do. The UAW doesn't represent the growing work forces at rivals operating down South — and probably won't anytime soon should this walkout become a recruiting poster for anti-UAW forces from Alabama to Texas.

What happened? For most of the 10 days since the Sept. 14 contract deadline, the signs pointed toward a contract in the most consequential bargaining this industry has seen in two generations. UAW President Ron Gettelfinger signaled the union's desire to avoid a costly walkout, even as GM expressed optimism it would reach a deal to dramatically improve its competitiveness without harming workers.

Not anymore. In one swift act, the UAW jumped from the small artillery of local "bottleneck" strikes to nuclear weapons, sending all 73,000 UAW-GM members out on strike for the first time in 37 years. After this, which began at 11 a.m. Monday, there is nothing left in the union's arsenal.

The union says the strike is over job security. The hard fact of the matter is that General Motors is fighting for survival right now.

In union parlance, this is the "heat-and-light show" writ large — the union turns up the heat until the company sees the light. Except that this company, GM, and its crosstown rivals are less the Big Three of old than they've ever been.

They're bleeding cash. Their market share is declining. Their debt is rated "junk." They're growing overseas where they are unencumbered by 70-plus years of tradition, bargaining history and a crushing, backward culture. They're selling assets so furiously that they look like companies either preparing for a confrontation with labor or in partial liquidation or both.

Most importantly, their competition isn't standing still. The Chinese and the Indians are pushing the Koreans. The Koreans are pushing the Japanese. The Japanese are pushing the Germans, French, Italians and Americans.

How secure will the jobs be if there is no company left?

Trade Progress - Maybe

The Washington Post editorializes on some progress in getting free-trade agreements through the Democratic-controlled Congress. It appears that a deal has been reached with Peru and that the House will sign off on it. But the Post also points out that it should not have been necessary to drag it out and that there is much work left to do.

IT APPEARS that the Democratic Congress and the government of Peru have finally gotten to "yes" on the pending free-trade agreement that the Bush administration and Lima negotiated earlier this year. Last week, House Ways and Means Committee Chairman Charles B. Rangel (N.Y.) and trade subcommittee Chairman Sander M. Levin (Mich.) circulated a "Dear Democratic Colleague" letter signaling members of their party that it was now safe to vote for the pact. Mr. Rangel and Mr. Levin assured Democrats that Peru has adjusted its labor laws to meet international standards. A vote on the bill is due in Mr. Rangel's committee tomorrow; the Senate Finance Committee approved it on Friday, 18 to 3. An October floor vote on final passage is within reach.

Much of the credit for the progress belongs to Mr. Rangel and Peruvian President Alan Garcia, each of whom showed considerable flexibility and political skill in recasting the agreement in a form that House Democrats could accept — without sacrificing its tariff-slashing essence. They spent a good part of the summer dancing this minuet. But let us also be clear that it should never have been necessary in the first place. On May 10, after the Bush administration agreed to incorporate labor and environmental conditions in free-trade agreements, Democratic leaders pledged swift approval for the Peru deal and a similar one with Panama, only to renege a month later under pressure from organized labor. That sent the Peru deal into the purgatory from which it has now, seemingly, been rescued.

That purgatory is pretty crowded right now, too. Agreements with Columbia, Panama and South Korea languish there because of anti-trade pressure. Despite the pressure group's position, it is in America's best interest to make sure we are supporting democratic governments, particularly in South America. We must not turn our backs on friends, leaving them vulnerable to pressure form the budding dictatorship of (T)Hugo Chavez. Protectionism hurts the US and her allies.

The Unfriendly Skies

John Fund reports on yet another thing to worry about in this modern age: a staggering increase in flight delays and probably service cuts by airlines. The problem? A completely outdated air control system - and no workable method to fix it.

If you think there are more airport delays and cancellations than ever, you're right. The percentage of late flights has doubled since 2002. And as bad as things are now, they're about to get worse. The Federal Aviation Administration predicts there will be 36% more people flying by 2015. If the U.S. doesn't dramatically expand the capacity of its overburdened air traffic control system, the airlines won't be able to keep up with demand and ticket prices will skyrocket.

It ought to be an issue in the presidential campaign that the FAA isn't equipped to clean up this mess. "The FAA as currently structured is impossible to run efficiently," says Langhorne Bond, who ran the agency from 1977 to 1981. BusinessWeek reports the air traffic control network runs on software that is so outdated that there are only six programmers left in the U.S. who are able to update the code. The FAA's efforts to move to a satellite-based system have been plagued by cost overruns and performance shortfalls.

The U.S. Chamber of Commerce warns that if the U.S. doesn't do something dramatic to upgrade its aviation infrastructure, the results will be "devastating." Rationing is already rearing its head as airlines deal with capacity limits by eliminating marginal routes in order to focus on more-profitable ones.

This would mean that smaller airports will be a thing of the past - as is actually already happening. Fund points to the way Europe and Canada have fixed this problem - by forming either public-private corporations or even outright, self-supporting private concerns. It is working very well in Canada.

Since 1996, planes in Canada have been controlled by Nav Canada, an independent user-owned corporation that has unsnarled Canadian airspace. Nav Canada pays for itself through user fees and has thus been able to invest vast sums in new technology while cutting overhead, increasing staffing and raising the salaries of controllers. Airline-related delays have declined and customer service improved.

No matter how it is addressed, it needs to be done soon. Or the skies are going to get even more unfriendly than they already are.

About That Doubling Down

Here's a bit of confirmation that doubling down on America is not a bad idea at all. We lead the world - by a lot - in productivity. So says the much-vaunted-by-the-left United Nations.

GENEVA - American workers stay longer in the office, at the factory or on the farm than their counterparts in Europe and most other rich nations, and they produce more per person over the year.

They also get more done per hour than everyone but the Norwegians, according to a U.N. report released Monday, which said the United States "leads the world in labor productivity."

The average U.S. worker produces $63,885 of wealth per year, more than their counterparts in all other countries, the International Labor Organization said in its report. Ireland comes in second at $55,986, followed by Luxembourg at $55,641, Belgium at $55,235 and France at $54,609.

The productivity figure is found by dividing the country's gross domestic product by the number of people employed. The U.N. report is based on 2006 figures for many countries, or the most recent available.

Only part of the U.S. productivity growth, which has outpaced that of many other developed economies, can be explained by the longer hours Americans are putting in, the ILO said.

The U.S., according to the report, also beats all 27 nations in the European Union, Japan and Switzerland in the amount of wealth created per hour of work — a second key measure of productivity.

Norway, which is not an EU member, generates the most output per working hour, $37.99, a figure inflated by the country's billions of dollars in oil exports and high prices for goods at home. The U.S. is second at $35.63, about a half dollar ahead of third-place France.

The figures for Norway are skewed, as the report admits, by the gas and oil revenue of their offshore drilling operations. So, still think everything is gloomy in the US? Really?

Fed Cuts Interest Rate, London Stocks Rally

The Federal Reserve made an abrupt half-percentage point cut in the discount rate.

WASHINGTON - The Federal Reserve, declaring that increased economic uncertainty poses risks for U.S. business growth, announced Friday that it has approved a half-percentage point cut in its discount rate on loans to banks.

The action was the most dramatic effort yet by the central bank to restore calm to global financial markets which have been roiled in the past week by a widening credit crisis.

The decision means that the discount rate, the interest rate that the Fed charges to make direct loans to banks will be lowered to 5.75 percent, down from 6.25 percent.

The Fed did not change its target for the more important federal funds rate, which has remained at 5.25 percent for more than a year.

However, it has been infusing billions of dollars in money into the banking system over the past week to keep that rate from rising above the target level.

In premarket trading, U.S. stock futures reversed previous declines after the Fed's announcement.

Reaction in the London stock market was immediate - and very positive:

London's leading blue-chip shares jumped sharply at lunchtime after the US Federal Reserve cut interest rates to ease the credit crunch. The FTSE 100 index rebounded more than 200 points.

The Fed said that the downside risks to growth of deteriorating financial conditions had increased appreciably and that it was prepared to act as needed to mitigate any adverse effects on the economy.

At just after 1.30pm, the FTSE was up 225.6 points at 6,084.5, and the futures markets reversed earlier pessimism and pointed to a higher opening for Wall Street.

That's a good thing.

UPDATE: The Fed's press release.

Dow Jones Board Okays Sale

The board of Dow Jones has agreed to accept the buyout deal from Rupert Murdoch's News Corp. The matter is now in the hands of the Bancroft family. They still control Dow Jones and appear to be having a family spat over the whole matter, so the outcome is still in doubt.

NEW YORK - The fate of Dow Jones & Co. now rests with the Bancroft family, the company's longtime controlling shareholders, who must decide whether to sell the publisher of The Wall Street Journal to Rupert Murdoch's News Corp., a global media conglomerate that owns Twentieth Century Fox and the Fox News Channel.

The board of Dow Jones said late Tuesday it was ready to sign off on Murdoch's proposal to buy the company for $5 billion. However, the key remains with the Bancroft family, whose three dozen members have been deeply divided over whether to sell to Murdoch. The are expected to meet Monday to discuss the deal.

Dow Jones wound up agreeing to Murdoch's initial offer without a last-minute price increase, as efforts by some board members and a union representing Wall Street Journal reporters failed to come up with viable alternatives to Murdoch's $60-per-share bid, which represents a premium of about 65 percent over where Dow Jones shares were trading before the offer became public in early May.

If the Bancrofts do sink the deal, it would surely result in a sharp drop in Dow Jones shares and the likelihood of shareholder lawsuits.

Actually, the premium Murdoch offered in his bid indicates he is very, very serious about acquiring Dow Jones. This will continue to be interesting. The board must have been satisfied with assurances of editorial and journalist freedom at the WSJ or they would not have signed off.

March Of The Sockpuppets

The New York Times notices the ruckus created by the exposure of John Mackey, CEO of Whole Foods, as a sockpuppet. It is pretty hard on Mackey.

For executives like Mr. Mackey, sock-puppeting is probably more gratifying than effective in swaying opinion or stock prices — until they get caught. Then it is embarrassing, and for chief executives, at least, potentially illegal. Laws carefully prescribe what executives of public companies can say. The Wall Street Journal reported on its Web site Friday night that the Securities and Exchange Commission had begun a formal inquiry into whether Mr. Mackey violated security laws with the posts. (Ed Note: The NYT has corrected that last bit. The SEC inquiry is informal.)

Whole Foods maintains that Mr. Mackey did not break the law because he did not disclose any confidential company information.

But the consequences could be damaging to the company, if not to Mr. Mackey. Securities lawyers say the Federal Trade Commission might use the comments to scuttle Whole Foods’ proposed acquisition of a competitor, Wild Oats, a company Mr. Mackey derided in his posts. Wild Oats may also use the comments as the basis of a lawsuit against Whole Foods.

The most interesting ting in the article comes at the very end, however. At least one industry insider is convinced that Mackey is only the tip of the iceberg.

Paul Kedrosky, a venture capitalist in San Diego and author of the blog Infectious Greed, said he thinks that business people are increasingly resorting to sock-puppetry. “I’m convinced it’s broader than anybody knows,” he said, “I’m convinced this is the tip of the iceberg.”

Mr. Kedrosky said that one chief executive recently told him that he almost had to “chew off my right arm to keep from participating” in an online forum. He declined to name the company but said, “It’s a hard temptation to walk away from.”

Oh, well. It could be open season on sockpuppets soon. We were lucky enough to get a candid picture of Mackey so folks will know what he looks like.

Whole Foods CEO John Mackey strikes an impromptu Pose

Deal Reached On Dow Jones

A tentative deal has been reached for Rupert Murdoch's News Corp to buy Dow Jones. The deal will be put to a vote with the board of Dow Jones later today (according to the WSJ website. The AP has different information.) The Bancroft family is apparently still divided over the deal, however.

Negotiators from the two companies on Monday reached an agreement in principle for the original $5 billion that Murdoch had offered, and it will go to Dow Jones' board Tuesday for its approval, the Journal said, citing unnamed people familiar with the situation.

The deal would still need approval from Dow Jones' controlling shareholders, the Bancroft family, which has been divided on a sale to News Corp. because of concerns over whether the Journal would maintain its editorial independence.

Christopher Bancroft, a Dow Jones director, recently has been approaching major stockholders in an attempt to buy enough shares of Dow Jones to block a sale.

Michael B. Elefante, the Bancroft family's lead trustee, has scheduled a meeting for Thursday to present the agreement to the family and is expected to give the family members several days to make a decision, the Journal reported.

Wouldn't you like to be able to attend that meeting. It will be messy, I'm sure.

Whole Sockpuppets

This is actually a few days old, but I just caught it. In what can only be considered a bizarre case of serious weirdness, the CEO of the Whole Foods company, John Mackey, has been caught posting sockpuppet comments on Yahoo chat rooms dedicated to stock trading. And the Security and Exchange Commission is going berserk on him for it. The posts go all the way back to 1999 and continued until quite recently.

Mackey, Whole Foods CEO, was outed this week as "Rahodeb," a frequent visitor to Yahoo chat rooms dedicated to stock trading. In his comments, Rahodeb was unstintingly bullish on the prospects of Whole Foods' (WFMI) continuing growth, and frequently critical of a rival company, Wild Oats. (OATS)

It's not clear whether he violated any securities laws in his pseudonymous postings, but his comments could end up hurting Whole Foods shareholders in another way. The Federal Trade Commission is using some of his remarks to bolster its contention that Whole Foods' planned acquisition of Wild Oats, announced in February, would be anti-competitive.

In a court filing Tuesday, the FTC referred to Mackey's anonymous postings to back up its position.

Corporate governance experts and image consultants say that Mackey's exposure as an anonymous commentator could cause the company's board to question his leadership abilities.

"This evidence raises more doubts about his sanity than his criminality," says Jack Coffee, a securities law expert at Columbia Law School. "The merger is a major business strategy, and he's undercut it with reckless, self-destructive behavior. It's a little weird, like catching him as a Peeping Tom."

"It's more of an embarrassment than an issue of profound ethical and legal consequence," says Eric Dezenhall, a crisis communications consultant. "It shows a degree of obsessiveness that's a little disturbing."

Wednesday, after The Wall Street Journal identified Mackey as Rahodeb, Whole Foods acknowledged that the CEO had posted anonymous comments from 1999 through 2006 using the handle, an anagram of his wife's name, Deborah.

This is unhinged behavior at best. But on the bright side, Salon should be offering Mackey a job soon. They like sockpuppets. Holmes may have to get on the case.

Murdoch Buys Dow Jones: Report

The Business is reporting that a deal has been reached selling Dow Jones (and therefore the Wall Street Journal) to Rupert Murdoch.

Rupert Murdoch has succeeded with his $5 billion bid for Dow Jones, owners of the Wall Street Journal, according to sources acting for the Dow Jones board. Negotiations have been completed and the board is confident the terms of the deal will be accepted by the Bancroft family, which controls a majority of voting shares in Dow Jones, over the next few days. A formal announcement is expected next week.

Murdoch’s News Corporation will take over America’s most prestigious financial publisher at the price he originally offered on April 17, when he proposed $60 a share when the stock was trading at $36, a 67% premium.

After lengthy talks involving many lawyers, the deal includes a legally-enforceable agreement with Murdoch which will supposedly guarantee the integrity and independence of the Wall Street Journal’s journalism.

No hint of this on the other wires yet, so this is subject to correction.

UPDATE: And Dow Jones is reporting that the story is false.

NEW YORK -(Dow Jones)- Dow Jones & Co. (DJ) denied a press report Friday that said Rupert Murdoch has agreed with the Dow Jones board to terms of a $5 billion bid for the company.

A spokeswoman for Dow Jones said the report from The Business was "false." She said there has been "no change" in ongoing negotiations on the takeover offer from News Corp. (NWS). "The only agreement is on editorial independence," said the spokeswoman, Andrea Grinbaum.