At Harkham Hillel Hebrew Academy in Beverly Hills, increasing numbers of cash-strapped families are asking for financial assistance or more time to pay tuition.
Trustees at Yeshivat Yavneh in Hancock Park are setting aside additional funds for financial aid even as some families consider home schooling.
In Orange County, Morasha Jewish Day School lost 15 financially ailing families over the summer and will close after this term.
Jewish day schools in Southern California and across the nation face an economic crisis that is prompting calls for major education reforms and increased support from the wider Jewish community.
The Orthodox Union, a New York-based education and service organization, recently proposed a plan to create stripped-down, low-cost schools targeted at families who can't afford to send their children to established institutions.
Other proposals drafted by the group include nationwide, low-cost health insurance for staff and teachers, a solar energy conversion plan and a dedicated fund to which the local Orthodox community would contribute, whether or not they have children in school.
"If things continue the way they are, schools are going to be so cost-prohibitive the system will collapse," said Rabbi Saul Zucker, director of educational services at the Orthodox Union. "There are Orthodox Jewish students attending public schools because of financial issues that a generation ago would never have, and young married couples having fewer children because of tuition costs."
About 200,000 students attend more than 700 Jewish day schools in the United States. Tuitions at the schools average about $14,000 and in the past five years have typically increased about 7% per year, outpacing wage increases for most families, Zucker said.
The most radical of Zucker's proposals would create alternative schools that would charge reduced fees of about $6,500 annually but operate with larger class sizes, scaled-down computer labs and no extracurricular activities unless staffed by volunteers.
Zucker acknowledged concerns about creating a two-tier system but predicted that parents would go along if it were a choice between a basic Jewish education or public schools.
In Los Angeles, 36 Jewish day schools serve about 10,000 students, according to the Bureau of Jewish Education of Greater Los Angeles. About 40% of Jewish day students in Los Angeles receive financial aid, a number expected to grow even as philanthropic dollars for some schools decrease.
"While there are a handful of philanthropists who heavily support their favorite Jewish institution, until Jewish education becomes more of a priority for the larger Jewish community, we will have this crisis," said Rabbi Moshe Dear, head of school at Yeshivat Yavneh.
His school, which charges $15,000 in annual tuition, is offering delayed payment plans. But Dear said he has heard that some parents are considering home schooling to save money.
Jewish schools are suffering many of the same economic pressures as secular prep schools and parochial campuses, but many shoulder the added expense of a religious-training curriculum that requires additional staff.
Orthodox families also tend to be larger than many others, which contributes to a heavier tuition burden, Dear and others said. And most consider a Jewish education -- with its emphasis on religious traditions -- indispensable.
That is the case for parents Gil and Iris Harel, who have two children attending Hillel, another at a local Jewish high school and a son in college.
But it has been a financial struggle to keep their children in school. Family vacations, investments, choice of vehicles and day-to-day purchases such as clothing have been affected as the "uncertainty of the economy harms everyone," said Gil Harel, a specialized general contractor.
Meanwhile, there will probably be more scenarios like that in Rancho Santa Margarita, where Morasha Jewish Day School, a pre-kindergarten-through-sixth-grade campus with 60 students, is closing after 23 years.
Even though the school expected to increase enrollment next year, it could not close a $200,000 deficit, said head of school Eve Fein. Morasha lost 15 families this year and had trouble selling two acres of property when the real estate market crashed.
"We had over 50% of our students on tuition assistance and were happy to be able to do so because we didn't want Jewish education to be just for the elite or rich," Fein said. "But it caught up with us."
Monday, May 18, 2009
Found money: L.A. council close to compromise on LAPD [Updated]
threatened cut to the ranks of the Los Angeles Police Department apparently will be averted in a compromise reached by members of the City Council.
The council has been considering a police hiring freeze as one way to reach the $530 million in cuts needed to close the city’s looming budget shortfall.
Over the weekend, however, aides to the council and Mayor Antonio Villaraigosa said they found enough money to hire replacements for up to 480 of the 520 officers who typically leave each year through retirements and such. Apparently, the city’s share of property taxes next year will be $20 million greater than expected, and $4 million provided by the federal government could also be used to hire officers. Plus, the council may decide to use some of the $18 million held in city reserves.
The money will only allow the city to maintain close to its current level of police staffing. It won’t be enough for Villaraigosa to continue his goal to grow the Police Department by 1,000 officers, one of the top priorities of his administration.
The council is expected to vote on the compromise this evening.
-- Phil Willon
A threatened cut to the ranks of the Los Angeles Police Department apparently will be averted in a compromise reached between the City Council and Mayor Antonio Villaraigosa.
The council has been considering a police hiring freeze as one way to reach the $530 million in cuts needed to close the city’s looming budget shortfall.
Over the weekend, however, aides to the council and mayor said they found enough money to hire replacements for up to 480 of the 520 officers who typically leave each year through retirements and such. Apparently, the city’s share of property taxes next year will be $20 million greater than expected, and $4 million provided by the federal government could also be used to hire officers. Plus, the council may decide to use some of the $18 million held in city reserves.
The money will only allow the city to maintain close to its current level of police staffing. It won’t be enough for Villaraigosa to continue his goal to grow the Police Department by 1,000 officers, one of the top priorities of his administration.
The council is expected to vote on the compromise this evening
The council has been considering a police hiring freeze as one way to reach the $530 million in cuts needed to close the city’s looming budget shortfall.
Over the weekend, however, aides to the council and Mayor Antonio Villaraigosa said they found enough money to hire replacements for up to 480 of the 520 officers who typically leave each year through retirements and such. Apparently, the city’s share of property taxes next year will be $20 million greater than expected, and $4 million provided by the federal government could also be used to hire officers. Plus, the council may decide to use some of the $18 million held in city reserves.
The money will only allow the city to maintain close to its current level of police staffing. It won’t be enough for Villaraigosa to continue his goal to grow the Police Department by 1,000 officers, one of the top priorities of his administration.
The council is expected to vote on the compromise this evening.
-- Phil Willon
A threatened cut to the ranks of the Los Angeles Police Department apparently will be averted in a compromise reached between the City Council and Mayor Antonio Villaraigosa.
The council has been considering a police hiring freeze as one way to reach the $530 million in cuts needed to close the city’s looming budget shortfall.
Over the weekend, however, aides to the council and mayor said they found enough money to hire replacements for up to 480 of the 520 officers who typically leave each year through retirements and such. Apparently, the city’s share of property taxes next year will be $20 million greater than expected, and $4 million provided by the federal government could also be used to hire officers. Plus, the council may decide to use some of the $18 million held in city reserves.
The money will only allow the city to maintain close to its current level of police staffing. It won’t be enough for Villaraigosa to continue his goal to grow the Police Department by 1,000 officers, one of the top priorities of his administration.
The council is expected to vote on the compromise this evening
Bank Stocks Help Rally the Markets
Wall Street’s recent buying spree, interrupted last week, revved up again on Monday.
Traders seized on last week’s stock declines as a chance to get back in at lower prices, and they pushed shares of financial firms sharply higher. Rising oil prices lifted energy producers, and a better than-expected profit at the home improvement chain Lowe’s helped to bolster consumer stocks.
At the close, the Dow Jones industrial average was up 235.44 points or 2.8 percent, at 8,504.08. The broader Standard & Poor’s 500-stock index rose 26.83 points, or 3 percent, to close at 909.71, while the Nasdaq was up 52.22 points, 3.1 percent, at 1,732.36. Last week the Dow fell 3.6 percent and the S.&P. 500 skidded 5 percent.
Shares of Bank of America were up nearly 10 percent at $11.73 after analysts at Goldman Sachs named the company a “conviction buy.” The financial services provider Corporation rose 8.5 percent after announcing that it would raise more than $1 billion in stock and debt not backed up by the government’s liquidity-guarantee program as it seeks to repay its bailout funds.
Bailout recipients like Wells Fargo and Morgan Stanley have been raising new unsecured capital in recent weeks, intending to get out of the government’s Troubled Asset Relief Program.
Weaker retail sales helped to stifle some of the momentum of Wall Street’s recent rally last week, raising concerns that talk of economic hope and “green shoots” of recovery could be overblown. But on Monday, many investors used the market dip as an excuse to buy.
“The pullback last week created a little bit of breathing room, and buyers might be more apt to step in at these levels,” said Todd Salamone, senior vice president of research at Schaeffer’s Investment Research.
Shares of Lowe’s, the home improvement chain, rose 8.1 percent to $19.94 after it reported lower earnings that nevertheless beat analysts’ expectations, and rival Home Depot ended up 6.6 percent at $26.02. The results warmed hopes that wary consumers would come out of hibernation this spring and take on building projects and home renovations, breathing some life into the construction and home-improvement industries.
Also, the National Association of Home Builders said its index of builder confidence in the housing market rose in May, ticking up to 16 points from 14 last month. Shares of large home builders like Toll Brothers, Pulte Homes and Centex paced the broader markets.
Other retailers also gained ground after sliding last week. Shares of Wal-Mart Stores were 3.7 percent higher at $49.92, and department stores including Macy’s, Kohl’s and J. C. Penney were all higher.
Although stock markets have surged more than 30 percent from their 12-year lows set in early March, some analysts warn that investors seem to be betting on a quick economic recovery, one that may not materialize.
“That’s going to be quite difficult,” said John Brady, a senior vice president at MF Global. “Unemployment is going to move higher, and consumers are going to continue to increase savings.”
Interest rates were slightly higher. The Treasury’s benchmark 10-year note fell 26/32, to 99 3/32, and the yield, which moves in the opposite direction from the price, was 3.23 percent, up from 3.13 percent late Friday.
Following are the results of Monday’s Treasury auction of three- and six-month bills:
Traders seized on last week’s stock declines as a chance to get back in at lower prices, and they pushed shares of financial firms sharply higher. Rising oil prices lifted energy producers, and a better than-expected profit at the home improvement chain Lowe’s helped to bolster consumer stocks.
At the close, the Dow Jones industrial average was up 235.44 points or 2.8 percent, at 8,504.08. The broader Standard & Poor’s 500-stock index rose 26.83 points, or 3 percent, to close at 909.71, while the Nasdaq was up 52.22 points, 3.1 percent, at 1,732.36. Last week the Dow fell 3.6 percent and the S.&P. 500 skidded 5 percent.
Shares of Bank of America were up nearly 10 percent at $11.73 after analysts at Goldman Sachs named the company a “conviction buy.” The financial services provider Corporation rose 8.5 percent after announcing that it would raise more than $1 billion in stock and debt not backed up by the government’s liquidity-guarantee program as it seeks to repay its bailout funds.
Bailout recipients like Wells Fargo and Morgan Stanley have been raising new unsecured capital in recent weeks, intending to get out of the government’s Troubled Asset Relief Program.
Weaker retail sales helped to stifle some of the momentum of Wall Street’s recent rally last week, raising concerns that talk of economic hope and “green shoots” of recovery could be overblown. But on Monday, many investors used the market dip as an excuse to buy.
“The pullback last week created a little bit of breathing room, and buyers might be more apt to step in at these levels,” said Todd Salamone, senior vice president of research at Schaeffer’s Investment Research.
Shares of Lowe’s, the home improvement chain, rose 8.1 percent to $19.94 after it reported lower earnings that nevertheless beat analysts’ expectations, and rival Home Depot ended up 6.6 percent at $26.02. The results warmed hopes that wary consumers would come out of hibernation this spring and take on building projects and home renovations, breathing some life into the construction and home-improvement industries.
Also, the National Association of Home Builders said its index of builder confidence in the housing market rose in May, ticking up to 16 points from 14 last month. Shares of large home builders like Toll Brothers, Pulte Homes and Centex paced the broader markets.
Other retailers also gained ground after sliding last week. Shares of Wal-Mart Stores were 3.7 percent higher at $49.92, and department stores including Macy’s, Kohl’s and J. C. Penney were all higher.
Although stock markets have surged more than 30 percent from their 12-year lows set in early March, some analysts warn that investors seem to be betting on a quick economic recovery, one that may not materialize.
“That’s going to be quite difficult,” said John Brady, a senior vice president at MF Global. “Unemployment is going to move higher, and consumers are going to continue to increase savings.”
Interest rates were slightly higher. The Treasury’s benchmark 10-year note fell 26/32, to 99 3/32, and the yield, which moves in the opposite direction from the price, was 3.23 percent, up from 3.13 percent late Friday.
Following are the results of Monday’s Treasury auction of three- and six-month bills:
In Advising U.S., BlackRock Thrives in Uncertain Time
The financial crisis has ravaged many a Wall Street giant, but it has also produced a handful of winners. BlackRock, a money manager that is much admired but little known outside financial circles, is fast emerging as one of the nation’s financial powerhouses.
BlackRock, which started in a one-room office 21 years ago, now manages $1.3 trillion in assets for big private clients, including hedge funds and foreign governments.
But it is the company’s highly prized role as a government adviser and contractor that is now drawing attention.
By dint of its expertise and track record, it has won contracts to help the government manage the complex rescues of Bear Stearns, the American International Group and Citigroup.
It also won a bid to carry out a Federal Reserve program to stimulate the moribund housing market, and it has been hired to help evaluate Fannie Mae and Freddie Mac, the government-created mortgage finance giants.
Other firms have been hired by the government to assist with the bailout, illustrating the increasingly symbiotic relationship between Washington and Wall Street.
It makes sense for the government to turn to financial experts for help, but BlackRock has become so ubiquitous that some lawmakers, federal auditors and watchdog groups are now asking if the firm does too much, and if its roles as government adviser, giant federal contractor and private money manager will inevitably collide.
Can a company that is being paid to price and sell troubled assets for the government buy the same kinds of assets for private clients without showing preference? And should the government seek counsel from a company whose clients stand to make or lose billions if those policies are enacted?
“They have access to information when the Federal Reserve will try to sell securities, and what price they will accept. And they have intricate financial relations with people across the globe,” Senator Charles E. Grassley, Republican of Iowa, said. “The potential for a conflict of interest is great and it is just very difficult to police.”
Without naming BlackRock, federal auditors have warned that any private parties that purchase distressed assets on the government’s behalf could use generous federal subsidies to overpay, artificially pushing up the price of similar assets that they manage for their own portfolios.
“In other words, the conflict results in an enormous profit for the fund manager at the expense of the taxpayer,” Neil M. Barofsky, the special inspector general for the Troubled Asset Relief Program, wrote in a report last month.
Some of BlackRock’s advice to the government has in fact helped the company. For example, in its role as an informal adviser, it urged the Fed to intervene in the markets in a way that made investors feel it was safe to put money back into money market funds, including BlackRock’s.
The Federal Reserve will not reveal what it is paying BlackRock, disclosing only that on one of its five contracts, it will pay at least $71 million over three years to BlackRock and other firms to manage a portfolio of mortgage assets once owned by Bear Stearns. BlackRock says that rate is discounted and that the fees it collects on bailout-related work are only a tiny portion of its overall revenue.
BlackRock has many admirers for the range and the quality of services it has provided to the federal government. James R. Wilkinson, who served until January as the chief of staff to the former Treasury secretary, Henry M. Paulson Jr., described BlackRock’s co-founder and chief executive, Laurence D. Fink, as a “patriot.”
He added, “He is willing to help our country when we need it most.”
Mr. Fink said he was proud that his company was helping pull the economy back from the brink, and he bristled at the suggestion of impropriety.
Treasury and Fed officials have begun to take precautions. BlackRock’s dominance has prompted the Fed to seek an alternative partner as it prepares to expand its rescue efforts, a government official close to the situation said, requesting anonymity because the actions could affect the market.
And Treasury is holding off announcing the winning bidders for perhaps the most anticipated of all the bailout programs — the $1 trillion federally subsidized plan to purchase troubled assets from banks — in part to make sure the bidders cannot game the system. BlackRock is widely expected to win one of the contracts, in which the government would be a partner with private firms.
Andrew Williams, a Treasury Department spokesman, said that BlackRock had no special status and was among a large group of industry players consulted about bailout programs.
“We take this very seriously,” Mr. Williams said. “We talk to a lot of people — as we should.”
Now 47 percent owned by Bank of America, BlackRock offers traditional services like managing other people’s money. But the unit that has grabbed most of the attention lately is BlackRock Solutions, whose sophisticated software, fine-tuned over many years, can take apart the thousands of loans in a mortgage-backed security to estimate what it is now worth and what it will most likely be worth in the future, helping investors decide whether to hold or sell the asset.
During one frantic weekend in March 2008, when Bear Stearns was collapsing, BlackRock’s omnipresence became evident.
On a Saturday, the firm was hired by JPMorgan Chase — which was considering buying Bear Stearns — to value one type of Bear Stearns security.
The next day the Federal Reserve hired BlackRock, through a no-bid contract, to analyze and eventually sell off a $30 billion pool of risky mortgage securities that JPMorgan did not want.
BlackRock, which started in a one-room office 21 years ago, now manages $1.3 trillion in assets for big private clients, including hedge funds and foreign governments.
But it is the company’s highly prized role as a government adviser and contractor that is now drawing attention.
By dint of its expertise and track record, it has won contracts to help the government manage the complex rescues of Bear Stearns, the American International Group and Citigroup.
It also won a bid to carry out a Federal Reserve program to stimulate the moribund housing market, and it has been hired to help evaluate Fannie Mae and Freddie Mac, the government-created mortgage finance giants.
Other firms have been hired by the government to assist with the bailout, illustrating the increasingly symbiotic relationship between Washington and Wall Street.
It makes sense for the government to turn to financial experts for help, but BlackRock has become so ubiquitous that some lawmakers, federal auditors and watchdog groups are now asking if the firm does too much, and if its roles as government adviser, giant federal contractor and private money manager will inevitably collide.
Can a company that is being paid to price and sell troubled assets for the government buy the same kinds of assets for private clients without showing preference? And should the government seek counsel from a company whose clients stand to make or lose billions if those policies are enacted?
“They have access to information when the Federal Reserve will try to sell securities, and what price they will accept. And they have intricate financial relations with people across the globe,” Senator Charles E. Grassley, Republican of Iowa, said. “The potential for a conflict of interest is great and it is just very difficult to police.”
Without naming BlackRock, federal auditors have warned that any private parties that purchase distressed assets on the government’s behalf could use generous federal subsidies to overpay, artificially pushing up the price of similar assets that they manage for their own portfolios.
“In other words, the conflict results in an enormous profit for the fund manager at the expense of the taxpayer,” Neil M. Barofsky, the special inspector general for the Troubled Asset Relief Program, wrote in a report last month.
Some of BlackRock’s advice to the government has in fact helped the company. For example, in its role as an informal adviser, it urged the Fed to intervene in the markets in a way that made investors feel it was safe to put money back into money market funds, including BlackRock’s.
The Federal Reserve will not reveal what it is paying BlackRock, disclosing only that on one of its five contracts, it will pay at least $71 million over three years to BlackRock and other firms to manage a portfolio of mortgage assets once owned by Bear Stearns. BlackRock says that rate is discounted and that the fees it collects on bailout-related work are only a tiny portion of its overall revenue.
BlackRock has many admirers for the range and the quality of services it has provided to the federal government. James R. Wilkinson, who served until January as the chief of staff to the former Treasury secretary, Henry M. Paulson Jr., described BlackRock’s co-founder and chief executive, Laurence D. Fink, as a “patriot.”
He added, “He is willing to help our country when we need it most.”
Mr. Fink said he was proud that his company was helping pull the economy back from the brink, and he bristled at the suggestion of impropriety.
Treasury and Fed officials have begun to take precautions. BlackRock’s dominance has prompted the Fed to seek an alternative partner as it prepares to expand its rescue efforts, a government official close to the situation said, requesting anonymity because the actions could affect the market.
And Treasury is holding off announcing the winning bidders for perhaps the most anticipated of all the bailout programs — the $1 trillion federally subsidized plan to purchase troubled assets from banks — in part to make sure the bidders cannot game the system. BlackRock is widely expected to win one of the contracts, in which the government would be a partner with private firms.
Andrew Williams, a Treasury Department spokesman, said that BlackRock had no special status and was among a large group of industry players consulted about bailout programs.
“We take this very seriously,” Mr. Williams said. “We talk to a lot of people — as we should.”
Now 47 percent owned by Bank of America, BlackRock offers traditional services like managing other people’s money. But the unit that has grabbed most of the attention lately is BlackRock Solutions, whose sophisticated software, fine-tuned over many years, can take apart the thousands of loans in a mortgage-backed security to estimate what it is now worth and what it will most likely be worth in the future, helping investors decide whether to hold or sell the asset.
During one frantic weekend in March 2008, when Bear Stearns was collapsing, BlackRock’s omnipresence became evident.
On a Saturday, the firm was hired by JPMorgan Chase — which was considering buying Bear Stearns — to value one type of Bear Stearns security.
The next day the Federal Reserve hired BlackRock, through a no-bid contract, to analyze and eventually sell off a $30 billion pool of risky mortgage securities that JPMorgan did not want.
Those multiple roles created the potential for conflict, BlackRock’s own executives acknowledge. The company would be trying to sell assets on behalf of the government that were similar to assets it buys and sells for thousands of other private investors.
For example, if BlackRock Solutions signaled to BlackRock’s asset managers the timing of a planned sale, that could benefit BlackRock’s investors, but harm taxpayers and the Federal Reserve.
“We were very sensitive to it,” said Mark Wiedman, a managing director at BlackRock Solutions.
To avoid this, BlackRock Solutions and BlackRock asset management employees are housed in separate buildings, working on separate computer networks. The firm also sells the Bear Stearns securities only through an independent broker, meaning BlackRock does not know who the buyers are. The Fed, in addition, has prohibited BlackRock from knowingly buying any of the Fed-controlled assets.
But some remain skeptical that such firewalls really protect taxpayers.
“How can one company have so much control over the process?” said Scott Amey, general counsel at the Project on Government Oversight, a Washington-based non-profit group. “Isn’t there somebody else they can turn to?”
The concerns about BlackRock also extend to its role as an informal adviser. Mr. Fink has been known to call Treasury officials several times a day, Bush and Obama administration officials said, between occasional visits.
Last fall Mr. Fink urged the Fed to take action to unlock the frozen market for short-term lending to companies — a business that BlackRock’s money market mutual funds played a major role in. Investors had withdrawn $48 billion from those BlackRock funds, but once the Fed adopted the policy Mr. Fink was advocating, the money came pouring back.
Mr. Fink said his advice was for the good of the economy, and that his was one of many industry voices calling for such a move.
Still, Mr. Fink has not been shy in boasting about his access. “I mean it is a great seal of approval,” Mr. Fink told Wall Street analysts in December, as he simultaneously coached the Bush administration and the incoming Obama team. “We are asked to help navigate new policy. I’m running out of here to go meet with Treasury to talk about plans later this afternoon.”
But it is clear that the income from fees is a lesser benefit than the buffing of its global reputation, a point Mr. Fink has made. “It gives comfort to our clients that we are being involved in some of the solutions of our economy, and it allows us to show our clients that we are being asked in these difficult situations to provide advice,” he said at the same event.
BlackRock has not been immune to market turmoil, but its stock over the last year has held up better than its peers’. While BlackRock’s share price tumbled 33 percent, Federated Investors shares have lost 34 percent and Legg Mason, 65 percent. BlackRock ended 2008, a disastrous year for Wall Street, with $786 million in profit on $5 billion in revenue.
Some lawmakers remain wary, even though they cannot cite any specific impropriety. “The very nature of what we are asking them to do almost guarantees that it is going to be to the benefit of BlackRock,” said Representative Darrell Issa of California, the ranking Republican on the House Committee on Oversight and Government Reform. “You can have separate pews, but if you go to the same church, it will cross over
BlackRock, which started in a one-room office 21 years ago, now manages $1.3 trillion in assets for big private clients, including hedge funds and foreign governments.
But it is the company’s highly prized role as a government adviser and contractor that is now drawing attention.
By dint of its expertise and track record, it has won contracts to help the government manage the complex rescues of Bear Stearns, the American International Group and Citigroup.
It also won a bid to carry out a Federal Reserve program to stimulate the moribund housing market, and it has been hired to help evaluate Fannie Mae and Freddie Mac, the government-created mortgage finance giants.
Other firms have been hired by the government to assist with the bailout, illustrating the increasingly symbiotic relationship between Washington and Wall Street.
It makes sense for the government to turn to financial experts for help, but BlackRock has become so ubiquitous that some lawmakers, federal auditors and watchdog groups are now asking if the firm does too much, and if its roles as government adviser, giant federal contractor and private money manager will inevitably collide.
Can a company that is being paid to price and sell troubled assets for the government buy the same kinds of assets for private clients without showing preference? And should the government seek counsel from a company whose clients stand to make or lose billions if those policies are enacted?
“They have access to information when the Federal Reserve will try to sell securities, and what price they will accept. And they have intricate financial relations with people across the globe,” Senator Charles E. Grassley, Republican of Iowa, said. “The potential for a conflict of interest is great and it is just very difficult to police.”
Without naming BlackRock, federal auditors have warned that any private parties that purchase distressed assets on the government’s behalf could use generous federal subsidies to overpay, artificially pushing up the price of similar assets that they manage for their own portfolios.
“In other words, the conflict results in an enormous profit for the fund manager at the expense of the taxpayer,” Neil M. Barofsky, the special inspector general for the Troubled Asset Relief Program, wrote in a report last month.
Some of BlackRock’s advice to the government has in fact helped the company. For example, in its role as an informal adviser, it urged the Fed to intervene in the markets in a way that made investors feel it was safe to put money back into money market funds, including BlackRock’s.
The Federal Reserve will not reveal what it is paying BlackRock, disclosing only that on one of its five contracts, it will pay at least $71 million over three years to BlackRock and other firms to manage a portfolio of mortgage assets once owned by Bear Stearns. BlackRock says that rate is discounted and that the fees it collects on bailout-related work are only a tiny portion of its overall revenue.
BlackRock has many admirers for the range and the quality of services it has provided to the federal government. James R. Wilkinson, who served until January as the chief of staff to the former Treasury secretary, Henry M. Paulson Jr., described BlackRock’s co-founder and chief executive, Laurence D. Fink, as a “patriot.”
He added, “He is willing to help our country when we need it most.”
Mr. Fink said he was proud that his company was helping pull the economy back from the brink, and he bristled at the suggestion of impropriety.
Treasury and Fed officials have begun to take precautions. BlackRock’s dominance has prompted the Fed to seek an alternative partner as it prepares to expand its rescue efforts, a government official close to the situation said, requesting anonymity because the actions could affect the market.
And Treasury is holding off announcing the winning bidders for perhaps the most anticipated of all the bailout programs — the $1 trillion federally subsidized plan to purchase troubled assets from banks — in part to make sure the bidders cannot game the system. BlackRock is widely expected to win one of the contracts, in which the government would be a partner with private firms.
Andrew Williams, a Treasury Department spokesman, said that BlackRock had no special status and was among a large group of industry players consulted about bailout programs.
“We take this very seriously,” Mr. Williams said. “We talk to a lot of people — as we should.”
Now 47 percent owned by Bank of America, BlackRock offers traditional services like managing other people’s money. But the unit that has grabbed most of the attention lately is BlackRock Solutions, whose sophisticated software, fine-tuned over many years, can take apart the thousands of loans in a mortgage-backed security to estimate what it is now worth and what it will most likely be worth in the future, helping investors decide whether to hold or sell the asset.
During one frantic weekend in March 2008, when Bear Stearns was collapsing, BlackRock’s omnipresence became evident.
On a Saturday, the firm was hired by JPMorgan Chase — which was considering buying Bear Stearns — to value one type of Bear Stearns security.
The next day the Federal Reserve hired BlackRock, through a no-bid contract, to analyze and eventually sell off a $30 billion pool of risky mortgage securities that JPMorgan did not want.
BlackRock, which started in a one-room office 21 years ago, now manages $1.3 trillion in assets for big private clients, including hedge funds and foreign governments.
But it is the company’s highly prized role as a government adviser and contractor that is now drawing attention.
By dint of its expertise and track record, it has won contracts to help the government manage the complex rescues of Bear Stearns, the American International Group and Citigroup.
It also won a bid to carry out a Federal Reserve program to stimulate the moribund housing market, and it has been hired to help evaluate Fannie Mae and Freddie Mac, the government-created mortgage finance giants.
Other firms have been hired by the government to assist with the bailout, illustrating the increasingly symbiotic relationship between Washington and Wall Street.
It makes sense for the government to turn to financial experts for help, but BlackRock has become so ubiquitous that some lawmakers, federal auditors and watchdog groups are now asking if the firm does too much, and if its roles as government adviser, giant federal contractor and private money manager will inevitably collide.
Can a company that is being paid to price and sell troubled assets for the government buy the same kinds of assets for private clients without showing preference? And should the government seek counsel from a company whose clients stand to make or lose billions if those policies are enacted?
“They have access to information when the Federal Reserve will try to sell securities, and what price they will accept. And they have intricate financial relations with people across the globe,” Senator Charles E. Grassley, Republican of Iowa, said. “The potential for a conflict of interest is great and it is just very difficult to police.”
Without naming BlackRock, federal auditors have warned that any private parties that purchase distressed assets on the government’s behalf could use generous federal subsidies to overpay, artificially pushing up the price of similar assets that they manage for their own portfolios.
“In other words, the conflict results in an enormous profit for the fund manager at the expense of the taxpayer,” Neil M. Barofsky, the special inspector general for the Troubled Asset Relief Program, wrote in a report last month.
Some of BlackRock’s advice to the government has in fact helped the company. For example, in its role as an informal adviser, it urged the Fed to intervene in the markets in a way that made investors feel it was safe to put money back into money market funds, including BlackRock’s.
The Federal Reserve will not reveal what it is paying BlackRock, disclosing only that on one of its five contracts, it will pay at least $71 million over three years to BlackRock and other firms to manage a portfolio of mortgage assets once owned by Bear Stearns. BlackRock says that rate is discounted and that the fees it collects on bailout-related work are only a tiny portion of its overall revenue.
BlackRock has many admirers for the range and the quality of services it has provided to the federal government. James R. Wilkinson, who served until January as the chief of staff to the former Treasury secretary, Henry M. Paulson Jr., described BlackRock’s co-founder and chief executive, Laurence D. Fink, as a “patriot.”
He added, “He is willing to help our country when we need it most.”
Mr. Fink said he was proud that his company was helping pull the economy back from the brink, and he bristled at the suggestion of impropriety.
Treasury and Fed officials have begun to take precautions. BlackRock’s dominance has prompted the Fed to seek an alternative partner as it prepares to expand its rescue efforts, a government official close to the situation said, requesting anonymity because the actions could affect the market.
And Treasury is holding off announcing the winning bidders for perhaps the most anticipated of all the bailout programs — the $1 trillion federally subsidized plan to purchase troubled assets from banks — in part to make sure the bidders cannot game the system. BlackRock is widely expected to win one of the contracts, in which the government would be a partner with private firms.
Andrew Williams, a Treasury Department spokesman, said that BlackRock had no special status and was among a large group of industry players consulted about bailout programs.
“We take this very seriously,” Mr. Williams said. “We talk to a lot of people — as we should.”
Now 47 percent owned by Bank of America, BlackRock offers traditional services like managing other people’s money. But the unit that has grabbed most of the attention lately is BlackRock Solutions, whose sophisticated software, fine-tuned over many years, can take apart the thousands of loans in a mortgage-backed security to estimate what it is now worth and what it will most likely be worth in the future, helping investors decide whether to hold or sell the asset.
During one frantic weekend in March 2008, when Bear Stearns was collapsing, BlackRock’s omnipresence became evident.
On a Saturday, the firm was hired by JPMorgan Chase — which was considering buying Bear Stearns — to value one type of Bear Stearns security.
The next day the Federal Reserve hired BlackRock, through a no-bid contract, to analyze and eventually sell off a $30 billion pool of risky mortgage securities that JPMorgan did not want.
Those multiple roles created the potential for conflict, BlackRock’s own executives acknowledge. The company would be trying to sell assets on behalf of the government that were similar to assets it buys and sells for thousands of other private investors.
For example, if BlackRock Solutions signaled to BlackRock’s asset managers the timing of a planned sale, that could benefit BlackRock’s investors, but harm taxpayers and the Federal Reserve.
“We were very sensitive to it,” said Mark Wiedman, a managing director at BlackRock Solutions.
To avoid this, BlackRock Solutions and BlackRock asset management employees are housed in separate buildings, working on separate computer networks. The firm also sells the Bear Stearns securities only through an independent broker, meaning BlackRock does not know who the buyers are. The Fed, in addition, has prohibited BlackRock from knowingly buying any of the Fed-controlled assets.
But some remain skeptical that such firewalls really protect taxpayers.
“How can one company have so much control over the process?” said Scott Amey, general counsel at the Project on Government Oversight, a Washington-based non-profit group. “Isn’t there somebody else they can turn to?”
The concerns about BlackRock also extend to its role as an informal adviser. Mr. Fink has been known to call Treasury officials several times a day, Bush and Obama administration officials said, between occasional visits.
Last fall Mr. Fink urged the Fed to take action to unlock the frozen market for short-term lending to companies — a business that BlackRock’s money market mutual funds played a major role in. Investors had withdrawn $48 billion from those BlackRock funds, but once the Fed adopted the policy Mr. Fink was advocating, the money came pouring back.
Mr. Fink said his advice was for the good of the economy, and that his was one of many industry voices calling for such a move.
Still, Mr. Fink has not been shy in boasting about his access. “I mean it is a great seal of approval,” Mr. Fink told Wall Street analysts in December, as he simultaneously coached the Bush administration and the incoming Obama team. “We are asked to help navigate new policy. I’m running out of here to go meet with Treasury to talk about plans later this afternoon.”
But it is clear that the income from fees is a lesser benefit than the buffing of its global reputation, a point Mr. Fink has made. “It gives comfort to our clients that we are being involved in some of the solutions of our economy, and it allows us to show our clients that we are being asked in these difficult situations to provide advice,” he said at the same event.
BlackRock has not been immune to market turmoil, but its stock over the last year has held up better than its peers’. While BlackRock’s share price tumbled 33 percent, Federated Investors shares have lost 34 percent and Legg Mason, 65 percent. BlackRock ended 2008, a disastrous year for Wall Street, with $786 million in profit on $5 billion in revenue.
Some lawmakers remain wary, even though they cannot cite any specific impropriety. “The very nature of what we are asking them to do almost guarantees that it is going to be to the benefit of BlackRock,” said Representative Darrell Issa of California, the ranking Republican on the House Committee on Oversight and Government Reform. “You can have separate pews, but if you go to the same church, it will cross over
Ex-U.S. Envoy in Talks for Key Role in Afghan Government
Zalmay Khalilzad, who was President George W. Bush’s ambassador to Afghanistan, could assume a powerful, unelected position inside the Afghan government under a plan he is discussing with Hamid Karzai, the Afghan president, according to senior American and Afghan officials.
Mr. Khalilzad, an American citizen who was born in Afghanistan, had considered challenging Mr. Karzai for the presidency in elections scheduled for this summer.
But Mr. Khalilzad missed the May 8 filing deadline, and the American and Afghan officials say that he has been talking with Mr. Karzai for several weeks about taking on a job that the two have described as the chief executive officer of Afghanistan.
Such an alliance would benefit Mr. Karzai by co-opting a potential rival. For its part, the White House has made no secret of its growing disenchantment with Mr. Karzai, and some Afghanistan experts said that enlisting Mr. Khalilzad would have the virtue of bringing a strong, competent leader into an increasingly dysfunctional Afghan government.
The position would allow Mr. Khalilzad to serve as “a prime minister, except not prime minister because he wouldn’t be responsible to a parliamentary system,” a senior Obama administration official said. Taking the unelected position would also allow Mr. Khalilzad to keep his American citizenship.
Administration officials insisted that the United States was not behind the idea of enlisting Mr. Khalilzad to serve in the Afghan government, and they gave no further details on what his duties might be.
They said that Mr. Karzai had sought out Mr. Khalilzad, but that the idea of enlisting a chief executive had also been raised by Gordon Brown, the British prime minister.
American and British officials expressed concern that any belief that the West was behind the plan would harm its chances inside Afghanistan. They spoke on the condition of anonymity because they were not authorized to discuss the matter publicly.
“This has the makings of a really bad movie,” said Teresita C. Schaffer, a South Asia expert at the Center for Strategic and International Studies in Washington.
“The idea of having an American as a major senior official of Afghanistan is a very risky one both for the Afghan government and the person in question.”
But, she added: “Whoever is going to run Afghanistan will have to have both feet on the ground there, and I know Zal has intimate knowledge of the country and was involved to a degree that was virtually unheard of for an ambassador.”
Mr. Khalilzad met with Mr. Karzai about the job when Mr. Karzai visited Washington two weeks ago, and they discussed the proposal then.
Mr. Khalilzad then flew to Kabul, the country’s capital, several days ago to continue talks with Mr. Karzai, whose re-election campaign comes at a time when security in Afghanistan is deteriorating.
During his visit to Washington, Mr. Karzai also outlined his plan to Secretary of State Hillary Rodham Clinton and Richard C. Holbrooke, the special representative to the region, the officials said.
Administration officials say that President Obama, Mrs. Clinton and Mr. Holbrooke all told Mr. Karzai that it was up to him and Mr. Khalilzad to decide whether to proceed.
A plan that puts Mr. Khalilzad near the top of a Karzai government would provide the Obama administration with a strong conduit to push American interests in Afghanistan, particularly in cracking down on corruption and the drug trade, which American officials say has helped to fuel the resurgence of the Taliban.
While Mr. Khalilzad served in the Bush administration — including as ambassador to Iraq and the United Nations — he has maintained ties with the Obama administration, as well, and has twice been to the State Department to meet with Mr. Holbrooke.
Mr. Khalilzad could not be reached for comment on Monday.
Mr. Karzai has already successfully defused the candidacies of other potential rivals for the presidency.
One of them, Gul Agha Shirzai, the popular governor of Nangarhar Province, announced after a four-hour meeting with Mr. Karzai that he was pulling out of the presidential race.
Another, Muhammad Qasim Fahim, a former warlord who later became defense minister, was identified by Mr. Karzai as one of two vice-presidential running mates, in a move widely interpreted as an attempt to bolster Mr. Karzai’s standing among former mujahedeen parties.
Kai Eide, the United Nations special representative to Afghanistan, criticized the choice of Mr. Fahim because of human rights concerns.
It remains unclear whether Mr. Karzai and Mr. Khalilzad can strike a deal on an alliance, the American and Afghan officials said.
Several of Mr. Karzai’s own ministers have opposed such a pact, they said, and it is not certain whether Mr. Karzai remains willing to bring Mr. Khalilzad aboard now that the filing deadline for presidential candidates has passed.
Mr. Karzai and Mr. Khalilzad have had a long and sometimes bumpy relationship. They worked closely when Mr. Khalilzad was ambassador to Afghanistan, from 2003 to 2005, and Mr. Karzai, the new president of a fledgling democracy, was viewed as a darling of the West.
But as the United States and Britain have become increasingly disenchanted with Mr. Karzai amid widespread corruption allegations, the two men have also put some distance between themselves, which expanded further as Mr. Khalilzad began to make plans to run against Mr. Karzai for president.
While he was working for the Bush administration, Mr. Khalilzad often brushed up against other officials, including Secretary of State Condoleezza Rice.
He got in trouble for appearing on a panel with Iran’s foreign minister without getting permission from the White House first. And he annoyed State Department officials when he arranged to meet in Dubai with Asif Ali Zardari to talk about Mr. Zardari’s bid for the presidency of Pakistan, just when the United States was trying to convince Pakistanis that America was not interfering in their internal politics.
Mr. Khalilzad, an American citizen who was born in Afghanistan, had considered challenging Mr. Karzai for the presidency in elections scheduled for this summer.
But Mr. Khalilzad missed the May 8 filing deadline, and the American and Afghan officials say that he has been talking with Mr. Karzai for several weeks about taking on a job that the two have described as the chief executive officer of Afghanistan.
Such an alliance would benefit Mr. Karzai by co-opting a potential rival. For its part, the White House has made no secret of its growing disenchantment with Mr. Karzai, and some Afghanistan experts said that enlisting Mr. Khalilzad would have the virtue of bringing a strong, competent leader into an increasingly dysfunctional Afghan government.
The position would allow Mr. Khalilzad to serve as “a prime minister, except not prime minister because he wouldn’t be responsible to a parliamentary system,” a senior Obama administration official said. Taking the unelected position would also allow Mr. Khalilzad to keep his American citizenship.
Administration officials insisted that the United States was not behind the idea of enlisting Mr. Khalilzad to serve in the Afghan government, and they gave no further details on what his duties might be.
They said that Mr. Karzai had sought out Mr. Khalilzad, but that the idea of enlisting a chief executive had also been raised by Gordon Brown, the British prime minister.
American and British officials expressed concern that any belief that the West was behind the plan would harm its chances inside Afghanistan. They spoke on the condition of anonymity because they were not authorized to discuss the matter publicly.
“This has the makings of a really bad movie,” said Teresita C. Schaffer, a South Asia expert at the Center for Strategic and International Studies in Washington.
“The idea of having an American as a major senior official of Afghanistan is a very risky one both for the Afghan government and the person in question.”
But, she added: “Whoever is going to run Afghanistan will have to have both feet on the ground there, and I know Zal has intimate knowledge of the country and was involved to a degree that was virtually unheard of for an ambassador.”
Mr. Khalilzad met with Mr. Karzai about the job when Mr. Karzai visited Washington two weeks ago, and they discussed the proposal then.
Mr. Khalilzad then flew to Kabul, the country’s capital, several days ago to continue talks with Mr. Karzai, whose re-election campaign comes at a time when security in Afghanistan is deteriorating.
During his visit to Washington, Mr. Karzai also outlined his plan to Secretary of State Hillary Rodham Clinton and Richard C. Holbrooke, the special representative to the region, the officials said.
Administration officials say that President Obama, Mrs. Clinton and Mr. Holbrooke all told Mr. Karzai that it was up to him and Mr. Khalilzad to decide whether to proceed.
A plan that puts Mr. Khalilzad near the top of a Karzai government would provide the Obama administration with a strong conduit to push American interests in Afghanistan, particularly in cracking down on corruption and the drug trade, which American officials say has helped to fuel the resurgence of the Taliban.
While Mr. Khalilzad served in the Bush administration — including as ambassador to Iraq and the United Nations — he has maintained ties with the Obama administration, as well, and has twice been to the State Department to meet with Mr. Holbrooke.
Mr. Khalilzad could not be reached for comment on Monday.
Mr. Karzai has already successfully defused the candidacies of other potential rivals for the presidency.
One of them, Gul Agha Shirzai, the popular governor of Nangarhar Province, announced after a four-hour meeting with Mr. Karzai that he was pulling out of the presidential race.
Another, Muhammad Qasim Fahim, a former warlord who later became defense minister, was identified by Mr. Karzai as one of two vice-presidential running mates, in a move widely interpreted as an attempt to bolster Mr. Karzai’s standing among former mujahedeen parties.
Kai Eide, the United Nations special representative to Afghanistan, criticized the choice of Mr. Fahim because of human rights concerns.
It remains unclear whether Mr. Karzai and Mr. Khalilzad can strike a deal on an alliance, the American and Afghan officials said.
Several of Mr. Karzai’s own ministers have opposed such a pact, they said, and it is not certain whether Mr. Karzai remains willing to bring Mr. Khalilzad aboard now that the filing deadline for presidential candidates has passed.
Mr. Karzai and Mr. Khalilzad have had a long and sometimes bumpy relationship. They worked closely when Mr. Khalilzad was ambassador to Afghanistan, from 2003 to 2005, and Mr. Karzai, the new president of a fledgling democracy, was viewed as a darling of the West.
But as the United States and Britain have become increasingly disenchanted with Mr. Karzai amid widespread corruption allegations, the two men have also put some distance between themselves, which expanded further as Mr. Khalilzad began to make plans to run against Mr. Karzai for president.
While he was working for the Bush administration, Mr. Khalilzad often brushed up against other officials, including Secretary of State Condoleezza Rice.
He got in trouble for appearing on a panel with Iran’s foreign minister without getting permission from the White House first. And he annoyed State Department officials when he arranged to meet in Dubai with Asif Ali Zardari to talk about Mr. Zardari’s bid for the presidency of Pakistan, just when the United States was trying to convince Pakistanis that America was not interfering in their internal politics.
U.S. to Issue Tougher Fuel Standards for Automobiles
President Obama will announce as early as Tuesday that he will combine that state’s emissions rules with the existing corporate average fuel economy standard overseen by the Transportation Department, the officials said. As a result, cars and light trucks sold in the United States will be roughly 30 percent cleaner and more fuel-efficient by 2016.
The White House would not divulge details, but environmental advocates and industry officials briefed on the program said that the president would grant California’s longstanding request to implement its tailpipe standards. Thirteen other states and the District of Columbia have said they intend to apply the same rules. That request had been denied by the Bush administration but has been under review by top Obama administration officials since January.
Yet Mr. Obama is planning to go further, effectively issuing a single rule for both fuel economy and emissions that matches California’s strictest-in-the-nation standard.
Under the new standard, the new combined fuel efficiency standard for cars and light trucks will be about 35 miles per gallon by 2016, roughly in line with the California rule.
“This is a very big deal,” said Daniel Becker of the Safe Climate Campaign, a group that has pushed for tougher mileage and emissions standards with the goal of curbing the heat-trapping gases that have been linked to global warming. “This is the single biggest step the American government has ever taken to cut greenhouse-gas emissions.”
Industry officials spoke on condition of anonymity about the program because they said they did not want to comment publicly in advance of the White House announcement.
The current standards are 27.5 miles a gallon for cars and about 24 miles a gallon for trucks. The new mileage and emissions rules will gradually tighten, beginning with 2011 models, until they reach the 2016 standards.
The auto industry is not expected to challenge the rule, which provides two things they have long asked for: certainty on a timetable and a single national standard.
The administration has faced a June 30 deadline set by Congress to decide whether to grant California’s application to impose new emissions rules. President Obama became personally involved in the issue because he is also trying to find a way to rescue the American automobile companies from their financial crisis.
One top industry official said the administration wanted to get the new mileage rules in place before General Motors makes a decision on a bankruptcy filing, which could happen by the end of the month.
The new rules also provide some certainty for Chrysler, which is already under bankruptcy protection, so that it can plan its future models.
Mr. Obama directed the Environmental Protection Agency in January to reconsider the Bush administration’s past rejection of the California application. The president also instructed the Transportation Department to draw up rules to supplement a 2007 law requiring a 40 percent improvement in gas mileage for autos and light trucks by 2020.
The Bush administration failed to write any regulations to enforce the 2007 law.
Daniel J. Weiss, an environmental policy analyst at the liberal Center for American Progress, said that under the White House plan, California would retain the ability to set its own emissions standards in the future when the current program expires.
He also said that the new administration program was very close in language and intent to a provision in the climate change and energy bill now before the House Energy and Commerce Committee. That bill calls for a "harmonization" of the California and federal regulatory programs to provide a nationwide standard.
He said the standards were being written so that the car companies would already be on track to meet the standards set in the first few years of the program. The cars and trucks that will be sold in that period are already in the design phase. But starting in 2013 and 2014, the new rules will begin to bite, Mr. Weiss said.
"The rubber really meets the road in 2014," he said.
Mr. Obama has been thinking about the future of the American automobile industry for years. In 2006, during his second year as a United States senator, he co-sponsored a bill to raise fuel economy standards and another to encourage the use of alternative fuels.
During the presidential campaign, he gave a speech in Detroit chastising the American automobile industry for doing too little to reduce the nation’s dependence on foreign oil and to improve the vehicles’ fuel efficiency.
"The auto industry’s refusal to act for so long has left it mired in a predicament for which there is no easy way out," Mr. Obama said.
That inaction was one factor that brought General Motors and Chrysler to their current dire state, requiring billions in federal bailouts and Chrysler’s forced marriage to Fiat to survive.
The White House would not divulge details, but environmental advocates and industry officials briefed on the program said that the president would grant California’s longstanding request to implement its tailpipe standards. Thirteen other states and the District of Columbia have said they intend to apply the same rules. That request had been denied by the Bush administration but has been under review by top Obama administration officials since January.
Yet Mr. Obama is planning to go further, effectively issuing a single rule for both fuel economy and emissions that matches California’s strictest-in-the-nation standard.
Under the new standard, the new combined fuel efficiency standard for cars and light trucks will be about 35 miles per gallon by 2016, roughly in line with the California rule.
“This is a very big deal,” said Daniel Becker of the Safe Climate Campaign, a group that has pushed for tougher mileage and emissions standards with the goal of curbing the heat-trapping gases that have been linked to global warming. “This is the single biggest step the American government has ever taken to cut greenhouse-gas emissions.”
Industry officials spoke on condition of anonymity about the program because they said they did not want to comment publicly in advance of the White House announcement.
The current standards are 27.5 miles a gallon for cars and about 24 miles a gallon for trucks. The new mileage and emissions rules will gradually tighten, beginning with 2011 models, until they reach the 2016 standards.
The auto industry is not expected to challenge the rule, which provides two things they have long asked for: certainty on a timetable and a single national standard.
The administration has faced a June 30 deadline set by Congress to decide whether to grant California’s application to impose new emissions rules. President Obama became personally involved in the issue because he is also trying to find a way to rescue the American automobile companies from their financial crisis.
One top industry official said the administration wanted to get the new mileage rules in place before General Motors makes a decision on a bankruptcy filing, which could happen by the end of the month.
The new rules also provide some certainty for Chrysler, which is already under bankruptcy protection, so that it can plan its future models.
Mr. Obama directed the Environmental Protection Agency in January to reconsider the Bush administration’s past rejection of the California application. The president also instructed the Transportation Department to draw up rules to supplement a 2007 law requiring a 40 percent improvement in gas mileage for autos and light trucks by 2020.
The Bush administration failed to write any regulations to enforce the 2007 law.
Daniel J. Weiss, an environmental policy analyst at the liberal Center for American Progress, said that under the White House plan, California would retain the ability to set its own emissions standards in the future when the current program expires.
He also said that the new administration program was very close in language and intent to a provision in the climate change and energy bill now before the House Energy and Commerce Committee. That bill calls for a "harmonization" of the California and federal regulatory programs to provide a nationwide standard.
He said the standards were being written so that the car companies would already be on track to meet the standards set in the first few years of the program. The cars and trucks that will be sold in that period are already in the design phase. But starting in 2013 and 2014, the new rules will begin to bite, Mr. Weiss said.
"The rubber really meets the road in 2014," he said.
Mr. Obama has been thinking about the future of the American automobile industry for years. In 2006, during his second year as a United States senator, he co-sponsored a bill to raise fuel economy standards and another to encourage the use of alternative fuels.
During the presidential campaign, he gave a speech in Detroit chastising the American automobile industry for doing too little to reduce the nation’s dependence on foreign oil and to improve the vehicles’ fuel efficiency.
"The auto industry’s refusal to act for so long has left it mired in a predicament for which there is no easy way out," Mr. Obama said.
That inaction was one factor that brought General Motors and Chrysler to their current dire state, requiring billions in federal bailouts and Chrysler’s forced marriage to Fiat to survive.
Judges uphold British soldiers' human rights – even in battle
British soldiers must be protected by European human rights laws wherever they are deployed, even in battle, the appeal court ruled yesterday in a judgment described by the government as having "very serious implications" for military operations.
Three senior judges unanimously rejected claims by the Ministry of Defence that a British soldier could be protected by the Human Rights Act only when he is on a military base. "In our judgment it makes no sense to hold that he is not so protected when in an ambulance or in a truck or in the street or in the desert," they said.
"Soldiers serve abroad as a result of, and pursuant to, the exercise of UK jurisdiction over them. Thus the legality of their presence and of their actions depends on their being subject to UK jurisdiction and complying with UK law."
The ruling means that sending soldiers on patrol or into battle with clearly defective or inadequate equipment could breach their human rights.
The court case followed a legal challenge to the MoD's refusal to hand over information at the inquest of Private Jason Smith, a TA soldier who died of heatstroke in Basra on 13 August 2003. He told medical staff four days previously that he was feeling seriously unwell in the 50C heat.
Smith's mother, Catherine, said: "I am absolutely delighted and relieved by the result. This victory is not for me, nothing can bring Jason back, but it is for all those brave men and women who are still risking their lives in our name. It is also for families who still have to go through the trauma of an inquest."
Jocelyn Cockburn, her solicitor, said: "The implications of this judgment are simple – our armed forces now have the same protections as all the rest of us. The MoD suggestion that they should lose these protections when on the battlefield is outrageous. Soldiers have the right to know, when risking their lives for us, that we have provided them with all reasonable protection."
The MoD could now face a series of compensation claims. Inquests have heard that soldiers have died as a result of faulty equipment or lack of body armour.
Sir Anthony Clarke, Master of the Rolls, said the MoD had been given leave to appeal to the law lords because of the importance of the case.
However, John Wadham, the legal director of the Equality and Human Rights Commission, said: "This case is not about compensation but about transparency." He added: "Of course we recognise that the armed forces are operating in dangerous situations. We can't protect their life at all costs in a combat situation, but we can do our best to ensure they remain as safe as possible".
Bob Ainsworth, the armed forces minister, said the MoD was "surprised and disappointed" by the judgment. "It potentially has serious implications for the ability of our forces – and those of our allies – to conduct military operations overseas."
An MoD spokesman said: "In the heat of battle during dynamic and fast-moving military operations on foreign territory, the UK could not secure the rights and freedoms which the Human Rights Act seeks to guarantee."
However, the judges referred to "reasonable steps" that could be taken to protect soldiers. They also said a new inquest into Smith's death should consider whether there had been "systemic failures" in the army.
Shami Chakrabarti, director of civil liberties campaign group Liberty, said: "This is a wonderful landmark decision that will defend Britain's bravest men and women for years to come. Some would like to caricature human rights as shielding only criminals but the court of appeal has made clear that they belong to everyone."
This case, and other recent ones where judges have attacked MoD secrecy, will force it to be more open, especially in future inquests, analysts said.
Past criticism has already led the MoD to improve medical care and welfare provision for soldiers, as well as getting them better equipment.
Nick Harvey, Liberal Democrat defence spokesman, said later: "The government has been trading on the can-do attitude of British soldiers for far too long. Ministers are happy to waste billions of pounds on huge procurement projects, but they pinch pennies when it comes to providing the vital equipment that our troops on the front line depend upon."
Liam Fox, the shadow defence secretary, said: "To apply the Human Rights Act in a warzone flies in the face of common sense. Our troops and commanders have enough to worry about on the battlefield without worrying about where the next legal attack will come from."
Three senior judges unanimously rejected claims by the Ministry of Defence that a British soldier could be protected by the Human Rights Act only when he is on a military base. "In our judgment it makes no sense to hold that he is not so protected when in an ambulance or in a truck or in the street or in the desert," they said.
"Soldiers serve abroad as a result of, and pursuant to, the exercise of UK jurisdiction over them. Thus the legality of their presence and of their actions depends on their being subject to UK jurisdiction and complying with UK law."
The ruling means that sending soldiers on patrol or into battle with clearly defective or inadequate equipment could breach their human rights.
The court case followed a legal challenge to the MoD's refusal to hand over information at the inquest of Private Jason Smith, a TA soldier who died of heatstroke in Basra on 13 August 2003. He told medical staff four days previously that he was feeling seriously unwell in the 50C heat.
Smith's mother, Catherine, said: "I am absolutely delighted and relieved by the result. This victory is not for me, nothing can bring Jason back, but it is for all those brave men and women who are still risking their lives in our name. It is also for families who still have to go through the trauma of an inquest."
Jocelyn Cockburn, her solicitor, said: "The implications of this judgment are simple – our armed forces now have the same protections as all the rest of us. The MoD suggestion that they should lose these protections when on the battlefield is outrageous. Soldiers have the right to know, when risking their lives for us, that we have provided them with all reasonable protection."
The MoD could now face a series of compensation claims. Inquests have heard that soldiers have died as a result of faulty equipment or lack of body armour.
Sir Anthony Clarke, Master of the Rolls, said the MoD had been given leave to appeal to the law lords because of the importance of the case.
However, John Wadham, the legal director of the Equality and Human Rights Commission, said: "This case is not about compensation but about transparency." He added: "Of course we recognise that the armed forces are operating in dangerous situations. We can't protect their life at all costs in a combat situation, but we can do our best to ensure they remain as safe as possible".
Bob Ainsworth, the armed forces minister, said the MoD was "surprised and disappointed" by the judgment. "It potentially has serious implications for the ability of our forces – and those of our allies – to conduct military operations overseas."
An MoD spokesman said: "In the heat of battle during dynamic and fast-moving military operations on foreign territory, the UK could not secure the rights and freedoms which the Human Rights Act seeks to guarantee."
However, the judges referred to "reasonable steps" that could be taken to protect soldiers. They also said a new inquest into Smith's death should consider whether there had been "systemic failures" in the army.
Shami Chakrabarti, director of civil liberties campaign group Liberty, said: "This is a wonderful landmark decision that will defend Britain's bravest men and women for years to come. Some would like to caricature human rights as shielding only criminals but the court of appeal has made clear that they belong to everyone."
This case, and other recent ones where judges have attacked MoD secrecy, will force it to be more open, especially in future inquests, analysts said.
Past criticism has already led the MoD to improve medical care and welfare provision for soldiers, as well as getting them better equipment.
Nick Harvey, Liberal Democrat defence spokesman, said later: "The government has been trading on the can-do attitude of British soldiers for far too long. Ministers are happy to waste billions of pounds on huge procurement projects, but they pinch pennies when it comes to providing the vital equipment that our troops on the front line depend upon."
Liam Fox, the shadow defence secretary, said: "To apply the Human Rights Act in a warzone flies in the face of common sense. Our troops and commanders have enough to worry about on the battlefield without worrying about where the next legal attack will come from."
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