Matt Taibbi Exposes The Great College Loan Swindle

Authored by Matt Taibbi via RollingStone.com,

How universities, banks and the government turned student debt into America"s next financial black hole...

On a wind-swept, frigid night in February 2009, a 37-year-old schoolteacher named Scott Nailor parked his rusted "92 Toyota Tercel in the parking lot of a Fireside Inn in Auburn, Maine. He picked this spot to have a final reckoning with himself. He was going to end his life.

Beaten down after more than a decade of struggle with student debt, after years of taking false doors and slipping into various puddles of bureaucratic quicksand, he was giving up the fight. "This is it, I"m done," he remembers thinking. "I sat there and just sort of felt like I"m going to take my life. I"m going to find a way to park this car in the garage, with it running or whatever."

Nailor"s problems began at 19 years old, when he borrowed for tuition so that he could pursue a bachelor"s degree at the University of Southern Maine. He graduated summa cum laude four years later and immediately got a job in his field, as an English teacher.

But he graduated with $35,000 in debt, a big hill to climb on a part-time teacher"s $18,000 salary. He struggled with payments, and he and his wife then consolidated their student debt, which soon totaled more than $50,000. They declared bankruptcy and defaulted on the loans. From there he found himself in a loan "rehabilitation" program that added to his overall balance. "That"s when the noose began to tighten," he says.

The collectors called day and night, at work and at home. "In the middle of class too, while I was teaching," he says. He ended up in another rehabilitation program that put him on a road toward an essentially endless cycle of rising payments. Today, he pays $471 a month toward "rehabilitation," and, like countless other borrowers, he pays nothing at all toward his real debt, which he now calculates would cost more than $100,000 to extinguish. "Not one dollar of it goes to principal," says Nailor. "I will never be able to pay it off. My only hope to escape from this crushing debt is to die."

After repeated phone calls with lending agencies about his ever-rising interest payments, Nailor now believes things will only get worse with time. "At this rate, I may easily break $1 million in debt before I retire from teaching," he says.

Nailor had more than once reached the stage in his thoughts where he was thinking about how to physically pull off his suicide. "I"d been there before, that just was the worst of it," he says. "It scared me, bad."

He had a young son and a younger daughter, but Nailor had been so broken by the experience of financial failure that he managed to convince himself they would be better off without him. What saved him is that he called his wife to say goodbye. "I don"t know why I called my wife. I"m glad I did," he says. "I just wanted her or someone to tell me to pick it up, keep fighting, it"s going to be all right. And she did."

From that moment, Nailor managed to focus on his family. Still, the core problem – the spiraling debt that has taken over his life, as it has for millions of other Americans – remains.

Horror stories about student debt are nothing new. But this school year marks a considerable worsening of a tale that ought to have been a national emergency years ago. The government in charge of regulating this mess is now filled with predatory monsters who have extensive ties to the exploitative for-profit education industry – from Donald Trump himself to Education Secretary Betsy DeVos, who sets much of the federal loan policy, to Julian Schmoke, onetime dean of the infamous DeVry University, whom Trump appointed to police fraud in education.

Americans don"t understand the student-loan crisis because they"ve been trained to view the issue in terms of a series of separate, unrelated problems.

They will read in one place that as of the summer of 2017, a record 8.5 million Americans are in default on their student debt, with about $1.3 trillion in loans still outstanding.

In another place, voters will read that the cost of higher education is skyrocketing, soaring in a seemingly market-defying arc that for nearly a decade now has run almost double the rate of inflation. Tuition for a halfway decent school now frequently surpasses $50,000 a year. How, the average newsreader wonders, can any child not born in a yacht afford to go to school these days?

In a third place, that same reader will see some heartless monster, usually a Republican, threatening to cut federal student lending. The current bogeyman is Trump, who is threatening to slash the Pell Grant program by $3.9 billion, which would seem to put higher education even further out of reach for poor and middle-income families. This too seems appalling, and triggers a different kind of response, encouraging progressive voters to lobby for increased availability for educational lending.

But the separateness of these stories clouds the unifying issue underneath: The education industry as a whole is a con. In fact, since the mortgage business blew up in 2008, education and student debt is probably our reigning unexposed nation-wide scam.

It"s a multiparty affair, what shakedown artists call a "big store scheme," like in the movie The Sting: a complex deception requiring a big cast to string the mark along every step of the way. In higher education, every party you meet, from the moment you first set foot on campus, is in on the game.

America as a country has evolved in recent decades into a confederacy of widescale industrial scams. The biggest slices of our economic pie – sectors like health care, military production, banking, even commercial and residential real estate – have become crude income-redistribution schemes, often untethered from the market by subsidies or bailouts, with the richest companies benefiting from gamed or denuded regulatory systems that make profits almost as assured as taxes. Guaranteed-profit scams – that"s the last thing America makes with any level of consistent competence. In that light, Trump, among other things, the former head of a schlock diploma mill called Trump University, is a perfect president for these times. He"s the scammer-in-chief in the Great American Ripoff Age, a time in which fleecing students is one of our signature achievements.

It starts with the sales pitch colleges make to kids. The thrust of it is usually that people who go to college make lots more money than the unfortunate dunces who don"t. "A bachelor"s degree is worth $2.8 million on average over a lifetime" is how Georgetown University put it. The Census Bureau tells us similarly that a master"s degree is worth on average about $1.3 million more than a high school diploma.

But these stats say more about the increasing uselessness of a high school degree than they do about the value of a college diploma. Moreover, since virtually everyone at the very highest strata of society has a college degree, the stats are skewed by a handful of financial titans. A college degree has become a minimal status marker as much as anything else. "I"m sure people who take polo lessons or sailing lessons earn a lot more on average too," says Alan Collinge of Student Loan Justice, which advocates for debt forgiveness and other reforms. "Does that mean you should send your kids to sailing school?"

But the pitch works on everyone these days, especially since good jobs for Trump"s beloved "poorly educated" are scarce to nonexistent. Going to college doesn"t guarantee a good job, far from it, but the data show that not going dooms most young people to an increasingly shallow pool of the very crappiest, lowest-paying jobs. There"s a lot of stick, but not much carrot, in the education game.

It"s a vicious cycle. Since everyone feels obligated to go to college, most everyone who can go, does, creating a glut of graduates. And as that glut of degree recipients grows, the squeeze on the un-degreed grows tighter, increasing further that original negative incentive: Don"t go to college, and you"ll be standing on soup lines by age 25.

With that inducement in place, colleges can charge almost any amount, and kids will pay – so long as they can get the money. And here we run into problem number two: It"s too easy to find that money.

Parents, not wanting their kids to fall behind, will pay every dollar they have. But if they don"t have the cash, there is a virtually unlimited amount of credit available to young people. Proposed cuts to Pell Grants aside, the landscape is filled with public and private lending, and students gobble it up. Kids who walk into financial-aid offices are often not told what signing their names on the various aid forms will mean down the line. A lot of kids don"t even understand the concept of interest or amortization tables – they think if they"re borrowing $8,000, they"re paying back $8,000.

Nailor certainly was unaware of what he was getting into when he was 19. "I had no idea [about interest]," he says. "I just remember thinking, "I don"t have to worry about it right now. I want to go to school." " He pauses in disgust. "It"s unsettling to remember how it was like, "Here, just sign this and you"re all set." I wish I could take the time machine back and slap myself in the face."

The average amount of debt for a student leaving school is skyrocketing even faster than the rate of tuition increase.

In 2016, for instance, the average amount of debt for an exiting college graduate was a staggering $37,172. That"s a rise of six percent over just the previous year. With the average undergraduate interest rate at about 3.7 percent, the interest alone costs around $115 per month, meaning anyone who can"t afford to pay into the principal faces the prospect of $69,000 in payments over 50 years.

So here"s the con so far.

You must go to college because you"re screwed if you don"t.

 

Costs are outrageously high, but you pay them because you have to, and because the system makes it easy to borrow massive amounts of money.

 

The third part of the con is the worst: You can"t get out of the debt.

Since government lenders in particular have virtually unlimited power to collect on student debt – preying on everything from salary to income-tax returns – even running is not an option. And since most young people find themselves unable to make their full payments early on, they often find themselves perpetually paying down interest only, never touching the principal. Our billionaire president can declare bankruptcy four times, but students are the one class of citizen that may not do it even once.

October 2017 was supposed to represent the first glimmer of light at the end of this tunnel. This month marks the 10th anniversary of the Public Service Loan Forgiveness program, one of the few avenues for wiping out student debt. The idea, launched by George W. Bush, was pretty simple: Students could pledge to work 10 years for the government or a nonprofit and have their debt forgiven. In order to qualify, borrowers had to make payments for 10 years using a complex formula. This month, then, was to start the first mass wipeouts of debt in the history of American student lending. But more than half of the 700,000 enrollees have already been expunged from the program for, among other things, failing to certify their incomes on time, one of many bureaucratic tricks employed to limit forgiveness eligibility. To date, fewer than 500 participants are scheduled to receive loan forgiveness in this first round.

Moreover, Trump has called for the program"s elimination by 2018, meaning that any relief that begins this month is likely only temporary. The only thing that is guaranteed to remain real for the immediate future are the massive profits being generated on the backs of young people, who before long become old people who, all too often, remain ensnared until their last days in one of the country"s most brilliant and devious moneymaking schemes.

Everybody wins in this madness, except students. Even though many of the loans are originated by the state, most of them are serviced by private or quasi-private companies like Navient – which until 2014 was the student-loan arm of Sallie Mae – or Nelnet, companies that reported a combined profit of around $1 billion last year (the U.S. government made a profit of $1.6 billion in 2016!). Debt-collector companies like Performant (which generated $141.4 million in revenues; the family of Betsy DeVos is a major investor), and most particularly the colleges and universities, get to prey on the desperation and terror of parents and young people, and in the process rake in vast sums virtually without fear of market consequence.

About that: Universities, especially public institutions, have successfully defended rising tuition in recent years by blaming the hikes on reduced support from states. But this explanation was blown to bits in large part due to a bizarre slip-up in the middle of a controversy over state support of the University of Wisconsin system a few years ago.

In that incident, UW raised tuition by 5.5 percent six years in a row after 2007. The school blamed stresses from the financial crisis and decreased state aid. But when pressed during a state committee hearing in 2013 about the university"s finances, UW system president Kevin Reilly admitted they held $648 million in reserve, including $414 million in tuition payments. This was excess hidey-hole cash the school was sitting on, separate and distinct from, say, an endowment fund.

After the university was showered with criticism for hoarding cash at a time when it was gouging students with huge price increases every year, the school responded by saying, essentially, it only did what all the other kids were doing. UW released data showing that other major state-school systems across the country were similarly stashing huge amounts of cash. While Wisconsin"s surplus was only 25 percent of its operating budget, for instance, Minnesota"s was 29 percent, and Illinois maintained a whopping 34 percent reserve.

When Collinge, of Student Loan Justice, looked into it, he found that the phenomenon wasn"t confined to state schools. Private schools, too, have been hoarding cash even as they plead poverty and jack up tuition fees. "They"re all doing it," he says.

While universities sit on their stockpiles of cash and the loan industry generates record profits, the pain of living in debilitating debt for many lasts into retirement. Take Veronica Martish. She"s a 68-year-old veteran, having served in the armed forces in the Vietnam era. She"s also a grandmother who"s never been in trouble and consid?ers herself a patriot. "The thing is, I tried to do everything right in my life," she says. "But this ruined my life."

This is an $8,000 student loan she took out in 1989, through Sallie Mae. She borrowed the money so she could take courses at Quinebaug Valley Community College in Connecticut. Five years later, after deaths in her family, she fell behind on her payments and entered a loan-rehabilitation program. "That"s when my nightmare began," she says.

In rehabilitation, Martish"s $8,000 loan, with fees and interest, ballooned into a $27,000 debt, which she has been carrying ever since. She says she"s paid more than $63,000 to date and is nowhere near discharging the principal. "By the time I die," she says, "I will probably pay more than $200,000 toward an $8,000 loan." She pauses. "It"s a scam, you see. Nothing ever comes off the loan. It"s all interest and fees. And they chase you until you"re old, like me. They never stop. Ever."

And that"s the other thing about lending to students: It"s the safest grift around.

There"s probably no better symbol of the bankruptcy of the education industry than Trump University. The half-literate president"s effort at higher learning drew in suckers with pathetic promises of great real-estate insights (for instance, that Trump "hand-picked" the instructors) and then charged them truckfuls of cash for get-rich-quick tutorials that students and faculty later described as "almost completely worthless" and a "total lie." That Trump got to settle a lawsuit on this matter for $25 million and still managed to be elected president is, ironically, a remarkable testament to the failure of our education system. About the only example that might be worse is DeVry University, which told students that 90 percent of graduates seeking jobs found them in their fields within six months of graduation. The FTC found those claims "false and unsubstantiated," and ordered $100 million in refunds and debt relief, but that was in 2016 – before Trump put DeVry chief Schmoke, of all people, in charge of rooting out education fraud. Like a lot of things connected to politics lately, it would be funny if it weren"t somehow actually happening.?"Yeah, it"s the fox guarding the henhouse," says Collinge. "You could probably find a worse analogy."

But the real problem with the student-loan story is that it"s so poorly understood by people not living the nightmare. There"s so much propaganda that blames the borrowers for taking on the debt in the first place that there"s often little sympathy for people in hopeless situations. To make matters worse, band-aid programs that supposedly offer help hypnotize the public into thinking there are ways out, when the "help" is usually just another trick to add to the balance.

"That"s part of the problem with the narrative," says Nailor, the schoolteacher. "People think that there"s help, so what are you complaining about? All you got to do is apply for help."

But the help, he says, coming from a for-profit predatory system, often just makes things worse. "It did for me," he says. "It does for a lot of people."

Here's What Your Identity Sells For On The Dark Web

Millions of Americans who trusted Equifax with sensitive personal and financial data, including social security numbers and credit-card information, are now nervously wondering whether they will be among the unlucky minority of affected customers whose identities are successfully “repurposed” by online criminal groups.

One researcher from security firm SecureWorks shared some details about today’s burgeoning marketplace for stolen data with Bloomberg, and the conclusion is clear: It is now easier – and cheaper – for criminals to access and abuse illicit data than ever before. In fact, a high-limit American express card with a high chance of working can be purchased online for less than $20. Criminals can buy files with thousands of low-limit card numbers for pennies on the dollar.

According to Bloomberg, “verified” high-limit credit cards from developed countries like the US, Japan, and South Korea are selling on the dark web for the bitcoin equivalent of about $10 to $20.

“Verified” means the seller has tested out transactions on the card and found it hasn’t been canceled yet. For scammers on a budget, there’s unverified stolen credit card data, which comes out to pennies a card when bought in bulk.

Here’s a screengrab from one dark-web marketplace.

Luckily for criminals, cards generally aren’t selling any cheaper on the dark web these days, said Alex Tilley, a researcher at Secureworks. Today’s buyers are more likely to get higher-quality cards, ones with sizable limits that can be used fraudulently with ease. It isn’t as hit-or-miss as it used to be, a welcome change for criminals, chilling news for most of us.

Criminals have even set up sophisticated “rating systems” to help value the data. Business cards are preferred, Tilley said, because they don’t have a limit. Those and high-end personal cards—say, a Platinum American Express that has been verified and has an 85 percent rating (judged by the seller to have an 85 percent chance of being successfully used in a fraud)—will go for $15 to $20. A regular Mastercard that doesn’t have a high limit might go for $9.

One underground hacker market inexplicably called Trump’s Dumps is selling full identities of individuals just like you for as little as $10 apiece. They’re called fullz, “dossiers that provide enough financial, geographic and biographical information on a victim to facilitate identity theft or other impersonation-based fraud.” Fullz can help a criminal get past those irritating “secret questions” that sites ask to verify your identity.

Recently, Secureworks’ researchers have seen more offers of bulk pre-verified card details, along with more identifying information about the owners. In some cases, offers even include the cardholder’s mother’s maiden name. Still, they cost just $10 to $12. Below is a fullz offer with a lot of personal identification on a Korean consumer.

In a massive breach like Equifax, hackers can easily walk away with hundreds of millions of dollars in profits from selling the data. Meanwhile, the identity thieves who purchased it can reap their own fortune running their scams.

Congress, the FTC and Equifax customers – enraged by both the company’s reluctance to initially disclose the breach and its carelessness (some would say tight-fistedness) concerning its cybersecurity defenses – have buried the company in lawsuits and official inquiries.

As USA Today revealed yesterday, hackers took advantage of an Equifax security vulnerability two months after an industry group discovered the coding flaw and shared a fix for it, raising questions about why Equifax didn"t update its software successfully when the danger became known.

We’re looking forward to hearing the whole story from CEO Rick Smith when he testifies before Congress early next month. Whether Smith manages to hang on to his job remains to be seen - calls for his resignation after a 12-year-long scandal-free tenure are mounting. CNBC"s Jim Cramer said last night that Smith "should be fired today."

But perhaps more worrying for Smith and his C-Suite companions are calls from North Dakota Sen. Heidi Heitkamp, who has demanded a criminal investigation into whether the company"s executives - several of whom sold stock during the period between when the company first learned about the hack and when it disclosed it to the public - commited securities fraud.

"If that happened, then somebody needs to go to jail," she said.

New Uber CEO's "Welcome Aboard" Gift: Another Federal Investigation

Little more than a day after Dara Khosrowshahi decided to accept the Uber board’s offer to become the embattled ride-share company’s new CEO – after the company’s top two candidates dropped out of the running - he received a welcome-aboard present that was just so…Uber.

Namely, a report in the Wall Street Journal claiming that the DOJ is in the “preliminary stages” of an investigation into whether Uber executives violated the Foreign Corrupt Practices Act by allegedly paying bribes to government officials. Based on what it finds, the Justice Department may or may not decide to open a full-fledged FCPA investigation into Uber.

According to WSJ, it’s unclear whether US authorities are focused on one country or examining activities in multiple countries where the company operates. But if we had to guess, we’d bet that any alleged wrongdoing probably happened in China, where bribery and corruption proliferate. Uber’s foray into the world’s No. 2 economy famously ended in defeat one year ago when it sold its China division to local rival Didi Chuxing in exchange for a stake in the combined company.

In his first public remarks since accepting the job, Khosowshahi described the chance to run the ride-hailing startup as a “once in a lifetime opportunity.” But like they say: be careful what you wish for. Because, as Khosrowshahi absorbs his first blows in the unceasing media assault on Uber, he’s probably thinking to himself that he didn’t realize just how good he had it at Expedia – where his 12-year tenure was unblemished by scandal.

To add another layer of irony: He hasn’t even left yet.

Here’s WSJ:

“Even before he takes the job as Uber Technologies Inc.’s new chief executive, fresh challenges confront Expedia Inc. CEO Dara Khosrowshahi, with news of a federal bribery probe into Uber and public disagreement over how the board’s decision to hire him unfolded.

News of the probe, reported by The Wall Street Journal on Tuesday, came after Mr. Khosrowshahi made his first public comments since being voted in as CEO by Uber directors on Sunday. He would succeed Travis Kalanick, the Uber co-founder who was pressured to resign in June following a series of scandals and amid infighting on the board. Mr. Khosrowshahi was selected over two more seasoned executives in Jeff Immelt, chairman of General Electric Co. and Meg Whitman, chief of Hewlett Packard Enterprise Co.”

Khosrowshahi played up his relationship with former CEO and Uber co-founder Travis Kalanick, telling WSJ that “there’s mutual respect” between the two tech titans. We hope, for Khosrowshahi’s sake, that he’s being polite, not naïve. Because anybody who’s been following the Uber saga probably suspects that Kalanick would drive a knife into his successor’s back in a heartbeat if it would hasten his return as CEO.

“Speaking with the Journal at Expedia’s headquarters Tuesday morning, Mr. Khosrowshahi said his contract with Uber still needs to be finalized, but indicated he would take the job. He said Mr. Kalanick would remain involved with Uber and described as “budding” his relationship with the ex-CEO. “I think there’s mutual respect there,” he said.

‘He’s the founder of the company, he’s an incredible visionary, so he will be involved with the company going forward,’ Mr. Khosrowshahi said. ‘Exactly how, exactly when, is something that’s really up to Travis and the board.’"

When asked about the controversy surrounding his selection as CEO – he was chosen after two more-experienced candidates, HP Enterprise’s Meg Whitman and recently retired former GE CEO Jeff Immelt, publicly withdrew their candidacies - Khosrowshahi defended his selection.

“Mr. Khosrowshahi declined to discuss the controversy around the CEO search, saying ‘there has been too much obsession with the process.’

Despite the drama at Uber, Mr. Khosrowshahi said the offer to run it was too good to pass up. ‘It took a couple of pokes to get me interested,’ he said, ‘but the opportunity at Uber is once in a lifetime.’”

He added that his “first priority” at Uber would be focusing on the company’s employees, who’ve been without a leader for nine weeks.

“That part of the business maybe hasn’t been focused on as much,” he said, “and that comes first for me.”

But as much as Khosrowshahi would like to shoot the breeze by the water cooler, we imagine he’ll soon be busy putting out fires as the federal government is in the middle of multiple investigations into the company’s alleged misdeeds.

As WSJ notes, Uber faces growing pressure from U.S. authorities. In addition to the preliminary bribery probe, the Justice Department is separately pursuing a criminal investigation into “Greyball,” a software tool employees used to evade law-enforcement officials. And earlier this month, Uber settled Federal Trade Commission charges that it didn’t offer sufficient privacy protections for its users. The company didn’t admit nor deny the allegations as part of the settlement.

Good luck with the new job, Dara. You’re going to need it.
 

Birkenstock CEO Accuses Amazon Of "Modern Day Piracy"

President Donald Trump might’ve been on to something when he accused the Washington Post of being a “lobbyist weapon For Amazon.”

In a rambling five-page email published by WaPo, the CEO of Birkenstock USA threatened to cut off authorized retailers who sell even a “single pair” of its shoes to Amazon.com Inc., a continuation of his crusade against the online retailer, which began about a year ago when he demanded that the e-commerce powerhouse do more to ferret out fakes being sold on its platform. In the missive, CEO David Kahan blasted Amazon for soliciting Birkenstock retailers, offering to buy the company’s shoes from them for full price. Birkenstock stopped selling its shoes on Amazon earlier this year, citing a rise in counterfeit products and unauthorized sellers.

Though the paper disclosed its conflict of interest, the story was obviously intended to embarrass a business rival of WaPo owner and Amazon founder Jeff Bezos, despite the paper’s smoothly neutral tone.

“In the email, Kahan called the entreaty a “desperate act” and a “PERSONAL AFFRONT.”

“Birkenstock does NOT sell [to] Amazon,” he wrote in the email to retail partners. “And it is clear that they are seeking back-channel means by which to obtain our brand.”

He emphasized that the German shoemaker prohibits shop owners from selling, distributing or shipping its products to resellers.

“I will state clearly, any authorized retailer who may do this for even a single pair will be closed FOREVER,” Kahan wrote. “I repeat, FOREVER.”

Kahan added that he is considering legal action against Amazon.com for ‘knowingly encouraging a breach of our policy.’”

Birkenstock doesn’t allow unauthorized resellers like Amazon to sell its classic cork-and-leather sandals, believing that losing control of it products risks tarnishing its brand and reputation. Kahan also noted that, by cooperating with Amazon, the company risks losing control of how and where its products are sold.

Later in the lengthy missive, Kahan claimed that Amazon’s inability to weed out fakes is tantamount to encouraging piracy.

“"This is modern-day piracy on the high seas,” Kahan said in an interview. “This is a middle finger to all brands, not just Birkenstock.”

At least one Birkenstock retailer interviewed by WaPo said he supports Kahan’s decision to cut off Amazon, saying sales of the company’s shoes have risen about 20% over the past year.

“At Martin’s Family Shoes in Gettysburg, Pa., owner John Fidler says sales of Birkenstocks are up about 20 percent this year, which he attributes at least partly to the company’s split with Amazon. He was encouraged, he said, to receive Kahan’s “ticked off” email last week.

‘It was great that somebody finally put Amazon in its place,” he said. “I don’t see any reason to sell there.’”

Even though Amazon declined to comment about Kahan’s email specifically, it’s clear why the firm might consider his anti-counterfeit campaign a threat to its ambitions to keep expanding. As WaPo noted, Kahan’s decision to stop cooperating with Amazon could inspire other retailers to withhold their product from the platform, as brick-and-mortar retailers struggle to survive as consumers increasingly prefer to shop online.

Amazon is fighting battles on multiple fronts as it struggles to expand: Wal-Mart recently warned trucking firms that it would drop its business if it found out they were also moving goods for Amazon. Meanwhile, its deal to purchase Whole Foods Market is in danger of being scuttled by Congressional Democrats, who are falling for the FTC to investigate the company for possible antitrust violations.

Read the letter in its entirety below:

Amazon Retailer Letter 7.20.17 by zerohedge on Scribd

Democrats Urge Antitrust Action Against Amazon Over Whole Foods Deal

In the wake of their embarrassing electoral defeat in November, Congressional Democrats are turning against the wealthy tech benefactors who bankroll their campaigns. To wit, a group of 12 Democratic Congressman have signed a letter urging the Department of Justice and the Federal Trade Commission to conduct a more in-depth review of e-commerce giant Amazon.com Inc."s plan to buy grocer Whole Foods Market Inc., according to Reuters.

Rumblings that Amazon is engaging in monopolistic business practices resurfaced last week when the top Democrat on the House antitrust subcommittee, David Civilline, voiced concerns about Amazon"s $13.7 billion plan to buy Whole Foods Market and urged the House Judiciary Committee to hold a hearing to examine the deal"s potential impact on consumers.

Making matters worse for the retailer, Reuters reported earlier this week that the FTC is investigating the company for allegedly misleading customers about its pricing discounts, citing a source close to the probe.

The letter is at least third troubling sign that lawmakers are turning against Amazon, even as President Donald Trump has promised to roll back regulations, presumably making it easier for megamergers like the AMZN-WFM tieup to proceed.

So far, it’s mostly Democrats who are urging the FTC to take “a closer look” at the deal. However, some suspect that Amazon founder Jeff Bezo’s ownership of the Washington Post – a media outlet that has published dozens of embarrassing stories insinuating that Trump and his compatriots colluded with Russia to help defeat Democrat Hillary Clinton – could hurt the company’s chances of successfully completing the merger, as its owner has earned the enmity of president Trump. Similar concerns have dogged CNN-owner Time Warner’s pending merger with telecoms giant AT&T.

In the letter, the group of Democratic lawmakers – which includes rumored presidential hopeful Cory Booker, the junior senator from New Jersey – worried that the merger could negatively impact low-income communities. By putting other grocers out of business, the Amazon-backed WFM could worsen the problem of “food deserts,” areas where residents may have limited access to fresh groceries.

"While we do not oppose the merger at this time, we are concerned about what this merger could mean for African-American communities across the country already suffering from a lack of affordable healthy food choices from grocers," the letter said on Thursday.

In the hopes of changing Whole Foods’ “whole paycheck” image, Amazon has lobbied Congress to be able to accept food stamps online, and is participating in a pilot program to “expand access” to fresh food in impoverished communities. You can read the letter in full below:

@MaxineWaters @CoryBooker among 12 MoCs w/ concerns re: @amazon-Whole Foods deal. Read their letter to DOJ/ FTC -> https://t.co/fYh6kK0Wq9 pic.twitter.com/XZEgH3lv7I

— Jessica A. Torres (@jessalttorres) July 21, 2017

Brian Huseman, Amazon"s vice president of policy, in a letter to Fudge, tried to placate the angry Democrats by assuring them that Amazon intends to address their concerns.

""We agree with you that access to food is an important issue for the country, and we share your goal of improving that access," Huseman said in the letter.

"We deliver low-cost, healthy food to zip codes across the country that before Amazon had limited access to a large selection of high quality foods," Huseman wrote to Fudge.

Huseman also disputed claims that Amazon is anti-competitive, pointing out that Wal-Mart has a larger market share, and added that the company doesn’t plan on laying off workers…despite widely touting its plans to rely on automation – including special sensors and artificial intelligence – to eliminate the need for cashiers in it brick-and-mortar grocers.

“Amazon has sought to dispute that it would monopolize the grocery industry. Wal-Mart Stores Inc currently controls the largest market share.

‘We also do not plan job reductions as part of the acquisition, which if approved would result in a company with a combined less than 3 percent of national grocery sales,’ Huseman wrote.”

The letter was released to the public by the United Food and Commercial Workers union, which praised the Democrats plans to fight back against a merger that will likely result (despite Huseman’s claims to the contrary) in a sharp reduction in its membership base.

“Political concerns about Amazon’s acquisition of Whole Foods are growing for good reason,” UFCW President Marc Perrone said on Friday. “Amazon’s monopolistic desire to control the retail market and replace good jobs with automation is not only a direct threat to the hard-working men and women at Whole Foods, it’s also a direct threat to our economy and consumers."

Amazon and Whole Foods hope to expand access to fresh food, said Brian Huseman, Amazon"s vice president of policy, in a letter to Fudge, also on Thursday.

"We agree with you that access to food is an important issue for the country, and we share your goal of improving that access," Huseman said in the letter.

So far, any negative impact on Amazon’s shares has been minimal as the broader market remains in rally mode. On Friday, the Nasdaq fell after rising for nine straight days – stopping just shy of what would’ve been its longest winning streak in years.
 

Amazon's Phone-Charging Robot Will Spare You The Indignity Of Talking To Strangers

Amazon is having a rough week.

The e-commerce powerhouse has celebrated a string of victories this year. Its stock price broke above $1,000 for the first time; it is presiding over an unprecedented retrenchment within the retail space as more than 8,000 brick-and-mortar stores are expected to close in the US this year, and the company announced plans to acquire yuppie favorite Whole Foods Market, promising to transform the company’s stores into laboratories for automation and AI where advanced sensors will perform tasks previously reserved for human cashiers. It also revealed that its “Prime Day” sale was the "Biggest Global Shopping Event in Amazon History", surpassing Black Friday and Cyber Monday sales.

But the string of good news came to an abrupt halt last week when Reuters reported that the top Democrat on the House antitrust subcommittee, David Civilline, has voiced concerns about Amazon"s $13.7 billion plan to buy Whole Foods Market and requested in a letter to the House Judiciary Committee a hearing to examine the deal"s potential impact on consumers – the first stirrings of what could metastasize into an anti-trust probe.

Adding to the antitrust concerns, Reuters reported Thursday that the FTC is investigating the company for allegedly misleading customers about its pricing discounts, citing a source close to the probe. The news sent Amazon shares lower in afternoon trade:

Amid the negative news, the company’s investors enjoyed a brief moment of levity when career website Ladders reported on a patent that was awarded to the company earlier in the week. The patent, first filed in 2015, revealed the company’s plans to build a robot that, using the company’s massive data-mining apparatus, would be able to track down desperate mobile-device users in crowed public spaces like an airport or concert venue and present them with the greatest gift of all: an opportunity to charge their phones.  

Here’s a quick rundown of how it’ll work, courtesy of Ladders:

“You will make a wireless request (perhaps with your last precious few moments of juice).

The robot will find you in a crowd using sensor data. Through a cloud-based application, the robot can even find you automatically when your power hits below 10%. Nothing, of course is free, so the robot will ask you to watch an ad, complete a survey, or pay some money.

The robot would be designed for public use in airports, hotels, and shopping malls—all locations where losing battery power can be particularly inconvenient. Of course, a device like this would be perfect for business travelers, who have become accustomed to carrying heavy external batteries or even bulky power strips.

Then: the robot provides sweet, precious electricity to your phone or iPad or laptop.”

As Ladders pointed out, the patent description explains why these robots could be useful, especially for professionals who are increasingly dependent on mobile devices.

“It can be quite inconvenient to a user when one of these devices runs out of battery power. This is especially true if the user does not have an available charging adapter for the device,” the patent reads. “Users may find themselves asking friends, or even strangers, to borrow a charging adapter.”

Indeed, as Ladders notes, “there is clearly an unmet market that an army of mobile-charging robots for your personal use can fill.”

Whether Amazon intends to move forward with production of the robot remains to be seen. The company has yet to comment publicly about the patent. But as it continues to test and refine its army of package-delivering drones, it’s unsurprising that Amazon is finding other uses for robotics.

But that’s Amazon: Working tirelessly to build a future where your phone battery never creeps below 10%.

Read the patent below:

2017.07.20amazonpatent by zerohedge on Scribd

HOW GOOGLE FRAMES OUT, PAYS FOR, AND GETS GOV'T TO BE ITS BITCH

Intro - Beware the Holding Funnel

Originally on marketslant.com

What can one say. This is how business is done. And what is scarier it is now being done by firms with all your data. So, the next time you use your club card for a discount at the market, ask yourself : "Does Shop-Rite really want to make less money?" With shopping habits and data, real time pricing will come, and once they know your buying habits, look out.

Prices of things you buy most can change as you enter the store. If you doubt that, search for an Uber  car, then re-search it. We"ve  found  that the price can vary widely over minutes. From $80 to $140 LGA to Greenwich CT. The explanation given  us is "traffic and car availability" . That is Uber  changing price based  on car demand which effects car supply. 

Watch, Google will be part of the move to real time price changes in those fancy new cashierless markets with phone apps that help you  find what you want. "Those crackers you like so much are right at the end of that funnel shaped aisle. You can"t miss it them - Soren  K. Group

New Evidence Reveals an Extreme Level of Corruption

Written by Josie Wales for theantimedia.org

 In September of 2011, Google’s Executive Chairman Eric Schmidt testified before Congress that Google was not manipulating search results to favor its own shopping service (it was). Schmidt also denied allegations that the company was a monopoly, citing a research paper written by David Balto, former policy director of the Federal Trade Commission. What Schmidt neglected to tell the Senate Judiciary antitrust committee was that Google had funded that research paper.

And that’s not the only one, according to a recently published report by the non-profit, non-partisan watchdog organization, the Google Transparency Project, which identified “329 research papers published between 2005 and 2017 on public policy matters of interest to Google that were in some way funded by the company.”

What’s more, the academic research funded by Google covered “a wide range of policy and legal issues of critical importance to Google’s bottom line, including antitrust, privacy, net neutrality, search neutrality, patents and copyright.”

GTP’s report reveals a shocking list of sources that Google paid off. They include:

“[A]cademics, think-tanks, law firms, and economic consultants from some of the leading law schools and universities in the country, including Stanford, Harvard, MIT, University of California Berkeley, UCLA, Rutgers, Georgetown, Northwestern Law School, and Columbia.”

Internationally, GTP reports, “Google-funded studies were written by academics at some of the most prestigious universities in Europe, including Oxford (U.K.), Edinburgh University (U.K.), Berlin School of Economics (Germany), Heinrich Heine University (Germany), and KU Leuven (Belgium).”

The Wall Street Journal took their research a bit further, and what they discovered is astounding. WSJ reported:

“Some researchers share their papers before publication and let Google give suggestions, according to thousands of pages of emails obtained by the Journal in public-records requests of more than a dozen university professors. The professors don’t always reveal Google’s backing in their research, and few disclosed the financial ties in subsequent articles on the same or similar topics, the Journal found.”

University of Illinois law professor Paul Heald neglected to disclose the $18,830 he received from Google to fund “an idea on copyrights he thought would be useful to Google.” When he was questioned in an interview about his failure to mention his sponsor, Heald replied, “Oh, wow. No, I didn’t. That’s really bad. That’s purely oversight.” The professor also claims the money had no influence on his work.

Google has paid anywhere between $5,000 and $40,000 per paper, and the number of studies surged the highest in 2012 when the company was being investigated by the Federal Trade Commission and European regulators for antitrust violations. At least 50 studies on antitrust issues authored between 2011 and 2013 were bought and paid for by Google.

[EDIT- Some Examples from the site - Soren K]

?

for complete list or click HERE

According to a former employee and a former Google lobbyist, Google officials in Washington compiled wish lists of academic papers and then searched for willing authors to complete the desired work. Google often provided working titles, abstracts, and budgets for each proposed paper. Upon completion, they were pitched to government officials. The former lobbyist told the Journal that Google would “sometimes pay travel expenses for professors to meet with congressional aides and administration officials.”

Google’s massive influence on academic research should come as no surprise given the former CEO’s openness in discussing the company’s hand in writing legislation. At the Washington Ideas Forum, Schmidt described his experience working with the U.S. government, revealing that “The average American doesn’t realize how much of the laws are written by lobbyists…and it’s shocking, now, having spent a fair amount of time in the system –  how the system actually works.”

Shocking is an understatement. It’s absolutely terrifying how the system works. A multi-billion dollar company with a monopoly on the internet not only writes the laws, but funds academic studies to shield them from further laws that might prevent them from becoming even more dangerous, all while harvesting private data from over a billion people and developing AI technology that allows two neural networks to communicate using inhuman cryptographic language indecipherable to humans.

And the executive chairman of this disturbingly powerful corporation is a man who has stated that Google’s famous “Don’t be evil” slogan was “the stupidest rule ever.” This is the same man who told an audience in Washington, D.C., that “We don’t need you to type. We know where you are. We know where you’ve been. We can more or less know what you’re thinking about.”

What could go wrong?

theantimedia.org

Read more by Soren K.Group

How Google Rigs Search And Hurts Consumers

Authored by Mike Krieger via Liberty Blitzkrieg blog,

I’m sure all of you heard about the $2.7 billion fine imposed by the EU on Google as a result of its anti-competitive behavior, but not many of you probably know exactly what the search giant did to earn it. To shine some light on the topic, let’s take a look at a few excerpts from a recent article written by Silicon Valley antitrust lawyer Gary Reback.

Below are some choice excerpts from the piece, You Should Be Outraged at Google’s Anti-Competitive Behavior:

Before 2007, if a user searched for a product on Google, other sites listing prices for that product would appear among the general search results, ranked in the order of their quality to users. These “comparison shopping sites” were designed to identify merchants with the lowest prices. The more accurate and comprehensive their results, the higher they were ranked and the more traffic they generated.

But the more successful that comparison shopping sites became, the more they threatened Google’s business plan. Google makes money by selling ads placed next to its free search results, and merchants could not be expected to bid for ad placement if the listings in comparison shopping sites on the same search undercut their prices.

To address this, Google developed a cunning plan, the first phase of which was documented in a report by the FTC. Portions of the report were published by the Wall Street Journal more than two years ago.

Quoting internal Google documents and emails, the report shows that the company created a list of rival comparison shopping sites that it would artificially lower in the general search results, even though tests showed that Google users “liked the quality of the [rival] sites” and gave negative feedback on the proposed changes.

Google reworked its search algorithm at least four times, the documents show, and altered its established rating criteria before the proposed changes received “slightly positive” user feedback. Internal Google documents predicted that the proposed changes would reduce rivals’ user traffic up to 20 percent and subsequently reported producing the desired results once the changes were implemented.

At the same time, Google started putting the results from its own comparison shopping service at the top of search results. After these changes, the only source of low-price information readily available on Google’s search platform came from Google’s own comparison shopping service, known at the time as Google Product Search, which listed the lowest prices for products in its database at no charge to merchants.

Google’s conduct certainly hurt its rivals, particularly after a second round of search-listing demotions documented by the European Union. Many companies have been forced to lay off all of their employees and even shut down operations.

In 2012, Google took the extraordinary step to kill Google Product Search, replacing it with Google Shopping. This new service did not display the lowest price (or even a low price) in the general search results; rather, it displayed ads at the top of the search results page in response to the user’s search term. The ads were carefully placed by Google’s algorithms to minimize price competition among merchants, by, for example, showing ads next to each other that featured different product models at different price points.

Google Shopping also permitted merchants to purchase ads on a separate shopping page. Merchants — no longer promoted in search results for having lower prices — now must pay for better placement. Not surprisingly, they have raised prices to cover these costs.

Google’s competitors argued in a study, which I submitted to the European Commission a few years ago, that the prices in Google Shopping ads for specified products on search results pages were among the highest in Google’s database. Google’s displayed prices for everyday products, such as watches, anti-wrinkle cream and wireless routers, were roughly 50 percent higher — sometimes more — than those on rival sites. A subsequent study by a consumer protection group found similar results. A study by the Financial Times also documented the higher prices.

The Post’s editorial board claimed that the online availability of large merchant sites might restrain Google’s power over consumers. But those sites haven’t stopped Google from executing its plan so far. There is no denying that Google eliminated services showing the lowest prices, free to merchants, and replaced them with high-priced ads.

Some people like to blame all of the world’s problems on government.

Others blame business for everything that ever goes wrong.

I don’t fall into either of these categories. I think the greatest threat to humanity, freedom and our overall happiness comes down to concentrations of power.

Too much concentration of power within business or government ultimately leads to tyranny and oppression, and the best solution is for all of us to fight against concentrations of power in all its manifestations. Personally, I think Google has far too much power in a service as important to modern life as search, and it seems executives there are doing what always happens with concentrated power — abusing their position.

Einhorn: "The Longs Say Stocks Can Only Go Up, Seemingly To Infinity And Beyond. We Have Seen This Before"

David Einhorn may write in his latest quarterly letter to investors that "from a portfolio perspective, this quarter was a quiet one" but based on his activity the famous poker playing hedge fund manager was quite busy.

Among his various moves, Greenlight added a new position in Perrigo in the first quarter, after several large guidance cuts, and now sees the company"s earnings forecast as achievable. He also took a new long position in Conduent, as he believes the company as burdened with “underearning” contracts that it can renegotiate and exit. He also took a new long in unidentified European financial institution. On the other side, Greenlight closed shorts in Signet Jewelers, LyondelBasell, and RPC and also closed out shorts in three Canadian banks at a loss after oil and credit loss thesis didn’t “sufficiently” materialize.

Einhorn said he still likes Apple, which is a “superior company that still trades for less than a market multiple” while trimming his short position in Rite Aid after initially expecting deal with Walgreens to close at $9-share with FTC approval, and is watching the RAD situation “carefully” as original thinking was incorrect.

Performance wise, the fund returned 1.3% in Q1, underperforming the S&P"s 6.1% rise. "Apple (AAPL), Chemours (CC) and gold were the biggest winners; the bubble basket, Rite Aid (RAD), and a short position in Tesla (TSLA) were the biggest losers." And as he admits, ""It was a difficult quarter to be short the bubble basket, and TSLA in particular."

One day, TSLA will fall, but not yet.

Below are some of the notable highlights from the letter, presented below.

"It was a difficult quarter to be short the bubble basket, and TSLA in particular. Perhaps as the prospects for tax reform have dimmed, the market has regained enthusiasm for profitless companies that aren’t at risk of paying taxes. A number of these stocks are back in full-blown momentum mode. Analysts continue to raise “target prices” which the market treats as news."

"The bulls explain that traditional valuation metrics no longer apply to certain stocks. The longs are confident that everyone else who holds these stocks understands the dynamic and won’t sell either. With holders reluctant to sell, the stocks can only go up – seemingly to infinity and beyond. We have seen this before. It’s painful for the shorts, as the TSLA CEO has been happy to remind everyone via Twitter."

"There was no catalyst that we know of that burst the dot-com bubble in March 2000, and we don’t have a particular catalyst in mind here. That said, the top will be the top, and it’s hard to predict when it will happen. Notably, a number of bubble stocks advanced despite missed expectations and/or falling estimates. The basket is sized appropriately with the understanding that twice a silly price isn’t twice as silly. In due time, we expect these bubbles to pop."

"Our longs were profitable, though they went up a bit less than the market. Our shorts generated losses but added alpha, and gold gave us a small profit in macro. Apple (AAPL), Chemours (CC) and gold were the biggest winners; the bubble basket, Rite Aid (RAD), and a short position in Tesla (TSLA) were the biggest losers."

"Gold rose over 8% to start the year. Nothing significant happened here (the White House columns are not gold yet); gold simply reversed a portion of the post-election decline it suffered last quarter. Gold remains a long-term position with a thesis that global fiscal and monetary policies remain very risky."

Finally, Einhorn had some comments on the recent activist foray into GM:

While it was quiet on the portfolio front, we made more noise than usual (and more than we’d like) by making public our idea for General Motors Company (GM) to unlock tens of billions of dollars of shareholder value. As a general matter, we prefer to avoid public activism. The last time we did this was with AAPL in 2013 after owning the stock for three years. This is a similar situation; we had owned GM shares for years before advancing our idea to management.

We know this is a tough fight. Fortunately, the math is on our side (if GM does what we suggest, we believe the stock will go up a lot) and the ultimate decision will be made by our fellow shareholders. We believe others recognize that the stock is deeply undervalued and when shareholders grasp the math and the extent of GM’s behavior, they will vote with their wallets and for needed change at the Board level.

* * *

Full letter below:

We Finally Know Why Americans Spend More on Prescription Drugs Than Other Nations

November 11, 2016   |   Alice Salles

(ANTIMEDIA) Last week, Vermont Senator Bernie Sanders sent a letter to U.S. Attorney General Loretta Lynch and Edith Ramirez, chair of the Federal Trade Commission (FTC), requesting that the Department of Justice (DOJ) and the FTC look into some makers of prescription drugs and how they price insulin.

Sanders and Rep. Elijah Cummings (D-MD) wrote that though the original insulin patent expired 75 years ago, “three drugmakers who make different versions of insulin have continuously raised prices.”

In “numerous instances,” the letter continued, “price increases have reportedly mirrored one another precisely.”

Citing concerns over rising insulin prices and their continued impact on federal spending, the two Democrats accused the companies of taking part in “anti-competitive” conduct and urged the DOJ to investigate. The companies accused of colluding to inflate the price insulin are Eli Lilly, Merck & Co., and Sanofi.

Sanders’ theory that the companies are coordinating to ensure insulin prices remain high across the board partly explains the increasing prices. But a study recently published by the Journal of the American Medical Association(JAMA) shows the high cost of prescription drugs might be caused primarily by government granted monopolies.

According to the paper’s findings, researchers learned that manufacturers are allowed to set high drug prices due to market exclusivity, which is “protected by monopoly rights awarded upon Food and Drug Administration [or FDA] approval and by patents.” This is a finding that coincides with the assessment of many Austrian economists, who often argue the FDA causes “death and suffering” when it keeps drugs off the market due to heavy regulations.

In the United States, individuals spend more on prescription drugs than those in all other countries. The JAMA study noted that in 2013, “per capita spending on prescription drugs was $858,” a much higher cost to consumers than those in “19 other industrialized nations.” In those countries, people spent roughly $400 on prescription drugs. And with prices for prescription drugs in the U.S. jumping more than 10 percent in 2015, things are only getting worse for Americans.

Recently, former presidential contender and congressman Ron Paul wrote that “[m]onopolies and cartels are creations of government, not markets.” If the JAMA-published study on the high costs of prescription drugs arrived at the right conclusions, Paul’s explanation seems to point out a reason why.

“Government taxes and regulations,” the retired physician said, “are effective means of limiting competition in an industry.” When large corporations, like the three insulin makers Sen. Sanders is urging the DOJ to investigate, want to eliminate competition, they go to agencies like the FDA.

Since “[l]arge companies can afford the costs of complying with government regulations,” Paul added, smaller competitors are crushed by the high costs of doing business. What’s left? A small group of powerful entities that are ready to do anything to stay afloat. They might even collaborate with one another — as Sanders implies they have — after pushing all other competitors out of the picture with the aid of the FDA’s protectionist policies. After all, Paul explains, “[b]ig business can also afford to hire lobbyists to ensure that new laws and regulations favor big business.”

Examining the lobbying practices of Sanders’ three offenders, we find that Eli Lilly spent $5,470,000 on lobbying efforts in 2016 alone. Merck & Co. went beyond that, spending $5,500,000 on lobbying in 2016. Sanofi isn’t far behind, either; the company has spent $4,390,000 so far in 2016.

In the study published by JAMA, researchers concluded that the “approach the United States has taken to granting government-protected monopolies to drug manufacturers, combined with coverage requirements imposed on government-funded drug benefits” are pushing the prices up, creating an artificial scarcity that hurts those who cannot afford the life-saving drugs they require due to conditions such as diabetes.

Instead of more regulation, the solution is to allow companies to operate without being picked as winners by agencies like the FDA.

“Any businesses that charge high prices or offer substandard products” in a market environment free from government intervention, Paul wrote, “will soon face competition from businesses offering consumers lower prices and/or higher quality.” To put an end to high prices for prescription drugs, then, we must first put an end to monopoly-creating schemes — and yes, that includes terminating agencies like the FDA.

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This article (We Finally Know Why Americans Spend More on Prescription Drugs Than Other Nations) is free and open source. You have permission to republish this article under a Creative Commons license with attribution to Alice Salles and theAntiMedia.org. Anti-Media Radio airs weeknights at 11 pm Eastern/8 pm Pacific. If you spot a typo, please email the error and name of the article to edits@theantimedia.org.