Can Hank Paulson Defuse This Crisis?

Abstract: IF Henry M. Paulson Jr. hadn’t left Wall Street for Washington to become Treasury secretary in 2006, he would still be making tens of millions of dollars a year as the chairman of Goldman Sachs . He would be comfortably zipping around the globe on a corporate jet. He would be presiding over the only big Wall Street firm that hasn’t lost billions on bad debt. He wouldn’t be answering rounds of questions at meandering Congressional hearings. He wouldn’t be at the center of the Bush administration’s struggle to contain a potential financial meltdown the likes of which the world hasn’t seen since the Great Depression. And he certainly wouldn’t be openly (and with a grin) comparing himself to Job, the Bible’s best-known punching bag. Still, he insists that he doesn’t regret leaving his perch atop Goldman Sachs when the president called. “I don’t look back,” he told New York Times editors and reporters in a meeting last Monday. “It wasn’t my first choice, ever. I enjoyed what I was doing. I thought it was the right thing to do.” Whether Mr. Paulson has actually done the right things during his two uneven years in office has been a matter of intense debate in financial and political circles. That debate reached a boiling point last week as Congress moved toward approval of a taxpayer-financed rescue package that Mr. Paulson advocated for Fannie Mae and Freddie Mac, the government-sponsored mortgage giants that appear to be powder kegs. Even Mr. Paulson, for all his Wall Street experience and market savvy, occasionally appears flummoxed by the scale and complexity of the current crisis. “When I talk to people, there are a whole lot of them that say: ‘I don’t like this,’ ‘I don’t like that,’ ‘I don’t like the other thing,’ ” he said in the Times meeting. “I say: ‘Neither do I. What idea do you have? What do you think we should do?’ ” Mr. Paulson is leading the Bush administration’s struggle to contain an economic contagion stemming from a disintegrating housing sector, volatile financial markets and frozen credit, skyrocketing energy and food prices , widening job losses, and a precipitous fall in the dollar. As he scrambles to find solutions to these myriad and interconnected challenges he has earned plaudits for how quickly he has recently marshaled federal resources. Yet he’s also been roundly criticized as having not grasped the threat and severity of the crisis when it began to snowball about 18 months ago. Moreover, a Treasury secretary who initially preached against “excessive regulation” of the financial sector is presiding over a sweeping government intervention in the economy, one that conceivably marks the end of a federal deregulatory push that began in the late 1970s and accelerated in subsequent decades. And an administration that has rarely had conflicts with its allies in Congress discovered that the Fannie and Freddie legislation is opposed by most Republicans in the House of Representatives, some of whom claim it smacked of socialism. Critics on the right also accuse Mr. Paulson and Ben S. Bernanke, the Federal Reserve chairman, of panicking and over-reaching, keeping interest rates low, which they say has fanned inflation and caused the dollar to skid. Facing the possibility of even worse economic news in the months to come, Mr. Paulson — whose nickname “The Hammer” comes from his days as an offensive lineman on the Dartmouth football team in the ’60s — has won praise on Wall Street and Capitol Hill, particularly among Democrats, for his role in fashioning solutions to economic difficulties this year. “He has handled this crisis extremely well,” said Representative Barney Frank, the acerbic Massachusetts Democrat who is chairman of the House Financial Services Committee and customarily a scathing critic of the Bush administration. “It’s fair to say that he and almost everybody else failed to anticipate some of these problems. We all underestimated it. What I give him credit for is how rapidly he adapted.” But other observers say they still aren’t convinced that Mr. Paulson’s overall performance has been up to speed, seeing it as overly reactive rather than proactive. “I’m afraid there’s much more Treasury could have done much earlier in this process,” says Thomas H. Stanton, an author and expert on mortgage finance. “Once the financial markets showed signs of panic, Treasury had to act.” And, Mr. Stanton adds, “it’s almost as if Treasury was panicked as well.” Still, say others, Mr. Paulson and his Treasury team can’t shoulder all of the criticism aimed at the federal government over its handling of the financial crisis. “It wasn’t just the Treasury; it was a problem throughout the federal government that everyone was asleep at the wheel,” said Nouriel Roubini, an economics professor at the Stern School of Business at New York University. “They let the subprime market and housing bubble expand without any controls. They believed in risk-management models,” he said, thinking that “market discipline would be better than regulation. But the lesson we have learned is that self-regulation means no regulation.” WHEN Mr. Paulson accepted the Treasury job, he sought advice from Robert E. Rubin, another former Goldman Sachs chief, who served as Treasury secretary in the Clinton administration. The two sat together in the library of Mr. Rubin’s Manhattan home as Mr. Paulson peppered him with questions about how Washington works. “Some people from business or law go down to Washington and they go with the view that they’ve done very well in whatever they’ve done and they can take that same way of functioning and apply it in Washington,” says Mr. Rubin. “Very often that doesn’t work. Others say, ‘I’ve had a lot of experience, but this world operates in different ways and I have to learn how this world works.’ That’s a much more effective approach, and that’s my impression of what Hank has done.” In Washington, where politicians and policy wonks can feel in their bones when a Cabinet member does or doesn’t have clout, Mr. Paulson’s stock is riding high. It was the Treasury chief, for example, who persuaded Mr. Bush to go along with a $168 billion economic stimulus package in cooperation with Democrats early this year. As markets fell precipitously in March, he worked with Federal Reserve officials to orchestrate the fire sale of Bear Stearns to JPMorgan Chase, encouraging the Fed to financially back the deal and open its coffers to other ailing investment firms. Bear Stearns complained that it was being forced to accept a low-ball price for its ailing shares; Mr. Paulson demanded a rock-bottom price so the public didn’t have the impression that Bear’s shareholders were getting a life raft paid for by Main Street taxpayers. And this month, as Mr. Paulson helped hammer out emergency legislation authorizing the federal government to potentially inject hundreds of billions of dollars into Fannie and Freddie if the government-sponsored mortgage makers weaken further, he spent long hours with lawmakers of both parties. Although the White House made clear its distaste for parts of the legislation, especially increased federal spending for homeowners, it said that Mr. Bush was taking the Treasury secretary’s advice not to veto the bill. The House speaker, Nancy Pelosi, a California Democrat and a critic of the White House, praised Mr. Paulson for changing Mr. Bush’s mind. Senator Christopher J. Dodd, the Connecticut Democrat who is chairman of the Senate banking committee, is also singing “Kumbaya.” “I’ve watched him grow in the last year, not in terms of intellectual capacity but in his appreciation of how this town works,” says Mr. Dodd. Then again, in an environment where financiers and public-policy makers have temporarily tried to forge a bipartisan front to address the most severe economic tempest in a generation, few people are willing to speak critically of Mr. Paulson for attribution — recognizing, they say, a need for a nervous public and queasy financial markets to believe that the federal government is in charge, is capable, and knows exactly how to confront the downturn. “There’s reluctance to be critical because they understand that to be critical would further erode investor confidence and therefore cause the markets to dive deeper,” says James D. Cox, a corporate law professor at the Duke University School of Law. “We are at a point where it’s difficult to determine how much of this is being driven downward by psychology or the excesses of the past working themselves out. Most people think it’s excesses of the past, but they hope no one else realizes that.” Moreover, Mr. Paulson has especially endeared himself to the denizens of Wall Street by using federal power and the public purse to rescue the financial industry from its own, outsize mistakes and prevent the meltdown from getting out of control. “He’s saved their bacon,” Mr. Cox says. Truth be told, Mr. Paulson is not an easy person to stage manage anyway. Colleagues and acquaintances say he can be forceful and candid in his arguments, even if he is sometimes hot-tempered and prone to impulsive table-pounding. While Mr. Paulson’s weak communication skills make him a notoriously hobbled public speaker, in private he still can be a good listener. “He lacks the fluidity of a Bob Rubin, but he can be very persuasive,” Mr. Dodd says. For his part, Mr. Paulson has the confidence and self-awareness to cop to some of these faults. “I’m not an inspirational leader,” he told the Dartmouth Alumni Magazine in 2003. “I’m just not.” IF Mr. Paulson, 62, has been something of a fish out of water in Washington, he was sometimes that way on Wall Street as well. At Goldman Sachs he didn’t golf or drink, and he often left dinners with senior executives at 8:45 p.m. so he could go to bed. He shunned the Hamptons scene, spending free weekends in Barrington, Ill., where he and his wife, Wendy, built a house in 1974, down the road from his mother, Marianna. He has impeccable Republican credentials and raised funds for George W. Bush. Friends are quick to point out that both he and Wendy, a Democrat, are ardent bird watchers and environmentalists. (Mr. Paulson, who wanted to be a forest ranger before he chose a financial career, was chairman of the Nature Conservancy until he took the Treasury job.) He shuns the trappings of great wealth in other ways as well. He donated $100 million of his Goldman stock to a family foundation dedicated to conservation and environmental education and has said he would give the remainder of his fortune, which stood at about $500 million in 2006, to charity when he dies. He told one reporter that he loved his children too much to leave them money. MR. PAULSON was raised as a Christian Scientist in Barrington, studied English at Dartmouth, landed a Pentagon job, and then worked in the Nixon administration as a liaison to the Treasury and the Commerce Department. After that, he attended Harvard Business School and joined Goldman’s Chicago office as an investment banker after graduating. He made an early impression. “He was very smart, he had the best people in corporate finance working on his team — they recognized his talent — and when I went on client visits, the most important business people in Chicago looked to him personally for his advice,” said Stephen Friedman, a former Goldman Sachs chairman who was President Bush’s top economic adviser from 2002 to 2005. Inside Goldman, Mr. Paulson was known for his bulldog intensity and direct manner. “He used to say that he runs fastest toward problems, and it was true,” said Eric Schwartz, a former Goldman executive who worked closely with Mr. Paulson. “Instead of avoiding conflicts — which is what a lot of managers do — he goes headlong into them.” In 1999, he snared Goldman’s top job after leading a palace coup to push out Jon Corzine, his co-senior partner. (Mr. Corzine, a Democrat, is now the governor of New Jersey.) Mr. Paulson presided over Goldman as it successfully made the transition to public company, expanded aggressively into international markets, and shifted from a more advisory-focused business to one that takes more principal risk in trading and investing. He also defied conventional wisdom among critics and competitors who thought the firm was too small to go it alone. After the repeal of federal laws separating commercial and investment banking in 1999, it was widely accepted that new, sprawling megabanks like Citigroup would crush smaller firms like Goldman. But Mr. Paulson repositioned the business as one built on superior brainpower and the generation of heady profits through judicious risk-taking. Today, Goldman stands alone as the only bank that has yet to take huge write-downs in the credit crisis. Goldman, however, was also an integral part of a money-hungry Wall Street culture that helped build, oil and maintain the securitization and derivatives machinery underlying the current mortgage-fueled problems. Mr. Paulson’s tenure wasn’t without scars. His bluntness — or “brain-to-mouth,” as he has described it — has been a liability at times. In 2002, at an investment conference, he said that 15 percent to 20 percent of the people in each of Goldman’s businesses added 80 percent of the value. It violated Goldman’s cultlike approach to team work. He immediately apologized to all the firm’s employees. He was also deeply embroiled in the 2003 ouster of the former New York Stock Exchange chairman Richard A. Grasso over complaints about Mr. Grasso’s compensation. And Mr. Paulson sat at Goldman’s helm during the excesses of the dot-com bubble, selling vast numbers of subpar companies that promptly crashed with the market. Goldman wasn’t the worst of the offenders, but it wasn’t an exception either. WHEN Mr. Bush struggled to right his listing administration in 2006, his chief of staff, Joshua B. Bolten, a former executive at Goldman Sachs, recruited Mr. Paulson to replace John W. Snow at Treasury. Neither Mr. Snow nor his immediate predecessor, Paul H. O’Neill, was viewed in Washington as having much clout in the Bush administration — Mr. O’Neill went embarrassingly public with his criticisms after he left office — and Mr. Paulson demanded that he be given the authority they lacked if he were to take the job. According to administration officials and others close to Mr. Paulson, he asked to be named as the administration’s chief economic official and that he have a direct line to Mr. Bush. Upon taking office, Mr. Paulson had something of a rude awakening. He said he intended to direct a bipartisan effort to overhaul Social Security and Medicare , but Democrats balked. He tried to improve economic relations with China but met with limited success. Although the Chinese let their currency appreciate in value, they continued to resist opening their markets to American goods, services and investments. Meanwhile, the financial crisis has swirled around the White House in ever more violent waves. But each sign of economic trouble brought assurances from regulators, Mr. Paulson and others in the Bush administration that the housing sector was experiencing a “correction” or a “repricing of risk” that would work its way through the system without throwing the economy into a steep downturn. Each assurance soon ran aground as more bad economic news poured in. At the same time, Mr. Paulson began echoing the line of many in the financial industry that the real problem facing Wall Street was a welter of cumbersome regulations. Warning that private equity firms and others were raising capital in markets outside the United States, Mr. Paulson said in November 2006 that although he had no wish to lift regulations altogether, “excessive regulation slows innovation, imposes needless costs on investors and stifles competitiveness and job creation.” Accordingly, Mr. Paulson set up a presidential working group to come up with a new regulatory blueprint that would simplify if not lift government regulations. What he didn’t anticipate was that the financial crisis would redefine that mandate. Last fall, he declared that “the ongoing housing correction is not ending as quickly as it might have appeared late last year.” He repeatedly said that the problem wasn’t bad credit but market fears, so he encouraged banks to raise more capital and recommended other forms of financial engineering that didn’t gain traction. Most notably, he advocated bundling bad loans into off-balance-sheet entities that theoretically would allow banks to improve their financial standing. The plan was a total flop and yet another signal that Mr. Paulson underestimated the severity of the problem. Another initiative from Mr. Paulson was a program called the Hope Now Alliance, which the administration says has helped hundreds of thousands of homeowners stay in their homes through voluntary renegotiations with banks of mortgage payments. But the markets weren’t reassured. And then came the heart-stopping events this year, beginning with Bear Stearns and mushrooming into the Fannie and Freddie messes. Treasury has been “reactive and not proactive,” said George Soros, the financier and philanthropist. “You can see it on the compromise on Fannie Mae — it’s a halfway house. It remains part of the problem instead of becoming part of the solution.” Some associates of Mr. Paulson say he is handicapped by a lack of a strong bench at Treasury, although government analysts consider the caliber of the midlevel professionals there to be high. Mr. Paulson wound up relying more in the current crisis on Robert K. Steel, a former Goldman executive who left Treasury abruptly earlier this month to become chief executive at Wachovia Bank. Although there has been speculation that Mr. Steel’s departure hinged on a failure to grasp the problems at Fannie and Freddie and keep Mr. Paulson more fully apprised, people close to the situation at Treasury strongly deny that. Rather, they say, Mr. Steel left in part because he realized he wasn’t going to be promoted to a deputy position at Treasury. Mr. Steel says that he and Mr. Paulson foresaw the economic and housing problems much earlier than they are given credit for, and that they made early forays to reform Fannie and Freddie. “When Hank came to Washington, he went to the president and said we’d had a long period of time with no disruptions in the marketplace, and that there was a lot of dry tinder out there,” Mr. Steel recalls in an interview. “I think it’s pretty amazing that in August of ’06, he began to prepare for financial challenges.” Executives close to Mr. Paulson say the administration, including Mr. Steel, were stunned by the magnitude of Fannie’s and Freddie’s internal financial problems. Mr. Paulson says he was not late to the game. “I’ve had a number of people say to me, ‘You should have pushed this harder earlier.’ And I almost don’t get it. Because I came down here and from the day I showed up in Washington I looked at that problem; there is no doubt there is systemic risk,” he said when speaking at The New York Times last week. “The idea of working hard to get a regulator with powers to address some of these systemic issues is important.” Nonetheless, earlier this year Mr. Paulson’s hopes for reform consisted mostly of enhanced oversight of Fannie and Freddie. That effort also ran into Congressional opposition and demands that the two agencies expand their lending activities. Mr. Paulson’s associates say that he has also been frustrated at how hard it has been to convince the White House and other parts of the administration that quick action was essential in the Bear Stearns and Fannie and Freddie debacles. The Bear Stearns crisis happened so fast that Mr. Paulson didn’t bother following inter-agency protocols and simply briefed Mr. Bush and two top aides on the matter. The Treasury chief has also tried to avoid overstating or understating the dangers ahead. “I think we’ll be dealing with the housing issue in one way or another for months, maybe years after I’ve left,” he said at The Times. But he added that the “biggest part” of the crisis will be “largely over by year-end” and that progress “isn’t in a straight line.” Mr. Paulson has quietly tried to tell members of Congress that the whole world is watching how America deals with its housing problems, including Fannie and Freddie. Even so, he is quick to say how uncomfortable he is overseeing a huge, government-led intervention in the financial industry. “I would rather not be in the position of asking for extraordinary authorities to support” Fannie and Freddie, Mr. Paulson said during a speech at the New York Public Library. “But I am playing the hand that I have been dealt.” Some on Wall Street welcome his response. “He’s done a spectacular job balancing free-market ideology with strong government actions,” said Thomas Nides, chief administrative officer at Morgan Stanley and a Washington veteran. “And as a Democrat that’s not an easy thing to say. He’s a Republican and a free market guy — but he’s not making decisions based purely on ideology.” All of which is why Mr. Paulson has been working overtime to try to contain the financial mess. What the White House isn’t publicly emphasizing is that overseas governments and investors hold a considerable amount of securities guaranteed by Fannie and Freddie. If they sell off those securities it could spark a huge market disruption. To that end, backing up Fannie and Freddie is imperative, says Mr. Paulson. “The credit facility is like a lender of last resort and what I believe Congress wants to do — will want to do — is to increase the confidence in our capital markets and in these organizations,” he said at the Times meeting, discussing the proposed rescue package for the mortgage giants. “It will be used as a last resort and it will be used to protect the taxpayer.”

Finances
Housing
Paulson Henry M Jr
United States Politics and Government
Treasury Department
Economic Stimulus Act of 2008
Economic Conditions and Trends
Banks and Banking
Goldman Sachs Group Incorporated
Regulation and Deregulation of Industry


AOL Weighs on Time Warner; Earnings Fall 26%

Abstract: Second-quarter earnings at the media conglomerate Time Warner fell 26 percent on declining subscriber fees at its AOL online unit and lower ad revenue at the Time publishing business, the company said Wednesday. It affirmed its full-year financial targets after revenue rose at its film, cable and networks segments. The company, based in New York, said that net income was $792 million, or 22 cents a share, compared with $1.07 billion, or 28 cents a share, in the period a year earlier. Excluding one-time items, profit rose to 24 cents a share, from 22 cents a share last year, when gains from the sale of assets bolstered earnings. The adjusted result was a penny better than analyst expectations, according to Thomson Financial. Revenue rose 5 percent, to $11.56 billion, surpassing Wall Street’s estimate of $11.46 billion. The AOL online business remained a burden on the company’s bottom line. Subscription revenue fell 29 percent, pushing operating income down 36 percent. AOL scrapped fees for its e-mail service in favor of an ad-supported revenue model two years ago. The service still has 8.1 million subscribers. But ad revenue rose only 2 percent, to $530 million, in the quarter. Display advertising fell 14 percent, as automotive, telecommunications and financial services companies curbed spending in a slowing economy, the chief executive, Jeffrey L. Bewkes, told investors in a conference call. Mr. Bewkes called the second quarter a low-water mark and said he expected over all and display advertising growth rates at AOL to improve in the second half. Time Warner has made no secret of its plans to sell AOL to focus on content production. Mr. Bewkes said the company had “made the key decisions that will enable us to run AOL’s access and audience businesses separately beginning in 2009.” The Internet service provider EarthLink has been named as a potential bidder for the dial-up access business. Both Yahoo and Microsoft are thought to be interested in AOL’s Web sites, which could bolster either company’s viewer traffic and ad revenue. Time Warner previously announced it would sell the 84 percent of its cable operations that it still owns to shareholders later this year, giving Time Warner $9.25 billion from a special Time Warner Cable dividend. Mr. Bewkes said the spinoff was on pace to close by year’s end. Shares of Time Warner fell 5 cents, to $14.83, Wednesday. Time Warner still expects earnings from continuing operations for the year of $1.07 to $1.11 a share, excluding any proceeds from the sale of a unit.


Argentine Phone Calls Detail Efforts to Shield Iran

Abstract: BUENOS AIRES — Intercepted conversations between representatives of the Iranian and Argentine governments point to a long pattern of secret negotiations to reach a deal in which Argentina would receive oil in exchange for shielding Iranian officials from charges that they orchestrated the bombing of a Jewish community center in 1994. The transcripts were made public by an Argentine judge on Tuesday night, as part of a 289-page criminal complaint written by Alberto Nisman, the special prosecutor investigating the attack. Mr. Nisman was found dead in his luxury apartment on Sunday, the night before he was to present his findings to Congress. But the intercepted telephone conversations he described before his death outline an elaborate effort to reward Argentina for shipping food to Iran — and for seeking to derail the investigation into a terrorist attack in the Argentine capital that killed 85 people. The deal never materialized, the complaint says, in part because Argentine officials failed to persuade Interpol to lift the arrest warrants against Iranian officials wanted in Argentina in connection with the attack. The phone conversations are believed to have been intercepted by Argentine intelligence officials. If proved accurate, the transcripts would show a concerted effort by representatives of President Cristina Fernández de Kirchner’s government to shift suspicions away from Iran in order to gain access to Iranian markets and to ease Argentina’s energy troubles. The contacts came at a time when Iran was seeking to raise its profile in Latin America. In recent years, Iran has forged close ties with leftist governments in Venezuela and Bolivia, while also turning to large commodities producers like Brazil for food imports and as a counterweight to its isolation by the West over its nuclear program . Officials in Mrs. Kirchner’s government have lashed out at Mr. Nisman and his assertions before and after his death, saying that he had been manipulated by Antonio Stiusso, a former senior intelligence official ousted by the president in December. Aníbal Fernández, the presidential secretary, described Mr. Nisman’s complaint on Wednesday as “absolutely feeble.” The complaint asserts that the negotiators included Argentine intelligence operatives and Mohsen Rabbani, a former Iranian cultural attaché in Argentina charged with helping to coordinate the bombing . In one transcript from 2013, an Argentine union leader and influential supporter of Mrs. Kirchner said he was acting on the orders of the “boss woman,” adding that the government was open to sending a team from the national oil company to advance the negotiations. “He’s very interested in exchanging what they have for grains and beef,” said the union leader, Luis D’Elía, referring to a powerful Argentine minister with whom he had just met. Another intercept shows negotiators talking about ways to place blame for the bombing on right-wing groups and activists. Yet another transcript includes a discussion about swapping not just Argentine grains, but weapons as well, for Iranian oil. “The publication of Nisman’s complaint is a first step that can contribute to the transparency of an investigation plagued by mystery and frozen for 20 years in a tomb of impunity,” Fernándo González, an editor at the newspaper El Cronista, wrote on Wednesday, arguing that it would pave the way for new investigators and for Mrs. Kirchner to defend herself. Mr. Nisman asserted for years that Iran had helped plan and finance the bombing , and that its Lebanese ally, the militant group Hezbollah, had carried it out. His body was found at his apartment on Sunday with a gunshot wound to his head in a murky episode that government officials have called a suicide. An investigation by a prosecutor is underway. Some experts, including a former American F.B.I. agent who helped the Argentines in their investigation, have questioned the claims of direct Iranian involvement in the bombing. Still, Argentina had limited relations with Iran for years, partly because of the investigation’s importance to the nation’s large Jewish population. Then, in 2013, Argentina announced that it had reached an agreement with Iran to establish a joint commission to investigate the attack. The move was backed by Argentina’s Congress but faced stiff resistance by some who feared that it would make an impartial investigation unlikely. An Argentine court declared the agreement unconstitutional last year, and the government pledged to appeal. Image Cristina Fernández de Kirchner Credit Enrique Marcarian/Reuters Just last week, Mr. Nisman, 51, raised tensions further by accusing top Argentine officials, including Mrs. Kirchner, of conspiring with Iran to cover up responsibility for the bombing. He said the effort seemed to begin with a secret meeting in Aleppo, Syria, in January 2011 between Héctor Timerman, Argentina’s foreign minister, and Ali Akbar Salehi, Iran’s former foreign minister. At the meeting, the complaint contends, Mr. Timerman informed his Iranian counterpart that Argentina was no longer interested in supporting the investigation into Iran’s possible role in the attack. Instead, Argentina initiated steps toward a détente, with an eye on improving trade between the two countries. After this meeting, Mr. Nisman said a covert team of Argentine negotiators, including Mr. D’Elía, who has publicly asked whether Israel was to blame for the 1994 bombing, tried in vain to exchange Iran’s immunity for oil. Mr. Nisman said the negotiators, including intelligence agents, were given the task of “constructing a false hypothesis, based on invented evidence, to incriminate new authors” of the 1994 bomb attack. Mr. D’Elía declined to comment on Wednesday night. Mr. Timerman, the foreign minister, has rejected Mr. Nisman’s accusations, emphasizing that Argentina had not asked Interpol to lift the warrants. Mrs. Kirchner’s cabinet chief, Jorge Capitanich, also sought to discredit the findings, saying that Argentina had not imported crude oil from Iran. Separately, Telám, the official news agency, called the complaint a “labyrinth of inconsistencies,” contending that an operative identified by Mr. Nisman as an intelligence agent was not linked to Argentina’s intelligence secretariat. It also said that grain exports were carried out by agribusiness companies, arguing that the government could not have reached a deal without them. While the complaint made it clear that a deal did not reach fruition, contending it fell apart because of frustrations on the Iranian side, other countries have pursued oil-for-food exchanges in the region. In the Caribbean, Hugo Chávez, then the president of Venezuela, agreed to supply oil to the Dominican Republic partly in exchange for imports of food like black beans . But a deal with Iran would carry additional risks. A spokeswoman for the Treasury Department in Washington declined to comment on whether oil shipments from Iran to Argentina would be in violation of the sanctions enacted over Iran’s nuclear program. But on its website, the Treasury Department explains that bartering for Iranian oil could result in sanctions . Either way, during the period in which the secret negotiations were unfolding, Iran re-emerged as an important trading partner for Argentina, at a time when the country was seeking new markets for its commodities in the Middle East and Asia. “Trade improved significantly between Argentina and Iran since 2010 with large surpluses in Argentina’s favor, before dropping off in 2014,” said Juan Gabriel Tokatlián, an international relations expert at Torcuato di Tella University in Buenos Aires, pointing to annual trade volumes of more than $1 billion a year this decade, compared with negligible levels in the previous decade. Beyond trade, the warming relations between Argentina and Iran extended into the diplomatic realm, according to the intercepted calls. “We’re doing very well,” Ramón Héctor Bogado, who is identified in the complaint as an Argentine intelligence operative, said about the signing of the 2013 memorandum on a joint investigation into the bombing. “We have to work calmly,” Mr. Bogado told a man identified in the complaint as go-between on the Iranian side. “We have a job to do for the next 10 years.” But in just a few months, the transcripts suggested, the mood had changed as it became clear that Interpol would not lift the arrest warrants on the Iranians. “It looks like” Argentina’s foreign minister “messed up,” the go-between for Iran is quoted as saying in the complaint after returning from Tehran in May 2013, when it was becoming clear that Interpol would not remove the warrants.

Iran
Argentina
Bombs
Alberto Nisman
International relations
Oil and Gasoline
Wiretapping Eavesdropping
Judaism
Cristina Fernandez de Kirchner
Spying and Intelligence Agencies


Household Spending in Japan Soars at Fastest Pace in 9 Years.

Abstract: TOKYO (Reuters) — Japan’s household spending surged in March at the fastest pace in nine years in a sign that Prime Minister Shinzo Abe’s bold efforts to end two decades of stagnation are lifting consumer confidence and setting the stage for an economic revival. Household spending soared 5.2 percent in March from a year earlier in price-adjusted terms, the Ministry of Internal Affairs and Communications said on Tuesday, as some individual investors cashed in on stock gains to increase spending on cars and home repairs. The figure far exceeded the median estimate for a 1.8 percent annual increase and was the fastest gain since a 5.3 percent rise in the year to February 2004. Such a big increase in spending is unlikely to be sustained, and some worry that wages have been slow to improve. Still, analysts said they expect consumer spending to continue to expand at a more reasonable pace as investors cash in on stock market gains. A recent run of data has provided encouraging early hope that Mr. Abe’s push for aggressive fiscal and monetary policies can get the country’s economy, the world’s third-largest, moving again. Household spending is crucial to reigniting growth, and in this respect the data should come as a relief to Haruhiko Kuroda, governor of the Bank of Japan, who hopes to see the economy generate 2 percent inflation in roughly two years. On the whole, the figures suggest that expectations for Mr. Abe’s combination of fiscal spending, monetary stimulus and structural change, known as Abenomics, are having a positive impact on Japanese households, though the corporate sector is lagging. “I expect first-quarter gross domestic product growth to exceed an annualized 2 percent, and if the corporate sector catches up with households, the pace of growth could accelerate,” said Yoshiki Shinke, senior economist at the Dai-Ichi Life Research Institute. Mr. Abe’s policy mix has driven the yen to a four-year low against the dollar and led to a 50 percent rally in Japanese share prices from last November, which has helped buoy consumer sentiment.


Libyan Leader in Italy Seeks Tall, Leggy and Pious

Abstract: ROME — The 200 women who answered a Rome modeling agency’s advertisement for tall, attractive party guests thought they would be attending an elegant soirée on Sunday. They were — only the host turned out to be the Libyan leader, Col. Muammar el-Qaddafi , and instead of hors d’oeuvres he offered them copies of the Koran and urged them to convert to Islam, the Italian news media reported Monday. The women, all between the ages of 18 and 35, assembled in a Rome hotel before being screened by both metal detectors and the fashion police, who turned away anyone in a miniskirt or provocative clothing, according to Paola Lo Mele, a journalist for the ANSA news agency, who answered the modeling agency’s request and went undercover to the event. The women were each paid $75 to attend. Colonel Qaddafi and other world leaders are in Rome for the World Summit on Food Security of the Food and Agriculture Organization of the United Nations. The women who made the cut were bused to a villa in Rome, ANSA reported, where they waited an hour, unsure of what was to follow, before the famously late Libyan leader arrived. “All the girls expected a party with a gala dinner,” Ms. Lo Mele reported. Instead, Colonel Qaddafi “made a 45-minute speech on Islam and women’s role in Islam.” He gave the women a copy of the Koran and said that he would pay for them to visit Mecca, the duty of every Muslim, if they converted. “It was a bit of an indoctrination session,” Ms. Lo Mele added. Colonel Qaddafi, who has ruled Libya since 1969, also gave the women a copy of his Green Book, which outlines his political philosophy. Last year, Prime Minister Silvio Berlusconi signed an agreement to give Libya $5 billion over 20 years to compensate for Italy ’s colonial occupation of the country in the early 20th century. In exchange, Libya will give Italy the chance to secure oil contracts and will crack down on illegal immigrants, who often go through Libya on their way to Europe from Africa. In June , at Colonel Qaddafi’s request, the equal opportunities minister of Italy assembled hundreds of Italian women from different fields to have an audience with the Libyan leader when he visited Rome, one of his first visits to the West since economic sanctions against Libya were lifted in 2003. This week, Colonel Qaddafi is expected to hold similar events with other groups of women, ANSA reported.

Italy
Islam
Qaddafi Muammar el-
Models (Professional)


Novel About India Wins the Man Booker Prize

Abstract: LONDON — Aravind Adiga, 33, won the 40th Man Booker prize on Tuesday night for his debut novel, “The White Tiger,” a vivid exploration of India ’s class struggle told through the story of a village boy who becomes the chauffeur to a rich man. Mr. Adiga, who lives in Mumbai, was born in India and brought up partly in Australia. He studied at Columbia and Oxford and is a former correspondent for Time magazine in India. He is the second youngest writer to win the award; Ben Okri was 32 when he won for “The Famished Road” in 1991. Michael Portillo, a former cabinet minister and the chairman of this year’s panel of judges, praised Mr. Adiga’s novel, saying that the short list had contained a series of “extraordinarily readable page-turners.” However, Mr. Adiga’s book had prevailed, he said, “because the judges felt that it shocked and entertained in equal measure.” Mr. Adiga said his book was an “attempt to catch the voice of the men you meet as you travel through India — the voice of the colossal underclass.” “This voice was not captured,” he added, “and I wanted to do so without sentimentality or portraying them as mirthless humorless weaklings as they are usually.” When he accepted the award, Mr. Adiga dedicated it to “the people of New Delhi where I lived and where I wrote this book.” When asked what he would do with the money, Mr. Adiga joked, “The first thing I am going to do is to find a bank that I can actually put it in.” The Man Booker prize, Britain ’s best-known and most generous literary award, is given annually to a novel written by an author from Britain, Ireland or the Commonwealth nations and is accompanied by a check for £50,000 — about $86,000 — as well as an inevitable increase in sales. This year’s list of finalists was one of the least star-studded in recent years. It included two first-time novelists, and several of the favorites were snubbed by judges. Joseph O’Neill’s critically acclaimed “Netherland” was omitted from the short list, as was “The Enchantress of Florence” by Salman Rushdie. As a result, bookmakers were divided over the likely winner, oscillating between Mr. Adiga and the Irish writer Sebastian Barry, 53, whose book “The Secret Scripture” is the story of an Irish patient in a mental hospital sharing her shocking family history with her psychiatrist. The other books on the shortlist were “Sea of Poppies” by Amitav Ghosh, “The Clothes on Their Backs” by Linda Grant, “The Northern Clemency” by Philip Hensher and “A Fraction of the Whole” by Steve Toltz.

India
Man Booker Prize
Books and Literature
Adiga Aravind
Great Britain
Writing and Writers
Awards Decorations and Honors
White Tiger The (Book)


Brad Smith of the Jets Is Man of Many Talents

Abstract: In nearly three decades of coaching, Mike Westhoff has taught thousands of players with hundreds of different skill sets. He thought he had seen them all. At least until he met Brad Smith. The Jets list Smith as a wide receiver, which is a laughably incomplete description, as misleading as the Swiss Army knife, which has a dozen or so functions but is named after only one. Technically, Smith is a receiver. But he also returns kickoffs, blocks on punts, plays quarterback, runs the option, covers kickoffs, covers punts and forces opponents to spend extra time preparing for his varied deployments each Sunday. “Brad leaves,” Westhoff said last week, “I’m leaving.” Westhoff, one of the N.F.L.’s foremost special-teams coaches, remains a tough, no-nonsense coach, both brutal in his criticism and sparing in his praise. That is why players hold so much respect for him. So his compliments of Smith last week spoke volumes. He called Smith “a good football player” — which ranks among Westhoff’s highest compliments — who “enables us to do a lot of things.” He said that Smith performed so well in so many roles, all of which require film study and meetings, that he often felt fatigued. Westhoff termed Smith tough and versatile and credited him with setting up Eric Smith for a blocked punt this season. “If you saw what Brad Smith did, wow,” Westhoff said, adding: “Brad Smith gives us a lot of weapons. We haven’t used them all yet. But we’ve got ’em.” Those words rang true Sunday, when LaDainian Tomlinson, Mark Sanchez and the Jets’ defense — the usual suspects — stole the headlines, and Smith turned in a typically understated performance that was equally important in a 38-14 victory over the Buffalo Bills. Smith’s most obvious contribution came midway through the third quarter, with the Jets leading, 17-7. He took a direct snap near the goal line and rolled right, with five confused defenders in pursuit. There was mostly open space between Smith and the end zone. He took both his time and then two steps forward, indicating he might run before firing a tight spiral to tight end Dustin Keller, who caught the ball for a 3-yard score that put the game out of reach. It was Smith’s first N.F.L. touchdown pass in five seasons, but certainly not his first score. Previously, he caught two touchdown passes, ran for another touchdown and returned a kickoff for a touchdown in the A.F.C. championship game last season. After the Jets dismantled the Bills, Coach Rex Ryan joked that he had a quarterback controversy on his hands. Against the Bills, Smith returned the opening kickoff 38 yards and had 84 return yards over all. He carried the ball three times — an option in the first quarter, a reverse option in the second quarter and an end around in the fourth quarter — for 11 yards. His presence forced the Bills’ defense to take a timeout in the first half. He also made a tackle on a kickoff return. Smith took the field for every Jets special-teams play, his presence as indispensable as Tomlinson, or Sanchez, but with less fanfare. The Jets expected his versatility when they drafted Smith in the fourth round in 2006 out of Missouri, where he became the first quarterback in N.C.A.A. history to pass for more than 8,000 yards and rush for more than 4,000 yards. On Sunday, Smith talked about the friends and family from his hometown, Youngstown, Ohio, who traveled to the game. He detailed his touchdown pass to Keller (his first instinct was to run, but the play called for a pass). But when the subject turned to his job, or jobs, as the case may be, he shrugged. “My job is, when I step on the field, to do what I’m asked to do,” Smith said. “That’s my focus, and that’s my goal, just to do my job well.” If that continues, Smith will keep two people employed. Him and Westhoff. EXTRA POINTS Cornerback Darrelle Revis and linebacker Calvin Pace worked out Monday, and Rex Ryan is expecting both to play against Minnesota next Monday night ... Mark Sanchez has thrown eight touchdown passes with zero turnovers in the past three games. ... The Jets released wide receivers David Clowney and Patrick Turner. They re-signed defensive tackle Howard Green and will use the other spot for wide receiver Santonio Holmes, who returns this week from suspension.


Euro Here to Stay

Abstract: PARIS — The Nobel Peace Prize awarded to the European Union arrived just as a realization was dawning that Europe’s single currency — the Union’s most ambitious project — had survived three years of incessant financial turmoil and was not going to break up. But having narrowly avoided an acrimonious divorce and the loss of some of its errant children, the euro zone risks a future as an unequal, loveless marriage with frequent rows and the prospect of separate bedrooms. Two things have become clearer in the past few weeks that had been widely disputed: Contrary to prevailing opinion earlier this year, the euro is here to stay; and it could very well keep all its 17 members and add more. But the euro zone has not yet found a way out of the doldrums of economic stagnation, unemployment and social dislocation that are widening the gap between northern and southern Europe and fueling euro-skeptical populist movements in many countries. Three events have changed the outlook for the euro area. First, the European Central Bank put a floor under the euro zone by agreeing last month to buy unlimited quantities of bonds of any troubled member state that accepted the conditions of a bailout program. The E.C.B. president, Mario Draghi, made it clear that the bank would use all its tools to defeat anyone betting on a breakup of the monetary union. Second, the euro zone’s permanent rescue fund became operative last week after months of wrangling and legal challenges, providing a backstop of €500 billion, or $645 billion, for countries that risk losing access to capital markets. Third, the chancellor of Germany, Angela Merkel, signaled by visiting Athens that the Union’s most powerful economy wanted Greece to stay in the euro area; she drew a line after months of debate in Berlin, notably in her own coalition, about ejecting the Greeks. As a result of those developments, a flood of scenarios for the explosion and breakup of the euro, which had spewed for months from banks and political risk consulting firms in London and in New York, has suddenly dried up. In currency markets, short bets against the euro have subsided. Bond yields have fallen and bank shares have recovered. Spanish banks are having to borrow less from the E.C.B. as some of them regain access to the money markets. In another indication of a changed climate, economists at Citigroup have revised their view that Greece would almost certainly leave the euro, saying that important euro zone players seem to have decided that a Greek exit would do more harm than good. The U.S. bank lowered the probability of a Greek exit to 60 percent from 90 percent, although it still believes Greece is more likely than not to leave the euro within 12 to 18 months, arguing that European governments are unlikely to agree to waive part of the country’s huge debt to make it sustainable. Do not write off a write-off, though — especially if it can be delayed until after the German general election next year. It may then seem a more rational, albeit unpopular, option than a disorderly Greek default and exit, with all the disastrous economic and social consequences for Greece and Europe. One voice last week contrasted with the easing of European existential anxiety: The International Monetary Fund said the Union’s policy response remained “critically incomplete, exposing the euro area to a downward spiral of capital flight, breakup fears and economic decline.” In its role as a teller of uncomfortable truths, the I.M.F. is trying to jolt the euro zone, especially Germany, into moving ahead faster with a banking union, as well as closer fiscal integration and an altering of the policy mix between austerity and growth. In a candid acknowledgement, the I.M.F. said it had underestimated the damage to growth wrought by budget cutting and urged Europe to ease up on austerity, drawing an indignant rebuff from the German finance minister. The shift in perceptions about the euro zone is more noticeable in the financial markets than on the streets, where the effects of the sovereign debt crisis will continue to cause damage for years to come. Public spending cuts and recession are tearing at the fabric of societies in places like Athens and Madrid, casting many middle-class families and retirees into poverty and more unemployed and young people into precarious situations. The crisis has changed the balance of power in Europe, giving Germany and its north European allies a superior say in euro zone decision-making that is commensurate with their credit ratings, while making southern states weaker and more dependent. A two-speed Europe, in which everyone was heading in the same direction at different paces, may now be turning into a two-tier Europe, with the euro zone becoming a tighter inner core with its own budget and stricter rules, while Britain, Sweden and some others form a looser outer circle. Germany, determined to limit its taxpayers’ liabilities for other euro states, has rejected the issuing of common euro zone bonds or providing a guarantee for joint bank deposits. The German, Dutch and Finnish finance ministers are trying to rule out any retroactive use of euro zone rescue funds. Yet Berlin supports the emerging idea of a separate euro zone budget to cope with asymmetric economic shocks. Its backing for a single banking supervisor will surely open the door to some greater risk mutualization, where members receive dividends for doing business in a cooperative setting, in the longer term. As the euro area becomes a more integrated federal bloc, E.U. members outside the single currency zone face awkward choices. Those like Poland, Hungary and Latvia that aspire to join the monetary union as soon as possible are trying to hug the euro zone as tightly as possible, demanding seats and votes in a new banking supervisory authority that makes decisions on banks operating on their soil. Poland tried unsuccessfully last week to push into the inner sanctum of euro zone finance ministers by offering to join a group of E.U. states establishing a financial transaction tax in return for a seat at the Eurogroup table — the regular meetings of finance ministers of the euro zone countries. It was told only euro members could attend. Britain, which has no intention of joining either the euro or the banking union, is demanding a veto right to protect its large financial sector from decisions taken by the others, while aiming to use closer euro zone integration as an opportunity to negotiate a loosening of its own European ties. Sweden, with a pro-euro political establishment that lost a referendum on joining the currency in 2003, seems more uneasy and conflicted about the euro zone’s moving ahead without it. All of this means Europe faces a tense period of reshaping that will severely test its Nobel-recognized powers of building peace and prosperity on a fractious continent. Paul Taylor is a Reuters correspondent.

European Monetary Union
Euro (Currency)
European Sovereign Debt Crisis (2010- )


Arsenal Nudges Ahead of Manchester Into 2nd Place

Abstract: LONDON — Arsenal climbed into second place in the Premier League on Sunday as goals by Bacary Sagna and Cesc Fàbregas secured a 2-1 victory at Everton. Sagna scored a rare goal in the 36th minute when the defender smashed a high shot in at the near post from 10 yards. Fàbregas doubled Arsenal’s lead three minutes into the second half after exchanging passes with Marouane Chamakh before steering a low shot into the far corner. Everton applied pressure in the final 20 minutes and reduced the deficit in the 88th minute when midfielder Tim Cahill bundled in from close range. On Saturday, Nemanja Vidic preserved Manchester United ’s unbeaten start to the season with a late equalizer at Aston Villa. Vidic’s 85th-minute header secured a 2-2 tie for United at Villa, four minutes after Federico Macheda’s powerful strike started Manchester’s comeback. United had conceded two goals in four minutes earlier, with Ashley Young scoring from the penalty spot and Marc Albrighton netting from close range in the 76th minute. “We came back well, but it was too late and we shouldn’t have been in that position,” United Manager Alex Ferguson said. “Our passing was poor. Normally we can control the match. We didn’t control it.” Liverpool wasn’t so fortunate, with goals from Ricardo Fuller and Kenwyne Jones earning a comprehensive 2-0 victory for Stoke that sent the Reds back into the bottom half of the standings. Also Saturday, Gareth Bale’s two goals led Tottenham to a 4-2 victory that put the team three points behind fourth-place Manchester City, which slumped to its second successive 0-0 tie at home, to Birmingham. Manchester City has won just one of its last five league matches. Tottenham had not won in the league for a month as it struggled to cope with campaigns at home and in the Champions League. But Gareth Bale headed in Rafael Van der Vaart’s corner kick in the 16th, and Roman Pavlyuchenko netted four minutes before the break after missing a penalty kick. Peter Crouch added a third in the 68th minute — the England striker’s first league goal since May — and Bale scored his second from Alan Hutton’s cross in the 75th minute. Italian Serie A Mauro Zarate and Sergio Floccari scored a goal apiece to give Lazio a 2-0 victory over Napoli on Sunday. Lazio lost the Serie A league leadership after losing its last two matches, but was in control throughout the game. Zarate opened the scoring in the 15th minute, and Floccari doubled the lead from Zarate’s pass in the 61st minute. On Saturday, Francesco Totti’s first-half injury time penalty let A.S. Roma tie Juventus, 1-1. Totti netted his first league goal of the season after Vincenzo Iaquinta opened the scoring 10 minutes earlier. German Bundesliga Bayer Leverkusen kept pace with league leader Borussia Dortmund with a hard-fought 1-0 victory at St. Pauli to leapfrog Mainz for second place. Renato Augusto scored the winner in the 81st minute for Leverkusen, which stood seven points behind Dortmund. Mainz lost, 1-0, at home against 10-man Hanover and fell to third behind Leverkusen on goals scored. Fourth-place Eintracht Frankfurt also lost ground after being held to a 0-0 tie by Werder Bremen. French Ligue 1 Moussa Sow’s hat trick helped Lille rout Caen, 5-2, and climb to within a point of leader Brest in the standings on Saturday.

Everton
Manchester United
Arsenal Football Club
English Premier League
Sagna Bacary
Fabregas Cesc


Did Ending Regulation Help Fliers?

Abstract: Thirty years ago, airline deregulation was supposed to fulfill two main goals: spurring competition and bringing down airfares. Now the number of airlines may be shrinking, as the planned merger between Delta and Northwest is likely to encourage other big airlines to pair off. Reduced competition will probably mean higher fares, particularly as the airlines shrink their fleets and cut flights to reduce costs. All of which raises anew the question: Has deregulation really worked out? By some measures, it has. By others, not so much. Before the industry was deregulated in 1978, there were 10 big carriers — referred to as trunk lines, they controlled 90 percent of the American market — and 8 smaller regional carriers. The airlines were tightly controlled by the Civil Aeronautics Board, which regulated routes and set fares that guaranteed airlines a 12 percent return on flights that were 55 percent full. Service was limited. American, for example, flew to only 39 cities, and Continental had to wait eight years for approval to fly from San Diego to Denver. Discounts were rare, too. When some airlines tried to offer cheaper fares in 1974 for charter flights, the president of the Air Transport Association trade group said it would be “the beginning of the end of the nation’s air transportation system as we know it today.” It is a much different industry today, but not all of it is better. Flying is less expensive, as fares have fallen steadily, adjusted for inflation, and there are more flights to more cities. The barrier to entry is lower. Over the last 30 years, more than 150 airlines have sought bankruptcy protection or disappeared, but more keep springing up as investors continue to put hope over experience, said Denis O’Connor, managing director with AlixPartners, a restructuring firm. “People don’t understand how easy it is to start an airline,” Mr. O’Connor said, because of a ready supply of pilots and other employees, as well as used airplanes. “Why would you put capital in something if you can’t make a go of it? Southwest is an example of why you would.” But the industry incurred losses of more than $30 billion from 2001 to 2006 and has gleaned only scarce profits since then. Persistently high fuel costs are driving airlines into bankruptcy court, or one another’s arms, something proponents of deregulation did not foresee, said Alfred E. Kahn, who led the air board when deregulation took place. The Delta-Northwest merger plan, announced Monday, may lead to a deal between United and Continental, which would push other leading carriers like American to pursue partners of their own. Meanwhile, smaller carriers like Aloha and Frontier have sought bankruptcy protection in recent weeks. As anybody who has flown recently knows, the level of comfort and reliability today bears no relation to that of the regulated days. The naysayers at the time of deregulation predicted that “jobs would be gone, cities would lose service, and customers would pay higher fares,” said Mark H. Rose, a professor of history at Florida Atlantic University and a co-author of “The Best Transportation System in the World,” which examined deregulation of airlines, trucking and railroads. They were partly right. After a big industry buildup through the 1990s, more than 100,000 jobs have been lost since the beginning of the decade. Former hub airports like Pittsburgh and St. Louis are now far less busy as hometown airlines have merged with other carriers and their replacements have pulled back service. Fares have fallen, on average, but they often rise when an airline leaves a city. What the architects of deregulation did not predict at the time was the rise of frequent-flier programs and the hub-and-spoke system. Both have the effect of a kind of regulation, since they create incentives for consumers to stick with one airline, rather than shop solely on price. And fortress hubs, as their name implies, were intended to keep competitors at bay, giving the dominant airline in the city more control over pricing. Alliances between big carriers are meant to offer bigger route networks, but they also provide another reason for travelers to shop around less. All that would seem to spell less competition, not more. But Southwest’s transformation from a Texas puddle jumper to the biggest airline in terms of domestic traffic (at least until the Delta-Northwest merger is completed) would not have happened without deregulation. That airline’s evolution is what some experts point to as the best proof of why deregulation, for all its troubles, ultimately is better than a regulated environment. “This is the free market at work, and we’re not used to it,” said Mo Garfinkle, a lawyer and a longtime airline industry consultant. “The idea of deregulation was to allow entry, whether it was successful or not.” Mr. Garfinkle, who has advised many airlines involved in merger talks, says he believes that the industry is only now winding up the first phase of deregulation, in which industry practices had to be established. Indeed, the federal government still regulates safety and the air traffic control system, and it steps in whenever either seems threatened, as passengers were reminded when American, Southwest and others grounded hundreds of flights this past month to reinspect aircraft. On Wednesday, the Transportation Department announced two ideas for solving perennial delays at La Guardia Airport. One would call for the government to reduce the number of flights; the other would have airlines rein themselves in by selling some of the slots that give them the right to fly there. Both ideas, now up for discussion, are meant to encourage growth by new airlines, which might otherwise have a hard time establishing service from La Guardia, said D. J. Gribbin, the department’s general counsel. “If you block out a market, you block out competition,” Mr. Gribbin said. “This benefits new entries.” Beyond that, the next phase of deregulation will take place when airlines are truly globalized, flying freely inside other countries’ borders as well as their own, Mr. Garfinkle said. The merger between Delta and Northwest would be a major step toward that end, given their broad American network and extensive list of cities in Asia, Europe and elsewhere, he said. However, the prospect of American carriers trying to compete against healthier foreign airlines, some of them still government-owned, is daunting to James L. Oberstar, Democrat of Minnesota, who heads the House Committee on Transportation and Infrastructure. “It’s a very bad idea,” said Mr. Oberstar, whose state is home to Northwest’s headquarters. He said he expected “a cascade of carriers finding partners” if the Delta-Northwest combination is allowed to go forward, leading to fewer choices and higher prices for consumers. Even if that happens, Mr. Garfinkle says he doubts that Congress will take up any serious re-regulation efforts. “You’re not going to re-regulate fares, and you’re not going to re-regulate service,” Mr. Garfinkle said. “It’s not something where you can be half pregnant.” But Mr. Rose says members of Congress will have to discuss re-regulation, if only to seem as if they are looking out for their constituents’ interests. No city or state with an airline hub wants to see it vanish. “It’s like losing a major league ball club,” he said. Airline hubs are “the kind of things you need to be major league, for your corporations and for yourself.”

Airlines and Airplanes
Regulation and Deregulation of Industry
Mergers Acquisitions and Divestitures
Prices (Fares Fees and Rates)
Northwest Airlines Corp
Air Transport Assn
Frontier Airlines Inc


C.D.C. Says It Should Have Responded Faster to the Dallas Ebola Case

Abstract: DALLAS — The director of the federal Centers for Disease Control and Prevention said on Tuesday that the agency planned a more robust response to any future Ebola cases in American hospitals, saying for the first time that quicker and more concerted action on its part might have kept a Dallas nurse from becoming infected by the virus. The acknowledgment came on a day when a nurses’ union released a scathing statement that it said was composed by nurses at the Dallas hospital where the nurse, Nina Pham, 26, contracted Ebola. The statement told of “confusion and frequently changing policies and protocols,” inadequate protection against contamination and spotty training. “Were the protocols breached?” asked Deborah Burger, a co-president of the union, National Nurses United, reading the statement. “The nurses say there were no protocols.” Officials at the hospital, Texas Health Presbyterian Hospital, defended their efforts to “provide a safe working environment,” but said they would review any concerns raised by nurses. C.D.C. officials, responding earlier to the broader criticisms about their handling of the Ebola cases in Dallas, pledged to dispatch within hours a newly created response team to any hospital that had a confirmed case of Ebola, and they increased the amount of expertise, oversight and training at the hospital where the nurse treating Thomas Eric Duncan, 42, who had Ebola, became infected. Image Nina Pham is being treated at Texas Health Presbyterian Hospital, where she works. Credit Jennifer Joseph They have sent some of the world’s leading experts on Ebola to Dallas, as well as two nurses from Emory University Hospital in Atlanta who cared for Ebola patients safely and who will train hospital staff members on infection control and the use of protective gear. “I wish we had put a team like this on the ground the day the patient, the first patient, was diagnosed,” Dr. Thomas R. Frieden, director of the C.D.C., said at a news conference Tuesday. “That might have prevented this infection. But we will do that from today onward with any case, anywhere in the U.S.” He added, “We could have sent a more robust hospital infection-control team and been more hands-on with the hospital from Day 1.” Officials said they were now monitoring daily 76 health care workers at Presbyterian Hospital who treated or cleaned up after Mr. Duncan or might have handled blood specimens from the time he was admitted to the hospital on Sept. 28 to his death last Wednesday. “There were 76 people who had some level of contact and therefore are being actively monitored,” Dr. Frieden said. An additional 48 people were already being watched because they had possible contact with Mr. Duncan before he was hospitalized. One contact of Ms. Pham was also being monitored. The total under observation is now 125. Is the U.S. Prepared for an Ebola Outbreak? A look at the government agencies and private entities that were involved in the case of the first person found to have Ebola in the United States. Mr. Duncan, a Liberian who arrived in America last month, was initially sent home from the hospital although he had a fever and reported coming from Africa. His case was diagnosed on Sept. 30, two days after he was admitted and put in isolation. At some point, Ms. Pham contracted Ebola after having extensive interactions with him. The hospital said she was in “good condition,” and for the first time on Tuesday, Ms. Pham made a public statement, as the hospital said the costs of her care would be covered and would not be a financial burden on her or her family. “I’m doing well and want to thank everyone for their kind wishes and prayers,” she said. At the same time, Dr. Frieden said that the 48 people whom officials started monitoring two weeks ago had passed a critical period and were now unlikely to contract the disease. They were more than 14 days into the 21-day maximum incubation period. One of them is Mr. Duncan’s fiancée, Louise Troh, 54, who has been under state-ordered quarantine with her 13-year-old son and two other young men. “Right now, we’re O.K.,” she said in a phone interview from the house where she and the others have been staying, in an undisclosed location. “I’m healthy. Everybody’s fine. God is in control.” The Rev. George Mason, Ms. Troh’s pastor at Wilshire Baptist Church, drove on Tuesday to pick up an application for a new apartment for Ms. Troh. He said she would be starting over with almost nothing as her old apartment was shut by officials and decontaminated. “She lost everything,” Mr. Mason said. “It’s like she had a fire.” Officials with the nurses’ union that issued the statement Tuesday night said it had been prepared by Presbyterian nurses who had knowledge of the care provided to Mr. Duncan and to Ms. Pham. They refused to identify the nurses or their departments, saying the Presbyterian nurses feared retaliation, and they refused to say whether any nurses who prepared the statement had been involved in treating Mr. Duncan. The Presbyterian nurses are not members of the National Nurses United union. How Hospital Workers Are Supposed to Treat Ebola Safely A look at the C.D.C. guidance on protective clothing for workers treating the disease. The statement asserted that when Mr. Duncan arrived by ambulance with Ebola symptoms at the hospital’s emergency room on Sept. 28, he “was left for several hours, not in isolation, in an area where other patients were present.” At some point, it said, a nurse supervisor demanded that he be moved to an isolation unit “but faced resistance from other hospital authorities.” The nurses who first interacted with Mr. Duncan wore generic gowns, three pairs of gloves with no taping around the wrists, and surgical masks with the option of a shield, the statement said. “The gowns they were given still exposed their necks, the part closest to their face and mouth,” the nurses said. “They also left exposed the majority of their heads and their scrubs from the knees down. Initially they were not even given surgical bootees nor were they advised the number of pairs of gloves to wear.” The statement said hospital officials allowed nurses who interacted with Mr. Duncan at a time when he was vomiting and had diarrhea to continue their normal duties, “taking care of other patients even though they had not had the proper personal protective equipment while providing care for Mr. Duncan that was later recommended by the C.D.C.” Told of the statement, a spokeswoman for the C.D.C. said the agency would not be looking at the situation from a regulatory perspective. “That oversight comes from the health department at the state level,” the spokeswoman said. Dr. Frieden said the agency’s Ebola response teams would be deployed anywhere in the country starting on Tuesday. “We will put a team on the ground within hours, with some of the world’s leading experts in how to take care of and protect health care workers from Ebola infection,” he said, adding it would include specialists in other fields. It was unclear what, if any, monitoring the C.D.C. performed of the precautions hospital workers took as they went in and out of Mr. Duncan’s room. Officials said Ms. Pham had worn a gown, mask and other protective gear when she came into contact with Mr. Duncan, but they said she appeared to have breached safety protocol, possibly when removing the protections. The Texas health commissioner, David L. Lakey, said she was working with investigators to try to pinpoint when she may have been exposed.

Dallas
Ebola
Hospital
Nina Pham
Texas Health Presbyterian Hospital
Texas
Thomas Eric Duncan
Protective Clothing
CDC


Knicks’ Smith Given Five-Game Suspension

Abstract: J. R. Smith will serve a five-game suspension next season for violating the N.B.A.’s antidrug policy, adding one more blemish to a checkered résumé. The N.B.A. announced the suspension Friday afternoon and did not disclose details, in accordance with league policy. The length of the suspension indicates that Smith tested positive for marijuana use for a third time. A third positive test for marijuana triggers an automatic five-game suspension. No other drug-policy violations in the N.B.A. carry a suspension of that length. The Knicks declined to comment on the matter. Smith’s absence might be even longer than five games. He was in jeopardy of missing opening night, based on his rehabilitation schedule from a July knee operation. Under league rules, his suspension will start once he is medically cleared to play. The Knicks open the season Oct. 30 against the Milwaukee Bucks at Madison Square Garden. Games against the Chicago Bulls and the Minnesota Timberwolves follow, before two games against the Charlotte Bobcats. Smith, 27, was the sixth man of the year last season and the Knicks’ second-leading scorer, averaging a career-best 18.1 points per game. His considerable skills have always come with a barrel of caveats, for infractions both on and off the court. Image J. R. Smith will be suspended five games. Credit Seth Wenig/Associated Press In April, Smith drew a one-game suspension for elbowing Boston’s Jason Terry in the chin in a playoff game. Without Smith, the Knicks faltered, blowing their chance at a sweep. Smith was never the same after he returned, and his erratic play contributed to the Knicks’ six-game loss to the Indiana Pacers in the second round. At the time, Smith was also drawing scrutiny for his late-night activities, which were underscored when the singer Rihanna, on her Instagram account, called out Smith for “clubbing every night” during the playoffs. It was not until July that the Knicks revealed that Smith had been playing on an injured left knee, which surely contributed to his struggles. Smith had surgery on July 16 to repair damage to his patella tendon and a tear in the lateral meniscus. His recovery schedule was estimated at 12 to 16 weeks. Four days before the operation, the Knicks re-signed Smith to a three-year, $17.95 million contract. Smith continued to raise eyebrows this summer with a series of hair-color changes — red at one point, blond at another — showing off the new looks on his Twitter account. Last weekend, Smith all but guaranteed a Knicks championship in 2014, telling children at a summer camp, “I’m 100 percent sure.” More often, Smith has made headlines for his volatile behavior and legal infractions. He has served suspensions for reckless driving (seven games), fighting on the court (10 games) and fighting at a nightclub (three games). His driver’s license has been suspended multiple times. In the 2011-12 season, his first with the Knicks, Smith drew a $25,000 fine from the league for posting a lewd photo on his Twitter account. The latest five-game suspension suggests that Smith has been cited at least twice for marijuana use. Under N.B.A. policy, a first infraction forces a player to enroll in a league program. A second infraction — typically, either a positive test or an arrest — triggers a $25,000 fine. First and second infractions are not announced by the league.

Knicks
Basketball
J R Smith
Drug Abuse
Doping


North Jersey Data Center Industry Blurs Utility-Real Estate Boundaries

Abstract: The trophy high-rises on Madison, Park and Fifth Avenues in Manhattan have long commanded the top prices in the country for commercial real estate, with yearly leases approaching $150 a square foot. So it is quite a Gotham-size comedown that businesses are now paying rents four times that in low, bland buildings across the Hudson River in New Jersey. Why pay $600 or more a square foot at unglamorous addresses like Weehawken, Secaucus and Mahwah? The answer is still location, location, location — but of a very different sort. Companies are paying top dollar to lease space there in buildings called data centers, the anonymous warrens where more and more of the world’s commerce is transacted, all of which has added up to a tremendous boon for the business of data centers themselves. The centers provide huge banks of remote computer storage, and the enormous amounts of electrical power and ultrafast fiber optic links that they demand. Prices are particularly steep in northern New Jersey because it is also where data centers house the digital guts of the New York Stock Exchange and other markets. Bankers and high-frequency traders are vying to have their computers, or servers, as close as possible to those markets. Shorter distances make for quicker trades, and microseconds can mean millions of dollars made or lost. When the centers opened in the 1990s as quaintly termed “Internet hotels,” the tenants paid for space to plug in their servers with a proviso that electricity would be available. As computing power has soared, so has the need for power, turning that relationship on its head: electrical capacity is often the central element of lease agreements, and space is secondary. A result, an examination shows, is that the industry has evolved from a purveyor of space to an energy broker — making tremendous profits by reselling access to electrical power, and in some cases raising questions of whether the industry has become a kind of wildcat power utility. Even though a single data center can deliver enough electricity to power a medium-size town, regulators have granted the industry some of the financial benefits accorded the real estate business and imposed none of the restrictions placed on the profits of power companies. Some of the biggest data center companies have won or are seeking Internal Revenue Service approval to organize themselves as real estate investment trusts, allowing them to eliminate most corporate taxes. At the same time, the companies have not drawn the scrutiny of utility regulators, who normally set prices for delivery of the power to residences and businesses. While companies have widely different lease structures, with prices ranging from under $200 to more than $1,000 a square foot, the industry’s performance on Wall Street has been remarkable. Digital Realty Trust, the first major data center company to organize as a real estate trust, has delivered a return of more than 700 percent since its initial public offering in 2004, according to an analysis by Green Street Advisors. Image The Equinix data center in Secaucus has fuel for backup power systems. In the company’s leases, “power, cooling and space are very interrelated,” a spokeswoman said. Credit Chang W. Lee/The New York Times The stock price of another leading company, Equinix, which owns one of the prime northern New Jersey complexes and is seeking to become a real estate trust, more than doubled last year to over $200. “Their business has grown incredibly rapidly,” said John Stewart, a senior analyst at Green Street. “They arrived at the scene right as demand for data storage and growth of the Internet were exploding.” Push for Leasing While many businesses own their own data centers — from stacks of servers jammed into a back office to major stand-alone facilities — the growing sophistication, cost and power needs of the systems are driving companies into leased spaces at a breakneck pace. The New York metro market now has the most rentable square footage in the nation, at 3.2 million square feet, according to a recent report by 451 Research, an industry consulting firm. It is followed by the Washington and Northern Virginia area, and then by San Francisco and Silicon Valley. A major orthopedics practice in Atlanta illustrates how crucial these data centers have become. With 21 clinics scattered around Atlanta, Resurgens Orthopaedics has some 900 employees, including 170 surgeons, therapists and other caregivers who treat everything from fractured spines to plantar fasciitis. But its technological engine sits in a roughly 250-square-foot cage within a gigantic building that was once a Sears distribution warehouse and is now a data center operated by Quality Technology Services. Eight or nine racks of servers process and store every digital medical image, physician’s schedule and patient billing record at Resurgens, said Bradley Dick, chief information officer at the company. Traffic on the clinics’ 1,600 telephones is routed through the same servers, Mr. Dick said. “That is our business,” Mr. Dick said. “If those systems are down, it’s going to be a bad day.” The center steadily burns 25 million to 32 million watts, said Brian Johnston, the chief technology officer for Quality Technology. That is roughly the amount needed to power 15,000 homes, according to the Electric Power Research Institute. Mr. Dick said that 75 percent of Resurgens’s lease was directly related to power — essentially for access to about 30 power sockets. He declined to cite a specific dollar amount, but two brokers familiar with the operation said that Resurgens was probably paying a rate of about $600 per square foot a year, which would mean it is paying over $100,000 a year simply to plug its servers into those jacks. While lease arrangements are often written in the language of real estate,“these are power deals, essentially,” said Scott Stein, senior vice president of the data center solutions group at Cassidy Turley, a commercial real estate firm. “These are about getting power for your servers.” One key to the profit reaped by some data centers is how they sell access to power. Troy Tazbaz, a data center design engineer at Oracle who previously worked at Equinix and elsewhere in the industry, said that behind the flat monthly rate for a socket was a lucrative calculation. Tenants contract for access to more electricity than they actually wind up needing. But many data centers charge tenants as if they were using all of that capacity — in other words, full price for power that is available but not consumed. Image Bradley Dick, standing, chief information officer for Resurgens Orthopaedics in Atlanta, with Charlie Parker, supervisor of the tech call center. It uses a giant data center for patient records, schedules and calls. Credit Rich Addicks for The New York Times Since tenants on average tend to contract for around twice the power they need, Mr. Tazbaz said, those data centers can effectively charge double what they are paying for that power. Generally, the sale or resale of power is subject to a welter of regulations and price controls. For regulated utilities, the average “return on equity” — a rough parallel to profit margins — was 9.25 percent to 9.7 percent for 2010 through 2012, said Lillian Federico, president of Regulatory Research Associates, a division of SNL Energy. Regulators Unaware But the capacity pricing by data centers, which emerged in interviews with engineers and others in the industry as well as an examination of corporate documents, appears not to have registered with utility regulators. Interviews with regulators in several states revealed widespread lack of understanding about the amount of electricity used by data centers or how they profit by selling access to power. Bernie Neenan, a former utility official now at the Electric Power Research Institute, said that an industry operating outside the reach of utility regulators and making profits by reselling access to electricity would be a troubling precedent. Utility regulations “are trying to avoid a landslide” of other businesses doing the same. Some data center companies, including Digital Realty Trust and DuPont Fabros Technology, charge tenants for the actual amount of electricity consumed and then add a fee calculated on capacity or square footage. Those deals, often for larger tenants, usually wind up with lower effective prices per square foot. Regardless of the pricing model, Chris Crosby, chief executive of the Dallas-based Compass Datacenters, said that since data centers also provided protection from surges and power failures with backup generators, they could not be viewed as utilities. That backup equipment “is why people pay for our business,” Mr. Crosby said. Melissa Neumann, a spokeswoman for Equinix, said that in the company’s leases, “power, cooling and space are very interrelated.” She added, “It’s simply not accurate to look at power in isolation.” Ms. Neumann and officials at the other companies said their practices could not be construed as reselling electrical power at a profit and that data centers strictly respected all utility codes. Alex Veytsel, chief strategy officer at RampRate, which advises companies on data center, network and support services, said tenants were beginning to resist flat-rate pricing for access to sockets. “I think market awareness is getting better,” Mr. Veytsel said. “And certainly there are a lot of people who know they are in a bad situation.” The Equinix Story The soaring business of data centers is exemplified by Equinix . Founded in the late 1990s, it survived what Jason Starr, director of investor relations, called a “near death experience” when the Internet bubble burst. Then it began its stunning rise. Image Credit The New York Times Equinix’s giant data center in Secaucus is mostly dark except for lights flashing on servers stacked on black racks enclosed in cages. For all its eerie solitude, it is some of the most coveted space on the planet for financial traders. A few miles north, in an unmarked building on a street corner in Mahwah, sit the servers that move trades on the New York Stock Exchange; an almost equal distance to the south, in Carteret, are Nasdaq’s servers. The data center’s attraction for tenants is a matter of physics: data, which is transmitted as light pulses through fiber optic cables, can travel no faster than about a foot every billionth of a second. So being close to so many markets lets traders operate with little time lag. As Mr. Starr said: “We’re beachfront property.” Standing before a bank of servers, Mr. Starr explained that they belonged to one of the lesser-known exchanges located in the Secaucus data center. Multicolored fiber-optic cables drop from an overhead track into the cage, which allows servers of traders and other financial players elsewhere on the floor to monitor and react nearly instantaneously to the exchange. It all creates a dense and unthinkably fast ecosystem of postmodern finance. Quoting some lyrics by Soul Asylum, Mr. Starr said, “Nothing attracts a crowd like a crowd.” By any measure, Equinix has attracted quite a crowd. With more than 90 facilities, it is the top data center leasing company in the world, according to 451 Research. Last year, it reported revenue of $1.9 billion and $145 million in profits. But the ability to expand, according to the company’s financial filings, is partly dependent on fulfilling the growing demands for electricity. The company’s most recent annual report said that “customers are consuming an increasing amount of power per cabinet,” its term for data center space. It also noted that given the increase in electrical use and the age of some of its centers, “the current demand for power may exceed the designed electrical capacity in these centers.” To enhance its business, Equinix has announced plans to restructure itself as a real estate investment trust, or REIT, which, after substantial transition costs, would eventually save the company more than $100 million in taxes annually, according to Colby Synesael, an analyst at Cowen & Company, an investment banking firm. Congress created REITs in the early 1960s, modeling them on mutual funds, to open real estate investments to ordinary investors, said Timothy M. Toy, a New York lawyer who has written about the history of the trusts. Real estate companies organized as investment trusts avoid corporate taxes by paying out most of their income as dividends to investors. Equinix is seeking a so-called private letter ruling from the I.R.S. to restructure itself, a move that has drawn criticism from tax watchdogs. “This is an incredible example of how tax avoidance has become a major business strategy,” said Ryan Alexander, president of Taxpayers for Common Sense , a nonpartisan budget watchdog. The I.R.S., she said, “is letting people broaden these definitions in a way that they kind of create the image of a loophole.” Equinix, some analysts say, is further from the definition of a real estate trust than other data center companies operating as trusts, like Digital Realty Trust. As many as 80 of its 97 data centers are in buildings it leases, Equinix said. The company then, in effect, sublets the buildings to numerous tenants. Even so, Mr. Synesael said the I.R.S. has been inclined to view recurring revenue like lease payments as “good REIT income.” Ms. Neumann, the Equinix spokeswoman, said, “The REIT framework is designed to apply to real estate broadly, whether owned or leased.” She added that converting to a real estate trust “offers tax efficiencies and disciplined returns to shareholders while also allowing us to preserve growth characteristics of Equinix and create significant shareholder value.”

Data center
Commercial Real Estate
New Jersey
Electric power
Digital Realty Trust
Equinix
REIT
Banking and Finance


As Graduation Rates Rise, Experts Fear Diplomas Come Up Short

Abstract: GREENVILLE, S.C. — A sign in a classroom here at Berea High School, northwest of downtown in the largest urban district in the state, sends this powerful message: “Failure Is Not an Option. You Will Pass. You Will Learn. You Will Succeed.” By one measure, Berea, with more than 1,000 pupils, is helping more students succeed than ever: The graduation rate, below 65 percent just four years ago, has jumped to more than 80 percent. But that does not necessarily mean that all of Berea’s graduates, many of whom come from poor families, are ready for college — or even for the working world. According to college entrance exams administered to every 11th grader in the state last spring, only one in 10 Berea students were ready for college-level work in reading, and about one in 14 were ready for entry-level college math. And on a separate test of skills needed to succeed in most jobs, little more than half of the students demonstrated that they could handle the math they would need. It is a pattern repeated in other school districts across the state and country — urban, suburban and rural — where the number of students earning high school diplomas has risen to historic peaks, yet measures of academic readiness for college or jobs are much lower. This has led educators to question the real value of a high school diploma and whether graduation requirements are too easy. “Does that diploma guarantee them a hope for a life where they can support a family?” asked Melanie D. Barton, the executive director of the Education Oversight Committee in South Carolina, a legislative agency. Particularly in districts where student achievement is very low, she said, “I really don’t see it.” Image Students at Berea High School in Greenville, S.C. Some South Carolina business leaders worry that not enough students learn what they need for higher-skilled jobs. Credit Sean Rayford for The New York Times Few question that in today’s economy, finishing high school is vital, given that the availability of jobs for those without a diploma has dwindled. The Obama administration has hailed the rising graduation rate, saying schools are expanding opportunities for students to succeed. Earlier this month, the Department of Education announced that the national graduation rate hit 82 percent in 2013-14, the highest on record . But “the goal is not just high school graduation,” Arne Duncan, the departing secretary of education, said in a telephone interview. “The goal is being truly college and career ready.” The most recent evaluation of 12th graders on a national test of reading and math found that fewer than 40 percent were ready for college level work. College remediation and dropout rates remain stubbornly high, particularly at two-year institutions, where fewer than a third who enroll complete a degree even within three years . In South Carolina, even with a statewide high school graduation rate of 80.3 percent, some business leaders worry that not enough students have the abilities they need for higher-skilled jobs at Boeing, Volvo and BMW, which have built plants here in recent years. What is more, they say, students need to be able to collaborate and communicate effectively, skills they say high schools do not always teach. “If you look at what a graduation diploma guarantees today,” said Pamela P. Lackey, the president of AT&T South Carolina, “the issue is we have a system of education that prepares them for a different type of work than we have as a reality today.” Still, there is no single reason these rates have increased. Economists point to a decline in the teenage pregnancy rate, as well as a reduction in violent crime among teenagers. Some districts use data systems to identify students with multiple absences or failed classes so educators can better help them. And an increasing number of states and districts offer students more chances to make up failed credits online or in short tutoring sessions without repeating a whole semester or more. Image A calculus assignment at Berea. According to college entrance exams administered to every 11th grader in South Carolina last spring, only one in 14 of Berea’s students were ready for college-level work in math. Credit Sean Rayford for The New York Times States also vary widely in diploma requirements. In California, South Carolina and Tennessee, the authorities have recently eliminated requirements that students pass exit exams to qualify for a diploma. Alaska, California, Wisconsin and Wyoming demand far fewer credits to graduate than most states, according to the Education Commission of the States , although local school districts may require more. According to one analysis of requirements for the class of 2014, 32 states did not require that all graduates take four years of English and math through Algebra II or its equivalent, which is often defined as the minimum to be prepared for college. “Students and their families rely on and trust the high school diploma as a signal of readiness,” said Alissa Peltzman, the vice president of state policy at Achieve , a nonprofit that performed the study. “It needs to mean something. Otherwise, it’s a false promise for thousands of students.” Over the past decade in California, several large urban districts adopted coursework guidelines aligned to entrance requirements at the state’s public universities. Los Angeles initially required that students earn at least a C in those classes, but the number of students on track to graduate plummeted. Now grades of D or higher are accepted. “It’s a push and pull between rigorous standards that are harder to meet,” said Russell W. Rumberger, a professor of education at the University of California, Santa Barbara, “and less rigorous standards that are easier to meet but don’t necessarily ensure that you know that much.” In South Carolina, students must take four years of English and math and three years of social studies and science. Last year, the legislature voted to eliminate the exit exam. Parents of students with disabilities argued that the test made it difficult for their children to graduate, while business leaders said it did not indicate that students were ready for work. Image The principal of Berea, Mike Noel, in the halls before lunch. Administrators at the school are proud of the rising graduation rate. Credit Sean Rayford for The New York Times “Quite honestly, it had become very easy, and it didn’t mean a lot,” said Molly Spearman , the state superintendent of education. Last year, the legislature required all 11th graders to take a test assessing college and career readiness, as well as an exam that measured academic skills needed for most jobs. The first results, from the ACT college admissions tests, showed that only about a quarter of students statewide were ready for either college-level math or reading. Just 6 percent of black students and 15 percent of Hispanic students scored ready for college in math , with only slightly higher rates for reading. In one poor rural district where most of the students are African-American, graduation rates have risen to more than 85 percent, yet not one student scored high enough on the ACT to be deemed ready for college in reading or math. Even on simpler tests of the cognitive skills needed for many jobs, fewer than two-thirds of South Carolina 11th graders could show sufficient skills in both math and reading. Here at Berea High School, a rare, racially integrated campus with similar numbers of African-American, Hispanic and white students, administrators are proud of the rising graduation rate. Addressing the low scores on the ACT, administrators said many 11th graders had not yet learned the material covered when they took the test. And some educators say such tests do not accurately predict whether students will do well in college or in the workplace anyway. Imari Nicholson, a 17-year-old student at Berea, has expressed interest in sports therapy or dentistry. After he failed chemistry his junior year, his counselor reminded him that he would need the course to qualify for a college program in his chosen fields. He is retaking it this semester. This time, he is getting an A. But he said he was not satisfied with his scores on the ACT, which indicated that he was not yet ready for college. “I expect better of myself,” he said.

Graduation Rates
College
K-12 Education
US states
Reading and Writing Skills
Greenville SC
US Department of Education
ACT test
Mathematics